Sunday, November 16, 2008 7:46:32 PM
John:
Thanks for asking directly about this issue.
Regarding a "fault" contingency, that is certainly an erroneous claim. The Company has always disclosed succinctly that we "will continue to accrue such liability until the Registration Statement for such shares is declared effective;" I have not seen in any of these documents a "fault" clause. Please refer to the filing excerpt below...
It is true, however, that the Company timely filed, and has so far been waiting for the SEC's final approval. Management is well prepared for this contingency, and we all must wait to see the final outcome.
From our Second Quarter 10-Q filings with the USSEC in August:
http://sec.gov/Archives/edgar/data/1110607/000101968708003731/deepdown_10q-063008.htm
In connection with the private placement, Deep Down entered into a registration rights agreement where the holder has certain demand registration rights. Deep Down filed an S-1 Registration Statement on July 21, 2008. If the Registration Statement is not declared effective by September 3, 2008 (the “Required Effective Date”), then for each day following the Required Effective Date, until but excluding the date the Commission declares the Registration Statement effective, Deep Down shall be required to pay daily damages to the purchasers. Deep Down evaluated the registration rights agreement for liability treatment under Financial Accounting Standards Board (“FASB”) Statement No. 5, “Accounting for Contingencies” and Financial Statement Staff Position (FSP) EITF 00-19(2) “Accounting for Registration Payment Arrangements” and determined that the registration rights did not meet the definition of a liability under the authoritative guidance since management believes the liability is not estimable at this time.
John:
Please let me know if there are any other questions regarding this issue, I hope this clears things up.
Regards,
--Steve Haag
investor relations
Deep Down, Inc. (OTCBB: DPDW)
ir@deepdowninc.com
281-862-2201 (O)
281-862-2522 (F)
These are simply my personal comments, and should not be relied upon in your investment decisions. I strongly urge you to conduct your own due diligence with regard to any investment in Deep Down, Inc. I respectfully refer you to Deep Down's filings with the United States Securities and Exchange Commission.
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