Koil Energy Solutions (KLNG) 10-Q 12 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 10, 2016
Document And Entity Information
Entity Registrant Name	Deep Down, Inc.
Entity Central Index Key	1,110,607
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		15,493,360
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,016

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash (including a compensating balance of $3,900 at December 31, 2015) (Note 6)	$ 6,983	$ 4,274
Accounts receivable, net of allowance of $150	6,972	7,849
Inventory	3,117	3,117
Costs and estimated earnings in excess of billings on uncompleted contracts	2,274	1,354
Prepaid expenses and other current assets	284	229
Total current assets	19,630	16,823
Property, plant and equipment, net	8,052	10,762
Intangibles, net	72	75
Other assets	822	878
Total assets	28,576	28,538
Current liabilities:
Accounts payable and accrued liabilities	2,584	2,162
Billings in excess of costs and estimated earnings on uncompleted contracts	3,264	46
Current portion of long-term debt	0	2,747
Total current liabilities	5,848	4,955
Total liabilities	5,848	4,955
Commitments and contingencies (Notes 6 and 10)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding	0	0
Common stock, $0.001 par value, 24,500,000 shares authorized, 15,493,360 and 15,631,714 shares issued, respectively	15	16
Additional paid-in capital	73,132	72,989
Treasury Stock, 4,224 shares at cost	(4)	0
Accumulated deficit	(50,415)	(49,422)
Total stockholders' equity	22,728	23,583
Total liabilities and stockholders' equity	$ 28,576	$ 28,538

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
ASSETS
Compensating balance	$ 0	$ 3,900
Accounts receivable allowance	$ 150	$ 150
Stockholders' equity:
Preferred stock par value	$ .001	$ 0.001
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	24,500,000	24,500,000
Common stock issued	15,493,360	15,631,000
Common stock outstanding	15,493,360	15,631,000
Treasury stock, shares	4,224

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Revenues	$ 5,968	$ 6,536	$ 10,323	$ 12,369
Cost of sales:
Cost of sales	3,737	4,132	6,337	8,396
Depreciation expense	290	397	612	737
Total cost of sales	4,027	4,529	6,949	9,133
Gross profit	1,941	2,007	3,374	3,236
Operating expenses:
Selling, general and administrative	2,378	2,003	5,166	4,430
Depreciation and amortization	94	67	200	104
Total operating expenses	2,472	2,070	5,366	4,534
Operating loss	(531)	(63)	(1,992)	(1,298)
Other income (expense):
Interest expense, net	(6)	(64)	(61)	(125)
Equity in net income of joint venture	0	133	0	133
Gain on sale of property, plant and equipment	0	0	1,070	0
Other, net	0	(27)	0	(27)
Total other income (expense)	(6)	42	1,009	(19)
Loss before income taxes	(537)	(21)	(983)	(1,317)
Income tax expense	(5)	(8)	(10)	(14)
Net loss	$ (542)	$ (29)	$ (993)	$ (1,331)
Net loss per share:
Basic	$ (.03)		$ (.06)	$ (.09)
Diluted	$ (0.03)		$ (0.06)	$ (0.09)
Weighted-average shares outstanding:
Basic	15,546	15,110	15,555	15,120
Diluted	15,546	15,110	15,555	15,120

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net loss	$ (993)	$ (1,331)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Equity in net income of joint venture	0	(133)
Share-based compensation	274	253
Bad debt (credit) expense	0	(55)
Depreciation and amortization	812	841
Gain on disposal of property, plant and equipment, net	(1,070)	0
Write-off of deferred financing fees	23	0
Changes in assets and liabilities:
Accounts receivable, net	584	(3,428)
Costs and estimated earnings in excess of billings on uncompleted contracts	(920)	2,147
Prepaid expenses and other current assets	(55)	203
Other assets	15	45
Inventory, net	0	(18)
Accounts payable and accrued liabilities	207	(727)
Billings in excess of costs and estimated earnings on uncompleted contracts	3,218	436
Net cash (used in) provided by operating activities	2,095	(1,767)
Cash flows from investing activities:
Purchases of property, plant and equipment	(588)	(296)
Proceeds from sale of property, plant and equipment	3,800	0
Repayments on notes receivable	7	15
Distribution from joint venture	161	65
Net cash (used in) provided by investing activities	3,380	(216)
Cash flows from financing activities:
Purchase of treasury shares	(4)	0
Proceeds from bank loans	300	1,750
Cash paid for deferred financing costs	(15)	(25)
Release of compensating balance	3,900	0
Repayments of long-term debt	(3,047)	(398)
Net cash provided by financing activities	1,134	1,327
Change in cash	6,609	(656)
Cash, beginning of period	374	1,412
Cash, end of period	$ 6,983	$ 756

1. BASIS OF PRESENTATION

1. BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2016
Accounting Policies [Abstract]
BASIS OF PRESENTATION	Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain footnotes or other financial information that are normally required by United States generally accepted accounting principles (“GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and footnotes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed on March 29, 2016 with the Commission. Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying unaudited condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain previously reported amounts have been reclassified to conform to current period presentation. Principles of Consolidation The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. Segments We operate one principal deepwater oilfield services business, which provides many solutions to our customers. For the six months ended June 30, 2016 and 2015, we only had one reporting segment, Deep Down Delaware. All of the services and products we provide are interrelated, performed for the same general customers and marketed as such. In accordance with ASC Topic 280, Segment Reporting In determining the reportable segment, we concluded that all services and products have similar economic and other characteristics, including similar gross margin percentage, production processes, suppliers, regulatory environments, customer type, and underlying demand and supply. Our services and products follow the same accounting policies and are managed by our management team. Recently Issued Accounting Standards Not Yet Adopted In August 2014, the Financial Accounting Standards Board, (“FASB”) issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for us beginning January 1, 2017. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate the adoption of ASU 2014-15 will have a material effect on its financial position or results of operations. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. The effective date for this standard was deferred in July 2015 and will now be effective for us beginning January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method; we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 for us beginning January 1, 2017 In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The amendments in this update require, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amendments are effective for us beginning January 1, 2019. We are currently evaluating the impacts of the amendments to our financial statements and accounting practices for leases. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Among other amendments, ASU 2016-09 requires that excess tax benefits or deficiencies are recognized as income tax expense or benefit in the income statement, gives an entity the ability to elect to estimate the number of awards that are expected to vest or account for forfeitures as they occur and permits withholding up to the maximum statutory tax rates as the threshold to qualify for equity classification. The guidance will become effective for us beginning January 1, 2017. Early application is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements.

2. RESTATEMENT OF QUARTERLY INF

2. RESTATEMENT OF QUARTERLY INFORMATION (UNAUDITED)	6 Months Ended
	Jun. 30, 2016
Restatement of Prior Year Income [Abstract]
RESTATEMENT OF QUARTERLY INFORMATION (UNAUDITED)	In December 2014, at the request of a customer, we delivered a carousel to the customer on a lease or purchase arrangement. We honored this request in order to support its requirement for a critical umbilical project. At the completion of our customer’s requirement, we were advised by the customer it was not going to purchase the carousel, so we picked up the carousel and returned it to our facility. We then invoiced the customer on a rental basis. The customer has declined to pay the invoices. We are pursuing collection through arbitration. Under SEC Staff Accounting Bulletin No. 101 – Revenue Recognition in Financial Statements (SAB 101), “revenue should not be recognized until it is realized or realizable and earned.” Also according to SAB 101, revenue generally is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed or determinable, and collectability is reasonably assured. Based on the facts above and the guidelines of SAB 101, we determined that the revenue in relation to this situation should not have been recognized in the quarter ended June 30, 2015. As a result, we have reversed the misstated revenue and related receivable from our unaudited consolidated financial statements. The following table summarizes the impact of the revenue reversal on our unaudited consolidated statement of operations: Three Months Ended Six Months Ended June 30, 2015 June 30, 2015 As Reported Revenue Adjustment As Restated As Reported Revenue Adjustment As Restated Revenues 6,771 (235 ) 6,536 13,609 (1,240 ) 12,369 Gross profit 2,242 (235 ) 2,007 4,476 (1,240 ) 3,236 Operating (loss) income 172 (235 ) (63 ) (58 ) (1,240 ) (1,298 ) Income (loss) before income taxes 214 (235 ) (21 ) (77 ) (1,240 ) (1,317 ) Net income (loss) 206 (235 ) (29 ) (91 ) (1,240 ) (1,331 ) Net income (loss) per share: Basic earnings (loss) per common share 0.01 (0.02 ) – (0.01 ) (0.08 ) (0.09 ) Diluted earnings (loss) per common share 0.01 (0.02 ) – (0.01 ) (0.08 ) (0.09 )

3. INVENTORY

3. INVENTORY	6 Months Ended
	Jun. 30, 2016
Inventory Disclosure [Abstract]
INVENTORY	The finished goods inventory balance of $3,117 consists of a 3,500 MT portable umbilical carousel, which we fabricated and bought back from a customer in November 2013 and are currently holding for sale.

4. BILLINGS, COSTS AND ESTIMATE

4. BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	6 Months Ended
	Jun. 30, 2016
Contractors [Abstract]
BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	The components of billings, costs and estimated earnings on uncompleted contracts are summarized below: June 30, 2016 December 31, 2015 Costs incurred on uncompleted contracts $ 6,378 $ 3,220 Estimated earnings on uncompleted contracts 3,807 2,282 10,185 5,502 Less: Billings to date on uncompleted contracts (11,175 ) (4,194 ) $ (990 ) $ 1,308 Included in the accompanying consolidated balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 2,274 $ 1,354 Billings in excess of costs and estimated earnings on uncompleted contracts (3,264 ) (46 ) $ (990 ) $ 1,308 The balance in costs and estimated earnings in excess of billings on uncompleted contracts at June 30, 2016 and December 31, 2015 consisted of earned but unbilled revenues related to fixed-price and time and material projects. The balance in billings in excess of costs and estimated earnings on uncompleted contracts at June 30, 2016 and December 31, 2015 consisted of unearned billings related to fixed-price and time and material projects.

5. PROPERTY, PLANT AND EQUIPMEN

5. PROPERTY, PLANT AND EQUIPMENT	6 Months Ended
	Jun. 30, 2016
Property, Plant and Equipment [Abstract]
PROPERTY, PLANT AND EQUIPMENT	The components of net property, plant and equipment are summarized below: Range of June 30, 2016 December 31, 2015 Asset Lives Land $ – $ 1,582 – Buildings and improvements 5 1,447 7 - 36 years Leasehold improvements 825 825 2 - 5 years Equipment 15,435 15,435 2 - 30 years Furniture, computers and office equipment 1,362 1,468 2 - 8 years Construction in progress 1,140 341 – Total property, plant and equipment 18,767 21,098 Less: Accumulated depreciation and amortization (10,715 ) (10,336 ) Property, plant and equipment, net $ 8,052 $ 10,762 The reduction in our net property, plant and equipment was due to the sale of our Channelview location in March 2016.

6. LONG-TERM DEBT

6. LONG-TERM DEBT	6 Months Ended
	Jun. 30, 2016
Debt Disclosure [Abstract]
LONG-TERM DEBT	Credit Facility Since 2008, we have maintained a credit facility (the “Facility”) with Whitney Bank. The Facility has been amended and restated several times, most recently effective June 30, 2015 when we entered into the eighth amendment (“Eighth Amendment”). The relevant terms of the Eighth Amendment included: · an extension of the maturity date of the revolving credit facility (“Revolving Credit Facility”) to June 30, 2016; · a modification of the interest rate with respect to the Revolving Credit Facility to 4.0 percent per annum; · a modification of certain financial covenants; and · a requirement that we maintain a compensating balance of $3,900 in our existing interest-bearing account at Whitney, to continue until such time as we have regained compliance with all of our covenants under the Facility for two consecutive quarters commencing with the quarter ended June 30, 2015. Due to the expiration of our credit facility on June 30, 2016, we no longer have the requirement of a compensating balance and the $3,900 is now available for use. As of June 30, 2016, we no longer have these credit facilities available to us. Other terms of the Facility included: · a real estate term facility (“RE Term Facility”) of $2,000, at an interest rate of 4.0 percent per annum, maturing April 15, 2018, with the Company being obligated to make monthly increasing repayments of principal (along with accrued and unpaid interest thereon) at an amount of $9, beginning April 1, 2013, while there is any amount outstanding; · a carousel term facility (“Carousel Term Facility”) of $2,200, at an interest rate of 3.5 percent per annum, maturing October 15, 2016, with the Company being obligated to make monthly repayments of principal of $65 (along with accrued and unpaid interest thereon) beginning July 1, 2014, while there is any amount outstanding; and · outstanding balances under the Facility are secured by all of the Company’s assets. In March 2016, we paid off the RE Term Facility and the Carousel Term Facility with proceeds received from the sale of our Channelview location. As of June 30, 2016, the Company’s indebtedness under the Facility was $0.

7. SHARE-BASED COMPENSATION

7. SHARE-BASED COMPENSATION	6 Months Ended
	Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
SHARE-BASED COMPENSATION	We have a share-based compensation plan, the “2003 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan” (the “Plan”). Awards of common stock and options to purchase common stock granted under the Plan have vesting periods of three years and options are exercisable for two years once fully vested. Share-based compensation expense related to awards is based on the fair value at the date of grant, and is recognized over the requisite expected service period, net of estimated forfeitures. Under the Plan, the maximum number of shares issued pursuant to options is 15 percent of issued and outstanding common shares. Summary of Nonvested Shares of Restricted Stock On May 27, 2016, we granted 30 shares of restricted stock to an independent director, par value $0.001 per share. These shares have a fair value grant price of $1.02 per share, based on the closing price of Deep Down’s stock on that day. These shares vest over three years in equal tranches on the grant date anniversary, with continued service on our Board of Directors; we are amortizing the related share-based compensation of $31 over the three-year requisite service period. During the six months ended June 30, 2016 , we withheld 168 shares of our common stock from the vesting of nonvested shares granted to employees to satisfy tax withholding obligations. Once withheld, the shares were canceled and removed from the number of outstanding shares. We subsequently remitted the amount withheld to the tax authority. For the six months ended June 30, 2016 and 2015, we recognized a total of $274 and $253, respectively, of share-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. The unamortized estimated fair value of nonvested shares of restricted stock awards was $208 at June 30, 2016. These costs are expected to be recognized as expense over a weighted average period of 1.12 years. Summary of Stock Options For the six months ended June 30, 2016 and 2015, we did not recognize share-based compensation expense related to outstanding stock option awards. There was no unamortized estimated fair value of non-vested stock options

8. TREASURY STOCK

8. TREASURY STOCK	6 Months Ended
	Jun. 30, 2016
Equity [Abstract]
TREASURY STOCK	On May 23, 2016, our Board of Directors authorized a repurchase program (the “Repurchase Program”) under which we may repurchase up to $1,000 of our outstanding stock. The purchases may be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations. The Repurchase Program will be funded from cash on hand and cash provided by operating activities. The Repurchase Program will expire as of the close of business on March 31, 2017. As of June 30, 2016, we have purchased 4 shares at cost of $4 under this Repurchase Program. The average price per share of treasury stock through June 30, 2016 has been $0.93. Treasury shares are accounted for using the cost method.

9. INCOME TAXES

9. INCOME TAXES	6 Months Ended
	Jun. 30, 2016
Income Tax Disclosure [Abstract]
INCOME TAXES	Income tax expense during interim periods is based on applying the estimated annual effective income tax rate to interim period operations. The estimated annual effective income tax rate may vary from the statutory rate due to the impact of permanent items relative to our pre-tax loss, as well as by any valuation allowance recorded. We employ an asset and liability approach that results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial basis and the tax basis of those assets and liabilities. A valuation allowance is established when it is more likely than not that some of the deferred tax assets will not be realized. Although our future projections indicate that we may be able to realize some of these deferred tax assets, due to the degree of uncertainty of these projections, at June 30, 2016 and December 31, 2015 management has recorded a full deferred tax asset valuation allowance.

10. COMMITMENTS AND CONTINGENCI

10. COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	Litigation From time to time we are involved in legal proceedings arising from the normal course of business. As of the date of this Report, we are engaged in one material legal dispute, arising from the non-payment of equipment rental and services by one of our customers. Refer to Note 12 of the Notes to Consolidated Financial Statements in Part II. Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2015. Operating Leases We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023. Letters of Credit Certain of our customers could require us to issue a standby letter of credit (“LC”) in the ordinary course of business to ensure performance under terms of a contract or as a form of product warranty. The beneficiary could demand payment from the issuing bank for the amount of the outstanding letter of credit. There was $0 in LC’s outstanding at June 30, 2016 and December 31, 2015.

11. EARNINGS PER COMMON SHARE

11. EARNINGS PER COMMON SHARE	6 Months Ended
	Jun. 30, 2016
Net loss per share:
EARNINGS PER COMMON SHARE	Basic earnings per share (“EPS”) is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Fully diluted EPS is calculated by dividing net income (loss) by the weighted-average number of common shares and dilutive common stock equivalents (warrants, stock awards and stock options) outstanding during the period. Fully diluted EPS reflects the potential dilution that could occur if options to purchase common stock were exercised for shares of common stock. At June 30, 2016 and 2015, there were no potentially dilutive securities outstanding.

1. BASIS OF PRESENTATION (Polic

1. BASIS OF PRESENTATION (Policies)	6 Months Ended
	Jun. 30, 2016
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain footnotes or other financial information that are normally required by United States generally accepted accounting principles (“GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and footnotes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed on March 29, 2016 with the Commission. Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying unaudited condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain previously reported amounts have been reclassified to conform to current period presentation.
Principles of Consolidation	Principles of Consolidation The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
Segments	Segments We operate one principal deepwater oilfield services business, which provides many solutions to our customers. For the six months ended June 30, 2016 and 2015, we only had one reporting segment, Deep Down Delaware. All of the services and products we provide are interrelated, performed for the same general customers and marketed as such. In accordance with ASC Topic 280, Segment Reporting In determining the reportable segment, we concluded that all services and products have similar economic and other characteristics, including similar gross margin percentage, production processes, suppliers, regulatory environments, customer type, and underlying demand and supply. Our services and products follow the same accounting policies and are managed by our management team.
Recently Issued Adopted Accounting Standards	Recently Issued Accounting Standards Not Yet Adopted In August 2014, the Financial Accounting Standards Board, (“FASB”) issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for us beginning January 1, 2017. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate the adoption of ASU 2014-15 will have a material effect on its financial position or results of operations. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. The effective date for this standard was deferred in July 2015 and will now be effective for us beginning January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method; we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 for us beginning January 1, 2017 In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The amendments in this update require, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amendments are effective for us beginning January 1, 2019. We are currently evaluating the impacts of the amendments to our financial statements and accounting practices for leases. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Among other amendments, ASU 2016-09 requires that excess tax benefits or deficiencies are recognized as income tax expense or benefit in the income statement, gives an entity the ability to elect to estimate the number of awards that are expected to vest or account for forfeitures as they occur and permits withholding up to the maximum statutory tax rates as the threshold to qualify for equity classification. The guidance will become effective for us beginning January 1, 2017. Early application is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements.

2. RESTATEMENT OF QUARTERLY I18

2. RESTATEMENT OF QUARTERLY INFORMATION (UNAUDITED) (Tables)	6 Months Ended
	Jun. 30, 2016
Restatement of Prior Year Income [Abstract]
Restatement of Quarterly Information	Three Months Ended Six Months Ended June 30, 2015 June 30, 2015 As Reported Revenue Adjustment As Restated As Reported Revenue Adjustment As Restated Revenues 6,771 (235 ) 6,536 13,609 (1,240 ) 12,369 Gross profit 2,242 (235 ) 2,007 4,476 (1,240 ) 3,236 Operating (loss) income 172 (235 ) (63 ) (58 ) (1,240 ) (1,298 ) Income (loss) before income taxes 214 (235 ) (21 ) (77 ) (1,240 ) (1,317 ) Net income (loss) 206 (235 ) (29 ) (91 ) (1,240 ) (1,331 ) Net income (loss) per share: Basic earnings (loss) per common share 0.01 (0.02 ) – (0.01 ) (0.08 ) (0.09 ) Diluted earnings (loss) per common share 0.01 (0.02 ) – (0.01 ) (0.08 ) (0.09 )

4. BILLINGS, COSTS AND ESTIMA19

4. BILLINGS, COSTS AND ESTIMATED EARNINGS (Tables)	6 Months Ended
	Jun. 30, 2016
Contractors [Abstract]
COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS	June 30, 2016 December 31, 2015 Costs incurred on uncompleted contracts $ 6,378 $ 3,220 Estimated earnings on uncompleted contracts 3,807 2,282 10,185 5,502 Less: Billings to date on uncompleted contracts (11,175 ) (4,194 ) $ (990 ) $ 1,308 Included in the accompanying consolidated balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 2,274 $ 1,354 Billings in excess of costs and estimated earnings on uncompleted contracts (3,264 ) (46 ) $ (990 ) $ 1,308

5. PROPERTY, PLANT AND EQUIPM20

5. PROPERTY, PLANT AND EQUIPMENT (Tables)	6 Months Ended
	Jun. 30, 2016
Property, Plant and Equipment [Abstract]
Property, plant and equipment	Range of June 30, 2016 December 31, 2015 Asset Lives Land $ – $ 1,582 – Buildings and improvements 5 1,447 7 - 36 years Leasehold improvements 825 825 2 - 5 years Equipment 15,435 15,435 2 - 30 years Furniture, computers and office equipment 1,362 1,468 2 - 8 years Construction in progress 1,140 341 – Total property, plant and equipment 18,767 21,098 Less: Accumulated depreciation and amortization (10,715 ) (10,336 ) Property, plant and equipment, net $ 8,052 $ 10,762

2. RESTATEMENT OF QUARTERLY I21

2. RESTATEMENT OF QUARTERLY INFORMATION (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues	$ 5,968	$ 6,536	$ 10,323	$ 12,369
Gross profit	1,941	2,007	3,374	3,236
Operating (loss) income	(531)	(63)	(1,992)	(1,298)
Income (loss) before income taxes	(537)	(21)	(983)	(1,317)
Net income (loss)	$ (542)	$ (29)	$ (993)	$ (1,331)
Basic earnings (loss) per common share	$ (.03)		$ (.06)	$ (.09)
Diluted earnings (loss) per common share	$ (0.03)		$ (0.06)	$ (0.09)
Scenario, As Reported [Member]
Revenues		$ 6,771		$ 13,609
Gross profit		2,242		4,476
Operating (loss) income		172		(58)
Income (loss) before income taxes		214		(77)
Net income (loss)		$ 206		$ (91)
Basic earnings (loss) per common share		$ .01		$ (.01)
Diluted earnings (loss) per common share		$ 0.01		$ (0.01)
Scenario, Revenue Adjustment [Member]
Revenues		$ (235)		$ (1,240)
Gross profit		(235)		(1,240)
Operating (loss) income		(235)		(1,240)
Income (loss) before income taxes		(235)		(1,240)
Net income (loss)		$ (235)		$ (1,240)
Basic earnings (loss) per common share		$ (.02)		$ (.08)
Diluted earnings (loss) per common share		$ (0.02)		$ (0.08)

3. INVENTORY (Details Narrative

3. INVENTORY (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Finished goods	$ 3,117	$ 3,117

4. BILLINGS, COSTS AND ESTIMA23

4. BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Billings In Excess Of Costs And Estimated Earnings On Uncompleted Contracts And Deferred Revenues
Costs incurred on uncompleted contracts	$ 6,378	$ 3,220
Estimated earnings on uncompleted contracts	3,807	2,282
Gross costs and estimated earnings	10,185	5,502
Less: Billings to date on uncompleted contracts	(11,175)	(4,194)
Costs incurred plus estimated earning less billings on uncompleted contracts	(990)	1,308
Included in the accompanying condensed consolidated balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts	2,274	1,354
Billings in excess of costs and estimated earnings on uncompleted contracts	(3,264)	(46)
Total costs and estimated earnings and billings in excess of cost on uncompleted contracts	$ (990)	$ 1,308

5. PROPERTY, PLANT AND EQUIPM24

5. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Total property, plant and equipment	$ 18,767	$ 21,098
Less: Accumulated depreciation and amortization	(10,715)	(10,336)
Property, plant and equipment,net	8,052	10,762
Land
Total property, plant and equipment	0	1,582
Building and improvements
Total property, plant and equipment	$ 5	1,447
Range of Asset lives	7-36 years
Leasehold Improvements
Total property, plant and equipment	$ 825	825
Range of Asset lives	2-5 years
Equipment
Total property, plant and equipment	$ 15,435	15,435
Range of Asset lives	2-30 years
Furniture, computers and office equipment
Total property, plant and equipment	$ 1,362	1,468
Range of Asset lives	2-8 years
Construction in Progress
Total property, plant and equipment	$ 1,140	$ 341

6. LONG-TERM DEBT (Details Narr

6. LONG-TERM DEBT (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Compensating balance	$ 0	$ 3,900
Revolving Credit Facility
Line of credit maturity date	Jun. 30, 2016
Line of credit interest rate	4.00%
Compensating balance	$ 0
Maximum amount	3,900
Line of credit amount outstanding	$ 0
RE Term Facility
Line of credit maturity date	Apr. 15, 2018
Line of credit interest rate	4.00%
Maximum amount	$ 2,000
Line of credit amount outstanding	$ 0
Carousel Term Facility
Line of credit maturity date	Oct. 15, 2016
Line of credit interest rate	3.50%
Maximum amount	$ 2,200
Line of credit amount outstanding	$ 0

7. SHARE-BASED COMPENSATION (De

7. SHARE-BASED COMPENSATION (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Share based compensation expense	$ 274	$ 253
Employees [Member]
Shares withheld for tax purposes	168
Restricted Stock Awards
Share based compensation expense	$ 274	$ 253
Unamortized estimated fair value of non-vested stock options	$ 208
Weighted average period of unamortized fair value	1 year 1 month 13 days
Restricted Stock Awards | Independent Director [Member]
Restricted stock granted, shares	30
Fair value grant price per share	$ 1.02
Share based compensation expense	$ 31

8. TREASURY STOCK (Details Narr

8. TREASURY STOCK (Details Narrative) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2016USD ($)$ / sharesshares
Equity [Abstract]
Treasury stock purchased, shares | shares	4
Treasury stock purchased, value | $	$ 4
Average stock price | $ / shares	$ 0.93

10. COMMITMENTS AND CONTINGEN28

10. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Letters Of Credit Outstanding	$ 0	$ 0

11. EARNINGS PER COMMON SHARE (

11. EARNINGS PER COMMON SHARE (Details Narrative) - shares	Jun. 30, 2016	Jun. 30, 2015
Net loss per share:
Outstanding shares available to convert to common stock	0	0