bb, DPDW
They have had two previous mergers. Electrowave and Mako.
Maybe the way they handled those will show some insight:
ElectroWave:
Effective April 2, 2007, the Deep Down consummated an Asset Purchase Agreement with ElectroWave USA, Inc. ("ElectroWave") a Texas corporation, that provides for the acquisition of substantially all of the assets of ElectroWave. Deep Down formed a wholly-owned subsidiary, ElectroWave USA, Inc., a Nevada Corporation, to complete the acquisition. ElectroWave offers products and services in the fields of electronic monitoring and control systems for the energy, military, and commercial business sectors. ElectroWave designs, manufactures, installs, and commissions integrated PLC and SCADA based instrumentation and control systems, including ballast control and monitoring, drilling instrumentation, vessel management systems, marine advisory systems, machinery plant control and monitoring systems, and closed circuit television systems. ElectroWave's customers include Transocean Offshore, Diamond Offshore, Marinette Marine Corporation, VT Halter, Atlantic Marine, New York City Department of Transportation, and others. ElectroWave's equipment is installed on some of the latest generation United States Coast Guard and United States Navy vessels. Current systems are in operation in the following areas: United States Gulf of Mexico, the North Sea, Baku, Vietnam, Singapore, Nigeria, Equatorial Guinea, Cameroon, Angola, India, Egypt, the United Kingdom, Russia, Brazil, Australia, Indonesia, and the Middle East.
As part of the acquisition, Deep Down paid off $356,463.50 in bank debt and $43,815.00 in current debt of ElectroWave USA (Texas), along with ongoing accounts payable and received substantially all of the assets, including inventory, fixed assets and accounts receivable. In addition, Deep Down may issue up to an aggregate of $517,000 in Convertible Preferred Stock over the next three years, as an additional contingent purchase cost, if the operations of ElectroWave reach certain financial milestones based on net income for the fiscal years ending December 31, 2007, 2008 and 2009. Such Convertible Preferred Stock, if issued in the future, would have a conversion price equal to the greater of (a) $0.50 per share or (b) 120% of the volume weighted average price of the last reported trades for the 20 consecutive trading days immediately prior to December 31 of the respective year for which the Convertible Preferred shares are issued.
Item 3.02 Unregistered Sales of Equity Securities
Deep Down may issue up to an aggregate of $517,000 in Convertible Preferred Stock over the next three years, as additional contingent purchase cost, if the operations of ElectroWave reach certain financial milestones based on net income for the fiscal years ending December 31, 2007, 2008 and 2009. Such Convertible Preferred Stock, if issued in the future, would have a conversion price equal to the greater of (a) $0.50 per share or (b) 120% of the volume weighted average price of the last reported trades for the 20 consecutive trading days immediately prior to December 31 of the respective year for which the Convertible Preferred shares are issued.
Item 7. Financial Statements and Exhibits
ElectroWave reported unaudited revenues of approximately $3.2 million for the fiscal year ending December 31, 2006. The Registrant has engaged independent certified public accountants to audit the financial statements of ElectroWave and intends to include the audited financial statements on Form 8-K as soon as they are available.
Mako:
On December 18, 2007, Deep Down announced that it had signed a definitive purchase agreement to purchase Mako Technologies, Inc. ("Mako"). Headquartered in Morgan City, Louisiana, Mako serves the growing offshore petroleum and marine industries with technical support services, and products vital to offshore petroleum production, through rentals of its remotely operated vehicles (ROV), topside and subsea equipment, and diving support systems used in diving operations, maintenance and repair operations, offshore construction, and environmental/marine surveys.
The total cost of acquiring Mako is a maximum of $5.0 million in cash and 11,269,841 shares of common stock of Deep Down based on Mako management's expectation of $2,400,000 in earnings before depreciation, interest, amortization, taxes and other non-cash charges ("EBITDA"), after also adjusting for certain non-recurring expenses, for the fiscal year ending December 31, 2007. As part of this acquisition, Deep Down paid off $917,676 in Mako bank debt. The first installment of $2,916,667 in cash and 6,574,074 restricted shares of common stock of Deep Down has been paid. Up to $2,083,333 in cash and 4,695,767 restricted shares of common stock of Deep Down will be paid upon completion of an audit to verify adjusted EBITDA expectations for the fiscal year ending December 31, 2007. Prospect Capital Corporation is providing $6,000,000 in debt to fund the cash requirements and expenses associated with this transaction. Terms are substantially the same as those in the initial borrowing that was concluded in August 2007.
Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
On January 9, 2008 Deep Down, Inc. announced that it has closed on its anticipated additional $6,000,000 in debt financing with Prospect Capital Corporation to fund its acquisition of Mako Technologies, Inc. ("Mako"). Headquartered in Morgan City, Louisiana, Mako serves the growing offshore petroleum and marine industries with technical support services, and products vital to offshore petroleum production, through rentals of its remotely operated vehicles (ROV), topside and subsea equipment, and diving support systems used in diving operations, maintenance and repair operations, offshore construction, and environmental/marine surveys.
As part of this funding, Deep Down paid $2,916,667 in cash, issued 6,574,074 restricted shares of common stock of Deep Down and paid off an aggregate of $917,676 in Mako bank debt. Up to $2,083,333 in cash and 4,695,767 restricted shares of common stock of Deep Down will be paid upon completion of an audit to verify adjusted EBITDA expectations for the fiscal year ending December 31, 2007.
AI
