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Deep Down (DPDW)

Filed: 15 Oct 13, 8:00pm

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-191577

 

PROSPECTUS

 

4,443,611 Shares of Common Stock

 


 

These shares were issued to the Selling Shareholders pursuant to a private placement with closing dates on September 10, 2013 and September 26, 2013 (the “Private Placement”), and issued pursuant to an exemption provided by Rule 506 of the Securities Act of 1933, as amended. The term “Selling Shareholders” also covers persons to whom the original Selling Shareholders transfer their shares, including transferees, donees, pledgees, or other successors.

 

The methods of sale of the common stock offered by this Prospectus are described under the heading “Plan of Distribution” on page 16. We will receive none of the proceeds from the sale of any of the common stock to which this Prospectus relates. See “Use of Proceeds” on page 10.

 

The prices at which the Selling Shareholders may sell the shares of common stock that are part of this offering will be determined by the prevailing market price for the shares at the time the shares are sold, at negotiated prices, or prices determined from time to time by the Selling Shareholders.  See “Plan of Distribution” on page 16.

 

Sales of our common stock are reported on theOTCQX U.S., a segment of the OTCQX marketplace, under the symbol “OTCQX: DPDW.” On October 15, 2013, the last reported sale price of our common stock was $2.50 per share.

 

A current Prospectus must be in effect at the time of the sale of the shares of common stock discussed above. The Selling Shareholders will be responsible for any commissions or discounts due to brokers or dealers. We will pay all of the other offering expenses.

 

Each Selling Shareholder or dealer selling the common stock is required to deliver a current Prospectus upon the sale. In addition, for the purposes of the Securities Act of 1933, as amended, Selling Shareholders may be deemed underwriters.

 

This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Investing in our common stock involves a high degree of risk. You should carefully read and consider the “Risk Factors” beginning on page 3.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

 

Prospectus dated October 16, 2013.

 

 

 
 

 

TABLE OF CONTENTS

 

 

Prospectus Summary1
The Offering2
Risk Factors3
Special Note About Forward-Looking Statements9
Use of Proceeds10
Description of Capital Stock10
Interest of Named Experts and Counsel12
Experts12
Shares Available for Future Sale12
Selling Shareholders13
Plan of Distribution16
Legal Matters18
Where You Can Find More Information18
Information Incorporated by Reference18

 

 

 

 

 

i
 

PROSPECTUS SUMMARY

 

This Prospectus Summary highlights key aspects of our business that are described in more detail in our reports filed with the Securities and Exchange Commission (the “SEC” or “Commission”).  This Prospectus Summary does not contain all of the information that you should consider before making a future investment decision with respect to our securities.  You should read this entire Prospectus carefully, including the “Risk Factors” and the information incorporated by reference.

 

Unless the context indicates otherwise, all references in this Prospectus to “Deep Down,” “the Company,” “we,” “us” and “our” refer to Deep Down, Inc. and its wholly-owned subsidiaries.

 

This Prospectus is part of a Registration Statement on Form S-1 that we filed with the SEC using a “shelf” registration or continuous offering process. Under this shelf process, certain Selling Shareholders may from time to time sell the shares of common stock described in this Prospectus in one or more offerings.

 

You should rely only on the information contained or incorporated by reference in this Prospectus. Neither we nor the Selling Shareholders have authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Selling Shareholders are not making an offer to sell these securities in any jurisdiction where the offer or sale of these securities is not permitted. You should assume that the information appearing in this Prospectus is accurate only as of the date on the front cover of this Prospectus and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference. Our business, financial condition, results of operation and prospects may have changed since these dates.

 

Our Company

 

Deep Down, Inc. (OTCQX: DPDW) is a Nevada corporation engaged in the oilfield services industry. Deep Down is publicly traded and was incorporated on December 14, 2006, through a reverse merger with MediQuip Holdings, Inc. (“MediQuip”), a publicly-traded Nevada corporation.

 

Deep Down is the parent company to the following wholly-owned subsidiaries: Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”), Mako Technologies, LLC, a Nevada limited liability company (“Mako”), Deep Down International Holdings, LLC, a Nevada limited-liability company (“DDIH”) and Deep Down Brasil, Ltda, a Brazilian limited liability company (“Deep Down Brasil”). In August 2012, we consolidated the operations of Mako into Deep Down Delaware.

 

We provide services to the offshore energy industry to support deepwater exploration, development and production of oil and gas and other maritime operations.  We are primarily a service company and produce custom engineered products that assist us in fulfilling service objectives for specific projects on a contractual basis.  We design and manufacture a broad line of deep water equipment, surface equipment and offshore rig equipment that are used by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world.  We also manufacture monitoring and control systems used by offshore energy and other maritime operations.  Our products are often initially developed in direct response to customer requests for solutions to critical problems in the field.  We also serve the growing offshore petroleum and maritime industries with technical management and support services.  Set forth below is a more detailed description of important services and products we provide.

 

This Offering

 

All 4,443,611 shares of common stock offered herein were sold pursuant to a private offering of our common stock in September 2013 to sixty (60) accredited investors pursuant to an exemption from registration provided by Rule 506 of the Securities Act of 1933, as amended (the “Act”).

 

Risks Affecting Us

 

We are subject to a number of risks that you should consider before you decide to purchase our common stock. Those risks are discussed more fully under the heading “Risk Factors” on page 3.

 

1
 

THE OFFERING

 

The table below summarizes our shares of common stock outstanding connected with and after this offering.

 

  
Common stock offered for resale to the public by the Selling Shareholders (1):4,443,611 shares
Common stock outstanding after this offering (2):15,275,081 shares
Use of proceeds from this offering:We will not receive any proceeds from the resale of our common stock in this offering (see “Use of Proceeds” on page 10).
OTCQX Marketplace Trading Symbol:OTCQX: DPDW
Risk factorsSee “Risk Factors” beginning on page 3 and the other information included in this Prospectus for a discussion of risk factors you should carefully consider before deciding to invest in our common stock.

____________________

(1) All 4,443,611 shares of common stock offered herein were sold pursuant to a private offering of our common stock in September 2013 to sixty (60) accredited investors pursuant to an exemption from registration provided by Rule 506 of the Act.

 

(2) The number of shares of our common stock outstanding after this offering is based on the number of shares outstanding as of October 10, 2013 and excludes:

 

·Common shares in an amount equal to 15% of the total number of shares outstanding reserved for issuance under our stock purchase plan.

 

 

2
 

RISK FACTORS

 

If you purchase our common stock, you will be taking on a high degree of financial risk.  In deciding whether or not to purchase our common stock, you should carefully consider the following discussion of risks, together with the other information contained in this Prospectus.  The occurrence of any of the following risks could materially harm our business and financial condition and our ability to raise additional capital in the future.  In that event, the market price of our common stock could decline and you could lose part or all of your investment.

 

Risks Related to Our Business

 

We derive most of our revenues from companies in the offshore oil and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and gas prices.

 

We derive most of our revenues from customers in the offshore oil and gas exploration, development and production industry.  The offshore oil and gas industry is a historically cyclical industry characterized by significant changes in the levels of exploration and development activities. Oil and gas prices, and market expectations of potential changes in those prices, significantly affect the levels of those activities.  Worldwide political, economic and military events have contributed to oil and gas price volatility and are likely to continue to do so in the future. Any prolonged reduction in the overall level of offshore oil and gas exploration and development activities, whether resulting from changes in oil and gas prices or otherwise, could materially and adversely affect our financial condition and results of operations in our segments within our offshore oil and gas business.

 

Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our services and products include the following:

 

worldwide demand for oil and gas;
  
the ability of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain production levels and pricing;
  
the level of production by non-OPEC countries;
  
domestic and foreign tax policy;
  
laws and governmental regulations that restrict exploration and development of oil and gas in various offshore jurisdictions;
  
advances in exploration and development technology;
  
the political environment of oil-producing regions;
  
the price and availability of alternative fuels; and
  
overall economic conditions.

 

Our business involves numerous operating hazards that may not be covered by insurance. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations.

 

Our products are used in potentially hazardous drilling, completion and production applications that can cause personal injury, product liability and environmental claims. A catastrophic occurrence at a location where our equipment and/or services are used may expose us to substantial liability for personal injury, wrongful death, product liability or commercial claims. To the extent available, we maintain insurance coverage that we believe is customary in the industry. Such insurance does not, however, provide coverage for all liabilities, and we cannot assure you that our insurance coverage will be adequate to cover claims that may arise or that we will be able to maintain adequate insurance at rates we consider reasonable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations.

 

3
 

We may lose money on fixed-price contracts.

 

A portion of our business consists of designing, manufacturing, selling and installing equipment for major projects pursuant to competitive bids, and is performed on a fixed-price basis. Under these contracts, we are typically responsible for all cost overruns, other than the amount of any cost overruns resulting from requested changes in order specifications. Our actual costs and any gross profit realized on these fixed-price contracts will often vary from the estimated amounts on which these contracts were originally based.  This may occur for various reasons, including:

 

errors in estimates or bidding;
  
changes in availability and cost of labor and materials; or
  
variations in productivity from our original estimates.

 

These variations and the risks inherent in our projects may result in reduced profitability or losses on projects. Depending on the size of a project, variations from estimated contract performance could have a significant impact on our operating results.

 

Our business could be adversely affected if we do not develop new products.

 

Technology is an important component of our business and growth strategy, and our success as a company depends to a significant extent on the development and implementation of new product designs and improvements. Whether we can continue to develop systems and services and related technologies to meet evolving industry requirements and, if so, at prices acceptable to our customers will be significant factors in determining our ability to compete in the industry in which we operate. Many of our competitors are large multinational companies that may have significantly greater financial resources than we have, and they may be able to devote greater resources to research and development of new systems, services and technologies than we are able to do.

 

Loss of our key management or other personnel could adversely impact our business.

 

We depend on the services of our executive management team, including Ronald E. Smith and Eugene L. Butler. The loss of any of these officers could have a material adverse effect on our operations and financial condition. In addition, competition for skilled machinists, fabricators and technical personnel among companies that rely heavily on engineering and technology is intense, and the loss of qualified employees or an inability to attract, retain and motivate additional highly skilled employees required for the operation and expansion of our business could hinder our ability to conduct research activities successfully and develop and produce marketable products and services. While we believe that our wage rates are competitive and that our relationship with our skilled labor force is good, a significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates paid by us, or both. If either of these events were to occur, in the near-term, the profits realized by us from work in progress would be reduced and, in the long-term, our production capacity and profitability could be diminished, and our growth potential could be impaired.  Additionally, if we were to lose the services of our officers for any reason, we could face substantial costs and expenses to locate individuals with similar capabilities and/or may not be able to find suitable candidates to fill the vacancies left by such individuals, either of which could have a material adverse effect on our results of operations.

 

We may not be successful in integrating businesses that we may acquire.

 

The successful integration of acquired businesses is important to our future financial performance.  We may not achieve the anticipated benefits from any acquisition unless the operations of the acquired business are successfully combined with ours in a timely manner. The integration of our acquisitions will require substantial attention from our management.  The diversion of the attention of our management, and any difficulties encountered in the transition process, could have a material adverse effect on our operations and financial results.  The difficulties of integration may be increased by the necessity of coordinating geographically separated organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures.  There can be no assurance that there will not be substantial costs associated with such activities or that there will not be other material adverse effects of these integration efforts. In addition, the process of integrating the various businesses could also cause the interruption of, or a loss of momentum in, the activities of some or all of these businesses, which could have a material adverse effect on our operations and financial results. There can be no assurance that we will realize any of the anticipated benefits from our acquisitions.  The acquisition of oil service companies that are not profitable, or the acquisition of new facilities that result in significant integration costs and inefficiencies, could also adversely affect our profitability.

 

4
 

Our current and anticipated future growth has placed, and will continue to place, significant demands on our management, operational and financial resources.  Our ability to manage our growth effectively will require us to continue to improve our operational, financial and management information systems and to continue to attract, train, motivate, manage and retain key employees.  We may not be able to manage our expanded operations effectively.

 

We may not be successful in implementing our strategy or in responding to ongoing changes in the oil service industry which may require adjustments to our strategy.  If we are unable to implement our strategy successfully or do not respond timely and adequately to ongoing changes in the healthcare industry, our business, financial condition and results of operations will be materially adversely affected.

 

If we undertake international operations, it will involve additional risks not associated with our domestic operations.

 

If we become involved in international operations, the effect on our business from the risks we described will not be the same in all countries and jurisdictions.  By way of example, recently there has been political instability and civil unrest in Indonesia and West Africa and general economic downturns in Asia and Brazil.  However, the specific risks associated with our operations in foreign areas will include risks of:

 

multiple, conflicting, and changing laws and regulations, export and import restrictions, and employment laws;
  
regulatory requirements, and other government approvals, permits, and licenses;
  
potentially adverse tax consequences;
  
political and economic instability, including wars and acts of terrorism; political unrest, boycotts, curtailments of trade, and other business restrictions;
  
expropriation, confiscation or nationalization of assets;
  
renegotiation or nullification of existing contracts;
  
difficulties and costs in recruiting and retaining individuals skilled in international business operations;
  
foreign exchange restrictions;
  
foreign currency fluctuations;
  
foreign taxation;
  
the inability to repatriate earnings or capital;
  
changing political conditions;
  
changing foreign and domestic monetary policies;
  
regional economic downturns; and
  
foreign governmental regulations favoring or requiring the awarding of contracts to local contractors or requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction that may harm our ability to compete.

 

 

5
 

Our offshore oilfield operations involve a variety of operating hazards and risks that could cause losses.

 

Our operations are subject to the hazards inherent in the offshore oilfield business.  These include blowouts, explosions, fires, collisions, capsizing and severe weather conditions. These hazards could result in personal injury and loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations. We may incur substantial liabilities or losses as a result of these hazards.  While we maintain insurance protection against some of these risks, and seek to obtain indemnity agreements from our customers requiring the customers to hold us harmless from some of these risks, our insurance and contractual indemnity protection may not be sufficient or effective to protect us under all circumstances or against all risks.  The occurrence of a significant event not fully insured or indemnified against or the failure of a customer to meet its indemnification obligations to us could materially and adversely affect our results of operations and financial condition.

 

Laws and government regulations may add to our costs or adversely affect our operations.

 

Our business is affected by changes in public policy and by federal, state, local and foreign laws and regulations relating to the energy industry.  Oil and gas exploration and production operations are affected by tax, environmental and other laws relating to the petroleum industry, by changes in those laws and changes in related administrative regulations. It is also possible that these laws and regulations may in the future add significantly to our operating costs or those of our customers or otherwise directly or indirectly affect our operations.

 

Environmental laws and regulations can increase our costs, and our failure to comply with those laws and regulations can expose us to significant liabilities.

 

Risks of substantial costs and liabilities related to environmental compliance issues are inherent in our operations. Our operations are subject to extensive federal, state, local and foreign laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment.  Permits are required for the operation of various facilities, and those permits are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines, injunctions or both. In some cases, those governmental requirements can impose liability for the entire cost of cleanup on any responsible party without regard to negligence or fault and impose liability on us for the conduct of or conditions others have caused, or for our acts that complied with all applicable requirements when we performed them.  It is possible that other developments, such as stricter environmental laws and regulations, and claims for damages to property or persons resulting from our operations, would result in substantial costs and liabilities.  Our insurance policies and the contractual indemnity protection we seek to obtain from our customers may not be sufficient or effective to protect us under all circumstances or against all risks involving compliance with environmental laws and regulations.

 

We may be unable to successfully compete with other manufacturers of drilling and production equipment.

 

Several of our primary competitors are diversified multinational companies with substantially larger operating staffs and greater capital resources than ours and which have been engaged in the manufacturing business for a much longer time than us. If these competitors substantially increase the resources they devote to developing and marketing competitive products and services, we may not be able to compete effectively. Similarly, consolidation among our competitors could enhance their product and service offerings and financial resources, further intensifying competition.

 

The loss of a significant customer could have an adverse impact on our financial results.

 

Our principal customers are major integrated oil and gas companies, large independent oil and gas companies and foreign national oil and gas companies. Offshore drilling contractors and engineering and construction companies also represent a portion of our customer base. During the year ended December 31, 2012, our top 5 customers represented approximately 53% of total revenues. While we are not dependent on any one customer or group of customers, the loss of one or more of our significant customers could, at least on a short-term basis, have an adverse effect on our results of operations.

 

 

6
 

Our customers’ industries are undergoing continuing consolidation that may impact our results of operations.

 

The oil and gas industry is rapidly consolidating and, as a result, some of our largest customers have consolidated and are using their size and purchasing power to seek economies of scale and pricing concessions. This consolidation may result in reduced capital spending by some of our customers or the acquisition of one or more of our primary customers, which may lead to decreased demand for our products and services. We cannot assure you that we will be able to maintain our level of sales to a customer that has consolidated or replace that revenue with increased business activity with other customers. As a result, the acquisition of one or more of our primary customers may have a significant negative impact on our results of operations or our financial condition. We are unable to predict what effect consolidations in the industry may have on price, capital spending by our customers, our selling strategies, our competitive position, our ability to retain customers or our ability to negotiate favorable agreements with our customers.

 

Increases in the cost of raw materials and energy used in our manufacturing processes could negatively impact our profitability.

 

Commodity prices for items such as nickel, molybdenum and heavy metal scrap that are used to make the steel alloys required for our products increased significantly, resulting in an increase in our raw material costs. Similarly, energy costs to produce our products have increased significantly. If we are not successful in raising our prices on products, our margins will be negatively impacted.

 

Future capital needs.

 

Our growth and continued operations could be impaired by limitations on our access to the capital markets. There can be no assurance that capital from outside sources will be available, or if such financing is available, it may involve issuing securities senior to the common stock or equity financings which are dilutive to holders of the common stock.

 

We depend on third party suppliers for timely deliveries of raw materials, and our results of operations could be adversely affected if we are unable to obtain adequate supplies in a timely manner.

 

Our manufacturing operations depend upon obtaining adequate supplies of raw materials from third parties. The ability of these third parties to deliver raw materials may be affected by events beyond our control. Any interruption in the supply of raw materials needed to manufacture our products could adversely affect our business, results of operations and reputation with our customers.

 

Limitation on Remedies, Indemnification

 

The Company’s Bylaws provide that the officers and directors will only be liable to the Company for acts or omissions that constitute actual fraud, gross negligence or willful and wanton misconduct. Thus, the Company may be prevented from recovering damages for certain alleged errors or omissions by the officers and directors for liabilities incurred in connection with their good faith acts for the Company. Such an indemnification payment might deplete the Company’s assets. Stockholders who have questions regarding the fiduciary obligations of the officers and directors of the Company should consult with independent legal counsel. It is the position of the SEC that exculpation from and indemnification for liabilities arising under the 1933 Act and the rules and regulations hereunder is against public policy and therefore unenforceable.

 

Our internal controls over percentage-of-completion accounting for fixed-price contracts may be inadequate, which could cause our financial reporting to be unreliable.

 

At December 31, 2012, the Company reported a material weakness (“Material Weakness”) related to percentage-of-completion (“POC”) accounting for fixed-price contracts. During the fiscal quarter ended March 31, 2013, in order to begin to remediate the Material Weakness, the Company created and filled a financial management position within its project operations function, the primary responsibilities of which are to ensure: (a) that initial and updated detailed cost estimates and POC accounting schedules for fixed-price contracts are timely and accurately prepared; (b) proper segregation of accounting for time and materials aspects from POC aspects of contracts containing both; (c) effective financial management review of contract terms; (d) effective communication with accounting personnel, and (d) along with accounting personnel, effective financial management review of the POC accounting revenue recognition calculations.

 

Based on this remediation effort, the Company’s management, with the participation of the principal executive and principal financial officer, has concluded that, although significant progress toward remediation of the Material Weakness has been achieved, the Material Weakness still existed during the fiscal quarter ended June 30, 2013. It is our belief that we will be able to have the Material Weakness fully remediated by the end of the fiscal year ending December 31, 2013.

 

7
 

Risks Related to this Offering

 

We may face penalties if we fail to timely obtain effectiveness of this Registration Statement.

 

If this Registration Statement is not declared effective by December 9, 2013, or January 8, 2014 in the event of a full review by the Commission (the “Required Effective Date”), then for each month following the Required Effective Date, until the Commission declares the Registration Statement effective, the Company shall, for each such month, pay each Selling Shareholder with respect to any such failure, as damages, an amount equal to 1% (which increases to 2% after the first month) of the purchase price paid by such Selling Shareholder for the shares purchased pursuant to the private offering.Furthermore, if (i) prior to the effective date of this Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of this Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for this Registration Statement to be declared effective or (ii) after the effective date of this Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all securities included in such Registration Statement, or the Selling Shareholders are otherwise not permitted to utilize this Prospectus therein to resell such securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period, then the Company will be required to pay damages in the same manner as set forth in the previous sentence. All such damages are payable monthly and calculated on a daily pro rata basis for any portion of a month prior to the cure of an event triggering damages. In the event the Company must pay damages as set forth above, we may be required to pay damages of $159,970 per month to the Selling Shareholders. As a result, our failure to obtain timely effectiveness of this Registration Statement could cause a material adverse effect on our results of operations and/or force us to pay penalties to theSelling Shareholders. Notwithstanding the foregoing, no damages shall accrue during any time in which the securities covered by this Registration Statement may be sold by non-affiliates without volume or manner of sale restrictions under Rule 144.

 

Risks Related to the Securities Market and Ownership of Our Common Stock

 

Our stock price has been and will likely continue to be volatile and you may be unable to resell your shares at or above the price you paid.

 

The market price of our common stock could be subject to significant fluctuations.  Among the factors that could affect our stock price are:

 

quarterly variations in our operating results;

 

changes in revenue or earnings estimates or publication of research reports by analysts;

 

failure to meet analysts’ revenue or earnings estimates;

 

speculation in the press or investment community;

 

strategic actions by us or our competitors, such as acquisitions or restructurings;

 

actions by institutional stockholders;

 

general market conditions; and

 

domestic and international economic factors unrelated to our performance.

 

The stock markets in general and the markets for energy stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In particular, we cannot assure you that you will be able to resell your shares at any particular price, or at all.

 

8
 

Shares eligible for sale in the future could negatively affect our stock price.

 

The market price of our common stock could decline as a result of sales of a large number of shares of our common stock or the perception that these sales could occur.  This might also make it more difficult for us to raise funds through the issuance of securities.  As of October 10, 2013, we had 15,275,081 shares of common stock outstanding, of which 7,545,858 shares are freely tradable or covered by a current Registration Statement, and 4,443,611 shares were freely tradable under this Prospectus.  The remaining 3,285,612 shares of common stock outstanding are “restricted securities” as defined in Rule 144 and are held by our “affiliates” (as that term is defined in Rule 144 under the Securities Act).  These restricted securities may be sold in the future pursuant to Registration Statements filed with the SEC or without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act.

 

As of October 10, 2013, there were an aggregate of 945,000 shares of common stock issuable upon exercise of outstanding stock options.

 

We may register additional shares in the future in connection with acquisitions, compensation or otherwise.  We have not entered into any agreements or understanding regarding any future acquisitions and cannot ensure that we will be able to identify or complete any acquisition in the future.  Sales of shares of common stock in the public markets or through Rule 144 may have an adverse effect on prevailing market prices for our common stock.

 

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

 

Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such preferences, powers and relative, participating, optional and other rights, including preferences over our common stock respecting dividends and distributions, as our Board of Directors may determine.  The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

 

Investors may face significant restrictions on the resale of our common stock due to federal regulations of penny stocks.

 

Our common stock is subject to the requirements of Rule 15(g)-9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The penny stock disclosures require a broker-dealer to deliver, prior to any transaction, a disclosure schedule explaining the penny stock market and the risks associated with it; disclosure of commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for our common stock; and sending monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks. Such requirements could severely limit the market liquidity of the securities, the pricing of our common stock, and the ability of purchasers to sell their securities in the secondary market.

 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This Prospectus contains forward-looking statements. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” and similar words or phrases. These statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those projected. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in this Prospectus or incorporated by reference.

 

Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons; including the factors described under the heading

 

9
 

“Risk Factors” beginning on page 3.

 

You should not unduly rely on these forward-looking statements, which speak only as of the date on which it is made. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Prospectus or to reflect the occurrence of unanticipated events. You should review the factors and risks we describe in the reports we file from time to time with the SEC after the date of this Prospectus. The reports we file from time to time with the SEC are available to the public over the Internet at the SEC’s websitehttp://www.sec.gov.

 

USE OF PROCEEDS

 

We will not receive any proceeds from the sale of the Selling Shareholders’ shares of common stock registered herein.

 

DESCRIPTION OF CAPITAL STOCK

 

We have authorized capital stock consisting of 24,500,000 common shares, $0.001 par value, and 10,000,000 of all series of preferred stock, $0.001 par value.

 

Common Stock

 

As of October 10, 2013, there were 15,275,081 shares of our common stock outstanding, which were held by an estimated 1,101 record owners. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock, after payment of claims of creditors.

 

No preferred shares were issued and outstanding as of October 10, 2013.

 

Anti-takeover Effects of Our Articles of Incorporation and By-laws

 

Our articles of incorporation and bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of our company or changing our board of directors and management. The holders of our common stock do not have cumulative voting rights in the election of our directors, which makes it more difficult for minority stockholders to be represented on the board. Our articles of incorporation allow our board of directors to issue additional shares of our common stock and new series of preferred stock without further approval of our stockholders. The existence of authorized but unissued shares of common stock and preferred could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger, or otherwise.

 

Anti-takeover Effects of Nevada Law

 

Business Combinations

 

The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS, generally prohibit a Nevada corporation with at least 200 stockholders of record, a “resident domestic corporation,” from engaging in various “combination” transactions with any “interested stockholder” unless certain conditions are met or the corporation has elected in its articles of incorporation to not be subject to these provisions. We have not elected to opt out of these provisions and if we meet the definition of resident domestic corporation, now or in the future, our company will be subject to these provisions.

 

10
 

A “combination” is generally defined to include (a) a merger or consolidation of the resident domestic corporation or any subsidiary of the resident domestic corporation with the interested stockholder or affiliate or associate of the interested stockholder; (b) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, by the resident domestic corporation or any subsidiary of the resident domestic corporation to or with the interested stockholder or affiliate or associate of the interested stockholder having: (i) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the resident domestic corporation, (ii) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the resident domestic corporation, or (iii) 10% or more of the earning power or net income of the resident domestic corporation; (c) the issuance or transfer in one transaction or series of transactions of shares of the resident domestic corporation or any subsidiary of the resident domestic corporation having an aggregate market value equal to 5% or more of the resident domestic corporation to the interested stockholder or affiliate or associate of the interested stockholder; and (d) certain other transactions with an interested stockholder or affiliate or associate of the interested stockholder.

 

An “interested stockholder” is generally defined as a person who, together with affiliates and associates, owns (or within three years, did own) 10% or more of a corporation’s voting stock. An “affiliate” of the interested stockholder is any person that directly or indirectly through one or more intermediaries is controlled by or is under common control with the interested stockholder. An “associate” of an interested stockholder is any (a) corporation or organization of which the interested stockholder is an officer or partner or is directly or indirectly the beneficial owner of 10% or more of any class of voting shares of such corporation or organization; (b) trust or other estate in which the interested stockholder has a substantial beneficial interest or as to which the interested stockholder serves as trustee or in a similar fiduciary capacity; or (c) relative or spouse of the interested stockholder, or any relative of the spouse of the interested stockholder, who has the same home as the interested stockholder.

 

If applicable, the prohibition is for a period of two years after the date of the transaction in which the person became an interested stockholder, unless such transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; or the combination is approved by the board of directors and thereafter is approved at a meeting of the stockholders by the affirmative vote of stockholders representing at least 60% of the outstanding voting power held by disinterested stockholders; and extends beyond the expiration of the two-year period, unless (a) the combination was approved by the board of directors prior to the person becoming an interested stockholder; (b) the transaction by which the person first became an interested stockholder was approved by the board of directors before the person became an interested stockholder; (c) the transaction is approved by the affirmative vote of a majority of the voting power held by disinterested stockholders at a meeting called for that purpose no earlier than two years after the date the person first became an interested stockholder; or (d) if the consideration to be paid to all stockholders other than the interested stockholder is, generally, at least equal to the highest of: (i) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, plus compounded interest and less dividends paid, (ii) the market value per share of common shares on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, plus compounded interest and less dividends paid, or (iii) for holders of preferred stock, the highest liquidation value of the preferred stock, plus accrued dividends, if not included in the liquidation value. With respect to (i) and (ii) above, the interest is compounded at the rate for one-year United States Treasury obligations from time to time in effect.

 

Applicability of the Nevada business combination statute would discourage parties interested in taking control of our company if they cannot obtain the approval of our board of directors. These provisions could prohibit or delay a merger or other takeover or change in control attempt and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

 

Control Share Acquisitions

 

The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS, apply to “issuing corporations” that are Nevada corporations with at least 200 stockholders of record, including at least 100 stockholders of record who are Nevada residents, and that conduct business directly or indirectly in Nevada, unless the corporation has elected to not be subject to these provisions.

 

The control share statute prohibits an acquirer of shares of an issuing corporation, under certain circumstances, from voting its shares of a corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: (a) one-fifth or more but less than one-third, (b) one-third but less than a majority, and (c) a majority or more, of the outstanding voting power. Generally, once a person acquires shares in excess of any of the thresholds, those shares and any additional shares acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.

 

11
 

A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of these provisions and will be subject to the control share provisions of the NRS if we meet the definition of an issuing corporation upon an acquiring person acquiring a controlling interest unless we later opt out of these provisions and the opt out is in effect on the 10th day following such occurrence.

 

The effect of the Nevada control share statute is that the acquiring person, and those acting in association with the acquiring person, will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders at an annual or special meeting. The Nevada control share law, if applicable, could have the effect of discouraging takeovers of our company.

 

INTEREST OF NAMED EXPERTS AND COUNSEL

 

The validity of the common stock offered by this Prospectus is being passed upon for us byLewis Roca ‎Rothgerber LLP, which does not hold any interest in the Company, contingent or otherwise.

 

EXPERTS

 

The consolidated financial statements of Deep Down, Inc. as of and for the years ended December 31, 2012 and 2011, incorporated by reference in this Prospectus, have been included in reliance on the report dated March 28, 2013 of Hein & Associates LLC, an independent registered public accounting firm, given on the authority of such firm as experts on accounting and auditing.

 

SHARES AVAILABLE FOR FUTURE SALE

 

As of October 10, 2013 we had 15,275,081 shares of our Common Stock outstanding, of which 7,545,858 shares were freely tradable or covered by a current Registration Statement and 4,443,611 shares will be freely tradable under this Prospectus.  The remaining 3,285,612 shares of our Common Stock outstanding are “restricted securities” as defined in Rule 144 and are held by our “affiliates” (as that term is defined in Rule 144 under the Securities Act). These restricted securities may be sold in the future pursuant to Registration Statements filed with the SEC or without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act.

 

As of October 10, 2013, there were an aggregate of 945,000 shares of our Common Stock issuable upon exercise of outstanding stock options.

 

We may register additional shares in the future in connection with acquisitions, compensation or otherwise. We have not entered into any agreements or understanding regarding any future acquisitions and cannot ensure that we will be able to identify or complete any acquisition in the future.  Sales of shares of common stock in the public markets or through Rule 144 may have an adverse effect on prevailing market prices for our common stock.

 

Rule 144 governs resale of "restricted securities" for the account of any person (other than an issuer), and restricted and unrestricted securities for the account of an "affiliate" of the issuer. Restricted securities generally include any securities acquired directly or indirectly from an issuer or its affiliates which were not issued or sold in connection with a public offering registered under the Securities Act. An affiliate of the issuer is any person who directly or indirectly controls, is controlled by, or is under common control with, the issuer. Affiliates of the Company may include its directors, executive officers, and persons directly or indirectly owning 10% or more of the outstanding common stock.  Under rules adopted by the Commission, unregistered resales of restricted securities of reporting companies are able to be made by non-affiliates and affiliates after such securities have been held for six (6) months (assuming the issuer remains current in its SEC periodic reporting obligations for an additional six months, and subject to any affiliates complying with certain volume limitations and other resale requirements as set forth in Rule 144), and after one (1) year by affiliates and non-affiliates of non-reporting companies, subject to certain requirements under Rule 144, as it has been amended (including that there is current public information regarding the issuer for sales by affiliates and that other volume limitations are complied with for sales of affiliates, as described in greater detail in Rule 144).

 

12
 

SELLING SHAREHOLDERS

 

On September 10, 2013 and September 26, 2013, in a private placement we sold an aggregate of 4,443,611 shares of our common stock to the sixty (60) Selling Shareholders listed below.  Under the securities purchase agreement that we entered into with the investors, we agreed to register the shares sold for resale to the public under the Securities Act of 1933.

 

We are registering the shares to permit the Selling Shareholders to resell them in the manner contemplated under the “Plan of Distribution” beginning on page 16.  When we refer to “Selling Shareholders” in this Prospectus, we mean the persons listed in the table below, and the pledgees, donees, transferees, successors, and others who later come to hold any of the Selling Shareholders’ interests in shares of our common stock other than through a public sale.

 

The shares offered by this Prospectus may be offered from time to time by the Selling Shareholders.  They may sell some, all or none of their shares.  We do not know how long the Selling Shareholders will hold the shares before selling them.  We currently have no agreements, arrangements or understandings with the Selling Shareholders regarding the sale of any of the shares.

 

The following table sets forth the name of each Selling Shareholder, the number of shares owned by each Selling Shareholder before the private placement, the number of shares purchased by each Selling Shareholder in the private placement, and the number of shares of our common stock owned by the Selling Shareholders after this private placement.  The number of shares in the column “Number of Shares Purchased” represents all of the shares that a Selling Shareholder may offer under this Prospectus.  

 

The ownership of shares reported in the table below is based upon information provided by each Selling Shareholder and SEC Form 4s, SEC Schedules 13D and 13G, and other public documents filed with the SEC.  

 

None of the Selling Shareholders have, or within the past three years has had, any position, office or other material relationship with us.

 

Based on the information provided to us by the Selling Shareholders, none of the Selling Shareholders is, or is affiliated with, a broker-dealer other thanLake Street Fund, L.P., Wedbush Opportunity Partners, LP.,Wellington Trust Company, National Association Multiple Collective Investment Funds Trust, Micro Cap Equity Portfolio and Wellington Trust Company, National Association Multiple Common Trust Funds Trust, Micro Cap Equity Portfolio.  Each of the Selling Shareholders has represented to us that he or it had no agreements or understanding, directly or indirectly, with any person to distribute the securities.

 

The Selling Shareholders may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their shares since the date on which the information in the table is presented. Information about the Selling Shareholders may change over time.

 

The percentages of shares owned after the offering are based on 15,275,081, shares of our common stock outstanding as of October 10, 2013.

 

For all of the selling shareholders who are not natural persons, unless noted otherwise, the investment managers, general partners, trustees or principals named in the footnotes below have the sole voting and dispositive power over the shares held by the selling shareholders.

 

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    Shares of Common Stock Owned Prior to Private  Number of Shares Purchased in Private  Shares of Common Stock Owned After Private Placement
Name    Placement   Placement   (#)  (%)
Adam Boyd Sellers       5,000   5,000  *
Alexis B. Johnson       8,000   8,000  *
Allan R Schuman       5,000   5,000  *
Anne Hampson Ross       15,000   15,000  *
Bard Micro-Cap Value Fund, L.P. (a)     20,000   20,000  *
Blue Clay Capital Master Fund Ltd. (b)     85,000   85,000  *
Bradley Louis Radoff    480,000   164,000   644,000  4.2%
Carol Clark Coolidge Trust UAD 3/13/97       5,000   5,000  *
Charles M Hale Living Trust       200,000   200,000  1.3%
Christina D. Collier Trust UAD 12/23/2003       4,500   4,500  *
Christine Elizabeth Coolidge Rev Living Trust UAD 12/9/02       4,000   4,000  *
Citadel Industries, Inc. (c)     17,500   17,500  *
Deborah B. Dewing Trust UAD 6/1/99       4,500   4,500  *
Dale F. Snavely Trust UAD 3/30/93       20,000   20,000  *
Henry J Underwood Trust UAD 6/25/02       8,500   8,500  *
J. Scott Etzler       5,000   5,000  *
JAMAKA Capital L.P. (d)     200,000   200,000  1.3%
Jane Lois Kaplan Revocable Trust UAD 9/6/2000       8,000   8,000  *
Janet J. Underwood Trust UAD 6/25/02       10,000   10,000  *
Jennifer Bard Trust UAD 6/30/05       4,000   4,000  *
John Bard Manulis       5,000   5,000  *
Joseph H. Ballway, Jr.       3,000   3,000  *
Joshua Herrendorf       4,000   4,000  *
Julien D Lebourgeois       4,000   4,000  *
Katharine B. Dickson & Mark A Dickson JTWROS       20,000   20,000  *
Lake Street Fund, L.P. (e)     416,667   416,667  2.7%
Lucy H. Underwood       6,000   6,000  *
M. Edwards Sellers & Susan D. Boyd JTWROS       20,000   20,000  *
Marc E. Nicholson       6,000   6,000  *
Marcia E. Cremin Revocable Trust UAD 3/1/06       6,000   6,000  *
Marshall I Steinbaum       5,000   5,000  *
Marvin J. Pollack Trust UAD 5/22/90       5,000   5,000  *
Mary A Heatter Trust UAD 6/28/2004       3,000   3,000  *
Mary E. McAvoy Trust UAD 9/5/84       3,000   3,000  *
Mary M. Schwartz Trust UAD 9/5/06       3,000   3,000  *
Matthew Moog       5,000   5,000  *
MAZ Partners L.P. (f)     125,000   125,000  *
Michael D. Watt Trust UAD 3/15/02       5,000   5,000  *
N. Shaw Family Ltd Partnership (g)     4,000   4,000  *
Option Opportunities Corp (h)     41,667   41,667  *
Patrick T. Underwood       5,000   5,000  *
Perritt Ultra Microcap Fund (i)     250,000   250,000  1.6%
Perry J. Radoff, P.C., Profit Sharing Plan       55,556   55,556  *
Peter L. Abeles and Jonnet S. Abeles, JTWROS       3,000   3,000  *
R. Stuyvesant Pierrepont Trust V/W/D 1932 (j)     12,000   12,000  *
Robert E. Logan, Jr.       3,000   3,000  *
Robert S. Steinbaum       7,000   7,000  *
Serenity Now LLC (k)     33,333   33,333  *
Seville Enterprises, LP (l)     10,000   10,000  *
Sidney N. Herman       15,000   15,000  *
T. Michael Johnson & Patricia R. Johnson JTWROS       5,000   5,000  *
The Perlus Micro Cap Fund L.P. (m)  1,100,000   194,444   1,294,444  8.5%
Timothy B. Johnson       20,000   20,000  *
Warberg Opportunistic Trading Fund LP (n)     69,444   69,444  *
Wedbush Opportunity Partners, LP (o)     250,000   250,000  1.6%
Wellington Trust Company, National Association Multiple Collective Investment Funds Trust, Micro Cap Equity Portfolio (p)     223,200   223,200  1.5%
Wellington Trust Company, National Association Multiple Common Trust Funds Trust, Micro Cap Equity Portfolio (q)     1,776,800   1,776,800  11.6%
William A. Carey & Amanda C. Carey JTWROS       3,000   3,000  *
William G Escamilla Revocable Trust DTD 7/29/03       4,500   4,500  *
William K. Kellogg III 1992 Trust UAD 7/24/92       20,000   20,000  *
_____________    1,580,000   4,443,611   6,023,611   

* Less than 1%

14
 

 

(a)Mr. Timothy B. Johnson, General Partner, has voting and investment control of these shares.
  
(b)Mr. Brian Durst, Managing Director, has voting and investment control of these shares.
  
(c)Mr. James Boddy, Owner, has voting and investment control of these shares.
  
(d)Mr. David J. Douglas, Manager of JAMAKA Capital Management LLC, the G.P., has voting and investment control of these shares.
  
(e)Mr. Scott Hood, Managing Director of Lake Street Mgmt, LLC, has voting and investment control of these shares.
  
(f)Mr. Walter Schenker, Principal, has voting and investment control of these shares.
  
(g)Mr. Bruce P. Shaw, Partner, has voting and investment control of these shares.
  
(h)Messrs. Jonathon Blumberg, Daniel Warsh and David Dury exercise voting and investment control of these shares.
  
(i)Mr. Michael Corbett, President and CIO, has voting and investment control of these shares.
  
(j)Mr. Seth Pierrepont, Trustee, has voting and investment control of these shares.
  
(k)Messrs. Jonathon Blumberg, Dan Warsh and Eugene Rintels exercise voting and investment control over these shares.
  
(l)Mr. Marvin J. Pollack, Partner, has voting and investment control of these shares.
  
(m)Messrs. David Aaron LaSalle, James Lincoln Boucherat, Ashley Le Feuvre, Trevor Lennard Norman and Robert Anthony Christensen exercise voting and investment control of these shares.
  
(n)Messrs. Jonathon Blumberg and Dan Warsh exercise voting and investment control over these shares.
  
(o)The securities are held directly by Wedbush Opportunity Partners, L.P. (the Fund) for the benefit of the Fund’s investors.  Such securities may be deemed to be indirectly beneficially owned by Wedbush Opportunity Capital, LLC (the General Partner), as the general partner of the Fund, and Jeremy Q. Zhu as a Managing Director of the General Partner and lead member of the General Partners investment team that manages the Fund’s portfolio. Wedbush Opportunity Capital, LLC and Jeremy Zhu, Managing Director, disclaim beneficial ownership of shares owned by Wedbush Opportunity Partners L.P., except to the extent of any pecuniary interest therein.
  
(p)Wellington Management Company, LLP (“Wellington Management”) is an investment adviser registered under the Investment Advisers Act of 1940, as amended.  Wellington Management is the investment adviser to Wellington Trust Company, National Association Multiple Collective Investment Funds Trust, Micro Cap Equity Portfolio and in such capacity may be deemed to have shared voting and dispositive power over shares held by such entity.
  
(q)Wellington Management Company, LLP (“Wellington Management”) is an investment adviser registered under the Investment Advisers Act of 1940, as amended.  Wellington Management is the investment adviser to Wellington Trust Company, National Association Multiple Common Trust Funds Trust, Micro Cap Equity Portfolio and in such capacity may be deemed to have shared voting and dispositive power over shares held by such entity.

 

15
 

PLAN OF DISTRIBUTION

 

We are registering shares of common stock to permit the resale of such common stock by the holders from time to time after the date of this Prospectus.  We will not receive any of the proceeds from the sale by the Selling Shareholders of the shares of common stock.  We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

The Selling Shareholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents.  If the shares of common stock are sold through underwriters or broker-dealers, the Selling Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions.  

 

Each Selling Shareholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the OTC Bulletin Board or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Shareholder may use any one or more of the following methods when selling securities:

 

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

an exchange distribution in accordance with the rules of the applicable exchange;

 

privately negotiated transactions;

 

settlement of short sales;

 

in transactions through broker-dealers that agree with the Selling Shareholders to sell a specified number of such securities at a stipulated price per security;

 

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

a combination of any such methods of sale; or

 

any other method permitted pursuant to applicable law.

 

The Selling Shareholders may also sell securities under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this Prospectus.

 

Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the securities or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this Prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this Prospectus (as supplemented or amended to reflect such transaction).

 

16
 

 

The Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Shareholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

Because Selling Shareholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the Prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this Prospectus. The Selling Shareholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Shareholders.

 

We agreed to keep this Prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this Prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the Selling Shareholders or any other person. We will make copies of this Prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this Prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

17
 

LEGAL MATTERS

 

The validity of the common stock offered by this Prospectus is being passed upon for us byLewis Roca ‎Rothgerber LLP.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information with the SEC. You may read and copy any document we file at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549.  Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our filings with the SEC are also available to the public at the SEC’s website athttp://www.sec.gov.

 

We have filed a Registration Statement on Form S-1 with the SEC under the Securities Act of 1933. The Registration Statement relates to the common stock offered by the Selling Shareholders.  This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules to the Registration Statement.  Please refer to the Registration Statement and its exhibits and schedules for further information about us and the common stock.  Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, we refer you to the copy of that contract or document filed as an exhibit to the Registration Statement.

 

INFORMATION INCORPORATED BY REFERENCE

 

The SEC allows us to incorporate information by reference into this Prospectus. The information incorporated by reference is considered part of this Prospectus.

 

We incorporate by reference the documents listed below (other than information furnished under Items 2.02 or 7.01 of any Current Report on Form 8-K, which is not deemed filed under the Exchange Act):

 

·our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on March 28, 2013;
·our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as filed with the SEC on August 13, 2013;
·our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, as filed with the SEC on May 15, 2013;
·our Current Report on Form 8-K, as filed with the SEC on September 16, 2013.
·our Current Report on Form 8-K, as filed with the SEC on August 13, 2013;
·our Current Report on Form 8-K, as filed with the SEC on June 21, 2013;
·our Current Report on Form 8-K, as filed with the SEC on May 31, 2013;
·our Current Report on Form 8-K, as filed with the SEC on May 15, 2013;
·our Current Report on Form 8-K, as filed with the SEC on April 2, 2013;
·our Current Report on Form 8-K, as filed with the SEC on March 29, 2013;
·our Current Report on Form 8-K, as filed with the SEC on March 12, 2013;

 

We will provide to each person, including any beneficial owner, to whom a Prospectus is delivered, a copy of any or all of the reports or documents that have been incorporated by reference in this Prospectus, contained in the Registration Statement, but not delivered with this Prospectus. We will provide these documents at no charge to the requester upon written request directed to Deep Down, Inc., 8827 W. Sam Houston Pkwy N., Ste 100, Houston, TX 77040, Attention: Investor Relations, upon e-mail request toir@deepdowninc.com or upon oral request made by calling (281) 517-5006.

 

We also make available free of charge on our internet website athttp://www.deepdowncorp.com our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The contents of our website are not part of this Prospectus and should not be relied upon as though they were a part of it.

 

 

 

 

18
 

 

 

 

 

 

 

 

 

 

 

 

 

4,443,611 Shares of Common Stock


 

PROSPECTUS

 

October 16, 2013