Accounting Standards

Recently Adopted Accounting Standards

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows: Restricted Cash” to address diversity in practice in the classification and presentation of changes in restricted cash on the statement of cash flows. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments should be applied using a retrospective transition method to each period presented. On January 1, 2019, the Company adopted the provisions of ASU 2016-18 using the retrospective transition method. As a result, changes in restricted cash are now included in the beginning of period and end of period total cash, cash equivalents and restricted cash amounts.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:



(in thousands)	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	8,344	$	1,619
Restricted cash	113		113
Total cash, cash equivalents and restricted cash	8,457		1,732

In January 2017, the FASB issued ASU 2017-04, “Intangibles–Goodwill and Other - Simplifying the Test for Goodwill Impairment” to address the cost and complexity of the goodwill impairment test which resulted in the elimination of Step 2 from the goodwill impairment test. Step 2 measured a goodwill impairment loss by comparing the implied fair value of goodwill by assigning fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Rather, the Company would be required to do its annual and interim goodwill impairment tests by comparing the fair value of the reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount is greater than the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Income tax effects measuring the goodwill impairment loss, if applicable, from any tax deductible goodwill on the carrying amount on the reporting unit should also be considered. The guidance is effective for public business entities' financial statements issued for the Company’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in this update are to be applied on a prospective basis. Management adopted this standard in the first quarter of 2019 and applied the guidance within the standard when performing the Company’s interim impairment tests.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Accounting,” to simplify the accounting for share-based payment transactions to non-employees for goods and services by aligning it with the guidance for share-based payments to employees. This guidance is effective for public business entities for fiscal years beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of ASU 2014-09, “Revenue from Contracts with Customers—Topic 606.” Management adopted this standard in the fourth quarter of 2019. The adoption of this standard had no material impact on the consolidated financial statements.

New Revenue Recognition Standard

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), as amended by subsequent ASUs (collectively, “ASC Topic 606”) which amends the existing accounting standards for revenue recognition and establishes principles for recognizing revenue upon the transfer of promised goods or services to customers based on the expected consideration to be received in exchange for those goods or services. Effective December 31, 2019, management adopted ASC Topic 606 for the annual period beginning after January 1, 2019 using a modified retrospective transition approach. The prior year comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods; however, certain balances have been reclassified within the footnote disclosure for comparative purposes to conform to the current year presentation.

The adoption of ASC Topic 606 did not have an impact on revenue of our fixed-price and other service contracts. However, it did impact revenue of our construction-type contracts within our construction and service segments specifically in accounting for warranties. For many of our construction-type contracts, we previously included assurance-type warranties in total estimated project costs. Under ASC Topic 606, the estimated cost of satisfying assurance-type warranties is accrued in accordance with the guidance in ASC Topic 460, Guarantees. Upon adoption of ASC Topic 606, we removed estimated and actual warranty costs at the contract level and recognized a warranty liability and expense in direct proportion to the cost-to-cost method progress towards completion of the associated contract, which had a $0.6 million effect on our opening accumulated deficit balance.

The Company also offers service-type warranties on certain construction-type projects. These service-type warranties were not accounted for as a separate performance obligation prior to the adoption of ASC Topic 606. Upon adoption of ASC Topic 606, we allocated a portion of the contract's transaction price to the service-type warranty based on its estimated standalone selling price. The accounting for service-type warranties under ASC Topic 606 did not have a material impact on the consolidated financial statements as of January 1, 2019 and for the period ending December 31, 2019.

In addition, as of January 1, 2019, we began to separately present contract assets and liabilities on the consolidated balance sheets. Contract assets include amounts due under contractual retainage provisions that were previously included in accounts receivable as well as costs and estimated earnings in excess of billings on uncompleted contracts that were previously separately presented. Contract liabilities include billings in excess of costs and estimated earnings on uncompleted contracts that were previously separately presented and provisions for losses. See Note 5 - Contract Assets and Liabilities for further information.

The adoption of ASC Topic 606 had no impact on the cash flows provided by operating activities in the Company's consolidated statements of cash flows.

Notes 2, 4, 5, 8 and 18 include additional information relating to our adoption of ASC Topic 606. Note 13 includes information regarding our revenue disaggregated by segment.

Refer to the section, Effects of Adoption of ASC 606 and ASC 842 on Consolidated Financial Statements, below for additional disclosures around the quantitative impacts that the adoption of ASC Topic 606 had on our consolidated financial statements.

New Leasing Standard

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended and supplemented by subsequent ASUs (collectively, “ASC Topic 842”). ASC Topic 842 amends the existing guidance in Accounting Standards Codification (“ASC”) 840, Leases. This ASU requires, among other things, the recognition of lease right-of-use (“ROU”) assets and lease liabilities by lessees for those leases currently classified as operating leases. ASC Topic 842 allowed companies to adopt the new standard by applying either a modified retrospective method to the beginning of the earliest period presented in the financial statements or an optional transition method to initially apply the standard on January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard using the optional transition method on December 31, 2019. Under this method, financial results reported in periods prior to 2019 are unchanged. The Company elected the package of practical expedients which provides relief from having to reassess (1) whether any expired or existing contracts contain leases, (2) lease classification (as operating or financing) for any expired or existing leases, and (3) initial direct costs for any existing leases. The Company also elected not to separate non-lease components from lease components and did not elect the hindsight practical expedient.

The adoption of ASC Topic 842 had no impact to the Company's statements of operations or the cash flows provided by operating and financing activities in the Company's consolidated statements of cash flows.

Refer to Note 15 - Leases for additional information regarding the impact of the adoption of ASC Topic 842 on the Company's financial position as of December 31, 2019.

Additionally, refer to the section, Effects of Adoption of ASC 606 and ASC 842 on Consolidated Financial Statements, below for additional disclosures around the quantitative impacts that the adoption of ASC Topic 842 had on our consolidated financial statements.

Effects of Adoption of ASC 606 and ASC 842 on Consolidated Financial Statements

The effect of the changes made to the Company's consolidated January 1, 2019 balance sheet for the adoption of ASC Topic 606 and ASC Topic 842 were as follows:



CONSOLIDATED BALANCE SHEET
(in thousands)	Balance as of December 31, 2018 ^(a)		Adjustments due to ASC Topic 606		Adjustments due to ASC Topic 842		Balance as of January 1, 2019
Assets
Accounts receivable, net ^(b)	135,687		(29,867	)	—		105,820
Contract assets	—		63,810		—		63,810
Costs and estimated earnings in excess of billings on uncompleted contracts	32,698		(32,698	)	—		—
Operating lease right-of-use assets ^(c)	—		—		19,830		19,830
Deferred tax asset	4,409		(233	)	—		4,176

Liabilities
Contract liabilities	—		48,816		—		48,816
Billings in excess of costs and estimated earnings on uncompleted contracts	50,843		(50,843	)	—		—
Accrued expenses and other current liabilities	53,801		2,400		—		56,201
Current portion of long-term debt	3,141		—		62		3,203
Current operating lease liabilities ^(c)	—		—		3,240		3,240
Long-term debt	23,614		—		65		23,679
Long-term operating lease liabilities ^(c)	—		—		17,385		17,385
Other long-term liabilities	1,514		—		(794	)	720

Stockholders' Equity
Accumulated deficit	(8,424	)	639		(128	)	(7,913	)

(a) Balances as previously reported on the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

(b) Prior to the adoption of ASC Topic 606, retainage receivable was included within accounts receivable, net.

(c) Prior to the adoption of ASC Topic 842, operating lease right-of-use assets and current and long-term operating lease liabilities were not recorded on the Company's consolidated balance sheets.

The effect of the changes made to the Company's consolidated balance sheets and consolidated statements of operations for the adoption of ASC Topic 606 and ASC Topic 842 for the year ended December 31, 2019, were as follows:



CONSOLIDATED BALANCE SHEET	As of December 31, 2019
(in thousands)	Balance Without Adoption of ASC Topic 606 and ASC Topic 842		Adjustments due to ASC Topic 606		Adjustments due to ASC Topic 842		As Reported
Assets
Accounts receivable, net ^(a)	137,940		(32,873	)	—		105,067
Contract assets	(81	)	77,269		—		77,188
Costs and estimated earnings in excess of billings on uncompleted contracts	43,033		(43,033	)	—		—
Operating lease right-of-use assets ^(b)	—		—		21,056		21,056
Deferred tax asset	5,194		(408	)	—		4,786

Liabilities
Current portion of long-term debt	4,365		—		60		4,425
Current operating lease liabilities ^(b)	—		—		3,750		3,750
Contract liabilities	316		42,054		—		42,370
Accrued expenses and other current liabilities	17,159		2,886		—		20,045
Billings in excess of costs and estimated earnings on uncompleted contracts	45,076		(45,076	)	—		—
Long-term debt	38,802		—		66		38,868
Long-term operating lease liabilities ^(b)	—		—		18,247		18,247
Other long-term liabilities	1,702		—		(939	)	763

Stockholders' Equity
Accumulated deficit ^(c)	(10,651	)	1,091		(128	)	(9,688	)

(a) Prior to the adoption of ASC Topic 606, retainage receivable was included within accounts receivable, net.

(b) Prior to the adoption of ASC Topic 842, operating lease right-of-use assets and current and long-term operating lease liabilities were not recorded on the Company's consolidated balance sheets.



CONSOLIDATED STATEMENT OF OPERATIONS	As of December 31, 2019
(in thousands)	Balance Without Adoption of ASC Topic 606 and ASC Topic 842			Adjustments due to ASC Topic 606			Adjustments due to ASC Topic 842		As Reported
Revenue
Construction	$	438,179		$	17		$	—	$	438,196
Service	115,222			(84		)	—		115,138
Total revenue	553,401			(67		)	—		553,334
Cost of revenue
Construction	395,272			(569		)	—		394,703
Service	86,871			(117		)	—		86,754
Total cost of revenue	482,143			(686		)	—		481,457
Gross profit	71,258			619			—		71,877
Operating expenses:
Selling, general and administrative expenses	63,168			—			—		63,168
Amortization of intangibles	642			—			—		642
Total operating expenses	63,810			—			—		63,810
Operating income	7,448			619			—		8,067
Other income (expenses):
Impairment of goodwill	(4,359		)	—			—		(4,359		)
Interest expense, net	(6,285		)	—			—		(6,285		)
Loss on debt extinguishment	(513		)	—			—		(513		)
Gain on change in fair value of warrant liability	588			—			—		588
Gain on embedded derivative	388			—			—		388
Gain on disposition of property and equipment	57			—			—		57
Total other expenses	(10,124		)	—			—		(10,124		)
Loss before income taxes	(2,676		)	619			—		(2,057		)
Income tax benefit	$	(449	)	167			—		(282		)
Net loss	$	(2,227	)	$	452		$	—	$	(1,775	)

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a screen to determine when a set of assets and activities is not a business. If the screen is not met, the amendments require further consideration of inputs, substantive processes and outputs to determine whether the transaction is an acquisition of a business. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2018, and for interim periods within annual periods beginning after December 15, 2019. The amendments in this update are to be applied prospectively on or after the effective date. Management adopted this standard in the fourth quarter of 2019. The adoption of this standard had no material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management adopted this standard in the fourth quarter of 2019. The adoption of this standard only impacts disclosure and therefore, the adoption had no material impact on the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposure. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. The guidance is effective for smaller reporting companies on January 1, 2023 with early adoption permitted. The adoption of this standard will be through a cumulative-effect adjustment to retained earnings as of the effective date. Based on our historical experience, the Company does not expect that this pronouncement will have a significant impact in its financial statements or on the estimate of the allowance for doubtful accounts.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which affects general principles within Topic 740, and is meant to simplify and reduce the cost of accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and simplifies areas including franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, the incremental approach for intraperiod tax allocation, interim period income tax accounting for year-to-date losses that exceed anticipated losses and enacted changes in tax laws in interim periods. The changes are effective for annual periods beginning after December 15, 2020. Management is currently assessing the impact of this pronouncement on its consolidated financial statements.