As filed with the Securities and Exchange Commission on December 28, 2004
September 19, 2013
Registration No. 333-
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333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LYNCH CORPORATION
(Exact
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
(407) 298-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
R. LaDuane Clifton
Chief Financial Officer
2525 Shader Road
Orlando, Florida 32804
(407) 298-2000
(Name, address, including zip code, and telephone number,
including area code, of Registrant as Specified in Its Charter)
Indiana 38-1799862
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
140 Greenwich Avenue, 4th Floor
Greenwich, Connecticut 06830
(203) 622-1150
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------------
John C. Ferrara
President and Chief Executive Officer
Lynch Corporation
140 Greenwich Avenue, 4th Floor
Greenwich, Connecticut 06830
(203) 622-1150
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service of Process)
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agent for service)
Copy to:
David J. Adler,
Robert H. Friedman, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th55th Street
New York, New York 10022
(212) 451-2300
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Approximate date of commencement of proposed sale to the public: From
from time to time after the effective date of this Registration Statement becomes effective.
registration 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 form 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, please check the following box. [X]
ý
If this formForm 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 form 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 delivery ofthis Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the prospectus is expected to be madeCommission pursuant to Rule 434,
please462(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 accelerated filer," "accelerated filer" and "smaller reporting 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
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Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered (1) Share (2) Price Registration Fee
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Common Share, $0.01 136,643 shares $14.75 $2,015,484.20 $237.22
par value per share
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(1) In the event of a share split, share dividend or similar transaction
involving the common shares, the shares registered hereby will
automatically be increased pursuant
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 Act of 1933, the securities being registered hereunder include such indeterminate number of additional securities 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 securities being registered hereunder. |
| (2) | The offering price is estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933 based on the average of the high and low reported sales prices of our common stock and warrants on September 18, 2013 on the NYSE MKT. |
| (3) | Consists of (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. |
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 as amended, to cover the additional common shares required to prevent
dilution.
(2) Estimated solely for the purpose of calculatingor until the registration feestatement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Rule 457(c) under the Securities Act and based upon the average
of the high and low prices of the Registrant's common shares on the
American Stock Exchange on December 21, 2004.
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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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A)Section 8(a), MAY DETERMINE.
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may determine.
The information in this prospectus is not complete and may be changed. The selling shareholderstockholder 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 an
offeroffers to buy these securities in any state where thesuch offer or sale is not permitted.
Subject
SUBJECT TO COMPLETION, DATED SEPTEMBER 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
This prospectus relates to Completion, dated December 28, 2004
PROSPECTUS
LYNCH CORPORATION
136,643 COMMON SHARES
the sale, from time to time following the date hereof, of up to an aggregate of (i) 421,083 shares of common stock, par value $0.01 per share, 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, of The LGL Group, Inc. by the selling stockholder, Venator Merchant Fund, L.P. Venator Merchant Fund, L.P. is an investment limited partnership controlled by our Chairman of the Board, Marc Gabelli. Mr. Gabelli is the President and Sole Member of Venator Global, LLC, which is the sole general partner of Venator Merchant Fund, L.P.
The selling shareholder listed in this prospectus andstockholder or its pledgees, donees, transferees and otheror successors-in-interest may offer and sell or otherwise dispose of any or all of its shares of common stock and warrants described in this prospectus from time to time up to 136,643 common shares. We will not receive any of the proceeds from
such sale.
Our common shares are listed on The American Stock Exchange under the
symbol "LGL." The last reported sale price for our common shares on December 21,
2004 was $15.00 per share.
The selling shareholder may sell the common shares from time to time on any
stock exchangethrough public or automated interdealer quotation system on which the securities
are listed, in the over-the-counterprivate transactions at prevailing market in privately negotiated transactions
or otherwise, at fixed prices, that may be changed, at market prices prevailing
at the time of sale, 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 information about how the selling stockholder may sell or dispose of its securities.
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. See "Use of Proceeds." However, we will receive net proceeds of any warrants exercised. We will bear all costs relating to the registration of these securities.
Our common stock and warrants are traded on the NYSE MKT under the symbols "LGL" and "LGL WS", respectively. The last reported sales prices otherwise negotiated.
Our principal executive offices are located at 140 Greenwich Avenue, 4th
Floor, Greenwich, Connecticut 06830. Our telephone number is (203) 622-1150.
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INVESTINGof our common stock and warrants on the NYSE MKT on September 18, 2013 were $5.75 per share and $0.08 per warrant.
AN INVESTMENT IN OUR COMMON SHARESSECURITIES INVOLVES A HIGH DEGREE OF RISK. SEEYOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 2.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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3 OF THIS PROSPECTUS AND THE RISK FACTORS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS AS DESCRIBED IN 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 _____________, 2005.
___________ __, 2013.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................2
WHERE YOU CAN FIND MORE INFORMATION...........................................11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................11
INCORPORATION BY REFERENCE....................................................12
USE OF PROCEEDS...............................................................13
SELLING SHAREHOLDER...........................................................13
PLAN OF DISTRIBUTION..........................................................14
LEGAL MATTERS.................................................................15
EXPERTS.......................................................................15
| 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 prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the "SEC") using a "shelf" registration process or continuous offering process. Under this shelf registration process, the selling stockholder or its permitted transferees and successors may from time to time sell the securities described in this prospectus in one or more offerings.
It is important for you to read and consider all information contained in this prospectus in making your investment decision. You should also read and consider the information contained in the documents identified under the headings "Incorporation by Reference" and "Where You Can Find More Information."
You should rely only on the information and representations provided in this prospectus, including the information incorporated by reference. We have not authorized anyone to provide you with different information. You should not assume that the information contained or incorporated by reference in this prospectus or any related supplement. We have
not authorized anyone else to provide you with different information. The
selling shareholder will not make an offer to sell these shares in any state
where the offer is not permitted. You should not assume that the information in
this prospectus or any supplement is accurate as of any date other than as of the date onof this prospectus, as the frontcase may be, or in the case of those documents.
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS IMPORTANT FEATURES OF THIS OFFERING AND THE
INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THIS
SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN OUR COMMON SHARES. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY,
ESPECIALLY THE RISKS OF INVESTING IN OUR COMMON SHARES DISCUSSED UNDER "RISK
FACTORS."
the documents incorporated by reference, the date of such documents regardless of the time of delivery of this prospectus or any sale of our securities.
This prospectus does not constitute an offer to sell or a 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.
Unless the context otherwise requires, all references to "Lynch,"we," "we,""our", "us," or "our"the "Company" in this prospectus refer collectively to Lynch Corporation,The LGL Group, Inc., and references to the "selling stockholder" refer to Venator Merchant Fund, L.P.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere or incorporated by reference in 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 consolidated financial statements and the other information incorporated by reference into this prospectus, as well as the exhibits to the registration statement of which this prospectus is a part, before making an investment decision.
The Company
Overview
The LGL Group, Inc., incorporated in 1928 under the laws of the State of Indiana corporation,and reincorporated under the laws of the State of Delaware in 2007, is a globally-positioned producer of industrial and commercial products and services that is currently focused on the design and manufacture of highly-engineered electronic components and subsystems. The Company and its subsidiaries.subsidiaries maintain their executive offices at 2525 Shader Road, Orlando, Florida, 32804. The selling shareholder listed in this prospectusCompany's telephone number is (407) 298-2000. The Company's common stock and its pledgees, donees,
transfereeswarrants are traded on the NYSE MKT under the symbols "LGL" and other successors-in-interest may offer and sell from time to
time up to 136,643 common shares purchased directly from us in"LGL WS", respectively.
The Company operates through a private
placement on October 15, 2004. We agreed to register with the Securities and
Exchange Commission the resalenumber of the common shares purchased by the selling
shareholder.
THE COMPANY
We are a diversified holding company withoperating subsidiaries, engaged in
manufacturing. We have three wholly-owned subsidiaries,including M-tron Industries, Inc. ("Mtron"),
Lynch Systems, Inc. and Piezo Technology, Inc. Our business development strategy
is("PTI"), which are collectively referred to expand our existing operations through internal growth and acquisitions.
We may also, from time to time, consider the acquisition of other assets or
businesses that are not related to our present businesses.
M-TRON INDUSTRIES, INC./PIEZO TECHNOLOGY, INC.
M-tronherein as "MtronPTI." MtronPTI designs, manufactures and markets custom designedsells standard and custom-engineered electronic components that are used primarily to control the frequency or timing of electronic
signals in communications equipment.electronic circuits. Its devices, which are commonly called frequency control devices, crystals or oscillators, support fixedare used extensively in infrastructure equipment for the telecommunications and mobile
wireless, copper wire, coaxial cable, wide area networks, local area networksnetwork equipment industries, as well as in electronic systems for military applications, avionics, earth-orbiting satellites, medical devices, instrumentation, industrial devices and fiber opticglobal positioning systems. It sells its products to original equipment
manufacturers, contract manufacturers and to distributors.
On October 15, 2004, M-tron completed its acquisition of all the issued and
outstanding shares of Piezo. Piezo is a wholly-owned subsidiary of M-tron that
designs, manufactures and markets
MtronPTI's frequency control devices crystal resonators,consist of packaged quartz crystals, crystal oscillators timing devices, filters, crystal filters, liquid crystal
filters and relatedelectronic filters. Its products produce an electrical signal that has the following attributes:
| · | Accuracy: the measure of error between the specified frequency and the produced frequency; |
| · | Stability: the frequency of the signal does not vary significantly when the product is subjected to a range of operating environments; and |
| · | Low electronic noise: the signal does not add interfering signals that can degrade the performance of electronic systems. |
MtronPTI has more than 45 years of experience designing, manufacturing and technologies. Unlessmarketing crystal-based frequency control products. Its customers rely on the context otherwise
requires,skills of MtronPTI's engineering and design team to help solve frequency control problems during all referencesphases of their 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 "M-tron"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
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" below, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which is incorporated by reference in this prospectus. You should also refer to the other information in this prospectus, refer collectivelyincluding our financial statements and the related notes incorporated by reference in this prospectus. See "Incorporation by Reference" and "Where You Can Find More Information."
Risks Related to M-tronOur Business and Piezo.
LYNCH SYSTEMS, INC.
Lynch Systems designs, develops, manufactures and markets a broad range of
manufacturing equipment for the electronic display and consumer glass
industries. Lynch Systems also produces replacement parts for various types of
packaging and glass container-making machines, which Lynch Systems does not
manufacture.
RISK FACTORS
AN INVESTMENT IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. THE FOLLOWING
RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS, INCLUDING THE INFORMATION UNDER "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS," BEFORE MAKING AN INVESTMENT IN OUR COMMON SHARES.
WE HAVE INCURRED OPERATING LOSSES FOR THE PAST THREE YEARS AND FACE
UNCERTAINTY IN OUR ABILITY TO ACHIEVE OPERATING PROFITS IN THE FUTURE.
We have incurred substantial operating losses for the past three years.
Without giving effect to gains realized from the deconsolidation in 2001 and
2002 of one of our holdings, we suffered operating losses of $832,000, $3.3
million and $46.7 million in 2003, 2002 and 2001, respectively. Industry
We are uncertain
whetherdependent on a single line of business.
We are currently dedicated to manufacturing and marketing standard 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 MtronPTI's 2012 and 2011 revenues came from sales of frequency control devices, which consist of packaged quartz crystals, oscillator modules, electronic filters and integrated modules. We expect that this product line will continue to account for substantially all of MtronPTI's revenues 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 MtronPTI'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 achieve or sustaindevelop alternate business lines.
Our operating profitsresults vary significantly from period to period.
We experience fluctuations in our operating results. Some of the principal factors that contribute to these fluctuations include: changes in demand for our products; our effectiveness in managing manufacturing processes, costs and inventory; our effectiveness in engineering and qualifying new product designs with our OEM customers and in managing the risks associated with bringing those new products into production; changes in the future.
IF WE ARE UNABLE TO SECURE NECESSARY FINANCING, WE MAY NOT BE ABLE TO FUND OUR
OPERATIONS OR STRATEGIC GROWTH.
cost and availability of raw materials, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules; macroeconomic and served industry conditions; and events that may affect our production capabilities, such as labor conditions and political instability.
In orderaddition, due to achievethe prevailing economic climate and competitive differences between the various market segments which we serve, the mix of sales between our strategic business objectives, wecommunications, networking, military, avionics, industrial and instrumentation market segments may be
requiredaffect our operating results from period to seek additional financing.period. We may be unable to renew our existing
credit facilities or obtain new financing on acceptable terms, or at all. Under
our existing credit facilities,had a net loss in 2012 and for the first half of 2013, and we are requireduncertain as to obtainour ability to return to profitability.
We had a net loss of approximately ($1,320,000) for the lenders' consentyear ended December 31, 2012. We experienced a further net loss of approximately ($5,047,000) for most additional debt financingthe six months ended June 30, 2013. Our revenues are derived solely from our operating subsidiary, MtronPTI, and its future rate of growth and profitability are highly dependent on the development and growth 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 comply with other covenants, including
specific financial ratios. For example, we may require further capitalreturn to continue to developprofitability.
We have a large customer that accounts for a significant portion of our technologyrevenues, and infrastructure andthe loss of this customer, or decrease in their demand for working capital
purposes. In addition, future acquisitions would likely require additional
equity and/or debt financing. Our failure to secure additional financingour products, could have a material adverse effect on our continued developmentresults.
In 2012, MtronPTI's largest customer, an electronics contract manufacturing company, accounted for $2,914,000, or growth.
AS 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 results.
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A HOLDING COMPANY, WE DEPEND ON THE OPERATIONS OF OUR SUBSIDIARIES TO MEET
OUR OBLIGATIONS.
relatively small number of customers account for a significant portion of our accounts receivable, and the insolvency of any of these customers could have a material adverse impact on our liquidity.
In 2012, MtronPTI's three largest customers accounted for approximately $1,880,000, or 42.4%, of accounts receivable, compared to approximately $1,441,000, or 33.4%, as compared to 2011. The insolvency of any of these customers could have a material adverse impact on our liquidity.
MtronPTI's order backlog may not be indicative of future revenues.
MtronPTI's order backlog comprises orders that are subject to specific production release, orders under written contracts, oral and written orders from customers with which MtronPTI has had long-standing relationships and written purchase orders from sales representatives. MtronPTI's customers may order components 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. As a result, the Company cannot provide assurances as to the portion of backlog orders to be filled in a given year, and MtronPTI's order backlog as of any particular date may not be representative of actual revenues for any subsequent period.
We are a holding company, and therefore are dependent upon the operations of our subsidiaries to meet our obligations.
We are a holding company that transacts all of our 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. PaymentsThe ability of dividends and
advances and repayments of intercompany debt by 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 2012, approximately 15.4% of our revenue was attributable to finished products that were manufactured by an independent contract manufacturer with production locations in both Korea and China (as compared to 14.7% in 2011). We expect this manufacturer to continue to account for a similar portion of our total revenue in 2013 and 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 restricted
byhighly 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 credit agreements.
WE MAY MAKE ACQUISITIONS THAT ARE NOT SUCCESSFUL OR FAIL TO PROPERLY INTEGRATE
ACQUIRED BUSINESSES INTO OUR OPERATIONS.
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 have 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 we do identify 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:
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o the diversion of our management's attention from our existing business to
integrate the operations and personnel of the acquired or combined business
or joint venture;
o possible adverse effects on our operating results during the integration
process;
o substantial acquisition related expenses, which would reduce our net income
in future years;
o the loss of key employees and customers as a result of changes in
management; and
o our possible inability to achieve the intended objectives of the
transaction.
| · | 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 successfully or profitably integrate, operate, maintain andor manage, successfully or profitably, our newly acquired operations or employees. We may not be able to maintain uniform standards, controls, procedurespolicies and policies,procedures, and this may lead to operational inefficiencies.
PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER INDIANA LAW MAY PREVENT OR DELAY A
CHANGE OF CONTROL OF US AND COULD ALSO LIMIT THE MARKET PRICE OF OUR COMMON
SHARES.
Provisions of our certificate of incorporation and bylaws, as well as
provisions of Indiana corporate law,
If MtronPTI is unable to introduce innovative products, demand for its products may discourage, delay or prevent a merger,
acquisition or other change in control of our company, even if such a change in
control would be beneficial to our shareholders. These provisions may also
prevent or frustrate attempts by our shareholders to replace or remove our
management. These provisions include those:
o prohibiting our shareholders from fixing the number of our directors;
o requiring advance notice for shareholder proposals and nominations; and
o prohibiting shareholders from acting by written consent, unless unanimous.
We are subject to certain provisions of the Indiana Business Corporation
Law, or IBCL, that limit business combination transactions with 10% shareholders
during the first five years of their ownership, absent approval of our board of
directors. The IBCL also contains control share acquisition provisions that
limit the ability of certain shareholders to vote their shares unless their
control share acquisition was approved in advance by shareholders. These
provisions and other similar provisions make it more difficult for shareholders
or potential acquirers to acquire us without negotiation and could limit the
price that investors are willing to pay in the future for our common shares.
COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC
DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES.
Keeping abreast of, and in compliance with, changing laws, regulations and
standards relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, new SEC regulations and American Stock Exchange
rules, will require an increased amount of management attention and external
resources. We intend to invest all reasonably necessary resources to comply with
evolving standards, which will result in increased general and administrative
expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities.
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WE MAY BE EXPOSED TO LIABILITY AS A RESULT OF BEING NAMED AS A DEFENDANT IN A
LAWSUIT BROUGHT UNDER THE SO-CALLED "QUI TAM" PROVISIONS OF THE FEDERAL FALSE
CLAIMS ACT.
Lynch, Lynch Interactive Corporation and various other parties are
defendants in a lawsuit brought under the so-called "qui tam" provisions of the
federal False Claims Act in the United States District Court for the District of
Columbia. The main allegation in the case is that the defendants participated in
the creation of "sham" bidding entities that allegedly defrauded the U.S.
Treasury Department by improperly participating in Federal Communications
Commission spectrum auctions restricted to small businesses, and obtained
bidding credits in other spectrum auctions allocated to "small" and "very small"
businesses. The lawsuit seeks to recover an unspecified amount of damages, which
amount would be automatically tripled under the statute. Although Lynch
Interactive is contractually bound to indemnify us for any losses or damages we
may incur as a result of this lawsuit, Lynch Interactive may lack the capital
resources to do so. As a result, we could be held liable and forced to pay a
significant amount of damages without recourse.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS ON OUR COMMON SHARES IN THE
FORESEEABLE FUTURE.
We anticipate that all of our earnings will be retained for the development
of our business and do not anticipate paying cash dividends on our common
shares in the foreseeable future.
THERE IS A LIMITED MARKET FOR OUR COMMON SHARES. OUR SHARE PRICE IS LIKELY TO BE
HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY.
There is a limited public market for our common shares, and we cannot
assure you that an active trading market will develop. As a result of low
trading volume in our common shares, the purchase or sale of a relatively small
number of shares could result in significant share price fluctuations. Our share
price may fluctuate significantly in response to a number of factors, including
the following, several of which are beyond our control:
o changes in financial estimates or investment recommendations by securities
analysts relating to our shares;
o loss of a major customer;
o announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments; and
o changes in key personnel.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We could be the target of similar litigation in the future.
Securities litigation, regardless of merit or ultimate outcome, would likely
cause us to incur substantial costs, divert management's attention and
resources, harm our reputation in the industry and the securities markets and
reduce our profitability.
SECURITIES ANALYSTS MAY NOT INITIATE COVERAGE OF OUR COMMON SHARES OR MAY ISSUE
NEGATIVE REPORTS, AND THIS MAY HAVE A NEGATIVE IMPACT ON THE MARKET PRICE OF OUR
COMMON SHARES.
We cannot assure you that securities analysts will initiate coverage and
publish research reports on us. If securities analysts do not, this lack of
research coverage may adversely affect the market price of our common shares.
Recently adopted rules mandated by the Sarbanes-Oxley Act of 2002, and a global
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settlement reached among the Securities and Exchange Commission, other
regulatory agencies and a number of investment banks in April 2003 has led to a
number of fundamental changes in how analysts are reviewed and compensated. In
particular, many investment banking firms are now required to contract with
independent financial analysts for their stock research. It may be difficult for
companies with smaller market capitalizations, such as us, to attract
independent financial analysts who will cover our common shares, which could
have a negative effect on our market price.
IF WE ARE UNABLE TO INTRODUCE INNOVATIVE PRODUCTS, DEMAND FOR OUR PRODUCTS MAY
DECREASE.
Ourdecrease.
MtronPTI's future operating results are dependent on ourits ability to continually develop, introduce and market innovative products continually, to modify existing products, to respond to technological change and to customize some of ourits products to meet customer requirements. There are numerous risks inherent in this process, including the risks that weMtronPTI will be unable to anticipate the direction of technological change or that weit will be unable to develop and market new products and applications in a timely or cost-effective manner to satisfy customer demand.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY.
The success of our
MtronPTI's markets are highly competitive, and it may lose business depends, in part, upon our ability to protect
trade secrets, designs, drawings, copyrightslarger and patents, obtain or license
patents and operate without infringing on the intellectual property rights of
others. We rely on a combination of trade secrets, designs, drawings,
copyrights, patents, nondisclosure agreements and technical measures to protect
our proprietary rights in our products and technology. The steps taken by us in
this regard may not be adequate to prevent misappropriation of our technology.
In addition, the laws of some foreign countries in which we operate do not
protect our proprietary rights to the same extent as do the laws of the United
States. Although we continue to evaluate and implement protective measures, we
cannot assure you that these efforts will be successful. Our inability to
protect our intellectual property rights could diminish or eliminate the
competitive advantages that we derive from our technology, cause us to lose
sales or otherwise harm our business.
OUR OPERATING RESULTS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY
AFFECTED BY ECONOMIC, POLITICAL, HEALTH, REGULATORY AND OTHER FACTORS EXISTING
IN FOREIGN COUNTRIES IN WHICH WE OPERATE.
As we have significant international operations, our operating results and
financial condition could be materially adversely affected by economic,
political, health, regulatory and other factors existing in foreign countries in
which we operate. Our international operations are subject to inherent risks,
which may materially adversely affect us, including:
o political and economic instability in countries in which our products are
manufactured and sold;
o expropriation or the imposition of government controls;
o sanctions or restrictions on trade imposed by the United States government;
o export license requirements;
o trade restrictions;
o currency controls or fluctuations in exchange rates;
o high levels of inflation or deflation;
o greater difficulty in collecting our accounts receivable and longer payment
cycles;
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o changes in labor conditions and difficulties in staffing and managing our
international operations; and
o limitations on insurance coverage against geopolitical risks, natural
disasters and business operations.
In addition, these same factors may also place us at a competitive
disadvantage when compared to some of our foreignbetter-financed competitors. In response to
competitive pressures and customer requirements, we may further expand
internationally at lower cost locations. If we expand into these locations, we
will be required to incur additional capital expenditures.
OUR BUSINESSES ARE CYCLICAL. THE RECENT DECLINE IN DEMAND IN THE ELECTRONIC
COMPONENT AND GLASS COMPONENT INDUSTRIES MAY CONTINUE, RESULTING IN ADDITIONAL
ORDER CANCELLATIONS AND DEFERRALS AND LOWER AVERAGE SELLING PRICES FOR OUR
PRODUCTS.
Our subsidiaries sell to industries that are subject to cyclical economic
changes. The electronic component and glass component industries in general, and
specifically Lynch, have for the past several years experienced a decline in
product demand on a global basis, resulting in order cancellations and deferrals
and lower average selling prices. This decline is primarily attributable to a
slowing of growth in the demand for components used by telecommunications
infrastructure manufacturers and newer technologies introduced in the glass
display industry. We cannot assure you that any expected or perceived
improvements in the economy and the electronic component and glass component
industry will occur. The slowdown may continue and may become more pronounced. A
slowdown in demand, as well as recessionary trends in the global economy, make
it more difficult for us to predict our future sales, which also makes it more
difficult to manage our operations.
THE RESULTS OF OUR OPERATIONS ARE SUBJECT TO FLUCTUATIONS IN THE AVAILABILITY,
QUALITY AND COST OF THE RAW MATERIALS AND COMPONENTS NEEDED FOR OUR PRODUCTS.
Many of our products require the use of raw materials and components that
are produced in only a limited number of regions around the world or are
available from only a limited number of suppliers. We may have difficulty
obtaining these raw materials or components, the quality of available raw
materials or components may deteriorate or there may be significant price
increases for these raw materials or components. For periods in which the prices
of these raw materials or components are rising, we may be unable to pass on the
increased cost to our customers, which would result in decreased margins for the
products in which they are used. For periods in which the prices are declining,
we may be required to write down our inventory carrying cost of these raw
materials or components, as we record our inventory at the lower of cost or
market. Depending on the extent of the difference between market price and our
carrying cost, this write-down could have an adverse effect on our financial
results and results of operations.
From time to time, we have experienced short-term market shortages of raw
materials or components that have resulted in higher costs to us. Future market
shortages could affect our ability to meet our production requirements during
periods of growing demand for our products.
OUR MARKETS ARE HIGHLY COMPETITIVE, AND WE MAY LOSE BUSINESS TO LARGER AND
BETTER-FINANCED COMPETITORS.
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Our
MtronPTI's markets are highly competitive worldwide, with low transportation costs and few import barriers. We competeMtronPTI competes principally on the basis of product quality and reliability, availability, customer service, technological innovation, timely delivery and price. All ofWithin the industriesindustry in which we compete haveMtronPTI competes, competition has become increasingly concentrated and globalizedglobal in recent years. OurMany of MtronPTI's major competitors, some of which are larger, than us, and potential competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer support capabilities thancapabilities.
5
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 have.
OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR KEY MANAGEMENT AND TECHNICAL
PERSONNEL AND ATTRACTING, RETAINING, AND TRAINING NEW TECHNICAL PERSONNEL.
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 team and to recruit and retain
highly skilled technical personnel, including engineers.personnel. The labor markets in which we operate are highly competitive and mostsome of our operations are not located in highly populated areas. As a result, we may not be able to retainrecruit and recruitretain key personnel. Our failure to hire, retain or adequately train key personnel could have a negative impact on our performance. WE MAY NOT REALIZE THE SYNERGIES OR ACHIEVE THE INTENDED OBJECTIVES SOUGHT FROM
M-TRON'S ACQUISITION OF PIEZO.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 its needs.
If single-source components or key raw materials were to become unavailable on satisfactory terms, and MtronPTI could not obtain comparable replacement components or raw materials from other sources in a timely manner, the Company's business, results of operations and financial condition could be harmed. On October 15, 2004, M-tron completedoccasion, one or more of the components used in MtronPTI'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 acquisition of Piezo. The value
of this acquisition is largely based on the synergies thatmanufacturing process.
As a supplier to U.S. Government defense contractors, we believe will be
created by the integration of these two companies. This process involvesare subject to a number of risks, including the diversionprocurement 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 our management's attention fromcustomers 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 existing businessproduction facilities. One of those production facilities must comply with additional requirements and regulations for its production processes and for selected personnel in order to integrate Piezo's operationsmaintain the security of classified information. These requirements, although customary within these markets, increase our performance and personnel,compliance costs. If any of these various requirements change, our costs of complying with them could increase and possible
adverse effects onreduce our operating results duringmargins.
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We operate in a highly regulated environment and are routinely audited and reviewed by the integration process. In
addition, we may be unable to integrate, operate, maintainU.S. Government and manage Piezo's
operations or employees. We also may not be able to maintain uniformits agencies such as the Defense Contract Audit Agency ("DCAA") and Defense Contract Management Agency ("DCMA"). These agencies review our performance under our contracts, our cost structure and our compliance with applicable laws, regulations, and standards, controls, proceduresas well as the adequacy of, and policies,our compliance with, our internal control systems and this may lead to operational
inefficiencies.
M-TRON'S BACKLOG MAY NOT BE INDICATIVE OF FUTURE SALES AND MAY ADVERSELY AFFECT
OUR BUSINESS.
M-tron's backlog comprises orderspolicies. 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 production
release orderscontract will not be reimbursed or must be refunded if already reimbursed. If an audit uncovers improper or illegal 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.
From time to time, we may also be subject to U.S. Government investigations relating to our or our customers' operations and products, and are expected to perform in compliance with a vast array of federal laws, including the Truth in Negotiations Act, the False Claims Act, the International Traffic in Arms Regulations promulgated under written contracts, oralthe Arms Export Control Act, and written orders from customers
with which M-tron has had long-standing relationships and written purchase
orders from sales representatives. M-tron'sthe Foreign Corrupt Practices Act. We or our customers may order components from
multiple sourcesbe subject to ensure timely delivery when backlog is particularly longreductions of the value of contracts, contract modifications or termination, and may cancel or defer orders without significant penalty. They often cancel orders
when business is weakthe assessment of penalties and inventories are excessive, a phenomenon that M-tron
has experienced in the recent economic slowdown. As a result, we do not believe
that M-tron's backlog as of any particular date is necessarily representative of
actual net sales for any succeeding period.
M-TRON RELIES UPON ONE CONTRACT MANUFACTURER FOR A SIGNIFICANT PORTION OF ITS
FINISHED PRODUCTS, AND A DISRUPTION IN ITS RELATIONSHIP COULD HAVE A NEGATIVE
IMPACT ON M-TRON'S SALES.
In 2003, approximately 30% of M-tron's net sales were attributable to
finished products that were manufactured by an independent contract manufacturer
located in both Korea and China. We expect this manufacturer to account for a
smaller but substantial portion of M'tron's net sales in 2004 and a material
7
portion of M-tron's sales for the next several years. M-tron does 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, M-tron would have to identify and qualify acceptable replacement
manufacturers or manufacture the products internally. Due to specific product
knowledge and process capability, M-tronfines, which 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, M-tron's relationship with this manufacturer, may adversely
affect M-tron'snegatively impact our results of operations and financial condition, or result in a diminution in revenue from our customers, if we or our customers are found to have violated the law or are indicted or convicted for violations of federal laws related to government security regulations, employment practices or protection of the environment, or are found not to have acted responsibly as defined by the law. Such convictions could also result in suspension or debarment from serving as a supplier to government contractors for some period of time. Such convictions or actions could have a material adverse effect on us and our operating results. The costs of cooperating or complying with such audits or investigations may also adversely impact our financial condition.
CONTINUED MARKET ACCEPTANCE OF M-TRON'S PACKAGED QUARTZ CRYSTALS, OSCILLATOR
MODULES AND ELECTRONIC FILTERS IS CRITICAL TO OUR SUCCESS, BECAUSE FREQUENCY
CONTROL DEVICES ACCOUNT FOR NEARLY ALL OF M-TRON'S SALES.
Virtually all of M-tron's 2003results.
MtronPTI's products are complex and 2004 net sales came from sales of
frequency control devices,may contain errors or design flaws, which consist of packaged quartz crystals, oscillator
modules and electronic filters. We expect that this product line will continuecould be costly to account for substantially all of M-tron's net sales for the foreseeable
future. Any decline in demand for this product linecorrect.
When MtronPTI releases new products, or failure to achieve
continued market acceptance of existing and new versions of this product lineexisting products, they may harm M-tron's business and our financial condition.
M-TRON'S FUTURE RATE OF GROWTH IS HIGHLY DEPENDENT ON THE DEVELOPMENT AND GROWTH
OF THE MARKET FOR COMMUNICATIONS AND NETWORK EQUIPMENT.
M-tron's business depends heavily upon capital expenditures by the
providers of communications and network services. In 2003, thecontain undetected or unresolved errors or defects. The vast majority of M-tron's netMtronPTI'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, werediversion of development resources, damage to manufacturers of communicationsthe Company's reputation, product liability claims and network
infrastructure equipment, including indirect sales through distributorslegal action by its customers and contract manufacturers. In 2004, M-tron expects a smaller but significant
portion of its net salesthird parties, failure to be to manufacturers of communicationsattract new customers and network
infrastructure equipment. M-tron intends to increase its sales to communicationsincreased service costs.
Communications and network infrastructure equipment manufacturers in the future. Communications
and network service providers have experienced periods of capacity shortage and
periods of excess capacity. In periods of excess capacity, communications
systems and network operators cut purchases of capitalincreasingly rely upon contract manufacturers, thereby diminishing our ability to sell our products directly to those equipment including
equipment that incorporates M-tron's products. A slowdown in the manufacture and
purchase of communications and network infrastructure equipment could
substantially reduce M-tron's net sales and operating results and adversely
affect our financial condition. Moreover, if the market for communications or
network infrastructure equipment fails to grow as expected, M-tron may be unable
to sustain its growth. In addition, M-tron's growth depends upon the acceptance
of its products by communications and network infrastructure equipment
manufacturers. If, for any reason, these manufacturers do not find M-tron's
products to be appropriate for their use, our future growth will be adversely
affected.
COMMUNICATIONS AND NETWORK INFRASTRUCTURE EQUIPMENT MANUFACTURERS INCREASINGLY
RELY UPON CONTRACT MANUFACTURERS, THEREBY DIMINISHING M-TRON'S ABILITY TO SELL
ITS PRODUCTS DIRECTLY TO THOSE EQUIPMENT MANUFACTURERS.
There is a growingcontinuing trend among communications and network infrastructure equipment manufacturers to outsource the manufacturing of their equipment or components. As a result, M-tron'sMtronPTI's ability to persuade these original equipment
manufacturersOEMs to specifyutilize our products has beenin customer designs could be reduced and, in the absence of a 8
manufacturer's specification of M-tron'sMtronPTI's products, the prices that M-tronMtronPTI can charge for them may be subject to greater competition.
M-TRON'S GOVERNMENT CONTRACTS CONTAIN PROVISIONS THAT ARE UNFAVORABLE TO IT AND
HAVE A NUMBER OF SPECIFIC RISKS THAT MAY RESULT IN LOST ORDERS AND PROFITS.
Many
7
MtronPTI's customers are significantly larger than it and may exert leverage that will not be in our best interest.
The majority of M-tron's contracts with government agencies containMtronPTI's sales are to companies that are many times its size. This size differential may disadvantage MtronPTI in negotiating contractual terms. These terms include price, payment terms, product warranties and product consignment obligations.
There is a trend among some of MtronPTI's larger customers that require MtronPTI to provide increased levels of warranty coverage. Some of these warranty provisions would require MtronPTI to pay substantial financial penalties if the customer invokes the warranty. These warranty provisions 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 giveare not in the governments rightsbest interest of MtronPTI.
Future changes in MtronPTI's environmental liability and remedies not typically found in private
commercial contracts, including provisions enabling the government to:
o terminate or cancel existing contracts without good reason or penalty;
o suspend M-tron from doing business with a foreign government or prevent
M-tron from selling its products in certain countries;
o audit and object to M-tron's contract-relatedcompliance obligations may increase costs and expenses, including
allocated indirect costs;decrease profitability.
MtronPTI's present and o change specific terms and conditions in M-tron's contracts, including
changes that would reduce the value of the contract to M-tron.
M-tron's business generated from government contracts could be materially
and adversely affected if:
o M-tron's reputation or relationship with government agencies were impaired;
o M-tron were suspended or otherwise prohibited from contracting with a
domestic or foreign government;
o any of M-tron's products were to fail to meet the requirements of certain
applicable specified military standards;
o levels of government spending were to decrease;
o M-tron were barred from entering into new government contracts or extending
existing government contracts based on violations or suspected violations
of laws or regulations; or
o M-tron were not granted security clearances required to provide its
services and solutions to governments, or such security clearances were
revoked.
FUTURE CHANGES IN M-TRON'S ENVIRONMENTAL LIABILITY AND COMPLIANCE OBLIGATIONS
MAY INCREASE COSTS AND DECREASE PROFITABILITY.
M-tron'spast manufacturing operations, products, and/or product packaging are subject to environmental laws and regulations governing air emissions, wastewater discharges, and the handling, disposal and remediation of hazardous substances, wastes and other chemicals. In addition, more stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in M-tron'sMtronPTI's operations that any future regulations might require, or the cost of compliance that would be associated with these regulations.
LYNCH SYSTEMS' REVENUE IS LARGELY DEPENDENT ON DEMAND FOR ITS TELEVISIONS AND
COMPUTER MONITORS BASED ON CATHODE-RAY TUBE TECHNOLOGY. THIS TECHNOLOGY WILL
EVENTUALLY BE REPLACED BY PLASMA AND LIQUID CRYSTAL DISPLAYS.
Lynch Systems generates
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'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 subject us to certain business, economic and political risks.
We have office and manufacturing space in Noida, India and Yantai, China, and sales offices in Hong Kong and Shanghai, China. Additionally, foreign revenues for 2012 and 2011 (primarily to Malaysia and China) accounted for 49.2% of our 2012 consolidated revenues and 56.2% of our 2011 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 portionpart of its revenue fromour revenues for the foreseeable future. Our international operations and sales to glass producerscustomers outside of the United States subject our operating results and financial condition to certain business, economic, political, health, regulatory and other risks, including:
| · | Political and economic instability in countries in which MtronPTI's products are manufactured and sold; |
| · | Expropriation or the imposition of government controls; |
| · | Sanctions or restrictions on trade imposed by the United States government; |
| · | Export license requirements; |
| · | Trade restrictions; |
| · | Currency controls or fluctuations in exchange rates; |
| · | High levels of inflation or deflation; |
| · | Greater difficulty in collecting accounts receivable and longer payment cycles; |
| · | Changes in labor conditions and difficulties in staffing and managing international operations; and |
| · | Limitations on insurance coverage against geopolitical risks, natural disasters and business operations. |
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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 we incur a significant amount of foreign-currency denominated liabilities.
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 several 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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions designed to improve transparency and accountability concerning the supply televisionof certain minerals, known as "conflict minerals," originating from the Democratic Republic of Congo and computer monitor displaysadjoining countries that are believed to be benefitting armed groups. As a result, the SEC recently adopted new due diligence, disclosure and reporting requirements for companies that manufacture products that include components containing such minerals. Since we manufacture such products, we will be required to comply with the new SEC rules, with our first required report due in May 2014. We expect that the compliance process will be both time-consuming and costly. Costs associated with complying with these disclosure requirements will include diligence to determine the sources of minerals used in our products and potential changes to products, processes or sources of supply as a consequence of such verification activities. The implementation of these rules could adversely affect the sourcing, supply and pricing of certain materials used in our products. Because there may be only a limited number of suppliers offering "conflict free" minerals, we cannot be sure that we will be able to obtain necessary minerals from such suppliers in sufficient quantities or at competitive prices. In addition, our supply chain is complex and we may not be able to easily verify the origins for all minerals used in our products. We may face reputational challenges with our customers and other stakeholders if our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins of minerals contained in the components included in our products through the due diligence procedures that we implement.
Risks Related to Our Securities
The prices of our common stock and warrants have fluctuated considerably and are likely to remain volatile, in part 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 warrant 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 as 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 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" 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's efforts to grow revenue, the Company'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's cash resources.
Forward-looking statements are based on cathode-ray tube technology. This market is being rapidly penetrated by
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thinner, lighter weight plasma displaysour current expectations and liquid crystal displays. Although
cathode-ray tube televisions and computer monitors currently retain advantages
in image quality and price, glass producers are investing billions of dollars to
improveassumptions regarding our business, the quality and lower the unit price of plasma, liquid crystaleconomy and other display types. We believe that market penetration by plasmafuture conditions. As forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and liquid crystal
display producers will continue and eventually render obsolete cathode-ray tube
technology and this Lynch Systems product line.
LYNCH SYSTEMS' DEPENDENCE ON A FEW SIGNIFICANT CUSTOMERS EXPOSES IT TO OPERATING
RISKS.
Lynch Systems' sales to its 10 largest customers accounted for
approximately 84% of its net saleschanges in 2003, 2002 and 2001 and 72% in 2004. Lynch
Systems' sales to its largest customer accounted for approximately 20% of its
net sales in 2003, 2002 and 2001. If a significant customer reduces, delays or
cancels its orders for any reason, the business and results of operations of
Lynch Systems would be negatively affected.
A MULTIPLE MACHINE ORDER AND FUTURE ORDERS WITH A SIGNIFICANT CUSTOMER IN THE
TABLEWARE MARKET ARE CONTINGENT UPON THE SUCCESSFUL INSTALLATION AND OPERATION
OF THE MACHINES.
Lynch Systems has a significant order for glass manufacturing machinescircumstances that are scheduleddifficult to be shipped and installedpredict. 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 customer's factories in 2005.
We expect that this contract will represent approximately 33% of Lynch Systems'
revenues in 2005. Payment termsforward-looking statements include national and global economic, business, competitive, market and regulatory conditions and the factors described under this contract are based on
the successful operation of these machines during a trial operating period. Many
of these machines utilize new processes and require customer training. The
ability of the customer's personnel and resources to operate these machines
successfully is critical to Lynch Systems' ability to realize full payment. If
the customer cannot realize the full benefit of these machines, some of the
payments may be forfeited and future orders from this customer may be canceled.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC for our
common shares offered in this offering. This prospectus does not contain all the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make references"Risk Factors" in this prospectus, in our Annual Report on Form 10-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
We will not receive any of the proceeds from the sale of securities by the selling stockholder pursuant to this prospectus. See "Plan of Distribution." A portion of the shares of common stock covered by this prospectus are issuable upon exercise of warrants to purchase our contracts, agreementscommon stock, of which 25 warrants will entitle their holder to purchase one share of our common stock at the exercise price of $7.50 per share, as may be adjusted in accordance with the terms of the warrants. Upon exercise of any of these warrants, which are exercisable for cash only, the selling stockholder would pay us the exercise price. We expect to use any such proceeds for general corporate purposes.
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 name of the selling stockholder, the number of shares of common stock and warrants 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 documents,successors-in-interest that receive these securities after the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for the copiesdate of the actual
contract, agreement or other document.
The SEC maintains an Internet site at http://www.sec.gov that contains
reports, proxy and information statements, and other information regarding us.
You may also read and copy any document we file with the SEC at its Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room.
Our common shares are listed on the American Stock Exchange and our reports
and other information about us may also be inspected at the offices of the
American Stock Exchange at 86 Trinity Place, New York, New York 10006.
Additional information about us is available over the Internet at our web site
at www.lynchcorp.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and documents incorporated by reference into this prospectus contain forward-looking statements withinto resell or otherwise dispose of such securities in the meaningmanner contemplated under "Plan of Section 27A
ofDistribution" 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 and 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 securities being registered hereunder.
We have prepared the table below based on 2,594,931 shares of our common stock and 12,981,025 warrants outstanding as of September 18, 2013 and based on information supplied to us by the selling stockholder as of August 8, 2013. Beneficial ownership is determined in accordance with Section 21E13(d) of the Securities Exchange Act of 1934, as amended, that are not historical facts, but rather are
based on current expectations, estimates and projections about our business and
industry, our beliefs and assumptions. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," and variations of these
words and similar expressions are intended to identify forward-looking
statements. These statements are based on our current plans and expectations and
involve risks and uncertainties over which we have no control, that could cause
actual future activities and results of operations to be materially different
from those set forth in the forward-looking statements. Important factors that
could cause actual future activities and operating results to differ include
fluctuating demand for capital goods such as large glass presses, delay in the
recovery of demand for components used by telecommunications infrastructure
manufacturers and exposure to foreign economies. Important information regarding
risks and uncertainties is also set forth elsewhere in this document, including
in those described in "Risk Factors" beginning on page 2, as well as elsewhere
in this prospectus and in documents incorporated by reference into this
prospectus. You are cautioned not to place undue reliance on these
forward-looking statements, which reflect our management's view only as of the
date of this prospectus or as of the date of any document incorporated by
reference into this prospectus. All subsequent written or oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. We undertake no
obligation to update these statements or publicly release the results of any
revisions to the forward-looking statements that we may make to reflect events
or circumstances after the date of this prospectus or the date of any document
incorporated into this prospectus or to reflect the occurrence of unanticipated
events.
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You are also urged to carefully review and consider the various disclosures
made by us in this document, as well as in our periodic reports on Forms 10-K,
10-Q and 8-K, filed with the Securities and Exchange Commission.
We make available, free of charge, our annual report on Form 10-K,
quarterly reports on Form 10-Q, and current reports on Form 8-K, if any.
We also make this information available on our website at
www.lynchcorp.com.
INCORPORATION BY REFERENCE
The following documents filed by us with the SEC are incorporated by
reference in this prospectus:
(1) Our Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 2004;
(2) Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2004;
(3) Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2004;
(4) Our Annual Report on Form 10-K for the fiscal year ended December 31, 2003;
(5) Our Current Report on Form 8-K filed on November 18, 2004;
(6) Our Current Report on Form 8-K filed on October 20, 2004;
(7) Our Current Report on Form 8-K filed on October 8, 2004;
(8) Our Current Report on Form 8-K filed on September 23, 2004;
(9) Our Current Report on Form 8-K filed on September 14, 2004;
(10) Our Current Report on Form 8-K filed on September 8, 2004;
(11) Our Current Report on Form 8-K filed on December 22, 2004; and
(12) The description of the common shares contained in our Registration
Statement under the Securities Exchange Act, of 1934and generally includes voting or investment power with respect to such
commonsecurities and includes any shares filed with the Securities and Exchange Commission, including
any amendments or reports filed for the purpose of updating such
description.
All documents subsequently filed with the SEC by us pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended,
prior to the filing of a post-effective amendment that indicates that all
securities offered herein have been sold or that deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference herein and to
be part hereof from the respective dates of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof or of the related prospectus to the extent that a statement
contained herein or in any other subsequently filed document that is also
incorporated or deemed to be incorporated herein modifies or supersedes such
statement.
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Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this registration statement.
You may request a copy of these filings (excluding the exhibits to such
filings that we have not specifically incorporated by reference in such filings)
at no cost, by writing or telephoning us at the following address:
Lynch Corporation
140 Greenwich Avenue, 4th Floor
Greenwich, Connecticut 06830
Attention: Secretary
(203) 622-1150
USE OF PROCEEDS
The common shares offered hereby are being registered for the account of the selling shareholder identified in this prospectus. All net proceeds fromstockholder has the saleright to acquire within 60 days of the common shares will go to the selling shareholder. Accordingly, we
will not receive any part of the proceeds from such sales.
SELLING SHAREHOLDER
The following table sets forth information relating to the selling
shareholder and is as of the effective date of this prospectus. It includes the
number of common shares beneficially owned by the selling shareholder, the
maximum number of common shares to be sold in this offering by the selling
shareholder and the number of common shares to be beneficially owned by the
selling shareholder after this offering (assuming sale of such maximum number of
shares).September 18, 2013. The selling shareholder, Venator Merchant Fund, L.P.,stockholder has not been an
officer, director or employee of the Company forwithin the past three years. Venatoryears had any position, office or other material relationship with us, except that the selling stockholder is an investment limited partnership controlled by our Chairman of the Board, Marc Gabelli. Mr. Gabelli, became Chairman ofand is a party to the Board on September 20, 2004.
The common shares offered hereby were acquired on October 15, 2004.Registration Rights Agreement. Mr. Gabelli is the chief executive officerPresident and Sole Member of Venator Global, LLC, which is the sole general partner of Venator andthe selling stockholder. Mr. Gabelli has sole dispositivevoting and votingdispositive power over these shares. Except as set forth in this
paragraph, Venator has not had any material relationship with us in the past
three years. As of December 23, 2004, we have 1,632,126 common shares issued and
outstanding.
For purposes of the table below, beneficial ownership is determined in
accordance with the rules of the SEC, and includes voting or investment power
with respect to shares. The inclusion of any shares in this table does not
constitute an admission of beneficial ownership forsecurities held by the selling shareholder
named below.
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Shares Percent Maximum
Beneficially Beneficially Number of Shares to be Percent to be
Owned Prior Owned Prior Shares to be Beneficially Beneficially
Name and Address of to this to this Offered for Owned after Owned after
Selling Shareholder(1) Offering Offering Resale this Offering this Offering
- -----------------------------------------------------------------------------------------------------------------------
Venator Merchant Fund, L.P. 336,884 20.64% 136,643 200,241 12.27%
- -----------------------------------------------------------------------------------------------------------------------
(1) The address ofstockholder.
Information concerning the selling shareholder is One Corporate Center, Rye, New
York 10580.
Our registration of the shares included in this prospectus does not
necessarily mean that Venator will opt to sell any of the shares offered hereby.
The shares covered by this prospectusstockholder may be soldchange from time to time and, when necessary, any changed information will be set forth in a prospectus supplement to this prospectus.
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| 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) | Assumes the sale of all securities offered by this prospectus and that the selling stockholder will acquire no additional common stock or warrants prior to the completion of this offer. |
| (2) | Venator Merchant Fund, L.P.'s address is: 140 Greenwich Avenue, 3rd Floor, Greenwich, Connecticut, 06830. |
| (3) | Includes 350,902 shares of common stock and 70,181 shares of common stock issuable upon exercise of 1,754,510 warrants. The 70,181 shares of common stock issuable upon exercise of warrants are not deemed to be beneficially owned because the warrants are not exercisable within 60 days of September 18, 2013. |
PLAN OF DISTRIBUTION
We are 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 shareholder so long as this prospectus remains in effect.
PLAN OF DISTRIBUTIONstockholder. The selling shareholder, which as used herein includesstockholder and any of its pledgees, donees, pledgees, transferees or other successors-in-interest of the selling shareholder, selling
common shares or interests in common shares received after the date of this
prospectus from the selling shareholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, offer and sell transfer or otherwise dispose of any or all of theirits shares of common shares or interests in common
sharesstock and warrants offered hereby on any stock exchange, market or trading facility on which the shares or warrants are traded or in private transactions. These dispositionsThe securities may be sold directly or through one or more underwriters, broker-dealers or agents. If the securities are sold through underwriters or broker-dealers, the selling stockholder will be responsible for underwriting discounts or commissions or agent's commissions. These sales may be in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price,prices, at varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:
| · | 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 sell the shares or warrants as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | 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 shareholderstockholder 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 underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from timethe selling stockholder or commissions from purchasers of the securities for whom they may act as agent or to time,whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved).
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 may 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 close out short positions and to 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 sharesstock or warrants owned by itthem and, if it defaultsthey default in the performance of itstheir secured obligations, the pledgees or secured parties may offer and sell the common shares,securities from time to time underpursuant to this prospectus or under anany amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling shareholdersstockholders to include the pledgee, transferee or other successors in interest as selling shareholdersstockholders under this prospectus. The selling shareholderstockholder also may transfer and donate the common sharessecurities 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.
The
To the extent required by the Securities Act and the rules and regulations thereunder, the selling shareholderstockholder and any underwriters, broker-dealers or agents that
participatebroker-dealer participating in the saledistribution of the common shares or interests thereinsecurities may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. AnyAct, and any commission paid, or any discounts commissions,or concessions or profit they earn onallowed to, any resale of the
sharessuch broker-dealer may be deemed to be underwriting commissions or discounts and commissions under the Securities Act. At 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 the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other 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 shareholder is an "underwriter" withinstockholder and any other person participating in such distribution will be subject to applicable provisions of the meaningExchange Act and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of Section 2(11)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 and is subjectin accordance with the Registration Rights Agreement or the selling stockholder will be entitled to contribution. We may be indemnified by the prospectus delivery requirements ofselling stockholder against civil liabilities, including liabilities under the Securities Act.
14
Act that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the Registration Rights Agreement or we may be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock and warrants will be freely tradable in the hands of persons other than our affiliates.
LEGAL MATTERS
The validity of the common sharessecurities being offered hereby hasby this prospectus have been passed upon for us by Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th
Street, New York, New York 10022.
York.
EXPERTS
The consolidated financial statements and schedule audited by Ernst & Young LLP have
been incorporated in this Prospectus by reference to ourthe Annual Report on Form 10-K as of and for the fiscal
yearyears ended December 31, 20032012 and 2011, have been audited by McGladrey LLP (formerly McGladrey & Pullen, LLP), an independent registered public accounting firm, as stated in their reports incorporated by reference herein, and have been so incorporated in reliance on their report given on theirupon such reports and upon the authority of such firm as experts in auditingaccounting and accounting.
15
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, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents 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 this prospectus and the termination of the offering of the securities covered by this prospectus, provided, however, that we are 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, 2012, filed with the SEC on April 1, 2013; and |
| · | our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2013, and June 30, 2013, filed with the SEC on May 15, 2013 and August 14, 2013, respectively; and |
16
| · | our Current Reports on Form 8-K, filed with the SEC on January 7, 2013, March 14, 2013, April 30, 2013, June 14, 2013, June 28, 2013, July 2, 2013, July 17, 2013 and July 29, 2013; and |
| · | 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 annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC's Public Reference Room 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 more information about the operation of 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
17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the variousOther Expenses of Issuance and Distribution.
We estimate that expenses that will be paid by us in connection with the distribution described in this registration statement (other than brokerage commissions, discounts or other expenses relating to the sale of the securities being registered. Withby the selling security 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 Commission ("SEC")SEC registration fee, and the American
Stock Exchange ("AMEX") listing fee, all amounts shown are estimates.
SEC registration fee................................................. $237.22
AMEX listing fee..................................................... $2,732.86
Legal fees
| SEC registration fee | $ | 348.83 | ||
| Accounting fees and expenses | 3,000.00 | |||
| Legal fees and expenses | 5,000.00 | |||
| Miscellaneous | 1,500.00 | |||
| $ | 9,848.83 |
Item 15. Indemnification of Directors and Officers.
Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including Blue Skyattorneys' fees) ................... $27,000
Accounting Fees, judgments, fines and Expenses......................................... $5,000
Miscellaneous ..................................................... $5,000
---------
Total ................................................. $39,970.08
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as hereinafter set forth, thereamounts 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 no statute, charter provision,
by-law, contractmade a party by reason of such person being or having been a director, officer, employee or agent of the corporation. Section 145 of the DGCL also provides that expenses (including 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 amounts if it is determined such person is not entitled to be indemnified by the corporation. The DGCL provides that Section 145 is not exclusive of other arrangementrights to which those seeking indemnification may be entitled under which any controllingbylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Company'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, is insuredagainst all liabilities, losses, expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding.
Section 102(b)(7) of the DGCL 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 indemnifiedits stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director'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 manner
against liabilitytransaction from which he may incur in his capacity as such.
Article VI, Section 6.2 of Registrant's Restated Articlesthe director derived an improper personal benefit. The Company's Certificate of Incorporation provides thatfor such limitation of liability.
The Company'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, 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 inconsistentaffect 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 applicableits directors and executive officers, that require the Company to indemnify such persons to the fullest extent permitted by law, every directoragainst expenses, judgments, fines, settlements and officer shall be indemnified by Registrant against all liabilityother amounts incurred (including attorneys' fees), and reasonable expense that may be incurredadvance 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"), 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 in
connection withof the Company, or resulting from any claim, (i) if suchwhile a director or officer is wholly successful with respector 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 claim,provisions of Section 16(b) of the Exchange Act or (ii) if not wholly successful,
then if such director or officer is determined to have acted in good faith, in
what the director or officer reasonably believed to be the best interests of
Registrant or at least not opposed to its best interest and, in addition, with
respect to any criminal claim is determined to have had reasonable cause to
believe that his conduct was lawful or had no reasonable cause to believe that
his conduct was unlawful. The terminationsimilar provisions of any claim, by judgment, order,
settlement (whether withfederal, state, or without court approval), or conviction or upon a
plea of guilty or of nolo contendere, or its equivalent, shall not create a
presumption that a director or officer did not meet the standards of conductlocal laws. The indemnification agreements also set forth certain procedures that will apply in clause (ii) hereof. Forthe event of a more detailed description, reference is madeclaim 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 Article VI, Section 6.2which the Company agreed to indemnify and hold harmless the selling stockholder and each transferee thereof in accordance with the terms of the Registrant's Restated ArticlesRegistration Rights Agreement (each, a "Holder"), each director, officer, partner and agent of Incorporation filedeach 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 Exhibit 3(a) hereto which contains certain
indemnification provisions pursuant to authoritysuch 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 Indiana
Business Corporation Law.
Registrant's directorsregistration 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 officers arerelating to action or inaction required of the Company in connection with any such registration. The Company also coveredagreed 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 Registrant's
directorsthe provisions of this section. The Company currently maintains such insurance.
The right of any person to be indemnified is subject always to the right of the Company by the Board, in lieu of such indemnity, to settle any such claim, action, suit or proceeding at the expense of the Company by the payment of the amount of such settlement and officers insurance policy up to a maximum of $10 million.
the costs and expenses incurred in connection therewith.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the RegistrantCompany pursuant to the foregoing provisions, or otherwise, the RegistrantCompany has been informedadvised that in the opinion of the Securities and Exchange CommissionSEC, such
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indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
The following sections
In the event that a claim for indemnification against such liabilities (other than the payment of Chapter 37 of the Indiana Business Corporation
Law provide as follows:
Section 23-1-37-8 Permissive Indemnification
(a) A corporation may indemnify an individual made a party to a proceeding
because the individual isexpenses incurred or waspaid by a director, against liability incurredofficer or controlling person in the
proceeding if:
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official capacity with
the corporation, that the individual's conduct was in its best interests; and
(B) in all other cases, that the individual's conduct was at least not
opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual either:
(A) had reasonable cause to believe the individual's conduct was
lawful; or
(B) had no reasonable cause to believe the individual's conduct was
unlawful.
(b) A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (a)(2)(B).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
Section 23-1-37-9 Mandatory Indemnification
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was wholly successful on the merits or otherwise, in
the defense of any proceeding to which theaction, suit or proceeding) is asserted by such director, was a party because the
director isofficer or was a director of the corporation against reasonable expenses
incurred by the directorcontrolling person in connection with the proceeding.
Section 23-1-37-10 Advance Indemnification
(a) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final disposition of
the proceeding if:
(1) the director furnishes the corporation a written affirmation of the
director's good faith belief that the director has met the standard of conduct
described in section 8 of this chapter;
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(2) the director furnishes the corporation a written undertaking, executed
personally or on the director's behalf, to repay the advance if it is ultimately
determined that the director did not meet the standard of conduct; and
(3) a determination is made that the facts then known to those making the
determination would not preclude indemnification under this chapter.
(b) The undertaking required by subsection (a)(2) must be an unlimited
general obligation of the director but need not be secured and may be accepted
without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this section shall
be madesecurities being registered, we will, unless in the manner specified in section 12opinion of this chapter.
Section 23-1-37-11 Application for Indemnification
Unless a corporation's articles of incorporation provide otherwise, a
director ofits counsel the corporation who is a party to a proceeding may apply for
indemnificationmatter has been settled by controlling precedent, submit to the court conductingof appropriate jurisdiction the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court after giving any
notice the court considers necessary may orderquestion whether such indemnification ifby it determines:
(1) the director is entitled to mandatory indemnification under section 9
of this chapter, in which case the court shall also order the corporation to pay
the director's reasonable expenses incurred to obtain court-ordered
indemnification; or
(2) the director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not the director met the
standard of conduct set forth in section 8 of this chapter.
Section 23-1-37-12 Procedure for Determining Indemnification
(a) A corporation may not indemnify a director under section 8 of this
chapter unless authorizedagainst public policy as expressed in the specific case after a determination has been
made that indemnification of the director is permissible in the circumstances
because the director has met the standard of conduct set forth in section 8 of
this chapter.
(b) The determination shallSecurities Act and will be made by any one (1) of the following
procedures:
(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding.
(2) If a quorum cannot be obtained under subdivision (1), by majority
vote of a committee duly designatedgoverned by the boardfinal adjudication of such issue.
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At present, there is no pending litigation or proceeding involving any of our directors, (in which
designation directors who are parties may participate), consisting solely of two
(2)officers or more directors not at the time parties to the proceeding.
(3) By special legal counsel:
(A) selected by the board of directors or its committee in the
manner prescribed in subdivision (1) or (2); or
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(B) if a quorum of the board of directors cannot be obtained
under subdivision (1) and a committee cannot be designated under subdivision
(2), selected by majority vote of the full board of directors (in which
selection directors who are parties may participate).
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
(d) Authorization of indemnification and evaluationemployees as to reasonableness of
expenses shall be made in the same manner as the determination thatwhich indemnification is permissible, except that if the determination is made by
special legal counsel, authorizationsought, nor are we aware of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(b)(3) to select counsel.
Section 23-1-37-13 Indemnification of Officers, Agents and Employees
Unless a corporation's articles of incorporation provide otherwise:
(1) an officer of the corporation, whetherany threatened litigation or not a director, is entitled
to mandatory indemnification under section 9 of this chapter, and is entitled to
apply for court-ordered indemnification under section 11 of this chapter, in
each case to the same extent as a director;
(2) the corporation may indemnify and advance expenses under this chapter
to an officer, employee, or agent of the corporation, whether or not a director,
to the same extent as to a director; and
(3) a corporation may also indemnify and advance expenses to an officer,
employee, or agent, whether or not a director, to the extent, consistent with
public policy,proceeding that may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors, or contract.
Section 23-1-37-14 Insurance
A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, member, manager, trustee, employee, or agent of another
foreign or domestic corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan, or other enterprise, against liability
asserted against or incurred by the individualresult in that capacity or arising from
the individual's status as a director, officer, member, manager, employee, or
agent, whether or not the corporation would have power to indemnify the
individual against the same liability under section 8 or 9 of this chapter. The:
(1) corporation may purchase insurance under this section from; and
(2) insurance purchased under this section may be reinsured in whole or in
part by;
an insurer that is owned by or otherwise affiliated with the corporation whether
the insurer does or does not do business with other persons.
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Section 23-1-37-15 Indemnification Under Chapter Not Exclusive
(a) The indemnification and advanceclaims for expenses provided for or authorized
by this chapter does not exclude any other rights to indemnification and advance
for expenses that a person may have under:
(1) a corporation's articles of incorporation or bylaws;
(2) a resolution of the board of directors or of the shareholders; or
(3) any other authorization, whenever adopted, after notice, by a majority
vote of all the voting shares then issued and outstanding.
(b) If the articles of incorporation, bylaws, resolutions of the board of
directors or of the shareholders, or other duly adopted authorization of
indemnification or advance for expenses limit indemnification or advance for
expenses, indemnification and advance for expenses are valid only to the extent
consistent with the articles, bylaws, resolution of the board of directors or of
the shareholders, or other duly adopted authorization of indemnification or
advance for expenses.
(c) This chapter does not limit a corporation's power to pay or reimburse
expenses incurred by a director, officer, employee, or agent in connection with
the person's appearance as a witness in a proceeding at a time when the person
has not been made a named defendant or respondent to the proceeding.
ITEMindemnification.
Item 16. EXHIBITS.
- ------- --------
Exhibit No. Description
- ----------- -----------------------------------------------------
*3(a) Restated Articles of Incorporation of Registrant.
(b) Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 3.1 of the
Registrant's Current Report on Form 8-K filed on
December 22, 2004).
*4 Specimen Certificate for Common Shares, $0.01 par
value per share, of Lynch Corporation.
*5 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky
LLP.
*23(a) Consent of Ernst & Young LLP.
*23(b) Consent of Olshan Grundman Frome Rosenzweig & Wolosky
LLP, included in Exhibit 5 to this Registration
Statement.
*24 Powers of Attorney, included on the signature page to
this Registration Statement.
- ---------------
Exhibits.
| Exhibit No. | Description |
| 3.1** | Certificate of Incorporation of The LGL Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 31, 2007). |
| 3.2** | The LGL Group, Inc. By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on August 31, 2007). |
| 4.1 | 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 S-3 filed on September 23, 2010). |
| 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 10-Q filed on August 14, 2013). |
| 4.4* | Registration Rights Agreement, dated as of September 19, 2013, by and between the Company and Venator Merchant Fund L.P. |
| 5.1* | Opinion of Olshan Frome Wolosky LLP. |
| 23.1* | Consent of Independent Registered Public Accounting Firm – McGladrey LLP. |
| 23.2* | Consent of Olshan Frome Wolosky LLP (included in Exhibit 5.1). |
| 24.1* | Power of Attorney (included on the signature page hereto). |
_____________
* Filed herewith.
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ITEMherewith
** Previously filed
Item 17. UNDERTAKINGS.
Undertakings.
(a)The undersigned registrant hereby undertakes:
(1)
| (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 "Calculation of Registration Fee" table in the effective registration statement; and |
| (iii) | To |
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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 any material changeis contained in a form of prospectus filed pursuant to such
information inRule 424(b) that is part of the registration statement;
(2) statement.
| (2) | That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration 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. |
| (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 registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(b)That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration 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.
(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.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the
registrant'sour 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's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDEbona fide offering thereof.
(c)Insofar as indemnification for liabilities arising under the Securities Act as amended may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of anany action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a 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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SIGNATURES
Pursuant to the requirements of the Securities Act, of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements 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, in the TownCity of Greenwich,Orlando, State of ConnecticutFlorida, on the 28th day of
December, 2004.
LYNCH CORPORATION
By: /s/ John C. Ferrara
------------------------------------------
John C. Ferrara
Chief Executive Officer
September 19, 2013.
| THE LGL GROUP, INC. | ||
| By: | /s/ R. LaDuane Clifton | |
R. LaDuane Clifton Chief Financial Officer (Principal Financial Officer) | ||
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS,PERSONS PRESENT, that the persons whose signatures appear below do hereby constitute and appoint Gregory P. Anderson and R. LaDuane Clifton, and each person whose signature appears
below constitutes and appoints John C. Ferrara and Eugene Hynes as his true and
lawful attorney-in-fact, each acting alone,of them, with full power of substitution and resubstitutionfull power to act without the other, his true and lawful attorney-in-fact and agent to act for him and in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-3 and any andor all amendments includingthereto (including without limitation any post-effective amendments to thisthereto), and any registration statement and any related registration statement filed
pursuantfor 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 their substitutes, each acting along,any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1933,1934, this registration statement has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ John C. Ferrara December 28, 2004
- ------------------------------------------------
John C. Ferrara Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Eugene Hynes December 28, 2004
- ------------------------------------------------
Eugene Hynes Vice President, Treasurer and Secretary
(Principal Financial and Accounting Officer)
/s/ Marc Gabelli December 28, 2004
- ------------------------------------------------
Marc Gabelli Chairman of the Board of Directors
/s/ E. Val Cerutti December 21, 2004
- ------------------------------------------------
E. Val Cerutti Director
/s/ Avrum Gray December 28, 2004
- ------------------------------------------------
Avrum Gray Director
/s/ Anthony R. Pustorino December 18, 2004
- ------------------------------------------------
Anthony R. Pustorino Director
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| 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 Financial Officer | 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/ Donald H. Hunter | Director | September 19, 2013 | ||
DONALD H. HUNTER | ||||
/s/ Manjit Kalha | Director | September 19, 2013 | ||
| MANJIT KALHA |
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
*3(a) Restated Articles of Incorporation of Registrant.
(b) Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 3.1 of the
Registrant's Current Report on Form 8-K filed on
December 22, 2004).
*4 Specimen Certificate for Common Shares, $0.01 par
value per share, of Lynch Corporation.
*5 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky
LLP.
*23(a) Consent of Ernst & Young LLP.
*23(b) Consent of Olshan Grundman Frome Rosenzweig & Wolosky
LLP, included in Exhibit 5 to this Registration
Statement.
*24 Powers of Attorney, included on the signature page to
this Registration Statement.
- ---------------------
| Exhibit No. | Description |
| 3.1** | Certificate of Incorporation of The LGL Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 31, 2007). |
| 3.2** | The LGL Group, Inc. By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on August 31, 2007). |
| 4.1 | 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 S-3 filed on September 23, 2010). |
| 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 10-Q filed on August 14, 2013). |
| 4.4* | Registration Rights Agreement, dated as of September 19, 2013, by and between the Company and Venator Merchant Fund L.P. |
| 5.1* | Opinion of Olshan Frome Wolosky LLP. |
| 23.1* | Consent of Independent Registered Public Accounting Firm – McGladrey LLP. |
| 23.2* | Consent of Olshan Frome Wolosky LLP (included in Exhibit 5.1). |
| 24.1* | Power of Attorney (included on the signature page hereto). |
_____________
* Filed herewith.
herewith
** Previously filed
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