Nighthawk expects the deal to have an immediate impact on its bottom line based on purchase orders for HD MediPro3000 set-top boxes by an unnamed hospitality provider. The company anticipates the existing purchase orders to produce revenues of more than $400,000 once they’re completed.
“This is a huge event for Nighthawk Systems. This funding and subsequent acquisition of the set-top box business presents Nighthawk with an incredible opportunity to take a quick and large step forward in creating additional value in the Company,” said H. Douglas Saathoff, Nighthawk’s CEO, in a statement.
Since all of Nighthawk’s products, including the set-top boxes, utilize printed circuit boards, the company also expects to lower its costs through higher production volumes.
Under the terms of the deal, Eagle’s team of set-top box engineers and support staff have now become employees of Nighthawk. Nighthawk was able to fund the buyout by a $6 million sale of preferred stock. The preferred stock is not convertible for one year and is redeemable at Nighthawk’s option.
For its part, Eagle Broadband felt the deal was in its best interest because it lowered its debt and employee headcount.
“When Nighthawk approached us with an extremely attractive offer, we felt that selling this business would provide a more immediate return and give us the ability to focus our attention on the service areas of our business,” said Brian Morrow, COO of Eagle Broadband, in a statement. “This transaction significantly reduces Eagle’s financial pressures by paying off a large portion of our debt, and providing us the opportunity to reorganize our staff and capabilities.”