Digital Power Corporation announced the entry into an agreement that, upon consummation, will result in the acquisition of control of Microphase Corporation (MPC). MPC is the 62-year old global designer, developer, original equipment manufacturer (OEM) and industry leader of electronic components, devices and subsystems for the Defense, Aerospace and Telecommunication sectors. The Company believes MPC is prominent in delivering world-class radio frequency (RF) and microwave devices and components and innovative testing devices. The transaction will be governed by a Share Exchange Agreement executed as of April 28, 2017.
Commenting on the transaction, President and CEO Amos Kohn stated: "The purchase of MPC marks our first step in executing our acquisition growth strategy for 2017. We are very pleased, through the anticipated acquisition, with the expansion of our customer base, innovative technology, manufacturing capacity and capabilities and knowledge base that MPC represents and the synergistic opportunities that the Company will derive. MPC provides best in class technology and product solutions for mission critical applications for radar and missile guidance systems including DC and extremely high frequency (EHF) and revolutionary microwave test and measurement products. This acquisition is strategic in growing the Company as a leading provider to the Defense, Aerospace and Electronics markets." The transaction is subject to the Company's completion of its due diligence review of MPC including its financial statements, operations and other conditions.â€
"Microphase Corporation hallmarks the start of the Company's execution of the core acquisition strategy it has adopted. This transaction is an important first step in our growth strategy, provides value to our shareholders and to our operations, and will be strategic as we pursue our future acquisitions," stated Milton "Todd" Ault, III, the Company's Executive Chairman. Ault added, "The Company is focused on trading short-term profitability for growing topline revenue, cash and scale."
The details of the transaction include the Company acquiring 1,603,434 shares of MPC Common Stock, representing 58% of MPC's issued and outstanding shares, or 50.2% on a fully diluted basis, from certain shareholders of MPC in exchange for (i) an equivalent of 2,600,000 shares consisting of the Company's Common Stock and Series D Convertible Preferred Stock, assuming full conversion thereof, (ii) the issuance of warrants to purchase an aggregate of 1,000,000 shares of DPW Common Stock, and (iii) issuance of a 12% Promissory Note to MPC in the aggregate principal amount of $220,000.
In connection with the transaction, the Company also agreed to issue 10,000 shares of its Series E Convertible Preferred Stock which may be convertible into its Common Stock to guarantee the payment of an 8% Promissory Note issued by MPC to certain creditors, all which are subject to certain rights, conditions and restrictions as detailed in Current Report on Form 8-K filed by the Company with the SEC on May 3, 2017. The transaction is scheduled to close on May 25, 2017 and the conversion of the Series D and Series E Convertible Preferred Stock into Common Stock is subject to shareholder approval.
