As filed with the Securities and Exchange Commission on September 22, 201019, 2013
Registration No. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE LGL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 38-1799862 (I.R.S. Employer Identification Number) |
2525 Shader Road
Orlando, Florida 32804
(Address, including zip code, and telephone number,
including area code, of registrant’sregistrant's principal executive offices)
R. LaDuane Clifton
Chief AccountingFinancial Officer
2525 Shader Road
Orlando, Florida 32804
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Approximate date of commencement of proposed sale to the public: As soon as practicable
from time to time after the effective date of this registration statement.statement
If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ¨
If any of the securities being registered on this Formform are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ý
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Formform is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall have become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ¨
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large"large accelerated filer,” “accelerated filer”" "accelerated filer" and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer box | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | ý |
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered(1) | Proposed maximum aggregate offering price | Amount of registration fee | ||||||
| common stock, debt securities, warrants to purchase common stock, units | $ | 13,500,000 | (2) | $ | 962.55 | (3) | ||
Title of Each Class of Securities to be Registered | Amount to be Registered (1) | Proposed Maximum Offering Price Per Security (2) | Proposed Maximum Aggregate Offering Price (2) | Amount of Registration Fee | ||||||||||||
| Common Stock, par value $0.01 per share | 421,083 | (3) | $ | 5.74 | $ | 2,417,016.42 | $ | 329.68 | ||||||||
| Warrants to Purchase Common Stock | 1,754,510 | $ | 0.08 | $ | 140,360.80 | $ | 19.15 | |||||||||
| TOTAL | 2,175,593 | $ | 2,557,377.22 | $ | 348.83 | |||||||||||
| (1) | Pursuant to Rule 416 under the Securities |
| (2) | The |
| (3) |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling stockholder may not sell these securities or accept an offer to buy these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 2010
19, 2013
PROSPECTUS
THE LGL GROUP, INC.
421,083 SHARES OF COMMON STOCK
AND
1,754,510 WARRANTS TO PURCHASE COMMON STOCK
AND
1,754,510 WARRANTS TO PURCHASE COMMON STOCK
The selling stockholder or its pledgees, donees, transferees or successors-in-interest may offer and sell or otherwise dispose of any combination thereof, separately or as units,all of its shares of common stock and warrants described in this prospectus in onefrom time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling stockholder will bear all commissions and discounts, if any, attributable to the sales of these securities. See "Plan of Distribution" beginning on page 14 for more offerings. The aggregate initial offering priceinformation about how the selling stockholder may sell or dispose of allits securities.
We are not selling any securities sold under this prospectus and will not exceed $13,500,000.
Our common stock isand warrants are traded on the NYSE AmexMKT under the symbol “LGL.”symbols "LGL" and "LGL WS", respectively. The last reported sales priceprices of our common stock and warrants on the NYSE AmexMKT on September 21, 2010 was $22.90.
$0.08 per warrant.
AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. CONSIDER CAREFULLYYOU SHOULD READ THE RISK FACTORS BEGINNINGSECTION ENTITLED "RISK FACTORS" ON PAGE 43 OF THIS PROSPECTUS AND THE RISK FACTORS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS AS DESCRIBED IN THE APPLICABLE PROSPECTUS SUPPLEMENT.
THAT SECTION BEFORE INVESTING IN OUR SECURITIES.
_________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is __________, 201__.
___________ __, 2013.
TABLE OF CONTENTS
| PAGE | ||||
PROSPECTUS SUMMARY | 1 | |||
RISK FACTORS | 3 | |||
FORWARD-LOOKING STATEMENTS | 12 | |||
USE OF PROCEEDS | 13 | |||
SELLING STOCKHOLDER | 13 | |||
PLAN OF DISTRIBUTION | 14 | |||
LEGAL MATTERS | 16 | |||
EXPERTS | 16 | |||
INCORPORATION BY REFERENCE | 16 | |||
WHERE YOU CAN FIND MORE INFORMATION | ||||
| 17 | ||||
About this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the “Risk Factors” section, and the applicable prospectus supplement. As used throughout this prospectus and the prospectus supplement, the terms “LGL,” the “Company,” “we,” “us,” and “our” refer to The LGL Group, Inc. and its subsidiaries. The Company operates through its principal subsidiary, M-tron Industries, Inc., which includes the operations of M-tron Industries, Ltd. (“Mtron”), and Mtron’s subsidiaries, Piezo Technology, Inc. and Piezo Technology India Private Ltd (jointly, “PTI”). The combined operations of Mtron and PTI are referred to herein as “MtronPTI.”
This prospectus is part of a Registration Statementregistration statement on Form S-3 that we filed with the Securities and Exchange Commission utilizing(the "SEC") using a “shelf”"shelf" registration process or continuous offering process. Under this shelf registration process, wethe selling stockholder or its permitted transferees and successors may offer upfrom time to $13,500,000 offering price of any combination oftime sell the securities described in this prospectus in one or more offerings. This prospectus provides
It is important for you with a general description of the securities that we may offer. Each time we useto read and consider all information contained in this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering, including the specific amounts, processin making your investment decision. You should also read and terms of the offered securities. The prospectus supplement may also add, update or changeconsider the information contained in this prospectus. You should read car efully both this prospectus and any prospectus supplement, together with additional information described belowthe documents identified under the heading “Whereheadings "Incorporation by Reference" and "Where You Can Find More Information.”"
You should rely only on the information that we have provided or incorporated by reference in this prospectus, any applicable prospectus supplement and any related free writing prospectus that we may authorize to be provided to you.including the information incorporated by reference. We have not authorized any dealer, salesman or other personanyone to give anyprovide you with different information. You should not assume that the information or to make any representation other than those contained or incorporated by reference in this prospectus is accurate as of any applicabledate other than as of the date of this prospectus, supplementas the case may be, or any related free writing prospectus that we may authorize to be provided to you. You must not rely upon any information or representation not contained orin the case of the documents incorporated by reference, inthe date of such documents regardless of the time of delivery of this prospectus or the accompanying prospectus supplement. any sale of our securities.
This prospectus and the accompanying supplement to this prospectus dodoes not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate, nor do this prospectus and the accompanying supplement to this prospectus constitute an offer to sell or thea solicitation of an offer to buy securities in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation in such jurisdiction. You should not assume thatsolicitation.
Unless the information containedcontext otherwise requires, references to "we," "our", "us," or the "Company" in this prospectus any applicable prospectus supplement or any related free writing prospectus is accurate on any date subsequentrefer to The LGL Group, Inc., and references to the date set forth on the front of the document"selling stockholder" refer to Venator Merchant Fund, L.P.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere or that any information we have incorporated by reference is correct on any date subsequentin this prospectus. This summary may not contain all the information that you should consider before determining whether to invest in our securities. You should read the entire prospectus carefully, including the information included in the "Risk Factors" section, as well as our consolidated financial statements, notes to the date ofconsolidated financial statements and the documentother information incorporated by reference even thoughinto this prospectus, any applicable prospectus supplement or any related free writingas well as the exhibits to the registration statement of which this prospectus is delivered or securities sold on a later date.part, before making an investment decision.
Overview
The LGL Group, Inc., formerly Lynch Corporation, incorporated in 1928 under the laws of the State of Indiana and reincorporated under the laws of the State of Delaware in 2007, is a holding company with subsidiaries engaged in manufacturing custom-designed highly engineeredglobally-positioned producer of industrial and commercial products and services that is currently focused on the design and manufacture of highly-engineered electronic components.components and subsystems. The LGL Group, Inc.Company and its subsidiaries (collectively, the “Company”) maintains itsmaintain their executive offices at 2525 Shader Road, Orlando, Florida, 32804. The Company’sCompany's telephone number is (407) 298-2000. The Company’sCompany's common stock isand warrants are traded on the NYSE AmexMKT under the ticker symbol “LGL.”symbols "LGL" and "LGL WS", respectively.
The Company operates through a number of operating subsidiaries, including M-tron Industries, Inc. ("Mtron"), and Piezo Technology, Inc. ("PTI"), which are collectively referred to herein as "MtronPTI." MtronPTI currently our primary operating subsidiary which is wholly-owned,designs, manufactures and markets custom designed highly-engineeredsells standard and custom-engineered electronic components that are used primarily to control the frequency or timing of signals in electronic circuits. Its devices, which are commonly called frequency control devices, are used extensively in infrastructure equipment for the telecommunications and network equipment industries. Its devices are also usedindustries, as well as in electronic systems for military applications, avionics, earth orbitingearth-orbiting satellites, medical devices, instrumentation, industrial devices and global positioning systems.
| · | Accuracy: the measure of error between the specified frequency and the produced frequency; |
| · |
| · |
MtronPTI has more than 4045 years of experience designing, manufacturing and marketing crystal basedcrystal-based frequency control products. Its customers rely on the skills of MtronPTI’sMtronPTI's engineering and design team to help solve frequency control problems during all phases of their products’products' life cycles, including product design, prototyping, manufacturing, and subsequent product improvements.
Recent Developments
On July 17, 2013, the Company issued a press release providing an update on the strategic review process being conducted by a special committee (the "Special Committee") of the Company's Board of Directors (the "Board"). Previously, the Company announced that it was approached by an investment group interested in acquiring certain parts of MtronPTI, and that the Special Committee has initiated a strategic review process with the goal of executing on opportunities that create additional value for stockholders. The press release announced that, among other things, the Special Committee is considering options to streamline operational support for certain segments of the Company's business, as well as exploring the possibility of discontinuing or segmenting from the Company some or all of MtronPTI's operations.
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The Company's President and Chief Executive Officer, Greg Anderson, stated in the press release that "Fundamental business conditions have not materially improved as we have moved into the summer. Management is closely engaged with the Special Committee to evaluate strategic alternatives that support stockholder value creation." In the press release, the Company also stated its intention to file a new shelf registration statement with the SEC to replace its existing registration statement, which is set to expire in November of this year.
On August 12, 2013, the Company issued a press release announcing the Company's second quarter 2013 earnings results and current business activities, and to provide an update on the Company's strategic review process. Mr. Anderson stated in the press release that "Our strategic review process is continuing as we analyze options to unlock the potential of LGL and our subsidiary, MtronPTI, while seeking to create value for stockholders."
Company Information
Our principal executive offices are located at 2525 Shader Road, Orlando, Florida 32804, and our telephone number at that location is (407) 298-2000. Our Internet address is www.lglgroup.com. We make available free of charge on or through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information contained on our website is not part of this prospectus.
The Offering
| Securities Covered Hereby | · 421,083 shares of common stock, par value $0.01 per share, which includes (i) 350,902 shares of common stock and (ii) 70,181 shares of common stock issuable upon exercise of 1,754,510 warrants to purchase common stock; and · 1,754,510 warrants to purchase common stock |
| Use of Proceeds | We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of these securities by the selling stockholder. A portion of the shares of common stock covered by this prospectus are issuable upon exercise of warrants to purchase our common stock. Upon exercise of any of these warrants, the selling stockholder would pay us the exercise price set forth in the warrants. We expect to use any such proceeds for general corporate purposes. |
| NYSE MKT Symbols | LGL (common stock); LGL WS (warrants) |
| Risk Factors | Investing in our securities involves risks. Before making an investment decision, you should carefully consider the specific risks set forth under the caption "Risk Factors" beginning on page 3 of the prospectus. You should also refer to the other information in this prospectus, including our financial statements and the related notes incorporated by reference in this prospectus. |
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RISK FACTORS
Risks Related to Our Business and Industry
We are dependent on a single line of business.
We are currently dedicated to manufacturing and marketing custom designed highly engineeredstandard and custom-engineered electronic components that are used primarily to control the frequency or timing of signals in electronic circuits, and we do not offer any other products. Virtually all of our 2009MtronPTI's 2012 and 20102011 revenues came from sales of frequency control devices, which consist of packaged quartz crystals, oscillator modules, electronic filters and electronic filters.integrated modules. We expect that this product line will continue to account for substantially all of ourMtronPTI's revenues for the foreseeable future.
in 2013.
Given our reliance on this single line of business, any decline in demand for this product line or failure to achieve continued market acceptance of existing and new versions of this product line may harm ourMtronPTI's business and our financial condition. Additionally, unfavorable market conditions affecting this line of business would likely have a disproportionate impact on us in comparison with certain competitors, who have more diversified operations and multiple lines of business. Should this line of business fail to generate sufficient sales to support ongoing operations, there can be no assurance that we will be able to develop alternate business lines.
Our operating results vary significantly from period to period.
We had a net loss of approximately ($1,320,000) for the year ended December 31, 2012. We experienced a further net loss of approximately ($5,047,000) for the six months ended June 30, 2013. Our revenues are derived solely from our operating subsidiary, MtronPTI, and to retain our existing managementits future rate of growth and technical personnel. The labor markets in which we operateprofitability are highly competitivedependent on the development and somegrowth of demand for our products in the communications, networking, military, avionics, instrumentation and industrial markets, which are cyclical. We cannot be certain whether we will generate sufficient revenues or sufficiently manage expenses to return to profitability.
We have a large customer that accounts for a significant portion of our operations are not locatedrevenues, and the loss of this customer, or decrease in highly populated areas. As a result, we may not be able to recruit and retain key personnel. Our failure to hire, retain or adequately train highly-skilled employees requiredtheir demand for the operation of our business could hinder our ability to successfully develop marketable products, or could have a negative impactmaterial adverse effect on our performance.
results.
In addition, we depend2012, MtronPTI's largest customer, an electronics contract manufacturing company, accounted for $2,914,000, or 9.8%, of the Company's total revenues, compared to $3,680,000, or 10.3%, in 2011. The loss of this customer, or a decrease in their demand for our products, could have a material adverse effect on our senior executive officersresults.
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A relatively small number of customers account for a significant portion of our accounts receivable, and other key personnel to run our business. We do not have long-term contracts with our key personnel. The lossthe insolvency of any of these officerscustomers could have a material adverse impact on our liquidity.
In 2012, MtronPTI's three largest customers accounted for approximately $1,880,000, or other key personnel42.4%, of accounts receivable, compared to approximately $1,441,000, or 33.4%, as compared to 2011. The insolvency of any of these customers could adversely affecthave a material adverse impact on our operations.liquidity.
from multiple sources to ensure timely delivery when backlog is particularly long and may cancel or defer orders without significant penalty. They also may cancel orders when business is weak and inventories are excessive, a phenomenon that we previously experienced in the most recent preceding economic slowdown.excessive. As a result, wethe Company cannot provide assurances as to the portion of backloggedbacklog orders to be filled in a given year, and ourMtronPTI's order backlog as of any particular date may not be representative of actual revenues for any succeedingsubsequent period.
We are a holding company, and therefore are dependent upon the operations of our subsidiaries to meet our obligations.
We relyare a holding company that transacts business through our operating subsidiaries. Our primary assets are the shares of our operating subsidiaries. Our ability to meet our operating requirements and to make other payments depends on the surplus and earnings of our subsidiaries and their ability to pay dividends or to advance or repay funds. The ability of our subsidiaries to pay dividends or make other distributions to the Company is subject to certain limitations under our existing credit facility.
MtronPTI relies upon a limited number of contract manufacturers for a significant portion of its finished products, and a disruption in those relationships could have a negative impact on our revenues.
In 2009,2012, approximately 10.9%15.4% of our revenue was attributable to finished products that were manufactured by an independent contract manufacturer locatedwith production locations in both Korea and China (12.7%(as compared to 14.7% in 2008)2011). We expect this manufacturer to continue to account for a smaller but substantialsimilar portion of our productiontotal revenue in 20102013 and a material portion of our revenues for the next several years. We do not have a written, long-term supply contract with this manufacturer. If this manufacturer becomes unable to provide products in the quantities needed, or at acceptable prices, we would have to identify and qualify acceptable replacement manufacturers or manufacture the products internally. Due to specific product knowledge and process capability, we could encounter difficulties in locating, qualifying and entering into arrangements with replacement manufacturers. As a result, a reduction in the production capability or financial viability of this manufacturer, or a termination of, or significant interruption in, our relationship with this manufacturer, may adversely affect our results of operations and our financial condition.
MtronPTI's future rate of growth and profitability are highly dependent on the development and growth of the communications, networking, military, avionics, instrumentation and industrial markets, which are cyclical.
In 2012 and the first half of 2013, the majority of MtronPTI's revenues were derived from sales to manufacturers of equipment for the communications, networking, military, avionics, instrumentation and industrial markets for frequency control devices, including indirect sales through distributors and contract manufacturers. During the remainder of 2013, MtronPTI expects a significant portion of its revenues to continue to be derived from sales to these manufacturers. Often OEMs and other service providers within these markets have experienced periods of capacity shortage and periods of excess capacity, as well as periods of either high or low demand for their products. In periods of excess capacity or low demand, purchases of capital equipment may be curtailed, including equipment that incorporates MtronPTI's products. A slowdown, whether due to cyclical, macroeconomic or other factors, in the manufacture and purchase of equipment for these markets could substantially reduce MtronPTI's net sales and operating results and adversely affect our financial condition. Moreover, if these markets fail to grow as expected, MtronPTI may be unable to maintain or grow its revenue.
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The multiple variables which affect the communications, networking, military, avionics, instrumentation and industrial markets for equipment that require frequency control devices, as well as the number of parties involved in the supply chain and manufacturing process, can impact inventory levels and lead to supply chain inefficiencies. As a result of these complexities, MtronPTI has limited visibility to forecast revenue projections accurately for the near and medium-term timeframes.
Market share of frequency control devices with equipment manufacturers in the communications, networking, military, avionics, instrumentation and industrial markets may change over time, reducing the value of our relationships with our existing customer base.
We purchasehave developed long-term relationships with our existing customers, including pricing contracts, custom designs and approved vendor status. If these customers lose share to equipment manufacturers in the communications, networking, military, avionics, instrumentation and industrial markets with whom we do not have similar relationships, our ability to maintain revenue, margin or operating performance may be adversely affected.
We may make acquisitions that are not successful, or we may fail to integrate acquired businesses into our operations properly.
We intend to explore opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or product lines, or that might otherwise offer us growth opportunities. We may have difficulty finding such opportunities or, if such opportunities are identified, we may not be able to complete such transactions for reasons including a failure to secure necessary financing.
Any transactions that we are able to identify and complete may involve a number of risks, including:
| · | The diversion of our management's attention from the management of our existing business to the integration of the operations and personnel of the acquired or combined business or joint venture; |
| · | Due diligence may not identify material business risks; |
| · | Possible adverse effects on our operating results during the integration process; |
| · | Substantial acquisition-related expenses, which would reduce our net income, if any, in future years; |
| · | The loss of key employees and customers as a result of changes in management; and |
| · | Our possible inability to achieve the intended objectives of the transaction. |
In addition, we may not be able to integrate, operate, maintain or manage, successfully or profitably, our newly acquired operations or employees. We may not be able to maintain uniform standards, controls, policies and procedures, and this may lead to operational inefficiencies.
If MtronPTI is unable to introduce innovative products, demand for its products may decrease.
MtronPTI's future operating results are dependent on its ability to develop, introduce and market innovative products continually, to modify existing products, to respond to technological change and to customize some of its products to meet customer requirements. There are numerous risks inherent in this process, including the risks that MtronPTI will be unable to anticipate the direction of technological change or that it will be unable to develop and market new products and applications in a timely or cost-effective manner to satisfy customer demand.
MtronPTI's markets are highly competitive, and it may lose business to larger and better-financed competitors.
MtronPTI's markets are highly competitive worldwide, with low transportation costs and few import barriers. MtronPTI competes principally on the basis of product quality and reliability, availability, customer service, technological innovation, timely delivery and price. Within the industry in which MtronPTI competes, competition has become increasingly concentrated and global in recent years. Many of MtronPTI's major competitors, some of which are larger, and potential competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer support capabilities.
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Availability under our revolving credit facility may be limited due to a decline in the borrowing base.
Our credit facility includes a revolving credit facility that is based upon certain assets of MtronPTI, which include accounts receivable and inventory, subject to certain adjustments as defined by the loan agreement governing the credit facility. The total amount available to be borrowed under the revolving credit facility may be reduced if business activity levels lead to lower asset balances as defined under the loan agreement.
Compliance with the financial covenants under our existing loan agreement may be difficult due to our results of operations, our financial condition, or prevailing economic conditions.
We may find it difficult to comply with the financial covenants defined under our existing loan agreement, which requires that MtronPTI maintain a variety of affirmative and negative covenants, including, but not limited to, a financial covenant to maintain a certain level of tangible net worth. As of June 30, 2013, MtronPTI was not in compliance with the tangible net worth covenant under the loan agreement and the lender waived non-compliance with this covenant as of June 30, 2013. If prevailing business levels cause us to default on these covenants, the credit facility under our existing loan agreement may become unavailable and we may be unable to find a replacement facility or obtain additional financing on acceptable terms, or at all. This may limit our access to capital to fund our business or hinder our ability to meet our strategic objectives.
Under our existing loan agreement, we are required to obtain the lender's consent for most additional debt financing, potentially making it more difficult for us to obtain such financing.
Our success depends on our ability to retain key management and technical personnel and attracting, retaining, and training new technical personnel.
Our future growth and success will depend in large part upon our ability to recruit highly-skilled technical personnel, including engineers, and to retain our existing management and technical personnel. The labor markets in which we operate are highly competitive and some of our operations are not located in highly populated areas. As a result, we may not be able to recruit and retain key personnel. Our failure to hire, retain or adequately train key personnel could have a negative impact on our performance. The Company's employment agreement with Gregory P. Anderson, its President and Chief Executive Officer, expires on November 2, 2013.
MtronPTI purchases certain key components and raw materials from single or limited sources and could lose sales if these sources fail to fulfill ourits needs.
If single sourcesingle-source components or key raw materials were to become unavailable on satisfactory terms, and our wholly-owned subsidiary, MtronPTI could not obtain comparable replacement components or raw materials from other sources in a timely manner, ourthe Company's business, results of operations and financial condition could be harmed. On occasion, one or more of the components used in ourMtronPTI's products have become unavailable, resulting in unanticipated redesign and related delays in shipments. We cannot give assurance that similar delays will not occur in the future. Our suppliers may be impacted by compliance with environmental regulations including Restriction of Hazardous Substances ("RoHS") and Waste Electrical and Electronic Equipment ("WEEE"), which could disrupt the supply of components or raw materials or cause additional costs for MtronPTI to implement new components or raw materials into its manufac turingmanufacturing process.
As a supplier to U.S. Government defense contractors, we are subject to a number of procurement regulations and other requirements and could be adversely affected by changes in regulations or any negative findings from a U.S. audit or investigation.
A number of theour customers of our wholly-owned subsidiary, MtronPTI, are U.S. Government contractors. As one of their suppliers, we must comply with significant procurement regulations and other requirements. We also maintain registration under the International Traffic in Arms Regulations for all of our production facilities. One of those production facilities must comply with additional requirements and regulations for its production processes and for selected personnel relatedin order to maintainingmaintain the security of classified information. These requirements, although customary within these markets, increase our performance and compliance costs. If any of these various requirements change, our costs of complying with them could increase and reduce our operating margins.
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We operate in a highly regulated environment and are subject to auditroutinely audited and reviewreviewed by the U.S. Government and its agencies such as the Defense Contract Audit Agency (DCAA)("DCAA") and Defense Contract Management Agency (DCMA)("DCMA"). These agencies review our performance under our contracts, our cost structure and our compliance with applicable laws, regulations, and standards, as well as the adequacy of, and our compliance with, our internal control systems and policies. Systems that are subject to review include our purchasing systems, billing systems, property management and control systems, cost estimating systems, compensation systems and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed or must be refunded if already reimbursed. If an audit uncovers improper or illegal activ ities,activities, we may be subject to civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspension, or prohibition from doing business as a supplier to contractors who
sell products and services to the U.S. Government. In addition, our reputation could be adversely affected if allegations of impropriety were made against us.
When our wholly-owned subsidiary, MtronPTI releases new products, or new versions of existing products, they may contain undetected or unresolved errors or defects. The vast majority of MtronPTI’sMtronPTI's products are custom-designed for requirements of specific OEM systems. The expected business life of these products ranges from less than one year to more than 10 years depending on the application. Some of the customizations are modest changes to existing product designs while others are major product redesigns or new product platforms.
Despite testing, errors or defects may be found in new products or upgrades after the commencement of commercial shipments. Undetected errors and design flaws have occurred in the past and could occur in the future. These errors could result in delays, loss of market acceptance and sales, diversion of development resources, damage to ourthe Company's reputation, product liability claims and legal action by its customers and third parties, failure to attract new customers and increased service costs.
Communications and network infrastructure equipment manufacturers increasingly rely upon contract manufacturers, thereby diminishing our ability to sell itsour products directly to those equipment manufacturers.
There is a continuing trend among communications and network infrastructure equipment manufacturers to outsource the manufacturing of their equipment or components. As a result, ourMtronPTI's ability to persuade these OEMs to utilize itsour products in customer designs could be reduced and, in the absence of a manufacturer’smanufacturer's specification of MtronPTI's products, from our wholly-owned subsidiary, MtronPTI, the prices that MtronPTI can be chargedcharge for them may be subject to greater competition.
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The majority of theMtronPTI's sales made by our wholly-owned subsidiary, MtronPTI, are to companies that are many times its size. This size differential may placedisadvantage MtronPTI at a disadvantage in negotiating contractual terms. These terms include price, payment terms, product warranties and product consignment obligations.
There is a growing trend among some of MtronPTI’sMtronPTI's larger customers that require MtronPTI to provide increased levels of warranty coverage. Some of these changeswarranty provisions would require MtronPTI to pay substantial financial penalties if the customer invokes the warranty. These warranty provision. These additional warrantiesprovisions may result in additional production costs to MtronPTI. In addition, these new warranty provisions may place MtronPTI at a disadvantage in comparison to its competitors and may result in terms that are not in the best interest of MtronPTI.
Future changes in or the determination ofMtronPTI's environmental liability and compliance obligations of our past and present operating subsidiaries may increase costs and decrease profitability.
presently determine the modifications, if any, in ourMtronPTI's operations that any future regulations might require, or the cost of compliance that would be associated with these regulations.
Environmental laws and regulations may cause us to change our manufacturing processes, redesign some of our products, and change components to eliminate some substances in MtronPTI’sMtronPTI's products in order to be able to continue to offer them for sale.
We have significant international operations and sales to customers outside of the United States that subjectssubject us to certain business, economic and political risks.
We have office and manufacturing space in Noida, India.India and Yantai, China, and sales offices in Hong Kong and Shanghai, China. Additionally, our 2009foreign revenues for 2012 and 2008 sales to customers outside the United States2011 (primarily to Malaysia and China) accounted for 50.4%49.2% of our 20092012 consolidated revenues and 56.5%56.2% of our 20082011 consolidated revenues. For the six months ended June 30, 2013, foreign revenues accounted for 48.8% of consolidated revenues. We anticipate that sales to customers located outside of the United States will continue to be a significant part of our revenues for the foreseeable future. Our international operations and sales to customers outside of the United States subject our operating results and financial condition to certain business, economic, political, health, regulatory and other risks, including:
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| · | Trade restrictions; |
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Additionally, to date, very few of our international revenue and cost obligations have been denominated in foreign currencies. As a result, changes in the value of the United States dollar relative to foreign currencies may affect our competitiveness in foreign markets. We do not currently engage in foreign currency hedging activities, but may do so in the future to the extent that such obligations become more significant.
Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability.
We are subject to income taxes in the United States and certainseveral foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Furthermore, changes in domestic or foreign income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. The final determination of any tax audits or related litigation could be materially different from our historical income tax provisions and accruals. Additionally, changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes in tax legislation, changes in the valuation of deferred tax assets and liabilities, the results of audits and the examination of previously filed tax returns by taxing authorities and continuing assessments of our tax exposures could impact our tax liabilities and affect our income tax expense and profitability.
New regulations related to conflict minerals could adversely impact our business.
Risks Related to Our Securities
The prices of our common stock and accounting personnel, especiallywarrants have fluctuated considerably and are likely to remain volatile, in lightpart due to the limited market for our securities.
From January 1, 2012, through September 18, 2013, the high and low sales prices for our common stock were $9.14 and $4.76, respectively. From their issuance on August 6, 2013, through September 18, 2013, the high and low sales prices for our warrants were $0.22 and $0.04, respectively. There is a limited public market for our common stock and warrants, and we cannot provide assurances that a more active trading market will develop or be sustained. As a result of low trading volume in our common stock and warrants, the purchase or sale of a relatively small number of securities could result in significant price fluctuations and it may be difficult for holders to sell their securities without depressing the market price for such securities.
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Additionally, the market prices of our common stock and warrants may continue to fluctuate significantly in response to a number of factors, some of which are beyond our control, including the following:
| · | General economic conditions affecting the availability of long-term or short-term credit facilities, the purchasing and payment patterns of our customers, or the requirements imposed by our suppliers; |
| · | Economic conditions in our industry and in the industries of our customers and suppliers; |
| · | Changes in financial estimates or investment recommendations by securities analysts relating to our common stock; |
| · | Market reaction to our reported financial results; |
| · | Loss of a major customer; |
| · | Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; and |
| · | Changes in key personnel. |
The warrants may not have any value.
The warrants are "European style warrants" and will only become exercisable on the earlier of (i) the expiration date, August 6, 2018, and (ii) such date that the 30-day volume weighted average price per share, or VWAP, of our common stock is greater than or equal to $15.00. Once the warrants become exercisable, they may be exercised in accordance with the terms of the increased demandwarrant agreement until their expiration at 5:00 p.m., Eastern Time, on the expiration date.
The warrants have an exercise price of $7.50 per share. This exercise price does not necessarily bear any relationship to established criteria for valuation of our common stock, such personnelas book value per share, cash flows, or earnings, and you should not consider this exercise price as an indication of the current or future market price of our common stock. There can be no assurance that the market price of our common stock will exceed $7.50 per share at any time on the expiration date of the warrants, August 6, 2018, or at any other time the warrants may be exercised. If the warrants only become exercisable on the expiration date and the market price of our common stock on such date does not exceed $7.50 per share, the warrants will be of no value.
There can be no assurance that the 30-day VWAP of our common stock will be greater than or equal to $15.00 at any time prior to the expiration date of the warrants, August 6, 2018. As a result, the warrants may become exercisable only on the expiration date. If the warrants may be exercised only on the expiration date and their holder does not exercise their warrants on that date, their warrants will expire and be of no value.
No warrants will be exercisable unless at the time of exercise a prospectus relating to our common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, we will not be required to net cash settle or cash settle the warrant exercise, the warrants may have no value, the market for the warrants may be limited and the warrants may expire worthless.
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Holders of our warrants will have no rights as a common stockholder until such holders exercise their warrants and acquire shares of our common stock.
Until warrant holders acquire shares of our common stock upon exercise of the warrants, warrant holders will have no rights with respect to the shares of our common stock underlying such warrants. Upon the acquisition of shares of our common stock upon exercise of the warrants, the holders thereof will be entitled to exercise the rights of a common stockholder only as to matters for which the record date for the matter occurs after the exercise date of the warrants.
Adjustments to the exercise price of the warrants, or the number of shares of common stock for which the warrants are exercisable, following certain corporate events may not fully compensate warrant holders for the value they would have received if they held the common stock underlying the warrants at the time of such events.
The warrants provide for adjustments to the exercise price of the warrants following a number of corporate events, including (i) our issuance of a stock dividend or the subdivision or combination of our common stock, (ii) our issuance of rights, options or warrants to purchase our common stock at a price below the 10-day VWAP of our common stock, (iii) a distribution of capital stock of the Company or any subsidiary other than our common stock, rights to acquire such capital stock, evidences of indebtedness or assets, (iv) our issuance of a cash dividend on our common stock, and (v) certain tender offers for our common stock by the Company or one or more of our wholly-owned subsidiaries. The warrants also provide for adjustments to the number of shares of common stock for which the warrants are exercisable following our issuance of a stock dividend or the subdivision or combination of our common stock. Any adjustment made to the exercise price of the warrants or the number of shares of common stock for which the warrants are exercisable following a corporate event in accordance with these provisions may not fully compensate warrant holders for the value they would have received if they held the common stock underlying the warrants at the time of the event.
Our officers, directors and 10% stockholders have significant voting power and may vote their shares in a manner that is not in the best interest of other stockholders.
Our officers, directors and 10% or greater stockholders control approximately 36.4% of the voting power represented by our outstanding shares of common stock as of September 18, 2013. If these stockholders act together, they may be able to exert significant control over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of all of our stockholders.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company more difficult, which acquisition may be beneficial to stockholders.
Provisions in our certificate of incorporation and by-laws, as well as provisions of the General Corporation Law of the State of Delaware ("DGCL"), may discourage, delay or prevent a merger, acquisition or other change in control of the Company, even if such a change in control would be beneficial to our stockholders. These provisions include prohibiting our stockholders from fixing the number of directors, and establishing advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our Board.
Additionally, Section 203 of the DGCL prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. We have not opted out of the restrictions under Section 203, as permitted under DGCL.
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A strategic review of our operations and analysis of our strategic options is being conducted by a Special Committee of our Board, which may result in organizational changes, discontinuing or segmenting of operations, dispositions or other courses of action that could negatively affect the trading value of our common stock and warrants.
On July 17, 2013, we issued a press release providing an update on the strategic review process being conducted by a Special Committee of our Board. Previously, we announced that we were approached by an investment group interested in acquiring certain parts of MtronPTI, and that the Special Committee has initiated a strategic review process with the goal of executing on opportunities that create additional value for stockholders. The press release announced that, among publicly traded companies.other things, the Special Committee is considering options to streamline operational support for certain segments of our business, as well as exploring the possibility of discontinuing or segmenting from the Company some or all of MtronPTI's operations.
The Company's President and Chief Executive Officer, Greg Anderson, stated in the press release that "Fundamental business conditions have not materially improved as we have moved into the summer. Management is closely engaged with the Special Committee to evaluate strategic alternatives that support stockholder value creation." In the press release, we also stated our intention to file a new shelf registration statement with the SEC to replace our existing registration statement, which is set to expire in November of this year.
On August 12, 2013, the Company issued a press release announcing the Company's second quarter 2013 earnings results and current business activities, and to provide an update on the Company's strategic review process. Mr. Anderson stated in the press release that "Our strategic review process is continuing as we analyze options to unlock the potential of LGL and our subsidiary, MtronPTI, while seeking to create value for stockholders."
We cannot assure you that any organizational changes, discontinuing or segmenting of operations, dispositions or other courses of action that we implement following the completion of the Special Committee's strategic review process will have the intended effect of creating additional value for stockholders. Any such courses of action may impact us in ways that cannot be predicted at this time, and could negatively affect the trading value of our common stock and warrants.
FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this prospectus may contain forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend”"may," "should," "expect," "anticipate," "estimate," "believe," "intend" or the negative of these words or other variations on these words or comparable terminology, as they relate to future periods.
Examples of forward-looking statements include, but are not limited to, statements we make regarding the Company’sCompany's efforts to grow revenue, the Company’sCompany's expectations regarding fulfillment of backlog, the results of introduction of a new product line, future benefits to operating margins and the adequacy of the Company’sCompany's cash resources.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. As forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include national and global economic, business, competitive, market and regulatory conditions and the factors described under “Risk Factors”"Risk Factors" in this prospectus, in our Annual Report on Form 1 0-K10-K and our Quarterly Reports on Form 10-Q.
Further, we do not undertake any obligation to publicly update any forward-looking statements. As a result, you should not place undue reliance on these forward-looking statements.
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USE OF PROCEEDS
The selling stockholder will pay any underwriting discounts and commissions and any expenses incurred by the selling stockholder for brokerage, accounting, tax or legal services or any other expenses incurred by such selling stockholder in disposing of securities covered by this prospectus. We will bear the costs, fees and expenses incurred to effect the registration of securities covered by this prospectus, including all registration fees and filing fees, NYSE MKT listing fees and fees and expenses of counsel and our independent registered public accounting firm.
SELLING STOCKHOLDER
The following table sets forth the highname of the selling stockholder, the number of shares of common stock and low sales prices forwarrants owned beneficially by the selling stockholder as of September 18, 2013, the number of shares of common stock and warrants that may be offered pursuant to this prospectus, and the number of shares of common stock and warrants to be owned by the selling stockholder after this offering, assuming the sale of all securities offered by this prospectus.
As the selling stockholder may offer all, some or none of its common stock and warrants, and we do not know whether the selling stockholder will exercise all, some or none of its warrants, no definitive estimate as to the number of shares of common stock and warrants that will be held by the selling stockholder after the offering can be provided. In accordance with a Registration Rights Agreement, dated September 19, 2013 (the "Registration Rights Agreement"), by and between the Company and the selling stockholder, we are registering the securities listed below to permit the selling stockholder and its pledgees, donees, transferees or other successors-in-interest that receive these securities after the date of this prospectus to resell or otherwise dispose of such securities in the manner contemplated under "Plan of Distribution" below. Pursuant to Rule 416 under the Securities Act of 1933, as amended, or the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares of our common stock forand warrants as may from time to time be issued at currently indeterminate prices and as may be issuable as a result of stock splits, stock dividends or similar transactions with respect to the periods indicated as reported by NYSE Amex:securities being registered hereunder.
| Fiscal Year 2010 | High | Low | ||||||
| First Quarter | $ | 6.90 | $ | 6.90 | ||||
| Second Quarter | 14.20 | 6.90 | ||||||
| Third Quarter | 23.79 | 10.19 | ||||||
| Fiscal Year 2009 | High | Low | ||||||
| First Quarter | $ | 2.28 | $ | 1.18 | ||||
| Second Quarter | 4.50 | 1.70 | ||||||
| Third Quarter | 3.97 | 2.59 | ||||||
| Fourth Quarter | 3.75 | 2.30 | ||||||
| Fiscal Year 2008 | High | Low | ||||||
| First Quarter | $ | 13.90 | $ | 6.20 | ||||
| Second Quarter | 8.75 | 6.50 | ||||||
| Third Quarter | 8.40 | 5.00 | ||||||
| Fourth Quarter | 5.10 | 1.00 | ||||||
Information concerning the selling stockholder may change from time to time and, when necessary, any changed information will be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans (including individual arrangements):
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders(1) | 20,000 | $ | 13.17 | 481,700 | ||||||||
| Equity compensation plans not approved by security holders | -- | -- | -- | |||||||||
| Total | 20,000 | $ | 13.17 | 481,700 | ||||||||
set forth in a prospectus supplement to this prospectus.
| Number of Securities Beneficially Owned Prior to Offering | Maximum Number of Securities to be Sold Pursuant to this Prospectus | Number of Securities Beneficially Owned After Offering (1) | Percentage of Class Beneficially Owned After Offering (1) | |||||
| Name | ||||||||
Venator Merchant Fund, L.P. (2) | ||||||||
| Common stock | 350,902 | 421,083 (3) | 0 | -- % | ||||
| Warrants | 1,754,510 | 1,754,510 | 0 | -- % |
_____________
| (1) |
| (2) | Venator Merchant Fund, L.P.'s address is: 140 Greenwich Avenue, 3rd Floor, Greenwich, Connecticut, 06830. |
| (3) | Includes 350,902 shares of |
PLAN OF DISTRIBUTION
We may sell the securities offered byare registering pursuant to this prospectus a total of (i) 421,083 shares of common stock, which includes 350,902 shares of common stock and 70,181 shares of common stock issuable upon exercise of 1,754,510 warrants to purchase common stock, and (ii) 1,754,510 warrants to purchase common stock, on behalf of the selling stockholder. The selling stockholder and any of its pledgees, donees, transferees or other successors-in-interest may, from time to time, offer and sell or otherwise dispose of any or all of its shares of common stock and warrants offered hereby on any stock exchange, market or trading facility on which the shares or warrants are traded or in anyprivate transactions. The securities may be sold directly or through one or more of the following ways from time to time:
| · | sales on the NYSE MKT or any national securities exchange or quotation service on which our common stock or warrants may be listed or quoted at the time of sale; |
| · | sales in the over-the-counter market; |
| · | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to |
| · | 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; |
| · | transactions in which broker-dealers agree with the selling stockholder to sell a specified number of such shares of common stock or warrants at a stipulated price per share or warrant; |
| · | through the writing or settlement of options or other hedging transactions, whether the options are listed on an options exchange or otherwise; |
| · | through the settlement of short sales; |
| · | a combination of any such methods of sale; and |
| · | any other method permitted pursuant to applicable law. |
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The selling stockholder may also sell securities under Rule 144 promulgated under the Securities Act, if available, rather than under this prospectus. In addition, the selling stockholder may transfer securities by other means not described in this prospectus. If the selling stockholder effects such transactions by selling securities to or through dealers, and the dealersunderwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive compensationcommissions in the form of discounts, concessions or commissions from the underwritersselling stockholder or commissions from purchasers of the purchaserssecurities for whom they may act as agent.
In connection with sales of the shares of common stock or warrants or otherwise, the selling stockholder may enter into hedging transactions with broker-dealers, which underwriters allowmay in turn engage in short sales of the securities in the course of hedging in positions they assume. The selling stockholder may also sell shares of common stock or warrants short and deliver securities covered by this prospectus to dealers. Underwriters, dealersclose out short positions and agentsto return borrowed securities in connection with such short sales. The selling stockholder may also loan or pledge securities to broker-dealers that in turn may sell such securities.
The selling stockholder may pledge or grant a security interest in some or all of the shares of common stock or warrants owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the securities from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholder also may transfer and donate the securities in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
To the extent required by the Securities Act and the rules and regulations thereunder, the selling stockholder and any broker-dealer participating in the distribution may be deemed to be underwriters, and any discounts and commissions they receive and any profit they realize on the resale of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts and commissions under the Securities Act. UnderwritersAt the time a particular offering of the shares of common stock or warrants is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of securities being offered and their controlling persons, dealersthe terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and agentsother terms constituting compensation from the selling stockholder and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the securities may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the securities may not be sold unless such securities have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that any selling stockholder will sell any or all of the shares of common stock or warrants registered pursuant to the registration statement, of which this prospectus forms a part.
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The selling stockholder and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the securities by the selling stockholder and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with respect to the securities. All of the foregoing may affect the marketability of the securities and the ability of any person or entity to engage in market-making activities with respect to the securities.
We will pay all expenses of the registration of the shares of common stock and warrants pursuant to the Registration Rights Agreement, including, without limitation, SEC filing fees and expenses of compliance with state securities or "blue sky" laws; provided, however, the selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholder against liabilities, including some liabilities under the Securities Act in accordance with the Registration Rights Agreement or the selling stockholder will be entitled under agreements entered into with us, to indemnificationcontribution. We may be indemnified by the selling stockholder against and contribution toward specific civil liabilities, including liabilities under the Securiti es Act.
Once sold under the registration statement, of Regulation M, duringwhich this prospectus forms a part, the business day prior to the pricingshares of the offering, before the commencement of offers or sales of the securities. Passive market makers must comply with applicable volumecommon stock and price limitations and mustwarrants will be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which mig ht otherwise prevailfreely tradable in the open market and, if commenced, may be discontinued at any time.
LEGAL MATTERS
EXPERTS
The consolidated financial statements of our companyincorporated in this Prospectus by reference to the Annual Report on Form 10-K as of and for the years ended December 31, 20092012 and 2008, which2011, have been audited by McGladrey LLP (formerly McGladrey & Pullen, LLP), an independent registered public accounting firm, as stated in their reports incorporated by reference in this prospectus,herein, and have been so incorporated in reliance upon such reports and upon the reportauthority of J.H. Cohn LLP, independent registered public accountants, given upon its authoritysuch firm as experts in auditingaccounting and accounting.auditing.
INCORPORATION BY REFERENCE
We have filed with the Commission a registration statement on Form S-3 (including exhibits) under the Securities Act, with respect to the securities to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to our Company and the securities offered in this prospectus, reference is made to the registration statement, including the exhibits filed thereto. With respect to each such document filed with the SEC as an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matter involved.
The SEC allows us to incorporate by reference information contained in documents we file with it, which means that we can disclose important information to you by referring you to those documents already on file with the SEC that contain that information. The information incorporated by reference is considered to be part of this prospectus. The following documents, which have been filedprospectus, and later information that we file with the SEC pursuant towill automatically update and supersede this information. We incorporate by reference the Securitiesdocuments listed below and any future information filed (rather than furnished) with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of 1934, as amended (the “Exchange Act”),this prospectus and the termination of the offering of the securities covered by this prospectus, provided, however, that we are incorporated by reference:
not incorporating any information furnished under any of Item 2.02 or Item 7.01 of any Current Report on Form 8-K (and exhibits filed on such form that are related to such items):
| · | our Annual Report on Form 10-K for the fiscal year ended December 31, |
| · | our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, |
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| · | our Current Reports on Form 8-K, filed with the SEC on January 7, |
| · | the descriptions of our common stock and warrants contained in our registration statements under the Exchange Act with respect to our common stock and warrants filed with the SEC, including any amendments or reports filed for the purpose of updating such descriptions. |
WHERE YOU CAN FIND MORE INFORMATION
We file periodicannual, quarterly and current reports, proxy statements and other information with the SEC. Our filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’sSEC's Public Reference Room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for furthermore information onabout the operation of its Public Reference Room.the public reference room. Our SEC filings are also available to the public at the SEC's web site at http://www.sec.gov.
Upon written or oral request, we will provide at no cost to the requester a copy of all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus. You may obtain copies of these documents from us, without charge (other than exhibits, unless the exhibits are specifically incorporated by reference), by requesting them in writing or by telephone at the following address:
The LGL Group, Inc.
2525 Shader Road
Orlando, Florida 32804
(407) 298-2000
Attention: Corporate Secretary
2525 Shader Road
Orlando, Florida 32804
(407) 298-2000
Attention: Corporate Secretary
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Distribution.
We estimate that expenses in connection with the distribution described in this registration statement (other than brokerage commissions, discounts or other expenses relating to the sale of the sharessecurities by the selling security holders)holder) will be as set forth below. We will pay all of these expenses. The amounts shown below, with the exception of the Securities and Exchange CommissionSEC registration fee, are estimates.
| SEC registration fee | $ | 962.55 | $ | 348.83 | ||||
| Accounting fees and expenses | 3,000.00 | |||||||
| Legal fees and expenses | 5,000.00 | |||||||
| Printing expenses | ||||||||
| Blue sky fees and expenses | ||||||||
| Transfer agent fees and expenses | ||||||||
| Miscellaneous | 1,500.00 | |||||||
| $ | 9,848.83 | |||||||
| $ | ||||||||
Item 15. Indemnification of Directors and Officers
Officers.
Section 145 of the Delaware General Corporation LawDGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation. Section 145 of the Delaware General Corporation LawDGCL also provides that expenses (including attorneys’attorneys' fees) incurred by a director or officer in defending an action may be paid by a corporation in advance of the final disposition of an action if the director or officer undertakes to repay the advanced amoun tsamounts if it is determined such person is not entitled to be indemnified by the corporation. The Delaware General Corporation LawDGCL provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Company’sCompany's Bylaws provide that, to the fullest extent permitted by law, the Company shall indemnify and hold harmless any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person, or the person for whom he is the legally representative, is or was a director or officer of the Company, against all liabilities, losses, expenses (including attorney’sattorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with su chsuch proceeding.
Section 102(b)(7) of the Delaware General Corporation LawDGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’sdirector's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. The Company’sCompany's Certificate of Incorporation provides for such limitation of liability.
The Company’sCompany's Bylaws provide for the indemnification of, and advancement of expenses to, directors and officers of the Company (and, at the discretion of the Board, of Directors of the Company, employees and agents of the Company to the extent that Delaware law permits the Company to provide indemnification to such persons) in excess of the indemnification and advancement otherwise permitted under Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to
the Company, its stockholders and others. The provision does not affect directors’directors' responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.
The Company has entered into agreements with its directors and executive officers, that require the Company to indemnify such persons to the fullest extent permitted by law, against expenses, judgments, fines, settlements and other amounts incurred (including attorneys’attorneys' fees), and advance expenses if requested by such person, in connection with investigating, defending, being a witness in, participating, or preparing for any threatened, pending, or completed action, suit, or proceeding or any alternative dispute resolution mechanism, or any inquiry, hearing, or investigation (collectively, a “Proceeding”"Proceeding"), relating to any event or occurrence that takes place either prior to or after the execution of the indemnification agreement, related to the fact that such person is or was a director or officer of the Company, or whil ewhile a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Company or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by such person in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent of the Company. Indemnification is prohibited on account of any Proceeding in which judgment is rendered against such persons for an accounting of profits made from the purchase or sale by such persons of securities of the Company pursuant to the provisions of Section 16 (b)16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state, or local laws. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.
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The Company has entered into a Registration Rights Agreement, dated September 19, 2013 (the "Registration Rights Agreement"), with the selling stockholder pursuant to which the Company agreed to indemnify and hold harmless the selling stockholder and each transferee thereof in accordance with the terms of the Registration Rights Agreement (each, a "Holder"), each director, officer, partner and agent of each Holder, any underwriter (as defined in the Securities Act), and each person, if any, who controls each Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Securities Act and applicable state securities laws insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement, including any preliminary prospectus or final prospectus forming a part of the registration statement or any amendments or supplements thereto, arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances, or arise out of any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company and relating to action or inaction required of the Company in connection with any such registration. The Company also agreed to reimburse each such person for any legal or other expenses reasonably incurred by him in connection with investigating or defending any such loss, claim, damage, liability or action.
The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against liability under the provisions of this section. The Company currently maintains such insurance.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission,SEC, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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At present, there is no pending litigation or proceeding involving any of our directors, officers or employees as to which indemnification is sought, nor are we aware of any threatened litigation or proceeding that may result in claims for indemnification.
Exhibit No. | Description |
| Certificate of Incorporation of The LGL Group, Inc. (incorporated by reference to Exhibit 3.1 to the | |
| The LGL Group, Inc. By-Laws (incorporated by reference to Exhibit 3.2 to the | |
| Reference is made to Exhibits 3.1 and 3.2 above. | |
| 4.2** | Form of Certificate for Common |
| Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form | |
| 4.3** | Warrant Agreement, dated as of July 30, 2013, by and among The LGL Group, Inc., Computershare Inc., and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form |
| 4.4* | |
| 5.1* | Opinion of Olshan |
| 23.1* | Consent of Independent Registered Public Accounting Firm – |
| 23.2* | Consent of Olshan |
| 24.1* | Power of Attorney (included on the signature page hereto). |
_____________
* Filed herewith
Item 17. Undertakings.
(a)The undersigned registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
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Provided however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
| (2) |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a |
(b)That, for purposes of determining any liability under the Securities Act, each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’splan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statementregistration statement shall be deemed to be a new Registration Statementregistration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) To supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the registrant certifies that it has reasonable grounds to believe that it meets all of 1934, the Registrantrequirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.authorized, in the City of Orlando, State of Florida, on September 19, 2013.
| THE LGL GROUP, INC. | ||
| By: | /s/ R. LaDuane Clifton | |
(Principal | ||
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POWER OF ATTORNEY
KNOW ALL BY THESE PERSONS PRESENT, that the persons whose signatures appear below do hereby constitute and appoint Gregory P. Anderson and R. LaDuane Clifton, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agent to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-3 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this registration statement has been signed below by the following persons on behalf of the Registrantregistrant and in the capacities and on the dates indicated:indicated.
| SIGNATURE | CAPACITY | DATE | ||
/s/ Gregory P. Anderson | President and Chief Executive Officer | September 19, 2013 | ||
| GREGORY P. ANDERSON | (Principal Executive Officer) | |||
/s/ R. LaDuane Clifton | Chief | September 19, 2013 | ||
| R. LADUANE CLIFTON | ||||
| (Principal Financial Officer) | ||||
/s/ James L. Williams | Corporate Controller | September 19, 2013 | ||
| JAMES L. WILLIAMS | (Principal Accounting Officer) | |||
Chairman of the Board of Directors | September 19, 2013 | |||
| MARC J. GABELLI | ||||
(Non-Executive) | ||||
/s/ Patrick J. Guarino | Director | September 19, 2013 | ||
PATRICK J. GUARINO | (Lead Independent Director) | |||
/s/ James Abel | Director | September 19, 2013 | ||
JAMES ABEL | ||||
/s/ Michael Chiu | Director | September 19, 2013 | ||
MICHAEL CHIU | ||||
/s/ Vincent Enright | Director | September 19, 2013 | ||
VINCENT ENRIGHT | ||||
/s/ Timothy Foufas | ||||
| Director | ||||
| September | ||||
| 19, 2013 | ||||
TIMOTHY FOUFAS | ||||
/s/ | Director | |||
| September | ||||
| 19, 2013 | ||||
DONALD H. HUNTER | ||||
/s/ | Director | September 19, 2013 | ||
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EXHIBIT INDEX
Exhibit No. | Description |
| Certificate of Incorporation of The LGL Group, Inc. (incorporated by reference to Exhibit 3.1 to the | |
| The LGL Group, Inc. By-Laws (incorporated by reference to Exhibit 3.2 to the | |
| Reference is made to Exhibits 3.1 and 3.2 above. | |
| 4.2** | Form of Certificate for Common |
| Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form | |
| 4.3** | Warrant Agreement, dated as of July 30, 2013, by and among The LGL Group, Inc., Computershare Inc., and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form |
| 4.4* | |
| 5.1* | Opinion of Olshan |
| 23.1* | Consent of Independent Registered Public Accounting Firm – |
| 23.2* | Consent of Olshan |
| 24.1* | Power of Attorney (included on the signature page hereto). |
_____________
* Filed herewith
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