Englobal (ENGC) 10-Q 8 Nov 18 2018 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 29, 2018	Nov. 07, 2018
Document And Entity Information
Entity Registrant Name	ENGLOBAL CORP
Entity Central Index Key	933,738
Document Type	10-Q
Document Period End Date	Sep. 29, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		27,509,317
Trading Symbol	ENG
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,018

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Sep. 29, 2018	Sep. 30, 2017
Income Statement [Abstract]
Operating revenues	$ 14,255	$ 12,896	$ 41,314	$ 41,336
Operating costs	11,962	11,275	35,355	35,471
Gross profit	2,293	1,621	5,959	5,865
Selling, general and administrative expenses	2,483	3,041	7,935	9,503
Operating loss	(190)	(1,420)	(1,976)	(3,638)
Other income (expense):
Other income (expense), net	11	2	(367)	57
Interest expense, net	(1)	(19)	(14)	(95)
Loss before income taxes	(180)	(1,437)	(2,357)	(3,676)
Provision for federal and state income taxes	17	10,717	31	10,250
Net loss	$ (197)	$ (12,154)	$ (2,388)	$ (13,926)
Basic and diluted loss per common share:	$ (0.01)	$ (0.44)	$ (0.09)	$ (0.51)
Basic and diluted weighted average shares used in computing loss per share:	27,509,000	27,446,000	27,511,000	27,257,000

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 29, 2018	Dec. 30, 2017
Current Assets:
Cash, cash equivalents and restricted cash	$ 5,252	$ 9,648
Trade receivables, net of allowances of $202 and $695	10,493	9,114
Prepaid expenses and other current assets	315	994
Contract assets	4,291	5,273
Total Current Assets	20,351	25,029
Property and equipment, net	732	1,027
Goodwill	2,806	2,806
Other assets	371	390
Total Assets	24,260	29,252
Current Liabilities:
Accounts payable	3,297	3,742
Accrued compensation and benefits	1,586	2,039
Contract liabilities	287	1,334
Other current liabilities	239	1,068
Total Liabilities	5,409	8,183
Commitments and Contingencies (Note 8)
Stockholders' Equity:
Common stock - $0.001 par value; 75,000,000 shares authorized; 27,509,317and 27,514,380 shares issued and outstanding at September 29, 2018 and December 30, 2017, respectively	27	27
Additional paid-in capital	37,013	36,843
Accumulated deficit	(18,189)	(15,801)
Total Stockholders' Equity	18,851	21,069
Total Liabilities and Stockholders' Equity	$ 24,260	$ 29,252

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 29, 2018	Dec. 30, 2017
Statement of Financial Position [Abstract]
Trade receivables, allowances	$ 202	$ 695
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	27,509,317	27,514,380
Common stock, shares outstanding	27,509,317	27,514,380

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 29, 2018	Sep. 30, 2017
Cash Flows from Operating Activities:
Net loss	$ (2,388)	$ (13,926)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	386	791
Share-based compensation expense	171	288
Shares issued to vendor		225
Gain on sale of asset	(2)
Deferred tax		10,208
Changes in current assets and liabilities:
Trade accounts receivable	(1,379)	(124)
Contract assets	982	(1,665)
Other current assets	678	636
Accounts payable	(445)	(702)
Accrued compensation and benefits	(453)	(388)
Contract liabilities	(1,048)	831
Income taxes payable	(58)	181
Other current liabilities, net	(708)	(351)
Net cash used in operating activities	(4,264)	(3,996)
Cash Flows from Investing Activities:
Proceeds from notes receivable	19	45
Property and equipment acquired	(89)	(590)
Net cash used in investing activities	(70)	(545)
Cash Flows from Financing Activities:
Purchase of treasury stock		(91)
Payments on capitalized leases	(62)	(157)
Net cash used in financing activities	(62)	(248)
Net change in cash, cash equivalents and restricted cash	(4,396)	(4,789)
Cash, cash equivalents and restricted cash, at beginning of period	9,648	15,687
Cash, cash equivalents and restricted cash, at end of period	5,252	10,898
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	15	100
Cash paid (received) during the period for income taxes (net of refunds)	$ 96	$ (148)

Basis of Presentation

Basis of Presentation	9 Months Ended
	Sep. 29, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	NOTE 1 – BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of ENGlobal Corporation (which may be referred to as “ENGlobal,” the “Company,” “we,” “us,” or “our”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, these condensed financial statements do not include all of the information or note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 30, 2017, included in the Company’s 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The condensed financial statements included herein are unaudited for the three and nine month periods ended September 29, 2018 and September 30, 2017, and in the case of the condensed balance sheet as of December 30, 2017 have been derived from the audited financial statements of the Company. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly present the results for the periods presented. The Company has assessed subsequent events through the date of filing of these condensed financial statements with the Securities and Exchange Commission and believes that the disclosures made herein are adequate to make the information presented herein not misleading. We had no items of other comprehensive income in any period presented; therefore, no other components of comprehensive income are presented. Each of our quarters is comprised of 13 weeks.

Accounting Standards

Accounting Standards	9 Months Ended
	Sep. 29, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Accounting Standards	NOTE 2 – ACCOUNTING STANDARDS In May 2014, the Financial Statements Accounting Board (“FASB”) issued ASU No. 2014-09 , Revenue From Contracts with Customers (Topic 606), In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic 842): Targeted Improvements In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

Critical Accounting Policies Up

Critical Accounting Policies Update	9 Months Ended
	Sep. 29, 2018
Accounting Policies [Abstract]
Critical Accounting Policies Update	NOTE 3 – CRITICAL ACCOUNTING POLICIES UPDATE Our critical accounting policies are detailed in “Note 2 – Accounting Policies and New Accounting Pronouncements” within Item 8 of our Annual Report on Form 10-K for the year ended December 30, 2017. Significant changes to our accounting policies as a result of adopting Topic 606 are discussed below: Revenue Recognition A majority of sales of fabrication and assembled systems are under fixed-price contracts. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We generally recognize revenue over time as we perform because of continuous transfer of control to the customer. Our customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to the Company. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided, which measures the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We generally use the cost-to-cost method of revenue recognition to measure progress for our contracts because it best depicts the transfer of control to the customer which occurs as we consume the costs on the contracts. Therefore, revenues and estimated profits are recorded proportionally as costs are incurred. Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. The customer may retain a small portion of the contract price until completion of the contract. Revenue recognized in excess of billings is recorded as a contract asset on the balance sheet. Amounts billed and due from our customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer should we fail to adequately complete some or all of our obligations under the contract. For some contracts we may receive advance payments from the customer. We record a liability for these advance payments in contract liabilities on the balance sheet. The advance payment typically is not considered a significant financing component because it is used to meet working capital demand that can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of its obligations under the contract. To determine proper revenue recognition for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single performance obligation or whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most of our contracts, we provide a significant service of integrating a complex set of tasks and components into a single project. Hence, the entire contract is accounted for as one performance obligation. Less commonly, we may provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling price of the promised goods or services underlying each performance obligation and use the expected cost plus margin approach to estimate the standalone selling price of each performance obligation. Due to the nature of the work require to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to variables and requires significant judgment. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or a reduction of revenue) on a cumulative catch-up basis. We have a standard, monthly process in which management reviews the progress and execution of our performance obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the schedule, technical requirements, and other contractual requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. Based on this analysis, any adjustments to revenue, operating costs and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive performance and may result in an increase in operating income during the performance of individual performance obligations if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities. When estimates of total costs to be incurred exceed total estimates to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is recorded. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks or realizing related opportunities. Changes in estimates of net revenue, operating costs and the related impact to operating income are recognized monthly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. See “Note 6 – Segment Information” for disaggregated revenue information. Incremental Costs

Cash, Cash Equivalents and Rest

Cash, Cash Equivalents and Restricted Cash	9 Months Ended
	Sep. 29, 2018
Cash and Cash Equivalents [Abstract]
Cash, Cash Equivalents and Restricted Cash	NOTE 4 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated financial statements: September 29, 2018 December 30, 2017 (dollars in thousands) Cash and cash equivalents $ 5,252 $ 8,988 Restricted cash — 660 Total cash, cash equivalents and restricted cash $ 5,252 $ 9,648 Amounts included in restricted cash represent those required to be set aside to collateralize a letter of credit required by a customer. This letter of credit expired on December 31, 2017.

Contract Assets and Contract Li

Contract Assets and Contract Liabilities	9 Months Ended
	Sep. 29, 2018
Contractors [Abstract]
Contract Assets and Contract Liabilities	NOTE 5 – CONTRACT ASSETS AND CONTRACT LIABILITIES Our contract assets consist of unbilled amounts typically resulting from sales under long-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Our contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue. The noncurrent portion of deferred revenue is included in other long-term liabilities in our consolidated balance sheets. Costs, estimated earnings and billings on uncompleted contracts consisted of the following at September 29, 2018 and December 30, 2017: September 29, 2018 December 30, 2017 (dollars in thousands) Costs incurred on uncompleted contracts $ 35,213 $ 57,916 Estimated earnings on uncompleted contracts 7,068 15,423 Earned revenues 42,281 73,339 Less: billings to date 38,277 69,400 Net costs and estimated earnings in excess of billings on uncompleted contracts $ 4,004 $ 3,939 Contract assets $ 4,291 $ 5,273 Contract liabilities (287 ) (1,334 ) Net contract assets $ 4,004 $ 3,939

Segment Information

Segment Information	9 Months Ended
	Sep. 29, 2018
Segment Reporting [Abstract]
Segment Information	NOTE 6 – SEGMENT INFORMATION Our segments are strategic business units that offer different services and products and therefore require different marketing and management strategies. During 2017, ENGlobal changed the reporting structure within the Company by placing an operational leader in charge of its engineering offices and a separate operational leader in charge of its automation offices, including the office that contracts with government agencies. The operating performance is regularly reviewed with these two operational leaders, the chief executive officer (“CEO”), the chief financial officer (“CFO”) and others. This group represents the chief operating decision maker (“CODM”) for ENGlobal. The Engineering, Procurement and Construction Management (“EPCM”) segment provides services relating to the development, management and execution of projects requiring professional engineering and related project services primarily to the energy industry throughout the United States. The Automation segment provides services related to the design, integration and implementation of advanced automation, information technology, process distributed control systems, analyzer systems, and electrical projects primarily to the upstream and downstream sectors throughout the United States. The Automation segment includes the government services group, which provides engineering, design, installation and operation and maintenance of various government, public sector and international facilities and the fabrication operation. We have revised our segment reporting to reflect our current management approach and recast prior periods to conform to the current segment presentation. Effective December 31, 2017, we adopted the requirements of Topic 606 using the modified retrospective method as discussed in “Note 2 – Accounting Standards.” The presentation of our business segments, including corporate, set forth in these consolidated financial statements reflect these changes. Revenues, operating income, and identifiable assets for each segment are set forth in the following table. The amount identified as Corporate includes those activities that are not allocated to the operating segments and includes costs related to business development, executive functions, finance, accounting, safety, human resources and information technology that are not specifically identifiable with the segments. Segment information for the three months ended September 29, 2018 and September 30, 2017 is as follows (dollars in thousands): For the three months ended September 29, 2018: EPCM Automation Corporate Consolidated Revenue $ 6,821 $ 7,434 $ — $ 14,255 Gross profit 1,133 1,160 — 2,293 Gross Profit Margin 16.6 % 15.6 % 16.1 % SG&A 469 633 1,381 2,483 Operating income (loss) 664 527 (1,381 ) (190 ) Other income 11 Interest expense, net (1 ) Tax expense (17 ) Net loss $ (197 ) For the three months ended September 30, 2017: EPCM Automation Corporate Consolidated Revenue $ 5,399 $ 7,497 $ — $ 12,896 Gross profit 411 1,210 — 1,621 Gross Profit Margin 7.6 % 16.1 % 12.6 % SG&A 516 699 1,826 3,041 Operating income (loss) (105 ) 511 (1,826 ) (1,420 ) Other income 2 Interest expense, net (19 ) Tax expense (10,717 ) Net loss $ (12,154 ) Segment information for the nine months ended September 29, 2018 and September 30, 2017 is as follows (dollars in thousands): For the nine months ended September 29, 2018: EPCM Automation Corporate Consolidated Revenue $ 18,568 $ 22,746 $ — $ 41,314 Gross profit 2,879 3,080 — 5,959 Gross Profit Margin 15.5 % 13.5 % 14.4 % SG&A 1,426 2,001 4,508 7,935 Operating income (loss) 1,453 1,079 (4,508 ) (1,976 ) Other expense (367 ) Interest expense, net (14 ) Tax expense (31 ) Net loss $ (2,388 ) For the nine months ended September 30, 2017: EPCM Automation Corporate Consolidated Revenue $ 16,976 $ 24,360 $ — $ 41,336 Gross profit 1,742 4,123 — 5,865 Gross Profit Margin 10.3 % 16.9 % 14.2 % SG&A 1,614 2,106 5,783 9,503 Operating income (loss) 128 2,017 (5,783 ) (3,638 ) Other income 57 Interest expense, net (95 ) Tax expense (10,250 ) Net loss $ (13,926 ) Total Assets by Segment As of September 29, 2018 As of December 30, 2017 (dollars in thousands) EPCM $ 6,457 $ 5,976 Automation 12,388 12,485 Corporate 5,415 10,791 Consolidated $ 24,260 $ 29,252

Federal and State Income Taxes

Federal and State Income Taxes	9 Months Ended
	Sep. 29, 2018
Income Tax Disclosure [Abstract]
Federal and State Income Taxes	NOTE 7 – FEDERAL AND STATE INCOME TAXES The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). Under ASC 740-270 we estimate an annual effective tax rate based on year-to-date operating results and our projection of operating results for the remainder of the year. We apply this annual effective tax rate to the year-to-date operating results. If our actual results differ from the estimated annual projection, our estimated annual effective tax rate can change affecting the tax expense for successive interim results as well as the estimated annual tax expense results. Certain states are not included in the calculation of the estimated annual effective tax rate because the underlying basis for the tax is related to revenues and not taxable income. Amounts for Texas margin taxes are reported as income tax expense. The Company applies a more likely than not recognition threshold for all tax uncertainties. The FASB guidance for uncertain tax positions only allows the recognition of those tax benefits, based on their technical merits that are greater than 50 percent likelihood of being sustained upon examination by the taxing authorities. Management has reviewed the Company’s tax positions and determined there are no uncertain tax positions requiring recognition in the financial statements. U.S. federal tax returns prior to 2014 and Texas margins tax returns prior to 2014 are closed. Generally, the applicable statues of limitations are three to four years from their filings. The Company recorded income tax expense of $17 thousand for the three months ended September 29, 2018 as compared to income tax expense of $10.7 million for the three months ended September 30, 2017. The Company recorded income tax expense of $31 thousand for the nine months ended September 29, 2018 as compared to income tax expense of $10.3 million for the nine months ended September 30, 2017. No tax benefit is provided on the book loss for the nine months ended September 29, 2018 because of the full valuation allowance on any unrecognized benefit. The effective income tax rate for the three months ended September 29, 2018 was (9.3)% as compared to (745.50)% for the three months ended September 30, 2017. The effective tax rate differed from the federal statutory rate of 21% primarily due to the effect of the valuation allowances related to the expected unrealized deferred tax asset generated by the current year benefit.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 29, 2018
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	NOTE 8 – COMMITMENTS AND CONTINGENCIES From time to time, ENGlobal or one or more of its subsidiaries is involved in various legal proceedings or is subject to claims that arise in the ordinary course of business alleging, among other things, claims of breach of contract or negligence in connection with the performance or delivery of goods and/or services. The outcome of any such claims or proceedings cannot be predicted with certainty. Management is not aware of any pending or threatened lawsuits or proceedings that are expected to have a material effect on our financial position, results of operations or liquidity. We carry a broad range of insurance coverage, including general and business automobile liability, commercial property, professional errors and omissions, workers’ compensation insurance, directors’ and officers’ liability insurance and a general umbrella policy, all with standard self-insured retentions/deductibles. We also provide health insurance to our employees (including vision and dental), and are partially self-funded for these claims. Provisions for expected future payments are accrued based on our experience, and specific stop loss levels provide protection for the Company. We believe we have adequate reserves for the self-funded portion of our insurance policies. We are not aware of any material litigation or claims that are not covered by these policies or which are likely to materially exceed the Company’s insurance limits.

Critical Accounting Policies _2

Critical Accounting Policies Update (Policies)	9 Months Ended
	Sep. 29, 2018
Accounting Policies [Abstract]
Revenue Recognition	Revenue Recognition A majority of sales of fabrication and assembled systems are under fixed-price contracts. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We generally recognize revenue over time as we perform because of continuous transfer of control to the customer. Our customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to the Company. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided, which measures the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We generally use the cost-to-cost method of revenue recognition to measure progress for our contracts because it best depicts the transfer of control to the customer which occurs as we consume the costs on the contracts. Therefore, revenues and estimated profits are recorded proportionally as costs are incurred. Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. The customer may retain a small portion of the contract price until completion of the contract. Revenue recognized in excess of billings is recorded as a contract asset on the balance sheet. Amounts billed and due from our customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer should we fail to adequately complete some or all of our obligations under the contract. For some contracts we may receive advance payments from the customer. We record a liability for these advance payments in contract liabilities on the balance sheet. The advance payment typically is not considered a significant financing component because it is used to meet working capital demand that can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of its obligations under the contract. To determine proper revenue recognition for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single performance obligation or whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most of our contracts, we provide a significant service of integrating a complex set of tasks and components into a single project. Hence, the entire contract is accounted for as one performance obligation. Less commonly, we may provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling price of the promised goods or services underlying each performance obligation and use the expected cost plus margin approach to estimate the standalone selling price of each performance obligation. Due to the nature of the work require to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to variables and requires significant judgment. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or a reduction of revenue) on a cumulative catch-up basis. We have a standard, monthly process in which management reviews the progress and execution of our performance obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the schedule, technical requirements, and other contractual requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. Based on this analysis, any adjustments to revenue, operating costs and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive performance and may result in an increase in operating income during the performance of individual performance obligations if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities. When estimates of total costs to be incurred exceed total estimates to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is recorded. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks or realizing related opportunities. Changes in estimates of net revenue, operating costs and the related impact to operating income are recognized monthly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. See “Note 6 – Segment Information” for disaggregated revenue information.
Incremental Costs	Incremental Costs

Cash, Cash Equivalents and Re_2

Cash, Cash Equivalents and Restricted Cash (Tables)	9 Months Ended
	Sep. 29, 2018
Cash and Cash Equivalents [Abstract]
Schedule of Cash, Cash Equivalents and Restricted Cash	The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated financial statements: September 29, 2018 December 30, 2017 (dollars in thousands) Cash and cash equivalents $ 5,252 $ 8,988 Restricted cash — 660 Total cash, cash equivalents and restricted cash $ 5,252 $ 9,648

Contract Assets and Contract _2

Contract Assets and Contract Liabilities (Tables)	9 Months Ended
	Sep. 29, 2018
Contractors [Abstract]
Schedule of Costs Estimated Earnings and Billings on Uncompleted Contract	Costs, estimated earnings and billings on uncompleted contracts consisted of the following at September 29, 2018 and December 30, 2017: September 29, 2018 December 30, 2017 (dollars in thousands) Costs incurred on uncompleted contracts $ 35,213 $ 57,916 Estimated earnings on uncompleted contracts 7,068 15,423 Earned revenues 42,281 73,339 Less: billings to date 38,277 69,400 Net costs and estimated earnings in excess of billings on uncompleted contracts $ 4,004 $ 3,939 Contract assets $ 4,291 $ 5,273 Contract liabilities (287 ) (1,334 ) Net contract assets $ 4,004 $ 3,939

Segment Information (Tables)

Segment Information (Tables)	9 Months Ended
	Sep. 29, 2018
Segment Reporting [Abstract]
Schedule of Segment Information for Operation Statement	Segment information for the three months ended September 29, 2018 and September 30, 2017 is as follows (dollars in thousands): For the three months ended September 29, 2018: EPCM Automation Corporate Consolidated Revenue $ 6,821 $ 7,434 $ — $ 14,255 Gross profit 1,133 1,160 — 2,293 Gross Profit Margin 16.6 % 15.6 % 16.1 % SG&A 469 633 1,381 2,483 Operating income (loss) 664 527 (1,381 ) (190 ) Other income 11 Interest expense, net (1 ) Tax expense (17 ) Net loss $ (197 ) For the three months ended September 30, 2017: EPCM Automation Corporate Consolidated Revenue $ 5,399 $ 7,497 $ — $ 12,896 Gross profit 411 1,210 — 1,621 Gross Profit Margin 7.6 % 16.1 % 12.6 % SG&A 516 699 1,826 3,041 Operating income (loss) (105 ) 511 (1,826 ) (1,420 ) Other income 2 Interest expense, net (19 ) Tax expense (10,717 ) Net loss $ (12,154 ) Segment information for the nine months ended September 29, 2018 and September 30, 2017 is as follows (dollars in thousands): For the nine months ended September 29, 2018: EPCM Automation Corporate Consolidated Revenue $ 18,568 $ 22,746 $ — $ 41,314 Gross profit 2,879 3,080 — 5,959 Gross Profit Margin 15.5 % 13.5 % 14.4 % SG&A 1,426 2,001 4,508 7,935 Operating income (loss) 1,453 1,079 (4,508 ) (1,976 ) Other expense (367 ) Interest expense, net (14 ) Tax expense (31 ) Net loss $ (2,388 ) For the nine months ended September 30, 2017: EPCM Automation Corporate Consolidated Revenue $ 16,976 $ 24,360 $ — $ 41,336 Gross profit 1,742 4,123 — 5,865 Gross Profit Margin 10.3 % 16.9 % 14.2 % SG&A 1,614 2,106 5,783 9,503 Operating income (loss) 128 2,017 (5,783 ) (3,638 ) Other income 57 Interest expense, net (95 ) Tax expense (10,250 ) Net loss $ (13,926 ) Total Assets by Segment As of September 29, 2018 As of December 30, 2017 (dollars in thousands) EPCM $ 6,457 $ 5,976 Automation 12,388 12,485 Corporate 5,415 10,791 Consolidated $ 24,260 $ 29,252

Cash, Cash Equivalents and Re_3

Cash, Cash Equivalents and Restricted Cash (Details Narrative)	9 Months Ended
	Sep. 29, 2018
Cash and Cash Equivalents [Abstract]
Letter of credit expiration date	Dec. 31, 2017

Cash, Cash Equivalents and Re_4

Cash, Cash Equivalents and Restricted Cash - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 29, 2018	Dec. 31, 2017	Dec. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Cash and Cash Equivalents [Abstract]
Cash and cash equivalents	$ 5,252		$ 8,988
Restricted cash			660
Total cash, cash equivalents and restricted cash	$ 5,252	$ 9,648	$ 9,648	$ 10,898	$ 15,687

Contract Assets and Contract _3

Contract Assets and Contract Liabilities - Schedule of Costs Estimated Earnings and Billings on Uncompleted Contract (Details) - USD ($) $ in Thousands	Sep. 29, 2018	Dec. 30, 2017
Contractors [Abstract]
Costs incurred on uncompleted contracts	$ 35,213	$ 57,916
Estimated earnings on uncompleted contracts	7,068	15,423
Earned revenues	42,281	73,339
Less: billings to date	38,277	69,400
Net costs and estimated earnings in excess of billings on uncompleted contracts	4,004	3,939
Contract assets	4,291	5,273
Contract liabilities	(287)	(1,334)
Net contract assets	$ 4,004	$ 3,939

Segment Information - Schedule

Segment Information - Schedule of Segment Information for Operation Statement (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Sep. 29, 2018	Sep. 30, 2017	Dec. 30, 2017
Revenue	$ 14,255	$ 12,896	$ 41,314	$ 41,336
Gross profit	$ 2,293	$ 1,621	$ 5,959	$ 5,865
Gross Profit Margin	16.10%	12.60%	14.40%	14.20%
SG&A	$ 2,483	$ 3,041	$ 7,935	$ 9,503
Operating income (loss)	(190)	(1,420)	(1,976)	(3,638)
Other income	11	2	(367)	57
Interest expense, net	(1)	(19)	(14)	(95)
Tax expense	(17)	(10,717)	(31)	(10,250)
Net loss	(197)	(12,154)	(2,388)	(13,926)
Total Assets	24,260		24,260		$ 29,252
EPCM [Member]
Revenue	6,821	5,399	18,568	16,976
Gross profit	$ 1,133	$ 411	$ 2,879	$ 1,742
Gross Profit Margin	16.60%	7.60%	15.50%	10.30%
SG&A	$ 469	$ 516	$ 1,426	$ 1,614
Operating income (loss)	664	(105)	1,453	128
Total Assets	6,457		6,457		5,976
Automation [Member]
Revenue	7,434	7,497	22,746	24,360
Gross profit	$ 1,160	$ 1,210	$ 3,080	$ 4,123
Gross Profit Margin	15.60%	16.10%	13.50%	16.90%
SG&A	$ 633	$ 699	$ 2,001	$ 2,106
Operating income (loss)	527	511	1,079	2,017
Total Assets	12,388		12,388		12,485
Corporate [Member]
Revenue
Gross profit
Gross Profit Margin
SG&A	$ 1,381	$ 1,826	$ 4,508	$ 5,783
Operating income (loss)	(1,381)	$ (1,826)	(4,508)	$ (5,783)
Total Assets	$ 5,415		$ 5,415		$ 10,791

Federal and State Income Taxes

Federal and State Income Taxes (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Sep. 29, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Income tax benefits likelihood percentage description			greater than 50 percent likelihood
Total income tax (expense) benefit	$ (17)	$ (10,717)	$ (31)	$ (10,250)
Effective income tax rate, percent	(9.30%)	(745.50%)
Effective income tax rate reconciliation, at federal statutory income tax rate, percent			21.00%