1. BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

BASIS OF PRESENTATION

NOTE 1: BASIS OF PRESENTATION

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its wholly-owned subsidiary (“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 notes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Preparation of financial statements in conformity with US 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. 

Liquidity

The Company’s cash on hand was $3,033 and working capital was $3,965 as of March 31, 2020. As of December 31, 2019, cash on hand and working capital was $3,523 and $4,939, respectively. The Company does not have a credit facility in place and depends on cash on hand, cash flows from operations, and the potential opportunistic sales of property, plant and equipment (“PP&E”) to meet its liquidity needs.

Given the abrupt decline in oil prices and global economic activity caused by COVID-19, the Company cannot predict with certainty the overall impact on the Company’s operations and cash flows. The Company has taken steps to mitigate the challenges presented by the current macro environment, including workforce reductions, wage reductions, rent abatement, and limiting capital expenditures and R&D efforts to only critical items. The Company continues to seek further cost reduction opportunities to preserve liquidity.

Additionally, the Company applied for a loan under the Small Business Administration’s Paycheck Protection Program. On April 29, 2020, the Company received a loan in the amount of $1,111, which will be used to finance payroll, rent, and utilities over the balance of the second quarter of 2020. The loan principal and related interest accrued may be forgivable, partially or in full, if certain conditions are met.

The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, current working capital, and potential opportunistic sales of PP&E in addition to pursuing a disciplined approach to making capital investments.

Principles of Consolidation

The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated.

Segments

For the three months ended March 31, 2020 and 2019, we had one operating and reporting segment, Deep Down Delaware.