As
filed with the Securities and Exchange Commission on November 19, 2007
Registration
No. 333-139882
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 1 ON FORM S-1
TO
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
LANGER,
INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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3842
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11-2239561
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(Primary
Standard Industrial Classification Code
Number)
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(I.R.S.
Employer Identification Number)
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41
Madison Avenue, 28
th
Floor
New
York, NY 10010
(212)
687-3260
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's
Principal
Executive Offices)
W.
Gray Hudkins
President
and Chief Executive Officer
Langer, Inc.
41
Madison Avenue, 28
th
Floor
New
York, NY 10010
(212)
687-3260
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent
for Service)
Copy
to:
Robert
L. Lawrence, Esq.
Kane
Kessler, P.C.
1350
Avenue of the Americas - 26
th
Floor
New
York, New York 10019
212-541-6222
Approximate
date of commencement of proposed sale to public: From time to time after the
effective date of this Registration Statement.
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, check the
following box.
x
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
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.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) 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.
o
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 or until the registration statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to
said
Section 8(a), may determine.
CALCULATION
OF REGISTRATION FEE
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Title of securities to
be registered
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Amount to be
registered
(1)
(2)
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Proposed maximum
offering
price per share
(3)
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Proposed maximum
aggregate offering
price
(3)
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Amount of
registration fee
(4)(5)
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Common
Stock, $0.02 par value per share
(2)
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7,597,004
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$2.74
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$4,156,591
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$127.61
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1.
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Pursuant
to Rule 416 promulgated under the Securities Act, there are also
registered hereunder such indeterminate number of additional shares
of
common stock as may be issued to the selling stockholders to prevent
dilution resulting from stock splits, stock dividends, or similar
transactions.
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2.
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6,080,000
shares of common stock were covered by the Registration Statement
on Form
S-3 (File No. 333-139882) of Langer, Inc., which was filed with the
Securities and Exchange Commission on January 9, 2007. The number
of
additional shares to be registered by this Amendment is
1,517,004.
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3.
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Estimated
solely for the purpose of calculating the additional registration fee
payable on account of the 1,517,004 additional shares to be
registered under this Amendment, pursuant to Rule 457(c)
under the Securities Act of 1933, as amended, and based upon the
average
of the high and low reported sales prices of our Common Stock on
The
Nasdaq Global Market on November 16,
2007.
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4.
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Represents
the fee payable on the additional number of shares to be registered.
Fee
of $3,047.79 was previously paid when the Registration Statement
on Form
S-3 (File No. 333-139882) of Langer, Inc., was initially filed with
the
Securities and Exchange Commission on January 9,
2007.
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EXPLANATORY
NOTE
This
Amendment No. 1 to the Registration Statement on Form S-3 (File No. 333-139882)
of Langer, Inc., initially filed with the Securities and Exchange Commission
on
January 9, 2007, is being amended on Form S-1.
The
information in this prospectus is not complete and may be changed. The selling
stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is declared effective. This
prospectus is not an offer to sell these securities and neither we nor the
selling stockholders are soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject
to Completion, dated November 19, 2007
PROSPECTUS
LANGER, INC.
7,597,004
Shares
of Common Stock,
par
value $0.02 per share
This
prospectus covers up to 7,597,004 shares of common stock, or interests therein,
that may be sold or otherwise disposed of from time to time by the stockholders
identified in the “Selling Stockholders” section of this prospectus. The shares
covered by this prospectus were issued in private transactions.
The
prices at which the selling stockholders or their transferees may dispose of
their shares will be determined by the selling stockholders at the time of
sale
and may be at the prevailing market price for the shares, at prices related
to
such market price, at varying prices determined at the time of sale, or at
negotiated prices. Information regarding the selling stockholders and the times
and manner in which they may offer and sell the shares under this prospectus
is
provided under “Selling Stockholders” and “Plan of Distribution” in this
prospectus.
We
will
not receive any of the proceeds from the sale of the shares offered under this
prospectus. However, 6,195,165 of the shares of common stock offered in this
prospectus will be issued only upon the conversion of our 5% Convertible
Subordinated Notes due December 7, 2011 (the "5% Convertible Notes" or the
“Notes”). To the extent the Notes are converted into common stock, we will be
relieved of indebtedness equal to the converted portion of the Notes. We will
pay all expenses (except brokerage fees and commissions and similar expenses)
relating to the registration of shares with the Securities and Exchange
Commission.
Our
common stock is listed on The Nasdaq Global Market. On November 16, 2007, the
closing price of our common stock was $2.90 per share.
YOU
SHOULD CAREFULLY CONSIDER THE RISK FACTORS FOR OUR SHARES, WHICH ARE LISTED
ON
PAGE 7 OF THIS PROSPECTUS. SEE “RISK FACTORS”.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
You
should rely only on the information provided in, or incorporated by reference
in, this prospectus. We have not authorized anyone else to provide you with
any
information that is not in, or incorporated by reference in, the prospectus.
This
prospectus is not an offer to sell the common stock in any state where the
offer
is not permitted. The information in this document may only be accurate on
the
date of this document. Information contained on our website does not constitute
part of this document.
The
date
of this prospectus is November ____, 2007
TABLE
OF
CONTENTS
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Page
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Where
You Can Find More Information About Us
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iii
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Incorporation
of Information by Reference
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iii
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Special
Note Regarding Forward-Looking Statements
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iv
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Prospectus
Summary
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1
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The
Offering
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6
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Risk
Factors
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7
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Use
of Proceeds
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21
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Price
Range of Common Stock
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21
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Dividend
Policy
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21
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Selling
Stockholders
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22
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Description
of Capital Stock
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33
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Plan
of Distribution
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35
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Experts
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37
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Legal
Matters
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37
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Material
Changes
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37
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WHERE
YOU CAN FIND MORE INFORMATION ABOUT US
This
prospectus is part of a registration statement we have filed with the Securities
and Exchange Commission relating to the common stock being offered by the
selling stockholders. The registration statement contains exhibits and other
information about us and the offering that are not included in this prospectus.
We also file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
these documents, as well as the registration statement, at the Securities and
Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The
SEC maintains an Internet site at which our SEC filings may be found. The
address of that site is http://www.sec.gov. You can also obtain information
about us at our website, the address of which is http://www.langerinc.com.
INCORPORATION
OF INFORMATION BY REFERENCE
The
Securities and Exchange Commission (the “Commission”) allows us to “incorporate
by reference” the information we file with them, which means that we can
disclose important information to you by referring to those documents. The
information incorporated by reference is considered to be a part of this
prospectus. We incorporate by reference the documents listed below:
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(a)
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Annual
Report on Form 10-K for the year ended December 31, 2006, filed with
the
Commission on April 2, 2007;
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(b)
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Annual
Report on Form 10-K/A (Amendment No. 1) for the year ended December
31,
2006, filed with the Commission on April 30,
2007;
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(c)
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Quarterly
Report on Form 10-Q for the Quarter Ended March 31, 2007, filed with
the
Commission on May 15, 2007;
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(d)
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Quarterly
Report on Form 10-Q for the Quarter Ended June 30, 2007, filed with
the
Commission on August 14, 2007;
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(e)
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Quarterly
Report on Form 10-Q for the Quarter Ended September 30, 2007, filed
with the Commission on November 14,
2007;
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(f)
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Current
Report on Form 8-K, Date of Event - January 8, 2007, filed with the
Commission on January 12, 2007;
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(g)
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Current
Report on Form 8-K, Date of Event - January 23, 2007, filed with
the
Commission on January 29, 2007;
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(h)
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Current
Report on Form 8-K, Date of Event - February 16, 2007, filed with
the
Commission on March 2, 2007;
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(i)
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Current
Report on Form 8-K, Date of Event - March 28, 2007, filed with the
Commission on March 28, 2007.
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(j)
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Current
Report on Form 8-K/A (Amendment No. 1), Date of Event - January 23,
2007,
filed with the Commission on April 9,
2007;
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(k)
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Current
Report on Form 8-K, Date of Event - May 11, 2007, filed with the
Commission on May 15, 2007;
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(l)
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Current
Report on Form 8-K, Date of Event - June 20, 2007, filed with the
Commission on June 26, 2007;
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(m)
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Current
Report on Form 8-K, Date of Event - July 27, 2007, filed with the
Commission on July 27, 2007;
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(n)
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Current
Report on Form 8-K, Date of Event - August 14, 2007, filed with the
Commission on August 14, 2007;
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(o)
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Current
Report on Form 8-K, Date of Event - October 9, 2007, filed with the
Commission on October 12, 2007;
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(p)
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Current
Report on Form 8-K, Date of Event - November 14, 2007, filed with
the
Commission on November 14, 2007;
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(q)
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Current
Report on Form 8-K, Date of Event - November 16, 2007, filed with the
Commission on November 16, 2007;
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(r)
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Definitive
Proxy Statement dated May 23, 2007 and filed with the Commission
on May
24, 2007, relating to the Company’s 2007 Annual Meeting of Stockholders
held on June 20, 2007;
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(s)
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Definitive
Proxy Statement dated March 20, 2007 and filed with the Commission
on
March 21, 2007 relating to the Special Meeting of Stockholders held
on
April 19, 2007;
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(t)
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Definitive
Proxy Statement (Amendment No. 1) dated March 21, 2007 and filed
with the
Commission on March 26, 2007 relating to the Special Meeting of
Stockholders held on April 19, 2007;
and
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(u)
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The
description of the Company's common stock contained in the Company's
Registration Statement on Form 8-A (Reg. No. 000-12991), filed
with the Commission as of July 3, 2002 by the Company to register
such securities under the Exchange Act, including all amendments
and
reports filed for the purpose of updating that
description.
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We
will
send you at no cost a copy of any filing that is incorporated by reference
in
the prospectus. You may request a copy of any of these filings, without charge,
by writing or calling Kathleen P. Bloch,
Chief
Financial Officer, Langer, Inc., 41 Madison Avenue, 28
th
Floor,
New York, NY 10010, telephone no.: 212-687-3260, or by sending an e-mail to
Ms.
Bloch at KBloch@LangerInc.com.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements we make in this prospectus and the documents incorporated by
reference in this prospectus may constitute “forward-looking statements” within
the meaning of the Federal securities laws. Forward-looking statements include
statements concerning our plans, objectives, goals, strategies, future events,
future revenues or performance, capital expenditures, financing needs, plans
or
intentions relating to acquisitions, our competitive strengths and weaknesses,
our business strategy and the trends we anticipate in the industry and economies
in which we operate and other information that is not historical information.
Words or phrases such as “estimates,” “expects,” “anticipates,” “projects,”
“plans,” “intends,” “believes” and variations of such words or similar
expressions are intended to identify forward-looking statements. These
statements reflect our current views about future events based on information
currently available and assumptions we make. These forward-looking and other
statements, which are not historical facts, are based largely upon our current
expectations and assumptions and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
contemplated by such forward-looking statements.
These
risks and uncertainties include, among others:
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·
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Our
history of net losses and the possibility of continuing net losses
for the
remainder of 2007 and beyond.
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·
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We
may not be able to manage our
growth.
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Risks
associated with our strategy of acquiring and integrating
businesses.
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The
risk that we may not be able to raise adequate financing to fund
our
operations and growth prospects.
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Accordingly,
we advise you to carefully review the information set forth in "Risk Factors,"
starting at page 7.
We
cannot
guarantee our future performance nor can we assure you that we will be
successful in the implementation of our growth strategy or that any such
strategy will result in our future profitability. Our failure to successfully
implement our growth strategy could have a material adverse effect on the market
price of our common stock and our business, financial condition and results
of
operations. You also should be aware that, other than as required by law, we
have no obligation to, and do not intend to, update any forward-looking
statements to reflect events or circumstances occurring after the date of this
prospectus that may cause our actual results or performance to differ from
those
expressed in the forward-looking statements.
PROSPECTUS
SUMMARY
The
items in the following summary are described in more detail later in this
prospectus or in information incorporated by reference in this prospectus.
This
summary provides an overview of selected information and does not contain all
of
the information you should consider. Therefore, you should also read the more
detailed information set out in this prospectus, including the financial
statements and the related notes incorporated herein by reference and the other
information incorporated herein by reference. References in this prospectus
to
“Langer” the “Company,” “we,” “our” and “us” refer to Langer, Inc. and, if so
indicated or if the context requires, includes our wholly-owned
subsidiaries.
Company
Overview
We
design, manufacture and distribute high-quality medical products and services
targeting the long-term care, orthopedic, orthotic and prosthetic markets.
Through our wholly-owned subsidiaries, Twincraft, Inc., and Silipos, Inc.,
we
also offer a diverse line of personal care products for the private label
retail, medical, and therapeutic markets. We sell our medical products primarily
in the United States and Canada, as well as in more than 30 other countries,
to
national, regional, and international distributors, directly to healthcare
professionals, and directly to patients in instances where we also are providing
product fitting services. We sell our personal care products primarily in North
America to branded marketers of such products, specialty retailers, direct
marketing companies, and companies that service various amenities markets.
We
acquired Twincraft, a leading designer and manufacturer of bar soap, and certain
assets ("Regal") of Regal Medical Supply, LLC, a North Carolina limited
liability company, a provider of contracture management products and services
to
patients in long-term care and other rehabilitation settings, in
January 2007.
Our
broad
range of over 500 orthopedic products, including custom foot and ankle orthotic
devices, pre-fabricated foot products, rehabilitation products, and gel-based
orthopedic and prosthetics products, are designed to correct, protect, heal
and
provide comfort for the patient. Through our wholly-owned subsidiary, Regal
Medical Inc., starting in 2007, we also provide patient services in long-term
care settings by assisting facility personnel in product selection, order
fulfillment, product fitting and billing services. Our line of personal care
products includes bar soap, gel-based therapeutic gloves and socks, scar
management products, and other products that are designed to cleanse and
moisturize specific areas of the body, often incorporating essential oils,
vitamins and nutrients to improve the appearance and condition of the
skin.
Acquisition
History
In
February 2001, an investor group and management team led by our current
Chairman of the Board of Directors, Warren B. Kanders, purchased a controlling
interest in Langer, Inc., a custom orthotics company distributing its products
primarily to podiatric professionals.
The
investor group and management team since that time have evolved the Company’s
business toward a growth strategy in the medical products and personal care
industries. Since that time, in connection with our growth strategy, we have
consummated the following strategic acquisitions:
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·
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Twincraft
.
On January 23, 2007, we acquired Twincraft, our largest acquisition
to date, a designer and manufacturer of bar soap focused on the health
and
beauty, direct marketing, amenities and mass market channels. We
acquired
Twincraft to expand into additional product categories in the personal
care market, to increase our customer opportunities for our current
line
of Silipos gel-based skincare products, and to take advantage of
potential
commonalities in research and development advances. The aggregate
consideration paid by us in connection with this acquisition was
approximately $26.7 million, with $22.7 million paid in cash and the
balance through the issuance of 999,375 shares of our common stock.
As a
result of a post-closing upward adjustment to the purchase price
based
upon the audit of Twincraft’s financial statements for its 2006 fiscal
year, the Company paid the Twincraft sellers an additional $2,840,139
in
cash and issued an additional 68,981 shares of the Company's common
stock. The purchase price also potentially includes further payments
based
upon the financial performance of Twincraft in 2007 and
2008.
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·
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Regal
Medical Supply
.
On January 8, 2007, we acquired certain assets of Regal Medical
Supply, LLC, a provider of contracture management products and services
to
patients in long-term care and other rehabilitation settings. We
acquired
Regal as part of an effort to gain access to the long-term care market,
to
gain a new distribution channel for certain custom products we manufacture
into a market we previously had been unable to penetrate, to obtain
higher
average selling prices for these products, and to establish a national
network of service professionals to enhance our customer relationships
in
our core markets and new markets. The initial consideration for the
acquisition of the assets of Regal was approximately $1.6 million
which was paid through the issuance of 379,167 shares of common stock,
which has since been reduced to approximately $1.4 million or 333,483
shares of common stock due to a shortfall in the amount of working
capital
delivered at closing.
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·
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Silipos
.
On September 30, 2004, we acquired Silipos, Inc. ("Silipos"), a
leading designer, manufacturer and marketer of gel-based products
focusing
on the orthopedic, orthotic, prosthetic, and skincare markets. We
acquired
Silipos because of its distribution channels and proprietary products,
and
to enable us to expand into additional product lines that are part
of our
market focus. The aggregate consideration paid by us in connection
with
this acquisition was approximately $17.3 million, including
transaction costs, paid in cash and
notes.
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·
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Bi-Op
.
On January 13, 2003, we acquired Bi-Op Laboratories, Inc. (“Bi-Op”),
which is engaged in the design, manufacture and sale of footwear
and foot
orthotic devices as well as orthotic and prosthetic services. We
acquired
Bi-Op to gain access to additional markets and complementary product
lines. The aggregate consideration, including transaction costs,
was
approximately $2.2 million, paid in cash and shares of our common
stock.
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·
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Benefoot
.
On May 6, 2002, we acquired the net assets of Benefoot, Inc., and
Benefoot Professional Products, Inc. (together, “Benefoot”). Benefoot
designed, manufactured and distributed custom orthotics, custom
Birkenstock® sandals, therapeutic shoes, and prefabricated orthotic
devices to healthcare professionals. We acquired Benefoot to gain
additional scale in our historic custom orthotics business as well
as to
gain access to complementary product lines. The aggregate consideration,
including transaction costs, was approximately $7.9 million,
consisting of cash, notes, the assumption of liabilities consisting
of
approximately $0.3 million of long-term debt paid at closing and
shares of our common stock.
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Our
Addressable Markets
Medical
Products
The
medical products market we target is comprised of orthotic devices and
prosthetic products for non-invasive use. Orthotics are specialized devices
to
supplement or support abnormal or weakened limbs or joints. These devices are
specially designed to improve function and correct injuries or deformities
of
existing limbs or body parts and can be both custom designed to individual
patient requirements or pre-fabricated for off-the-shelf use. Orthotic products
range from full body spinal orthoses and custom fabricated arch supports to
braces for the back, shoulder, arm or knee; they may be rigid, semi-rigid,
or
soft and flexible depending on the requirement of the patient as evaluated
by
the doctor treating the patient.
Prosthetics
involve the design, fabrication and fitting of artificial limbs for patients
who
have lost their limbs due to traumatic injuries, vascular diseases, diabetes,
cancer and congenital diseases. Our target market is comprised of the production
and distribution of the components utilized in the fabrication of these
prosthetic devices. Prosthetic componentry includes external mechanical joints
such as hips and knees, artificial feet and hands, and sheaths and liners
utilized as an interface between the amputee’s skin and prosthetic
socket.
Based
on
third-party research performed at the request and at the expense of the Company,
we believe that the global orthopedic markets that we target are expected to
grow to approximately $3.4 billion by the end of 2009.
We
believe that growth of the orthopedic markets we target will be driven by the
following factors:
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·
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Aging
Population
.
By 2010, it is estimated that the number of people in the United
States
between the ages of 40 and 60 will grow from approximately 58 million
today to more than 64 million. With longer life expectancy, expanded
insurance coverage, improved technology and devices, and greater
mobility,
individuals are expected to seek orthopedic rehabilitation services
and
products more often.
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·
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Increased
Demand for Non-Invasive Procedures
.
We believe there is growing awareness and clinical acceptance by
patients
and healthcare professionals of the benefits of non-invasive solutions,
which should continue to drive demand for non-operative rehabilitation
products.
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·
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Technological
Sophistication of Orthotic and Prosthetic Devices
.
In recent years the development of stronger, lighter and cosmetically
appealing materials has led to advancements in design technology,
driving
growth in the orthotic and prosthetic industries. A continuation
of this
trend should enable the manufacture of new products that provide
greater
protection and comfort, and that more closely replicate the function
of
natural body parts.
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·
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Need
for Replacement and Continuing Care
.
Most prosthetic orthotic devices have useful lives ranging from three
to
five years, necessitating ongoing warranty replacement and retrofitting
for the life of the patient.
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·
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Growing
Emphasis on Physical Fitness, Leisure Sports and
Conditioning
.
As a large number of individuals participate in athletic activities,
many
of them suffer strains and injuries, requiring non-operative orthopedic
rehabilitation products.
|
Through
the acquisition of Regal in January 2007, we entered the market for the
direct provision of durable medical equipment and orthotic and prosthetic
supplies directly to patients in consultation and collaboration with healthcare
professionals in various settings. We are currently targeting the long-term
care
market, which is comprised of approximately 48,000 long term care facilities
nationwide; however, we believe that our addressable market is significantly
larger than this because of the existence of other health care settings that
prescribe durable medical equipment but do not presently supply it.
Personal
Care
Personal
care products are generally sold in the retail cosmetic marketplace and include
soaps, cleansers, toners, moisturizers, exfoliants, and facial masks, and can
also include over-the-counter (“OTC”) drug products such as acne soaps,
antiperspirants, and sunscreens. Third-party research that the Company engaged
and funded has reported that moisturizing and cleansing products account for
the
predominant portion of the personal care market. Many of these products combine
traditional moisturizing and cleansing agents with compounds such as retinoids,
hydroxy acids, and anti-oxidants that smooth and soothe dry skin, retain water
in the outer layer skin cells and help maintain or reinforce the skin’s
protective barrier, particularly skin tissue damaged from surgery or
injury.
Through
the acquisition of Twincraft in January 2007, a manufacturer of bar soap,
we have significantly increased our personal care products segment. For the
year
ended December 31, 2006, which ended prior to our acquisition of Twincraft,
Twincraft had net sales of approximately $31,000,000. There is no assurance
that
Twincraft will have similar results in 2007 or thereafter.
Based
on
third-party research that the Company engaged and funded, we believe that the
U.S. skincare moisturizer market is expected to grow to approximately
$2.5 billion by the end of 2009.
We
believe that growth in this market will be driven by an aging population, an
increasing number of image-conscious consumers, and the growth and popularity
of
spas and body/facial treatment centers.
Growth
Strategy
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·
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Gain
Access to New Sales Channels to Increase Selling Prices and Improve
Profitability
.
We are focused on expanding our customer base beyond our traditional
core
markets and offering an increasing array of value-added services
to
increase average selling prices, which we expect to lead to improved
profitability. Our orthotics distribution historically focused on
individual podiatry practices and medical distributors. With the
addition
of Regal and the provision of certain services, we are able to offer
products and services through healthcare facilities directly to patients,
which increases the average selling price we receive for a given
product.
In addition, due to the direct nature of the provision of these services
through practitioners and patients, we believe we will have the
opportunity to develop the ability to more directly influence our
growth
through the addition of licensed, revenue-generating personnel. Our
acquisition of Twincraft is expected to give us new products marketed
through new channels in our personal care
segment.
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Research,
Product, and Process Development
.
Since 2003, we have introduced over 100 new products, including the
Dura-gel prosthetic liner in September 2005, which led to an 18%
increase in prosthetic product sales in 2006. We also have invested
resources in internally developing alternate gel materials and other
thermoplastic elastomer materials in partnership with outside parties
that
has increased our competitiveness. During 2006, we completed the
conversion of our custom orthotics manufacturing facilities from
traditional manufacturing processes to ‘lean’ manufacturing through
process reengineering, which has led to improved service
levels.
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Innovation
.
Our personal care products group focuses on leveraging the research
and
development expertise of both Twincraft and Silipos to provide innovative
products to our customers. For example, our Twincraft subsidiary,
prior to
our acquisition of Twincraft, has successfully commercialized the
inclusion of a nanotechnology-driven microsphere encapsulant that
incorporates a time-released dosage of an active pharmaceutical ingredient
to increase the efficacy of the product for the treatment of a specific
condition. We continuously improve and innovate our gel-based personal
care products through the inclusion of various additives, the formulation
of our gels for optimal performance given a particular application,
and
the usage of different components, packaging and product construction
to
meet the needs of our customers. We believe innovation will be a
key to
our success in the future and is a core competency of the personal
care
products group of the Company.
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Acquisition
of Complementary Businesses
.
Subject to the availability of financing, we intend to continue our
program of targeted acquisitions in order to gain access to new product
groups and customer channels.
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Competitive
Strengths
Management
Team
.
Our
management team has been involved in the acquisition and integration of a
substantial number of companies. Our Chairman of the Board of Directors, Warren
B. Kanders, brings a track record spanning over 20 years of building public
companies through strategic acquisitions to enhance organic growth. W. Gray
Hudkins, who became our Chief Operating Officer on October 1, 2004, and our
President and Chief Executive Officer on January 1, 2006, brings a strong
investment banking background and has been involved in the acquisition and
integration of acquired companies prior to joining us, and since joining us
has
played a critical role in the acquisition and the integration of Silipos, and
the acquisitions of Regal and Twincraft.
Strong
Base Business
.
As
presently constituted, including the recent acquisitions of Twincraft and Regal,
we believe our business represents an increasingly diversified platform upon
which to further build our business. Our medical products business benefits
from
a reputation of quality products, approximately 35 patents or patent
applications, and quality brands and trademarks. The addition of Regal is
expected to enhance our distribution strength and our ability to directly affect
our growth. With the addition of Twincraft, our personal care products business
benefits from a diverse list of customers in the health and beauty, direct
marketing, amenities and mass market channels, and we believe the combination
of
Twincraft with our Silipos skincare business offers the possibility of a number
of synergistic revenue and expense opportunities.
S
trength
Across Distribution Channels
.
We
believe we maintain strong relationships across various distribution channels
in
our two reporting segments. In our medical products group, this includes
over
4,000 individual practitioners, a network of national, regional, independent
and
international distributors, a number of national providers of physical therapy
rehabilitation services focused on the long-term care market, medical catalog
companies, group purchasing organizations, original equipment manufacturers,
specialty retailers, and consumer catalog companies. In our personal care
products group, we enjoy strong relationships with customers in a number
of
previously outlined sales channels that provide diversification and the ability
to pursue growth opportunities in a number of different markets focused on
a
variety of product types and price points.
Risks
Affecting Us
There
are
numerous risks and uncertainties that may affect our financial and operating
performance and our growth. These risks include the following:
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Our
growth prospects depend on assumptions being realized
. Our
future growth prospects depend in part on increasing market demand
for the
types of products we sell. If our assumptions regarding demographics,
trends and the estimated market for the types of products we sell
prove to
be wrong, our growth prospects would be materially adversely affected.
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Our
acquisition strategy entails significant risk
. A
key element of our strategy is the acquisition of businesses and
assets
that will complement our current business, increase size, expand
our
geographic scope of operations and otherwise offer growth opportunities.
We may not be able to successfully identify attractive acquisition
opportunities, obtain financing for acquisitions or make acquisitions
on
satisfactory terms or successfully acquire and/or integrate identified
targets. Our recent acquisitions have substantially increased the
size of
our company and broadened our product offerings. An inability by
us to
successfully integrate and manage these acquisitions could have a
material
adverse effect on our business and profitability and harm our future
growth prospects.
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Our
industry is characterized by significant competition
. The
orthopedic, orthotic, prosthetic and skincare markets are highly
competitive. Certain of our competitors in these markets may have
more
resources and more recognizable trademarks for products similar to
those
sold by us and may develop new products which render our products
obsolete.
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We
may require substantial additional financing to carry out our business
objectives
. We
may require substantial financing in order to achieve our acquisition,
product expansion and other business objectives. We negotiated and
executed a $20 million asset-based lending facility with Wachovia
Bank,
National Association. However, this facility, alone, may not be adequate
to supply the amount of capital that may be required in the event
of any
material acquisition. As of October 31, 2007, our availability under
the credit facility was approximately $6.3 million. Any material
acquisition would be subject to the approval of
Wachovia.
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For
a
more detailed discussion of these and the other risks that we face, see the
discussion under the heading "Risk Factors" beginning on page 7.
On
December 8, 2006, we issued and sold an aggregate of $28,880,000 of the Notes
to
certain of the selling stockholders identified in the “Selling Stockholders”
section of this prospectus. The conversion price under the Notes is a fixed
price, subject to a weighted average anti-dilution adjustment if the Company
issues common stock for a consideration less than the applicable conversion
price (with customary exceptions for issuances pursuant to stock incentive
plans
and options and warrants outstanding prior to the sale of the Notes). As a
result of any adjustment that may be made pursuant to the weighted average
anti-dilution provisions of the Notes, the number of shares of common stock
issuable upon conversion of the Notes may be increased on account of downward
adjustments in the conversion price of the common stock acquirable upon
conversion of the Notes. On the date of the sale of the Notes, based on the
applicable conversion price on such date of $4.75, the Notes were convertible
into 6,080,000 shares of common stock, and the total market value of such shares
on the date of sale of the Notes was $25,613,915. Subsequent to the sale of
the
Notes, the conversion price was adjusted to $4.6617 pursuant to the
weighted-average anti-dilution provisions of the Notes, and based on the current
conversion price, the Notes are convertible into 6,195,165 shares of common
stock, such shares having a total market value of $17,965,979 based upon the
closing price of the Company’s common stock on November 16, 2007. On December 8,
2006, the date that the Notes were sold, the fair market value of the Company's
common stock was $4.14 per share, and the aggregate fair market value of
6,195,165 shares of stock, which is the number presently acquirable upon
conversion of the Notes, would be $25,647,983. Additional shares of common
stock
may hereafter become issuable on conversion of the Notes if the conversion
price
is adjusted under the terms of the Notes.
On
January 8, 2007, we acquired certain assets of Regal Medical Supply, LLC, a
North Carolina limited liability company, for an aggregate purchase price of
$1.6 million which was paid through the issuance of 379,167 shares of our
common stock, which has since been reduced to approximately $1.4 million or
333,483 shares of common stock, due to a shortfall in the amount of working
capital delivered by the seller at closing.
On
January 23, 2007, we acquired all of the capital stock of Twincraft for an
aggregate purchase price of approximately $26.7 million, with $22.7 million
paid in cash and the balance through the issuance of 999,375 shares of our
common stock. As a result of a post-closing upward adjustment to the purchase
price based upon the audit of Twincraft’s financial statements for its 2006
fiscal year, the Company paid the Twincraft sellers an additional $2,840,139
in
cash and issued an additional 68,981 shares of the Company's common stock.
This
prospectus relates to the sale or other disposition of the shares of our common
stock, or interests therein, that we issued to stockholders of Twincraft, and
to
Regal Medical Supply, LLC, and that are issued or issuable upon conversion
of
the Notes. We are not offering or selling any of our common stock in connection
with this registration statement.
RISK
FACTORS
The
following risk factors should be carefully considered in evaluating our
business, because such factors may have a significant impact on our business,
operating results, liquidity and financial condition. As a result of the risk
factors set forth below, actual results could differ materially from those
mentioned in any forward-looking statements. Additional risks and uncertainties
not presently known to us, or that we currently consider to be immaterial,
may
also impact our business, operating results, liquidity and financial condition.
If any of the following risks occur, our business, operating results, liquidity
and financial condition, and the price of our common stock, could be materially
adversely affected. You should also consider risk factors set forth in documents
incorporated herein by reference.
Risks
Related to Our Operations
We
have a history of net losses and may incur additional losses in the
future.
We
have a
history of net losses. In order for us to achieve and maintain consistent
profitability from our operations, we must continue to achieve product revenue
at or above current levels. We may increase our operating expenses as we attempt
to expand our product lines and acquire other businesses and products. As a
result, we may need to increase our revenues significantly to achieve
sustainable profitability. We cannot assure you that we will be able to achieve
sustainable profitability. Any such failure could have a material adverse effect
on the market price of our common stock and our business, financial condition
and results of operations. For the six months ended June 30, 2007, the Company
had a consolidated net loss (unaudited) of $1,634,550. We face the risk that
these losses may continue for the remainder of 2007 and beyond.
Our
business plan relies on certain assumptions for the market for our products
which, if incorrect, may adversely affect our
profitability.
We
believe that various demographics and industry-specific trends will help drive
growth in the medical and personal care markets, including:
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an
aging population with broad medical coverage, increased disposable
income
and longer life expectancy;
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a
growing emphasis on physical fitness, leisure sports and conditioning,
which will continue to lead to increased
injuries;
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increasing
awareness and use of non-invasive devices for prevention, treatment
and
rehabilitation purposes; and
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an
increase in the utilization of personal care products for various
applications, including cleansing, cosmetic and for the treatment
of
various conditions.
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These
demographics and trends are uncertain. The projected demand for our products
could materially differ from actual demand if our assumptions regarding these
factors prove to be incorrect or do not materialize, or if alternative
treatments to those offered by our products gain widespread
acceptance.
We
may face difficulties integrating the operations of
Twincraft.
In
January 2007 we completed the acquisition of Twincraft, our largest acquisition
to date. Our ability to integrate the operations of Twincraft is subject to
various risks, including:
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failure
to effectively integrate the two companies’ sales and marketing teams;
and
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If
any of
these risks were to materialize in the future, we may not be able to realize
the
sales or research and development synergies or other benefits expected from
this
acquisition. Our failure to successfully integrate the operations of Twincraft
in a timely manner without incurring unexpected costs could have a material
adverse effect on the market price of our common stock, business, financial
condition, and results of operations.
There
are significant risks associated with our strategy of acquiring and integrating
businesses.
A
key
element of our strategy is the acquisition of businesses and assets that will
complement our current business, increase size, expand our geographic scope
of
operations, and otherwise offer growth opportunities. We may not be able to
successfully identify attractive acquisition opportunities, obtain financing
for
acquisitions, make acquisitions on satisfactory terms, or successfully acquire
and/or integrate identified targets. Additionally, competition for acquisition
opportunities in our industries may escalate, which would increase the costs
to
us of completing acquisitions or prevent us from making acquisitions. Our
ability to implement our acquisition strategy is also subject to other risks
and
costs, including:
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loss
of key employees, customers or suppliers of acquired
businesses;
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diversion
of management’s time and attention from our core
businesses;
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adverse
effects on existing business relationships with suppliers and
customers;
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our
ability to realize operating efficiencies, synergies, or other benefits
expected from an acquisition;
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risks
associated with entering markets in which we have limited or no
experience; and
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assumption
of contingent or undisclosed liabilities of acquisition
targets.
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In
addition, in connection with our acquisitions of Regal on January 8, 2007,
and Twincraft, Inc. on January 23, 2007, we face the risk of incurring
potential liabilities of those companies which may not be covered by the limited
indemnification in the relevant acquisition agreements.
The
above
risks could have a material adverse effect on the market price of our common
stock and our business, financial condition and results of
operations.
We
may not be able to adequately manage our growth.
We
have
expanded, and are seeking to continue to expand, our business. This growth
has
placed significant demands on our management, administrative, operating and
financial resources. The continued growth of our customer base, the types of
products offered and the geographic markets served can be expected to continue
to place a significant strain on our resources. Personnel qualified in the
production and marketing of our products are difficult to find and hire, and
enhancements of information technology systems to support growth are difficult
to implement. Our future performance and profitability will depend in large
part
on our ability to attract and retain additional management and other key
personnel. In addition, although we have recently implemented a new information
technology platform, we cannot assure you that the new system will be effective
in accommodating our growing accounting, financial and information needs. Any
failure to adequately manage our growth could have a material adverse effect
on
the market price of our common stock and our business, financial condition
and
results of operations.
The
growth of our personal care business depends on the successful development
and
introduction of new products and services.
The
growth of our personal care business depends on the success of existing products
and services, including the manufacturing capabilities of our Twincraft
subsidiary, as well as the successful development and introduction of new
products manufacturing services, which face the uncertainty of customer
acceptance and reaction from competitors. In addition, our ability to create
new
products and new manufacturing services, and to sustain existing products and
services, is affected by whether we can:
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develop
and fund technological innovations;
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receive
and maintain necessary patent and trademark
protection;
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obtain
governmental approvals and registrations of regulated products and
manufacturing operations;
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comply
with Food and Drug Administration (FDA), Consumer Product Safety
Commission, and other governmental regulations;
and
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successfully
anticipate consumer needs.
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The
failure to develop and launch successful new products and provide new and
competitive manufacturing services could hinder the growth of our business.
Also, any delay in the development or launch of a new product could result
in
our not being the first to market, which could compromise our competitive
position.
Changes
in the requirements of our personal care customers and increasing dependence
on
key customers may adversely affect our business.
Our
personal care products are sold in a highly competitive global marketplace
which
is experiencing increased trade concentration. With the growing trend toward
consolidation, we are increasingly dependent on key customers, and some of
these
customers have greater bargaining strength than we do. They may use this
strength to demand lower prices, higher trade discounts, allowances or slotting
fees, which could lead to reduced sales or profitability. We may also be
negatively affected by changes in the requirements of our customers, such as
inventory de-stocking, and other conditions.
Rising
material and other costs and our increasing dependence on key suppliers could
adversely impact our profitability.
Raw
and
packaging material commodities are subject to wide price variations. Increases
in the costs of these commodities and other costs, such as energy costs, may
adversely affect Twincraft’s profit margins if we are unable to pass along any
higher costs in the form of price increases or otherwise achieve cost
efficiencies.
A
write-off of intangible assets may adversely affect our results of
operations.
Our
total
assets include substantial intangible assets, including goodwill acquired in
connection with the acquisitions of Benefoot, Bi-Op and Silipos, representing
the excess of cost over the fair value of the identifiable assets acquired.
We
expect to incur additional goodwill in connection with other acquisitions we
make in the future. We evaluate on a regular basis whether events and
circumstances have occurred that indicate that all or a portion of the carrying
amount of the goodwill or other intangible assets may no longer be recoverable,
in which case a charge to earnings would be required. In the year ended
December 31, 2005, we recorded a provision for impairment totaling
$2,102,000, with regard to certain identifiable intangible assets.
Our
business is highly competitive. If we fail to compete successfully, our sales
and operating results may be negatively affected and we may not achieve future
growth.
The
orthopedic, orthotic, prosthetic, skincare and personal care markets are highly
competitive. Certain of our competitors in these markets have more resources
and
experience as well as more recognizable trademarks for products similar to
those
sold by us. In addition, the market for orthopedic devices and related products
is characterized by new product development and corresponding obsolescence
of
existing products. Our competitors may develop new techniques, therapeutic
procedures or alternative products that are more effective than our current
technology or products or that render our technology or products obsolete or
uncompetitive, which could cause a decrease in orders for our custom orthotic
products. Such decreases would have a material adverse effect on the market
price of our common stock and our business, financial condition and results
of
operations.
We
may
not be able to develop successful new products or enhance existing products,
obtain regulatory clearances and approval of such products, market such products
in a commercially viable manner or gain market acceptance for such products.
Failure to develop, license or market new products and product enhancements
could materially and adversely affect our competitive position, which could
cause a significant decline in our sales and profitability.
We
expect
that the level of competition faced by us may increase in the future. Some
competitors have substantially greater financial, marketing, research and
technical resources than us. There can be no assurance that we will be able
to
compete successfully in the orthopedic, orthotic, prosthetic, skincare and
personal care markets. Any such failure could have a material adverse effect
on
the market price of our common stock and our business, financial condition
and
results of operations.
We
may not be able to raise adequate financing to fund our operations and growth
prospects.
Our
acquisition and product expansion programs, debt servicing requirements, and
existing operations will require substantial capital resources. We cannot assure
you that we will be able to generate sufficient operating cash flow or obtain
sufficient additional financing to meet these requirements.
We
negotiated and executed a $20 million asset-based lending facility with Wachovia
Bank, National Association. However, this facility, alone, may not be adequate
to supply the amount of capital that may be required in the event of any
material acquisition. As of September 30, 2007, our availability under the
credit facility was approximately $6.1 million. Any material acquisition would
be subject to the approval of Wachovia.
If we do
not have adequate resources and cannot obtain additional capital on terms
acceptable to us or at all, we may be required to reduce operating costs by
altering and delaying our business plan or otherwise radically altering our
business practices. Failure to meet our future capital requirements could have
a
material adverse effect on the market price of our common stock and our
business, financial condition and results of operations.
Substantially
all our assets are pledged to a secured lender.
On
May
11, 2007, we entered into a loan and security agreement with Wachovia Bank,
National Association, under which we have obtained a credit facility for loans
and other financial accommodations of up to a maximum of $20 million, of which
$6.3 million is available as of October 31, 2007. The amount of funds
available to us under the credit facility is based primarily on our levels
of
eligible accounts receivable and eligible inventory, and as of the date of
this
prospectus, we have not borrowed any funds under the facility. Substantially
all
our assets, including assets acquired in the future, are pledged to the lender
to secure our obligations to the lender. If we draw down funds under the credit
facility and are unable to repay the funds when due, or are otherwise in default
of the financial covenants and related obligations under the credit facility,
the lender would have the right to foreclose upon our assets, which would have
a
material adverse effect on our business, prospects, financial condition and
results of operations.
We
may be adversely affected by legal actions or proceedings.
On
or
about February 13, 2006, Dr. Gerald P. Zook filed a demand for
arbitration with the American Arbitration Association, naming Langer, Inc.,
and
Silipos as 2 of the 16 respondents. (Four of the other respondents are the
former owners of Silipos and its affiliates, and the other 10 respondents are
unknown entities.) The demand for arbitration alleges that Silipos is in default
of obligations to pay royalties in accordance with the terms of a license
agreement between Dr. Zook and Silipos dated as of January 1, 1997,
with respect to seven patents owned by Dr. Zook and licensed to Silipos.
Silipos has paid royalties to Dr. Zook, but Dr. Zook claims that
greater royalties are owed. The demand for arbitration seeks an award of
$400,000 and reserves the right to seek a higher award after completion of
discovery. Dr. Zook has agreed to drop Langer, Inc. (but not Silipos) from
the arbitration, without prejudice. The proceeding is in the discovery stage.
Additionally,
in the normal course of business, we may be subject to claims and litigation
in
the areas of general liability, including claims of employees, and claims,
litigation or other liabilities as a result of acquisitions we have completed.
The results of legal proceedings are difficult to predict and we cannot provide
you with any assurance that an action or proceeding will not be commenced
against us, or that we will prevail in any such action or proceeding. An
unfavorable outcome of the arbitration proceeding commenced by Dr. Gerald
P. Zook against us and Silipos, may adversely affect our rights to manufacture
and/or sell certain products or raise the royalty costs of those certain
products.
An
unfavorable resolution of any legal action or proceeding could materially
adversely affect the market price of our common stock and our business, results
of operations, liquidity or financial condition.
We
rely heavily on our relationships with healthcare practitioners, agents and
distributors for marketing our products, and our failure to maintain these
relationships could adversely affect our business.
The
sales
of our products depend significantly on the prescription or recommendation
of
such products by podiatrists, orthopedists, orthopedic surgeons, dermatologists,
cosmetic and plastic surgeons, occupational and physical rehabilitation
professionals, prosthetists, orthotists and other healthcare professionals.
Failure of our products to retain the support of these surgeons and other
specialists, or the failure of our products to secure and retain similar support
from leading surgeons and other specialists, could have a material adverse
effect on the market price of our common stock and our business, financial
condition and results of operation.
Our
marketing success also depends largely upon arrangements with agents and
distributors. Our success depends upon our agents’ and distributors’ sales and
service expertise and their relationships with the customers in the marketplace.
Our failure to maintain relationships with our agents and distributors for
marketing our products could have an adverse effect on the market price of
our
common stock and our business, financial condition and results of
operations.
We
enter into multi-year contracts with customers that can impact our
results.
We
enter
into multi-year contracts with some of our customers which include terms
affecting our pricing flexibility. There can be no assurance that these
restraints will not have an adverse impact on our margins and operating income.
While we have a diverse customer base, and no customer or distributor
constituted more than 3.8% of our consolidated revenues for the nine months
ended September 30, 2007, we do have customers and independent, third-party
distributors, the loss of which could have a material negative effect on our
consolidated results of operations.
The
nature of our business could subject us to potential product liability and
other
claims.
The
sale
of orthotic and prosthetic products and other biomechanical devices and personal
care products entails the potential risk of physical injury to patients and
other end users and an inherent risk of product liability, lawsuits and product
recalls. We currently maintain product liability insurance with coverage limits
of $11 million per occurrence and for an annual aggregate maximum subject
to a deductible of $25,000. However, we cannot assure you that this coverage
would be sufficient to cover the payment of any potential claim. In addition,
we
cannot assure you that this or any other insurance coverage will continue to
be
available or, if available, will be obtainable at a reasonable cost. Our
existing product liability insurance coverage may be inadequate to protect
us
from any liabilities we might incur, and we will continue to be exposed to
the
risk that our claims may be excluded and that our insurers may become insolvent.
A product liability claim or series of claims brought against us for uninsured
liabilities or liabilities in excess of our insurance coverage could have a
material adverse effect on the market price of our common stock and our
business, financial condition and results of operations. In addition, as a
result of a product liability claim, our reputation could be harmed and we
may
have to recall some of our products, which could result in significant costs
to
us and have a material adverse effect on the market price of our common stock
and our business, financial condition and results of operations.
Health
care regulations or health care reform initiatives could materially adversely
affect the market price of our common stock and our business, financial
condition and results of operations.
Our
businesses are subject to governmental regulation and supervision in the United
States at the federal and state levels and abroad. These regulations include
regulations of the FDA of our medical and personal care products, and
regulations regarding Medicare, Medicaid and physician self-referrals for
certain of our medical devices and products. Our newly acquired soap
manufacturing business (which is part of our personal care segment) is also
subject to regulation by the Consumer Product Safety Commission. These
regulations are far-reaching, and we may be required to alter one or more of
our
practices to be in compliance with these laws. For example, we may be required
to obtain regulatory approvals and otherwise comply with regulations regarding
safety, quality and efficacy standards of our medical products, and safety
and
manufacturing practices of our soap products. If we fail to obtain such
approvals and otherwise comply with applicable regulatory requirements that
could result in government authorities taking punitive actions against us,
including, among other things, imposing fines and penalties on us or preventing
us from manufacturing or selling our products. Health care fraud and abuse
regulations are complex, and even minor, inadvertent irregularities in
submissions can potentially give rise to claims that the statute has been
violated. Any violations of these laws could result in a material adverse effect
on the market price of our common stock and our business, financial condition
and results of operations. We cannot assure you that these laws and regulations
will not change or be interpreted in the future in a manner which restricts
or
adversely affects our business activities or relationships with providers of
orthotic and biomechanical products.
Changes
in government and other third-party payer reimbursement levels could adversely
affect the revenues and profitability of our medical
segment.
Our
medical products are sold by us through our network of national, regional,
independent and international distributors, hospitals, doctors and other
healthcare providers, many of whom are reimbursed for the healthcare services
provided to their patients by third-party payers, such as government programs,
including Medicare and Medicaid, private insurance plans and managed care
programs. Many of these programs set maximum reimbursement levels for certain
of
the products sold by us in the United States. We may be unable to sell our
products through our distribution channels on a profitable basis if third-party
payers deny coverage or reduce their current levels of reimbursement, or if
our
costs of production increase faster than increases in reimbursement levels.
The
percentage of our sales dependent on Medicare or other insurance programs may
increase as the portion of the United States population over age 65 continues
to
grow, making us more vulnerable to reimbursement level reductions by these
organizations. Reduced government reimbursement levels could result in reduced
private payer reimbursement levels because of indexing of Medicare fee schedules
by certain third-party payers. Furthermore, the healthcare industry is
experiencing a trend towards cost containment as government and private insurers
seek to contain healthcare costs by imposing lower reimbursement rates and
negotiating reduced contract rates with service providers.
Outside
the United States, reimbursement systems vary significantly by country. Many
foreign markets have government-managed health care systems that govern
reimbursement for new devices and procedures. The ability of hospitals supported
by such systems to purchase our products is dependent, in part, upon public
budgetary constraints. Canada and some European countries, for example, have
tightened reimbursement rates. If adequate levels of reimbursement from
third-party payers outside of the United States are not obtained, international
sales of our products may decline, which could adversely affect our net sales
and could have a material adverse effect on the market price of our common
stock
and our business, financial condition and results of operations.
Our
business is subject to substantial government regulation relating to medical
products that could have a material adverse effect on our
business.
Government
regulation in the United States and other countries is a significant factor
affecting the research, development, formulation, manufacture and marketing
of
our products. In the United States, the FDA has broad authority to regulate
the
design, manufacture, formulation, marketing and sale of medical devices, and
other medical products, and many of our personal care products, and the Consumer
Products Safety Commission and the FTC has broad authority over product
advertising. Overseas, these activities are subject to foreign governmental
regulation, which is in many respects similar to regulation in the United States
but which vary from country to country. United States and foreign regulation
continues to evolve, which could result in additional burdens on our operations.
If we fail to comply with applicable regulations we may be subject to, among
other things, fines, suspension or withdrawal of regulatory approvals, product
recalls, operating restrictions, and criminal prosecution. Additionally, the
cost of maintaining personnel and systems necessary to comply with applicable
regulations is substantial and increasing.
Some
of
our products may require or will require regulatory approval prior to being
marketed. The process of obtaining these approvals can be lengthy and expensive.
We may not be able to obtain or maintain necessary approvals for testing or
marketing our products. Moreover, regulatory approvals, if granted, may include
significant limitations on the indicated uses for which our products may be
marketed or other restrictions or requirements that reduce the value to us
of
the products. Regulatory authorities may also withdraw product approvals if
we
fail to comply with regulatory standards or if any problems related to our
products develop following initial marketing. We are also subject to strict
regulation with respect to our manufacturing operations. This regulation
includes testing, control and documentation requirements, and compliance with
current good manufacturing practices, which is monitored through inspections
by
regulatory authorities.
Our
profitability depends, in part, upon our and our distributors’ ability to obtain
and maintain all necessary certificates, permits, approvals and clearances
from
the United States and foreign regulatory authorities and to operate in
compliance with applicable regulations. Delays in the receipt of, or failure
to
receive necessary approvals, the loss of previously obtained approvals, or
failure to comply with existing or future regulatory requirements could have
a
material adverse effect on the market price of our common stock and our
business, financial condition and results of operations.
Modifications
to our marketed devices may require FDA regulatory clearances or approvals
and
may require us to cease marketing or recall the modified devices until such
clearances or approvals are obtained.
When
required, the products we market in the United States have been subjected to
Pre-market Notification requirements under Section 510(k) of the Federal Food
Drug & Cosmetics Act or were exempt from the 510(k) Pre-market Notification
process. We have modified some of our products and product labeling since
obtaining 510(k) clearance. If the FDA requires us to submit a new 510(k)
Pre-market Notification for modifications to our existing products, we may
be
the subject of enforcement actions by the FDA and be required to stop marketing
the products while the FDA reviews the 510(k) Pre-market Notification. If the
FDA requires us to go through a lengthier, more rigorous examination than we
expect, our product introductions or modifications could be delayed or canceled,
which could cause our sales to decline or otherwise adversely impact our growth.
In addition, the FDA may determine that future products will be subject to
the
more costly, lengthy and uncertain Pre-market Approval, or PMA, process.
Products that are approved through the PMA process generally need FDA approval
before they may be modified.
Our
products may be subject to product recalls even after receiving clearance or
approval, which would harm our reputation and our
business.
The
FDA,
the Consumer Products Safety Commission and foreign regulatory authorities
have
the authority to request and, in some cases, require the recall of products
in
the event of material deficiencies, design defects or manufacturing defects
or
consumer complaints which are substantiated by the Consumer Products Safety
Commission. A government-mandated or voluntary recall by us could occur as
a
result of component failures, manufacturing errors, design defects, or any
other
incidents related to our medical devices, including, but not limited to, adverse
event recalls, cease and desist communications and any other product liability
issues related to our medical devices. Any product recall would divert
managerial and financial resources and harm our reputation with customers and
our business.
If
we fail to comply with the FDA’s Quality System Regulation, our manufacturing
could be delayed, and our product sales and profitability could
suffer.
Our
manufacturing processes are required to comply with the FDA’s Quality System
Regulation, which covers the procedures concerning (and documentation of) the
design, testing, production processes, controls, quality assurance, labeling,
packaging, storage and shipping of our devices. We also are subject to state
requirements and licenses applicable to manufacturers of medical devices. In
addition, we must engage in extensive recordkeeping and reporting and must
make
available our manufacturing facilities and records for periodic unscheduled
inspections by governmental agencies, including the FDA, state authorities
and
comparable agencies in other countries. Moreover, failure to pass a Quality
System Regulation inspection or to comply with these and other applicable
regulatory requirements could result in disruption of our operations and
manufacturing delays. Failure to take adequate corrective action could result
in, among other things, significant fines, suspension of approvals, seizures
or
recalls of products, operating restrictions and criminal prosecutions. We cannot
assure you that the FDA or other governmental authorities would agree with
our
interpretation of applicable regulatory requirements or that we have in all
instances fully complied with all applicable requirements. Any failure to comply
with applicable requirements could adversely affect our product sales and
profitability.
Loss
of the services of key management personnel could adversely affect our
business.
Our
operations are dependent upon the skill, experience and performance of a
relatively small group of key management and technical personnel, including
our
Chairman, our President and Chief Executive Officer and head of our personal
care business segment. The unexpected loss of the services of one or more of
key
management and technical personnel could have a material adverse effect on
the
market price of our common stock and our business, financial condition and
results of operations.
Our
business, operating results and financial condition could be adversely affected
if we become involved in litigation regarding our patents or other intellectual
property rights.
The
orthopedic, orthotic, prosthetics and personal care product industries have
experienced extensive litigation regarding patents and other intellectual
property rights, and companies in this industry have used intellectual property
litigation in an attempt to gain a competitive advantage. Our products may
become subject to patent infringement claims or litigation or interference
proceedings declared by the United States Patent and Trademark Office (the
“USPTO”), or the foreign equivalents thereto to determine the priority of
inventions, by competitors or other companies. The defense and prosecution
of
intellectual property suits, USPTO interference proceedings or the foreign
equivalents thereto and related legal and administrative proceedings are both
costly and time consuming. An adverse determination in litigation or
interference proceedings to which we may become a party could:
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subject
us to significant liabilities to
third-parties;
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require
disputed rights to be licensed from a third-party for royalties that
may
be substantial;
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require
us to cease manufacturing, using or selling such products or technology;
or
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result
in the invalidation or loss of our patent
rights.
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Any
one
of these outcomes could have a material adverse effect on the market price
of
our common stock and our business, financial condition and results of
operations. Furthermore, we may not be able to obtain necessary licenses on
satisfactory terms, if at all. Even if we are able to enter into licensing
arrangements, costs associated with these transactions may be substantial and
could include the long-term payment of royalties. Accordingly, adverse
determinations in a judicial or administrative proceeding or our failure to
obtain necessary licenses could prevent us from manufacturing and selling our
products, or from using certain processes to make our products which would
have
a material adverse effect on the market price of our common stock and our
business, operating results and financial condition. Moreover, even if we are
successful in such litigation, the expense of defending such claims could be
material.
In
addition, we may in the future need to litigate to enforce our patents, to
protect our trade secrets or know-how or to determine the enforceability, scope
and validity of the proprietary rights of others. Such enforcement of our
intellectual property rights could involve counterclaims against us. Any future
litigation or interference proceedings may result in substantial expense to
us
and significant diversion of effort by our technical and management
personnel.
Intellectual
property litigation relating to our products could also cause our customers
or
potential customers to defer or limit their purchases of our products, or cause
healthcare professionals, agents and distributors to cease or lessen their
support and marketing of our products.
In
addition, in connection with our acquisition of Silipos, we may be subject
to
the Potential Poly-Gel Claims discussed under Item 3. Legal Proceedings,
including intellectual property claims, brought by Poly-Gel. For any of these
potential claims, SSL has generally agreed to indemnify us for losses up to
$2.0 million, after which we would be liable for any such claims. For
claims arising out of conduct that occurs after the closing of the Silipos
transaction on September 30, 2004, we have agreed to indemnify SSL against
losses. We would expect to vigorously defend against any claims brought by
Poly-Gel. However, if such claims were brought, we may not ultimately
prevail.
We
may not be able to maintain the confidentiality, or assure the protection,
of
our proprietary technology.
We
hold
or have the exclusive right to use a variety of patents, trademarks and
copyrights in several countries, including the United States that we are
dependent on, including approximately 35 patents and patent applications in
the
U.S. and certain foreign jurisdictions and a number of trademarks for
technologies and brands related to our product offerings. The ownership of
a
patent or an interest in a patent does not always provide significant
protection, and the patents and patent applications in which we have an interest
may be challenged as to their validity or enforceability. Others may
independently develop similar technologies or design around the patented aspects
of our technology. Challenges may result in potentially significant harm to
our
business. We are also dependent upon a variety of methods and technologies
that
we regard as proprietary trade secrets. In addition, we have (i) a
non-exclusive, paid up (except for certain administrative fees) license with
Applied Elastomerics, Incorporated (the “AEI License”) dated as of
November 30, 2001, as amended, to manufacture and sell certain products
using mineral oil based gels under certain patents, during the life of such
patents, and (ii) a license with Gerald Zook (the “Zook License”), effective as
of January 1, 1997, to manufacture and sell certain products using mineral
oil based gels under certain patents and know how, during the life of such
patents, in exchange for sales based royalty payments, that is exclusive as
to
certain products but is non-exclusive as to others. We also have exclusive
licenses to three types of orthotic devices which are patented in the United
States and several foreign countries. We believe our trademarks and trade names,
including Langer™, Sporthotics™, PPT™, Silipos™, Explorer Gel Liner™,
Siloliner™, and Silopad™, contribute significantly to brand recognition for our
products, and the inability to use one or more of these names could have a
material adverse affect on our business. For the years ended December 31,
2006 and 2005, revenues generated by the products incorporating the technology
licensed under the AEI License accounted for approximately 36.4% and 40.2%
of
our revenues. For the years ended December 31, 2006 and 2005, revenues
generated by products covered by the Zook License, as we understand the Zook
License, accounted for approximately 8.7% and 23.9% of our revenues. In 2006,
Dr. Gerald P. Zook, the licensor of the Zook License, commenced an
arbitration proceeding alleging that a broader range of products sold by us
are
covered by the Zook License and that more license fees are payable by us under
the Zook License, but he subsequently discontinued the arbitration against
the
Company with prejudice. See Item 3, “Legal Proceedings.”
We
rely
on a combination of trade secret, copyright, patent, trademark, unfair
competition and other intellectual property laws as well as contractual
agreements to protect our rights to such intellectual property. Due to the
difficulty of monitoring unauthorized use of and access to intellectual
property, however, such measures may not provide adequate protection. There
can
be no assurance that courts will always uphold our intellectual property rights,
or enforce the contractual arrangements that we have entered into to protect
our
proprietary technology and trade secrets.
Further,
although we seek to protect our trade secrets, know-how and other unpatented
proprietary technology, in part, with confidentiality agreements with certain
of
our employees and consultants, we cannot assure you that:
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these
confidentiality agreements will not be
breached;
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we
will have adequate remedies for any
breach;
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we
will not be required to disclose such information to the FDA or other
governmental agency in order for us to have the right to market a
product;
or
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trade
secrets, know-how and other unpatented proprietary technology will
not
otherwise become known to or independently developed by our
competitors.
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Any
finding of unenforceability, invalidity, non-infringement, or misappropriation
of our intellectual property could have a material adverse effect on the market
price of our common stock and our business, financial condition and results
of
operations. In addition, if we bring or become subject to litigation to defend
against claimed infringement of our rights or of the rights of others or to
determine the scope and validity of our intellectual property rights, such
litigation could result in substantial costs and diversion of our resources.
Unfavorable results in such litigation could also result in the loss or
compromise of our proprietary rights, subject us to significant liabilities,
require us to seek licenses from third parties, or prevent us from selling
our
products, which could have a material adverse effect on the market price of
our
common stock and our business, financial condition and results of
operations.
In
addition, our licenses, including the AEI License and the Zook License, could
be
terminated under a variety of circumstances including for material breach of
the
license agreements or in the event of the bankruptcy or insolvency of the
licensor. Any such termination could have a material adverse effect on the
market price of our common stock and our business, financial condition and
results of operations.
A
portion of our revenues and expenditures is subject to exchange rate
fluctuations that could adversely affect our reported results of
operations.
While
a
majority of our business is denominated in United States dollars, we maintain
operations in foreign countries, primarily the United Kingdom and Canada that
require payments in the local currency and payments received from customers
for
goods sold in these countries are typically in the local currency. Consequently,
fluctuations in the rate of exchange between the United States dollar and
certain other currencies may affect our results of operations and
period-to-period comparisons of our operating results. For example, the value
of
the U.S. dollar has fallen over the last year relative to the British pound
and
the Canadian dollar (which are the principal foreign currencies material to
our
business) causing an increase in our reported revenues when we convert the
higher valued foreign currencies into U.S. dollars. If the value of the U.S.
dollar were to increase in relation to those currencies in the future, there
could be a negative effect on the value of our sales in those markets when
we
convert amounts to dollars when we prepare our financial statements. We do
not
engage in hedging or similar transactions to reduce these risks.
We
may be liable for contamination or other harm caused by hazardous materials
that
we use.
Our
research and development and manufacturing processes involve the use of
hazardous materials. We are subject to federal, state and local regulation
governing the use, manufacture, handling, storage and disposal of hazardous
materials or waste. We cannot completely eliminate the risk of contamination
or
injury resulting from hazardous materials or waste, and we may incur liability
as a result of any contamination or injury. In addition, under some
environmental laws and regulations, we could also be held responsible for all
of
the costs relating to any contamination at our past or present facilities and
at
third-party waste disposal sites even if such contamination was not caused
by
us. We may incur significant expenses in the future relating to any failure
to
comply with environmental laws. Any such future expenses or liability could
have
a significant negative impact on our business, financial condition and results
of operations.
Our
quarterly operating results are subject to fluctuations.
Our
revenue and operating results have fluctuated and may continue to fluctuate
from
quarter to quarter due to seasonal factors and for other reasons. Revenues
derived from our sales of orthotic devices has historically been significantly
higher in North America in the warmer months of the year, while sales of
orthotic devices in the United Kingdom has not historically experienced
seasonality. We believe that this seasonality in North America results from
the
portion of our orthotics sales comprised of custom sandals which tend to be
higher in the spring and summer months. Our experience has also been that
physical activities in general tend to increase in warmer weather and that
many
patients of our customers in the healthcare profession tend to defer healthcare
purchases until the spring months. Other factors which can result in quarterly
variations include the timing and amount of new business generated by us, the
timing of new product introductions, our revenue mix, acquisitions, the timing
of additional selling and general and administrative expenses to support the
anticipated growth and development of new business units and the competitive
and
fluctuating economic conditions in the orthopedic industry.
Quarter-to-quarter
comparisons of our operating results are not necessarily meaningful and should
not be relied upon as indications of likely future performance or annual
operating results. Reductions in revenues or net income between quarters could
result in a decrease in the market price of our common stock.
We
may be unable to realize the benefits of our net operating loss (“NOL”)
carryforwards.
NOLs
may
be carried forward to offset federal and state taxable income in future years
and eliminate income taxes otherwise payable on such taxable income, subject
to
certain adjustments. Based on current federal corporate income tax rates, our
NOL could provide a benefit to us, if fully utilized, of significant future
tax
savings. However, our ability to use these tax benefits in future years will
depend upon the amount of our otherwise taxable income. If we do not have
sufficient taxable income in future years to use the tax benefits before they
expire, we will lose the benefit of these NOL carryforwards permanently.
Additionally, future utilization of net operating losses may be limited under
existing tax law due to the change in control of Langer in 2001 and may be
further limited as a result of pending or future offerings of our common
stock.
The
amount of NOL carryforwards that we have claimed to date of approximately $9,800
has not been audited or otherwise validated by the U.S. Internal Revenue Service
(the “IRS”). The IRS could challenge our calculation of the amount of our NOL or
any deductions or losses included in such calculation, and provisions of the
Internal Revenue Code may limit our ability to carry forward our NOL to offset
taxable income in future years. If the IRS were successful with respect to
any
challenge in respect of the amount of our NOL, the potential tax benefit of
the
NOL carryforwards to us could be substantially reduced.
Changes
in accounting standards regarding stock option plans, which became applicable
to
the Company as of January 1, 2006, could limit the desirability of granting
stock options, which could harm our ability to attract and retain employees,
and
could also negatively impact our results of operations.
A
change
in accounting standards (Statement of Financial Accounting Standards (“SFAS”)
No. 123(R), “Share-Based Payment”), which replaces SFAS No. 123, “Accounting for
Stock-Based Compensation” and supersedes Accounting Principles Board Opinion
(“ABP”) No. 25, “Accounting for Stock Issued to Employees,” and related
Interpretations require all public companies to account for the fair value
of
stock options granted to employees as an expense effective as of the beginning
of the first fiscal year beginning after June 15, 2005. In 2006, this
amount was $186,322. Prior to 2006, we were generally not required to record
stock compensation expense in connection with stock option grants, since grants
had an exercise price equal to or greater than market. However, in 2005, the
Company did have substantial non-cash charges due to certain stock option
modifications. The requirement to expense stock options may reduce the
attractiveness to us of granting stock options because of the additional expense
associated with these grants, which would negatively impact our reported results
of operations. For example, if we had been required to expense stock option
grants in accordance with the revised rule, our recorded net loss for the year
ended December 31, 2005 of approximately $4,557,000 would have been
increased by approximately $2,837,000 (of which approximately $766,000 would
have represented periodic expense relating to employee stock options granted
and
$2,071,000 would have represented expenses relating to the acceleration of
the
vesting of certain options to a net loss of approximately $7,394,000; and for
the year ended December 31, 2004, our recorded net income of approximately
$375,000 would have been reduced by approximately $521,000, to a net loss of
approximately $146,000. Nevertheless, stock options are an important employee
recruitment and retention tool, and we may not be able to attract and retain
key
personnel if we reduce the scope of our employee stock option program.
Accordingly, when we grant options in the future, our future results of
operations will be negatively impacted, as could our willingness to use stock
options as an employee recruitment and retention tool.
Risks
Related to Our Common Stock
One
stockholder has the ability to significantly influence the election of our
directors and the outcome of corporate action requiring stockholder
approval.
As
of
November 16, 2007, Warren B. Kanders, our Chairman of the Board of Directors,
in
his capacity as sole manager and voting member of Langer Partners, LLC (“Langer
Partners”) and the sole stockholder of Kanders & Company, Inc., may be
deemed to be the beneficial owner of 3,025,884 shares, or approximately 24.1%
of
our outstanding common stock. Of this amount, 1,866,856 shares are issued and
outstanding, and the balance is acquirable under options, warrants and
convertible notes. (This amount does not include a restricted stock award of
500,000 shares, which presently will vest only if and when the Company has
earnings before interest, taxes, depreciation and amortization of at least
$10,000,000 in any period of four consecutive fiscal quarters, commencing with
the quarter beginning January 1, 2007). As of November 16, 2007, current
executive officers and directors, including Mr. Kanders, beneficially own
an aggregate of 4,547,176 shares, or approximately 38.6% of our outstanding
common stock. Consequently, Mr. Kanders, acting alone or together with our
other officers and directors, has the ability to significantly influence all
matters requiring stockholder approval, including the election of our directors
and the outcome of corporate actions requiring stockholder approval, such as
a
change in control.
The
price of our common stock has been and is expected to continue to be volatile,
which could affect a stockholder’s return on investment.
There
has
been significant volatility in the stock market and in particular in the market
price and trading volume of securities of orthopedic and other health care
companies, which has often been unrelated to the performance of the companies.
The market price of our common stock has been subject to significant
fluctuations, and we expect it to continue to be subject to such fluctuations
for the foreseeable future. We believe the reasons for these fluctuations
include, in addition to general market volatility, the relatively thin level
of
trading in our stock, and the relatively low public float. Therefore, variations
in financial results, announcements of material events, technological
innovations or new products by us or our competitors, our quarterly operating
results, changes in general conditions in the economy or the health care
industry, other developments affecting us or our competitors or general price
and volume fluctuations in the market are among the many factors that could
cause the market price of our common stock to fluctuate
substantially.
Shares
of our common stock have been thinly traded in the past.
The
trading volume of our common stock has not been significant, and there may
not
be an active trading market for our common stock in the future. As a result
of
the thin trading market or “float” for our stock, the market price for our
common stock may fluctuate significantly more than the stock market as a whole.
Without a large float, our common stock is less liquid than the stock of
companies with broader public ownership and, as a result, the trading prices
of
our common stock may be more volatile. In the absence of an active public
trading market, an investor may be unable to liquidate his investment in our
common stock. Trading of a relatively small volume of our common stock may
have
a greater impact on the trading price for our stock than would be the case
if
our public float were larger. We cannot predict the prices at which our common
stock will trade in the future. Our common stock is currently traded on The
NASDAQ Global Market.
We
may issue a substantial amount of our common stock in the future which could
cause dilution to investors and otherwise adversely affect our stock
price.
A
key
element of our growth strategy is to make acquisitions. As part of our
acquisition strategy, we may issue additional shares of common stock as
consideration for such acquisitions. These issuances could be significant.
To
the extent that we make acquisitions and issue our shares of common stock as
consideration stockholder’s interest may be diluted. Any such issuance will also
increase the number of outstanding shares of common stock that will be eligible
for sale in the future. Persons receiving shares of our common stock in
connection with these acquisitions may be more likely to sell off their common
stock than other investors, which may influence the price of our common stock.
In addition, the potential issuance of additional shares in connection with
anticipated acquisitions could lessen demand for our common stock and result
in
a lower price than might otherwise be obtained. We may issue common stock in
the
future for other purposes as well, including in connection with financings,
for
compensation purposes, in connection with strategic transactions or for other
purposes.
In
January and May, 2007, we issued an aggregate of 1,068,356 shares of our common
stock as part of the consideration we paid for the Twincraft acquisition, and
we
may issue additional shares in 2008 and 2009 if Twincraft achieves certain
performance targets which entitle the sellers of Twincraft to additional
considerations. We also issued 333,483 shares in connection with the Regal
acquisition in 2007.
A
key
element of our compensation strategy is to base a portion of the compensation
payable to management and our directors on restricted stock awards and other
equity-based compensation, to align the interests of directors and management
with the interests of the stockholders. In 2007, to date, we have issued
restricted stock awards for an aggregate of 947,500 shares to 7 officers and
directors, which would vest if and when the Company achieves certain financial
and operating targets or, in some cases, upon a change of control. None of
the
restricted stock awards granted in 2007 is presently vested.
We
have a significant amount of convertible indebtedness outstanding and may issue
a substantial amount of our common stock in connection with these and other
outstanding securities and in connection with future acquisitions and our growth
plans; any such issuances of additional shares could adversely affect our stock
price.
On
December 8, 2006, we sold $28,880,000 of our 5% Convertible Notes in a
private placement. At the date of issuance, the 5% Convertible Notes were
convertible into 6,080,000 shares of our common stock at a conversion price
of
$4.75 per share. As a result of the anti-dilution provisions of the 5%
Convertible Notes and the issuance of 1,068,356 shares of common stock in the
Twincraft acquisition and 333,483 shares in the Regal acquisition, both of
which
closed in January 2007, the 5% Convertible Notes are now convertible into
6,195,165 shares of our common stock, at a conversion price, as adjusted, of
$4.6617 per share, subject to further adjustment in certain circumstances.
The
conversion of the 5% Convertible Notes could result in dilution in the value
of
the shares of our outstanding stock and the voting power represented thereby.
The effect of the conversion of all of our outstanding 5% Convertible Notes
would be to increase outstanding shares and dilute current shareholders by
approximately 53.9% at November 16, 2007. In addition, the conversion price
of
our 5% Convertible Notes may be lowered under the conversion price adjustment
provisions of the notes in certain circumstances, including if we issue common
stock at a net price per share less than the conversion price then in effect
or
if we issue rights, warrants or options entitling the recipients to subscribe
for or purchase shares of our common stock at a price per share less than the
conversion price (after taking into account any consideration we received for
such rights, warrants or options). A reduction in the conversion price may
result in the issuance of an additional number of shares upon the conversion
of
our 5% Convertible Notes. We also have a significant number of stock options
and
warrants outstanding, and restricted stock awards which would vest if we achieve
certain performance targets.
We
anticipate issuing additional shares of our common stock and may also issue
additional securities convertible into or exercisable or exchangeable for common
stock to finance acquisitions or for other reasons in the future. The number
of
outstanding shares of our common stock that will be eligible for sale in the
future is, therefore, likely to increase substantially. Persons receiving shares
of our common stock in connection with these acquisitions or financings may
be
more likely to sell large quantities of their common stock, which may adversely
affect the price of our common stock. In addition, the potential issuance of
additional shares in connection with anticipated acquisitions could lessen
demand for our common stock and result in a lower price than would otherwise
be
obtained. If our security holders sell substantial amounts of our common stock
in the public market, the market price of our common stock could fall. These
sales might make it more difficult for us to sell equity securities in the
future at a time and price that we deem appropriate and may require us to issue
greater amounts of our common stock to finance acquisitions. Additional shares
sold to finance acquisitions and conversions, exercises and exchanges of other
securities for common stock may also dilute our earnings per share.
Our
certificate of incorporation, our bylaws and Delaware law contain provisions
that could discourage, delay or prevent a takeover
attempt.
We
are
subject to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits publicly-held Delaware
corporations to which it applies from engaging in a “business combination”
(generally including mergers, consolidations and sales of 10% or more of the
corporation’s assets) with an “interested stockholder” (generally defined as a
person owning 15% or more of the outstanding voting stock of the corporation,
subject to certain exceptions) for a period of three years after the date of
the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. This provision could
discourage others from bidding for our shares and could, as a result, reduce
the
likelihood of an increase in our stock price that would otherwise occur if
a
bidder sought to buy our stock.
It
could
also discourage, delay or prevent another company from merging with us or
acquiring us, even if our stockholders were to consider such a merger or
acquisition to be favorable.
Additionally,
our Board of Directors has the authority to issue up to 250,000 shares of
preferred stock, and to determine the price, rights, preferences and
restrictions, including voting and conversion rights, of those shares without
any further action or vote by the stockholders. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the rights
of
the holders of preferred stock that may be issued in the future. Such provisions
could adversely affect the holders of common stock in a variety of ways,
including by potentially discouraging, delaying or preventing a takeover of
us
and by diluting our earnings per share.
We
do not expect to pay dividends in the foreseeable future.
We
currently do not intend to pay any dividends on our common stock. We currently
intend to retain any earnings for working capital, repayment of indebtedness,
capital expenditures and general corporate purposes.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares of our common stock offered
and sold by the selling stockholders pursuant to this prospectus. The selling
stockholders will receive all of the proceeds from any such sales. However,
6,195,165 of the shares of common stock offered in this prospectus will be
issued only upon the conversion of the 5% Convertible Subordinated Notes in
the
principal amount of $28,880,000. To the extent the Notes are converted into
common stock, we will be relieved of indebtedness equal to the principal amount
of the converted Notes.
PRICE
RANGE OF COMMON STOCK
In
addition to the information set forth in Item 5 of our Annual Report on Form
10-K for the year ended December 31, 2006, under the heading "Price Range of
Common Stock," we set forth below the high and low bid prices for our common
stock as reported on the Nasdaq Global Market for the periods
indicated:
|
Period
|
|
High
|
|
Low
|
|
|
Quarter
ended March 31, 2007
|
|
$
|
6.24
|
|
$
|
3.76
|
|
|
Quarter
ended June 30, 2007
|
|
$
|
6.00
|
|
$
|
4.62
|
|
|
Quarter
ended September 30, 2007
|
|
$
|
6.00
|
|
$
|
4.52
|
|
|
Period
from October 1 through November 16, 2007
|
|
$
|
5.18
|
|
$
|
2.32
|
|
We
have
not declared any cash dividends on our common stock in the past, and we do
not
presently anticipate declaring or paying any cash dividends in the foreseeable
future. We currently anticipate that we will retain all future earnings for
use
in our business. The payment of dividends in the future will be at the
discretion of our Board of Directors and will depend upon, among other things,
our results of operations, capital requirements, general business conditions,
contractual restrictions on payment of dividends, legal and regulatory
restrictions on payment of dividends, and other factors our Board of Directors
deems relevant.
The
payment of cash dividends is prohibited under the terms of the Company's
credit facility with Wachovia Bank, N.A.
SELLING
STOCKHOLDERS
General
The
following table sets forth certain information regarding the beneficial
ownership of our outstanding shares of our common stock as of November 16,
2007,
by each of the selling stockholders, and as adjusted to reflect the sale of
the
shares in this offering. As of November 16, 2007, 11,504,212 shares of our
common stock were outstanding. Information with respect to beneficial ownership
is based upon information obtained from the selling stockholders.
Our
registration of the shares of our common stock covered by this prospectus does
not necessarily mean that the selling stockholders will sell any of our common
stock that we have registered.
Except
as
indicated in the table below or the footnotes to the table, none of the selling
stockholders has held any position or office or had a material relationship
with
us or any of our affiliates within the past three years, other than as a result
of the ownership of our common stock or securities convertible into or
exchangeable for (with or without the payment of additional consideration)
our
common stock.
Except
as
indicated below, each selling stockholder has informed us that it is not a
registered broker-dealer or an affiliate of a registered
broker-dealer.
Shares
listed under the heading "Number of Shares Being Offered" represent the number
of shares that may be sold by each selling stockholder pursuant to this
prospectus. Pursuant to Rule 416 of the Securities Act, the registration
statement of which this prospectus is a part also covers any additional shares
of our common stock which become issuable in connection with such shares because
of any stock dividend, stock split, or other similar transaction effected
without the receipt of consideration which results in an increase in the number
of outstanding shares of our common stock.
The
information under the heading "Shares of Common Stock Beneficially Owned Prior
to Offering" is determined in accordance with the rules of the Commission,
and
includes voting and investment power with respect to shares. Shares of common
stock acquirable upon exercise of options and warrants, or upon conversion
of
convertible securities, which are currently exercisable or convertible, or
exercisable or convertible within 60 days after November 16, 2007 are
deemed outstanding for computing the percentage ownership of the person holding
the options, warrants or convertible securities, but are not deemed outstanding
for computing the percentage of any other person. The numbers of shares
acquirable on conversion of the 5% Convertible Notes held by the Selling
Stockholders has been determined based on the Conversion Price of $4.6617 per
share, which is the Conversion Price in effect on the date of this Prospectus.
The
information under the heading "Shares of Common Stock Beneficially Owned After
Offering" assumes that each selling stockholder sells all of its shares offered
pursuant to this prospectus to unaffiliated third parties, that the selling
stockholders will acquire no additional shares of our common stock prior to
the
completion of this offering, and that any other shares of our common stock
beneficially owned by the selling stockholders will continue to be beneficially
owned. Each selling stockholder may sell all, part or none of its shares and
may
acquire additional shares of our common stock.
|
|
|
Shares of Common Stock
Beneficially Owned Prior to
Offering
|
|
|
|
Shares of Common Stock
Beneficially Owned After
Offering
|
|
|
Name
of Beneficial Owner
|
|
Number
|
|
Percent (1)
|
|
Number
of
Shares Being
Offered
|
|
Number
|
|
Percent(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AmGuard
Insurance Company
|
|
|
114,757
|
(3)
|
|
*
|
|
|
107,257
|
|
|
7,500
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashford
Capital Partners, L.P.
|
|
|
312,761
|
(4)
|
|
2.6
|
|
|
312,761
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
A. Asch
|
|
|
649,856
|
(5)
|
|
5.6
|
|
|
649,856
|
|
|
0
|
|
|
*
|
|
|
|
|
Shares of Common Stock
Beneficially Owned Prior to
Offering
|
|
|
|
Shares of Common Stock
Beneficially Owned After
Offering
|
|
|
Name
of Beneficial Owner
|
|
Number
|
|
Percent (1)
|
|
Number
of
Shares Being
Offered
|
|
Number
|
|
Percent(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
D. Asch
|
|
|
254,293
|
(6)
|
|
2.2
|
|
|
254,293
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlas
Capital, SA (Int'l)
|
|
|
214,514
|
(7)
|
|
1.8
|
|
|
214,514
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calm
Waters Partnership
|
|
|
287,857
|
(8)
|
|
2.5
|
|
|
214,514
|
|
|
73,343
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
M. Candido
|
|
|
74,785
|
(9)
|
|
*
|
|
|
74,785
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commonfund
Hedged Equity Company
|
|
|
60,063
|
(10)
|
|
*
|
|
|
60,063
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finderne
LLC
|
|
|
20,378
|
(11)
|
|
*
|
|
|
20,378
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur
Goldstein, a director of the Company prior to June 20,
2007
|
|
|
84,238
|
|
|
*
|
|
|
21,451
|
|
|
62,787
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Good
Steward Trading Company SPC
|
|
|
18,877
|
(12)
|
|
*
|
|
|
18,877
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
T. Greenspon
|
|
|
6,435
|
|
|
*
|
|
|
6,435
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carolyn
D. Greenspon
|
|
|
55,725
|
|
|
*
|
|
|
10,725
|
|
|
45,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart
P. Greenspon, a director of the Company
|
|
|
199,877
|
(13)
|
|
1.7
|
|
|
32,177
|
|
|
167,700
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hank
& Co.
|
|
|
111,976
|
(14)
|
|
*
|
|
|
111,976
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warren
B. Kanders, as trustee for Allison Smith Kanders; Chairman of the
Board of
Directors of the Company
|
|
|
3,025,884
|
(15)
|
|
24.1
|
|
|
429,028
|
|
|
2,596,856
|
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
G. Kaplan
|
|
|
10,725
|
|
|
*
|
|
|
10,725
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knott
Partners, LP
|
|
|
503,893
|
(16)
|
|
4.2
|
|
|
503,893
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linerbrook
& Co.
|
|
|
218,804
|
(17)
|
|
1.9
|
|
|
218,804
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.
Lawrence Litke
|
|
|
89,422
|
(18)
|
|
*
|
|
|
89,422
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matterhorn
Offshore Fund, Ltd.
|
|
|
786,837
|
(19)
|
|
6.4
|
|
|
786,837
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millennium
Partners, L.P.
|
|
|
858,056
|
(20)
|
|
6.9
|
|
|
858,056
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mulsanne
Partners LP
|
|
|
3,861
|
(21)
|
|
*
|
|
|
3,861
|
|
|
0
|
|
|
*
|
|
|
|
|
Shares of Common Stock
Beneficially Owned Prior to
Offering
|
|
|
|
Shares of Common Stock
Beneficially Owned After
Offering
|
|
|
Name
of Beneficial Owner
|
|
Number
|
|
Percent (1)
|
|
Number
of Shares Being Offered
|
|
Number
|
|
Percent(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regal
Medical Supply, LLC
|
|
|
333,483
|
(22)
|
|
2.9
|
|
|
333,483
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shoshone
Partners LP
|
|
|
322,200
|
(23)
|
|
2.7
|
|
|
322,200
|
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wynnefield
Partners Small Cap Value, LP
|
|
|
231,514
|
(24)
|
|
2.0
|
|
|
214,514
|
|
|
17,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wynnefield
Partners Small Cap Value LP I
|
|
|
314,419
|
(24)
|
|
2.7
|
|
|
300,319
|
|
|
14,100
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wynnefield
Small Cap Value Offshore Fund, Ltd.
|
|
|
377,222
|
(24)
|
|
3.2
|
|
|
343,222
|
|
|
34,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
York
Credit Opportunities
|
|
|
1,072,570
|
(25)
|
|
8.5
|
|
|
1,072,570
|
|
|
0
|
|
|
*
|
|
|
*
|
Less
than 1%.
|
|
1.
|
Applicable
percentage of ownership for each selling stockholder in this column
is
based on 11,504,212 shares of our common stock outstanding as of
November
16, 2007, plus, for each Selling Stockholder, the number of additional
shares acquirable by such stockholder within 60 days after the date
hereof
upon conversion or exercise of the Notes, options, warrants and other
rights to acquire shares of the Company's common stock.
|
|
2.
|
Applicable
percentage of ownership for each selling stockholder in this column
is
based on an aggregate of (i) the 11,504,212 shares presently
outstanding, (ii) the 6,195,165 shares that would be outstanding if
and when all the shares acquirable by the Selling Stockholders on
conversion of the Notes have been sold, and (iii) the number of
additional shares acquirable by such stockholder within 60 days after
the
date hereof upon exercise of the options, warrants and other rights
to
acquire shares of the Company's common stock.
|
|
3.
|
Includes
7,500 shares acquirable upon exercise of warrants held by AmGuard
Insurance Company. Does not include 7,500 shares acquirable upon
exercise
of warrants held by NorGuard Insurance Company
,
an
affiliate of AmGuard Insurance Company, as to which AmGuard Insurance
Company disclaims beneficial ownership. The natural persons who exercise
voting and dispositive power with respect to the shares being offered
by
AmGuard Insurance Company are Mr. Y. Judd Shoval, Mrs. Susan W. Shoval,
and Mr. Jeffrey E. Picker.
|
|
4.
|
Does
not include 1,499,580 shares owned by Ashford Capital Management,
Inc., as
reported by Ashford Capital Management, Inc. on Schedule 13G, as
amended,
in its capacity as an investment adviser for clients other than Ashford
Capital Partners, L.P. Ashford Capital Management, Inc., is the investment
adviser of Ashford Capital Partners, L.P. According to such Schedule
13G,
as amended, Ashford Capital Management, Inc., has sole voting and
sole
dispositive power over an aggregate of 2,146,841 shares or our common
stock, which constitute 18.2% of our outstanding common stock (including
643,541 shares of common stock acquirable on conversion of 5% Convertible
Notes held by Ashford Capital Management, Inc., as investment adviser
for
certain of its clients). The natural persons who exercise voting
and
dispositive power with respect to the shares being offered by Ashford
Capital Partners, L.P. are Messrs. Theodore H. Ashford and Theodore
H.
Ashford III.
|
|
5.
|
Does
not included 200,000 shares acquirable under options held by Mr.
Peter A.
Asch, which are not presently exercisable, or any shares which Mr.
Asch
may become entitled to receive in 2008 and 2009 under certain provisions
of the purchase agreement by which the Company acquired the capital
stock
of Twincraft from him and the other former stockholders of Twincraft.
The
number of shares which he may be entitled to receive, if any, is
not
estimable as of the date hereof. Mr. Asch is the President and Chief
Executive Officer of Twincraft, Inc.
|
|
6.
|
Does
not include any shares which Mr. Richard D. Asch may become entitled
to
receive in 2008 and 2009 under certain provisions of the purchase
agreement by which the Company acquired the capital stock of Twincraft
from him and the other former stockholders of Twincraft. The number
of
shares which he may be entitled to receive, if any, is not estimable
as of
the date hereof. Mr. Richard Asch served as a vice president of Twincraft
from January through June 2007.
|
|
7.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Atlas Capital, SA (Int'l) is Mr. Robert
Dwek.
|
|
8.
|
The
natural person who exercise voting and dispositive power with respect
to
the shares being offered by Calm Waters Partnership is Mr. Richard
S.
Strong, its managing partner.
|
|
9.
|
Does
not include 100,000 shares acquirable under options held by Mr. Candido,
which are not presently exercisable, or any shares which Mr. Candido
may
become entitled to receive in 2008 and 2009 under certain provisions
of
the purchase agreement by which the Company acquired the capital
stock of
Twincraft from him and the other former stockholders of Twincraft.
The
number of shares which he may be entitled to receive, if any, is
not
estimable as of the date hereof. Mr. Candido is Vice President of
Twincraft, Inc.
|
|
10.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Commonfund Hedged Equity Company is Mr.
David
M. Knott.
|
|
11.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Commonfund Hedged Equity Company is Mr.
David
M. Knott.
|
|
12.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Commonfund Hedged Equity Company is Mr.
David
M. Knott.
|
|
13.
|
Includes
37,500 shares acquirable upon exercise of options awarded to Mr.
Stuart P.
Greenspon, a director of the Company, as to which 25,000 shares are
subject to lock-up agreements expiring at various times, not later
than
November 16, 2008. Does not include the shares owned by his adult
brother,
Andrew T. Greenspon; his adult daughter, Carolyn D. Greenspon; or
his
adult sister, Margaret G. Kaplan, all of whom are selling stockholders
hereunder; does not include 41,903 shares owned by his spouse; as
to the
shares owned by all such relatives, Mr. Stuart P. Greenspon disclaims
beneficial ownership thereof.
|
|
14.
|
Ashford
Capital Management, Inc., is the investment adviser for Hank & Co. and
exercises sole voting and sole dispositive power over the shares
owned by
Hank & Co. The natural persons who exercise voting and dispositive
power with respect to the shares being offered by Hank & Co. are
Messrs. Theodore H. Ashford and Theodore H. Ashford
III.
|
|
15.
|
Includes
100,000 options granted to Kanders & Company, Inc. that are presently
exercisable, 515,000 options granted to Mr. Kanders that are presently
exercisable, 15,000 shares acquirable upon exercise of warrants held
by
Langer Partners, LLC, 100,000 shares of restricted stock, which are
subject to a lock-up agreement that expires on September 1, 2008,
1,491,856 shares held by Langer Partners, LLC, and the 429,028 shares
of
common stock acquirable upon conversion of the $2,000,000 of 5%
Convertible Notes held by Mr. Kanders as a trustee for a member of
his
family. Mr. Kanders is the sole voting member and sole manager of
Langer
Partners, LLC and the sole stockholder of Kanders & Company, Inc. Does
not include 500,000 shares acquirable upon the vesting of a restricted
stock award granted January 23, 2007, which is not expected to vest
in the
next 60 days. Of the 515,000 options described above, 355,000 options
are
subject to a lock-up agreement, which expires with respect to 80,000
shares on November 12, 2007, and as to 91,667 shares on each of April
1,
2008 and 2009, and 91,666 shares on April 1, 2010. Kanders & Company,
Inc., disclaims beneficial ownership of shares owned or acquirable
under
options, warrants and convertible securities not directly owned by
it;
Langer Partners, LLC, disclaims beneficial ownership of shares owned
or
acquirable under options, warrants and convertible securities not
directly
owned by it; and Warren B. Kanders disclaims beneficial ownership
of
shares he holds in a fiduciary capacity and shares not directly owned
by
him. The 15,000 warrants held by Langer Partners, LLC, entitle Langer
Partners, LLC, to purchase a like number of shares of common stock
at a
price of $0.02 per share, or an aggregate price of $300. The market
price
per share of the Company's common stock on September 30, 2004, the
date on
which the warrants were purchased, was $6.90 per share, for a combined
market price of $103,500 (determined by using the market price per
share,
without adjustment for the lack of registration of the shares underlying
the warrants or attribution to the cost of the warrants of any portion
of
the purchase price of the senior subordinated notes sold with the
warrants). Mr. Kanders is the Chairman of our Board of
Directors.
|
|
16.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Commonfund Hedged Equity Company is Mr.
David
M. Knott.
|
|
17.
|
Ashford
Capital Management, Inc., is the investment adviser for Linerbrook
&
Co. and exercises sole voting and sole dispositive power over the
shares
owned by Linerbrook & Co. The natural persons who exercise voting and
dispositive power with respect to the shares being offered by Linerbrook
& Co. are Messrs. Theodore H. Ashford and Theodore H. Ashford
III.
|
|
18.
|
Does
not include 100,000 shares acquirable under options held by Mr. Litke,
which are not presently exercisable, or any shares which Mr. Litke
may
become entitled to receive in 2008 and 2009 under certain provisions
of
the purchase agreement by which the Company acquired the capital
stock of
Twincraft from him and the other former stockholders of Twincraft.
The
number of shares which he may be entitled to receive, if any, is
not
estimable as of the date hereof. Mr. Litke is Chief Operating Officer
of
Twincraft, Inc.
|
|
19.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Commonfund Hedged Equity Company is Mr.
David
M. Knott.
|
|
20.
|
Includes
43 shares owned by Millenco LLC., an affiliate of Millennium Partners,
L.P. Millenco LLC, is a registered broker-dealer, and two other affiliates
of Millennium Partners, L.P. are also registered broker-dealers.
Millennium Management LLC, a Delaware limited liability company,
is the
managing partner of Millennium Partners, L.P., and consequently may
be
deemed to have voting control and investment discretion over the
securities owned by Millennium Partners L.P. Mr. Israel A. Englander
is
the managing member of Millennium Management LLC, and may be deemed
to be
the beneficial owner of any shares deemed to be beneficially owned
by
Millennium Management LLC. Millennium Management LLC, Millennium
Partners,
L.P., and Mr. Englander have advised us that the foregoing should
not be
construed in and of itself as an admission by either of Millennium
Management LLC, or Mr. Englander as to beneficial ownership of the
shares
of our common stock owned by Millennium Partners, L.P.
|
|
21.
|
The
natural person who exercises voting and dispositive power with respect
to
the shares being offered by Commonfund Hedged Equity Company is Mr.
David
M. Knott.
|
|
22.
|
The
natural persons who exercise voting and dispositive power with respect
to
the shares being offered by Regal Medical Supply, LLC, are its
member-managers: Roy Kelley, John P. Kenney, Linda A. Lee, Richard
A.
Nace, David Ray, John E. Shero and William J. Warning.
|
|
23.
|
The
natural persons who exercise voting and dispositive power with respect
to
the shares being offered by Ashford Capital Partners, L.P. are Messrs.
Theodore H. Ashford and Theodore H. Ashford III.
|
|
24.
|
Wynnefield
Capital Management, LLC, a New York limited liability company (“WCM”) is
the sole general partner of each of Wynnefield Partners Small Cap
Value
LP, a Delaware limited partnership (“Wynnefield Partners”) and Wynnefield
Partners Small Cap Value LP I, a Delaware limited partnership (“Wynnefield
Partners I”). Nelson Obus and Joshua Landes are the co-managing members of
WCM and by virtue of such positions with WCM, have the shared power
to
vote and dispose of the shares of our common stock that are beneficially
owned by each of Wynnefield Partners and Wynnefield Partners I. Wynnefield
Capital, Inc., a Delaware corporation (“WCI”), is the sole investment
manager of Wynnefield Offshore. Messrs. Obus and Landes are the
co-principal executive officers of WCI and by virtue of such positions
with WCI, have the shared power to vote and dispose of the shares
of our
common stock that are beneficially owned by Wynnefield Offshore.
Each of
WCM, WCI and Messrs. Obus and Landes disclaims any beneficial ownership
of
the shares of our common stock that are directly beneficially owned
by
each of Wynnefield Partners, Wynnefield Partners I and Wynnefield
Offshore, except to the extent of their respective pecuniary interest
in
such shares.
|
|
25.
|
The
natural persons who exercises voting and dispositive power with respect
to
the shares being offered by York Credit Opportunities is Mr. James
G.
Dinan.
|
Conversion
Discounts for Shares Underlying Warrants
The
following table sets forth the total possible profit that may be realized as
a
result of conversion discounts for common stock underlying the Company's
warrants issued September 30, 2004 that are held by certain of the selling
stockholders or affiliates of the selling stockholders. Such warrants were
issued to the purchasers of the Company's 7% subordinated notes due September
30, 2009 (the “7% Notes”), at the rate of 20 warrants for each $1,000 of
principal amounts of 7% Notes purchased. The 7% Notes were repaid in full,
with
interest, on June 15, 2005. (The shares acquirable on exercise of the warrants
are not covered by this prospectus.)
|
Selling
Stockholder
|
|
Market
price
per
share
on
9/30/04
|
|
Exercise
price
on
9/30/04
1
|
|
Number
of
shares
acquirable
upon
exercise
|
|
Combined
market
price)
|
|
Combined
exercise
price
|
|
Total
possible
discount
to
market
price
|
|
|
AmGuard
Insurance Company
|
|
$
|
6.90
|
|
$
|
0.02
|
|
|
15,000
2
|
|
$
|
103,500
|
|
$
|
300
|
|
$
|
103,200
|
|
|
Langer
Partners, LLC
3
|
|
$
|
6.90
|
|
$
|
0.02
|
|
|
15,000
|
|
$
|
103,500
|
|
$
|
300
|
|
$
|
103,200
|
|
|
Wynnefield
Partners Small Cap Value, LP
|
|
$
|
6.90
|
|
$
|
0.02
|
|
|
17,000
|
|
$
|
117,300
|
|
$
|
340
|
|
$
|
116,960
|
|
|
Wynnefield
Partners Small Cap Value LP I
|
|
$
|
6.90
|
|
$
|
0.02
|
|
|
14,000
|
|
$
|
96,600
|
|
$
|
280
|
|
$
|
96,320
|
|
|
Wynnefield
Small Cap Value Offshore Fund, Ltd.
|
|
$
|
6.90
|
|
$
|
0.02
|
|
|
14,000
|
|
$
|
96,600
|
|
$
|
280
|
|
$
|
96,320
|
|
|
Total
possible discount to market price for all Selling
Stockholders
|
$
|
516,000
|
|
|
1
|
The
exercise price is set at a fixed price, subject to adjustment
for stock
splits and similar events.
|
|
2
|
Includes
7,500 shares acquirable under warrants held by an affiliate of
AmGuard
Insurance Company.
|
|
3
|
Langer
Partners, LLC, is an affiliate of Warren B. Kanders, one of the
selling
stockholders. Mr. Kanders is the Chairman of the Board of Directors
and,
personally and through other entities under his control, beneficially
owns
more than 10% of the Company's outstanding common
stock
|
Prior
Securities Transactions between the Selling Stockholders and the
Company
The
following table sets forth information about prior transactions between the
Company and the Selling Stockholders with respect to the Company's securities.
(None of the securities referred to below are covered by this prospectus.)
|
|
|
|
|
Shares
outstanding prior
to
transaction
1
|
|
|
|
|
|
Market
price per share
|
|
|
Selling
Stockholder
|
|
Date
of
transaction
|
|
Total
|
|
Held
by non-affiliates
|
|
Shares
in the transaction
|
|
Percent-age
2
|
|
Immediately
prior to transaction
3
|
|
As
of November 16, 2007
|
|
|
AmGuard
Insurance Company
|
|
|
10/31/01
|
4
|
|
4,268,022
|
5
|
|
1,355,144
|
|
|
41,667
|
|
|
3.1
|
%
|
$
|
6.00
|
|
$
|
2.90
|
|
|
Peter
A. Asch
|
|
|
1/23/07
|
|
|
10,451,540
|
6
|
|
5,931,914
|
|
|
649,856
|
7
|
|
11.0
|
%
|
$
|
4.20
|
|
$
|
|
|
|
Richard
Asch
|
|
|
1/23/07
|
|
|
10,451,540
|
|
|
5,931,914
|
|
|
254,293
|
|
|
4.3
|
%
|
$
|
4.20
|
|
$
|
|
|
|
Atlas
Capital, S.A.
|
|
|
10/31/01
|
|
|
4,268,022
|
|
|
1,355,144
|
|
|
250,000
|
|
|
18.4
|
%
|
$
|
6.00
|
|
$
|
|
|
|
Joseph
Candido
|
|
|
1/23/07
|
|
|
10,451,540
|
|
|
5,931,914
|
|
|
74,785
|
|
|
1.3
|
%
|
$
|
4.20
|
|
$
|
|
|
|
Arthur
Goldstein
|
|
|
2/13/01
|
|
|
2,613,181
|
8
|
|
1,567,128
|
9
|
|
32,787
|
|
|
3.0
|
%
|
$
|
3.50
|
|
$
|
|
|
|
Carolyn
Greenspon
|
|
|
10/31/01
|
|
|
4,268,022
|
|
|
1,355,144
|
|
|
5,000
|
|
|
*
|
|
$
|
6.00
|
|
$
|
|
|
|
Langer
Partners, LLC
10
|
|
|
12/28/00
|
|
|
2,613,181
|
|
|
1,567,128
|
|
|
824,475
|
11
|
|
52.6
|
%
|
$
|
1.00
|
|
$
|
|
|
|
Langer
Partners, LLC
|
|
|
2/13/01
|
12
|
|
2,613,181
|
|
|
1,567,128
|
|
|
667,381
|
|
|
42.6
|
%
|
$
|
3.50
|
|
$
|
|
|
|
Kanders
& Company, Inc.
|
|
|
2/13/01
|
|
|
2,613,181
|
|
|
1,567,128
|
|
|
100,000
|
|
|
6.4
|
%
|
$
|
3.50
|
|
$
|
|
|
|
Langer
Partners, LLC
|
|
|
10/31/01
|
|
|
4,268,022
|
|
|
1,355,144
|
|
|
416,667
|
|
|
30.7
|
%
|
$
|
6.00
|
|
$
|
|
|
|
Langer
Partners, LLC
|
|
|
9/30/04
|
13
|
|
4,380,851
|
14
|
|
1,496,136
|
15
|
|
15,000
|
16
|
|
1.0
|
%
|
$
|
6.90
|
|
$
|
|
|
|
|
|
|
|
Shares
outstanding prior
to
transaction
1
|
|
|
|
|
|
Market
price per share
|
|
|
Selling
Stockholder
|
|
Date
of
transaction
|
|
Total
|
|
Held
by non-affiliates
|
|
Shares
in the transaction
|
|
Percent-age
2
|
|
Immediately
prior to transaction
3
|
|
As
of November 16, 2007
|
|
|
Warren
B. Kanders
|
|
|
11/12/04
|
|
|
4,380,851
|
|
|
1,496,136
|
|
|
100,000
|
17
|
|
6.7
|
%
|
$
|
7.50
|
|
$
|
|
|
|
Kanders
& Company, Inc.
|
|
|
11/12/04
|
|
|
4,380,851
|
|
|
1,496,136
|
|
|
240,000
|
18
|
|
16.0
|
%
|
$
|
7.50
|
|
$
|
|
|
|
Warren
B. Kanders
|
|
|
11/8/05
|
|
|
9,690,823
|
|
|
6,819,373
|
|
|
240,000
|
19
|
|
3.5
|
%
|
$
|
5.05
|
|
$
|
|
|
|
Warren
B. Kanders
|
|
|
11/8/05
|
|
|
9,690,823
|
|
|
6,819,373
|
|
|
275,000
|
20
|
|
4.0
|
%
|
$
|
5.05
|
|
$
|
|
|
|
Warren
B. Kanders
|
|
|
1/23/07
|
|
|
10,451,540
|
|
|
5,931,914
|
|
|
500,000
|
21
|
|
8.4
|
%
|
$
|
4.20
|
|
$
|
|
|
|
A.
Lawrence Litke
|
|
|
1/23/07
|
|
|
10,451,540
|
|
|
5,931,914
|
|
|
89,422
|
|
|
1.5
|
%
|
$
|
4.20
|
|
$
|
|
|
|
Regal
Medical Supply, LLC
|
|
|
1/8/07
|
|
|
10,072,373
|
|
|
6,954,556
|
|
|
333,483
|
22
|
|
4.8
|
%
|
$
|
4.38
|
|
$
|
|
|
|
Wynnefield
Small Cap Value, LP
|
|
|
9/30/04
|
|
|
4,380,851
|
|
|
1,496,136
|
|
|
17,000
|
|
|
1.1
|
%
|
$
|
6.90
|
|
$
|
|
|
|
Wynnefield
Small Cap Value, LP I
|
|
|
9/30/04
|
|
|
|
|
|
|
|
|
14,000
|
|
|
*
|
|
$
|
6.90
|
|
$
|
|
|
|
Wynnefield
Small Cap Value Offshore Fund, Ltd.
|
|
|
9/30/04
|
|
|
|
|
|
|
|
|
14,000
|
|
|
*
|
|
$
|
6.90
|
|
$
|
|
|
|
1
|
As
used in this table, "non-affiliates" means persons who are not
(i) selling stockholders, (ii) affiliates of selling
stockholders, or (iii) affiliates of the Company.
|
|
2
|
Determined
based upon shares in the transaction divided by shares issued and
outstanding prior to the transaction and held by non-affiliates
and
persons other than the selling stockholders
.
|
|
3
|
Prices
reported are closing prices as of the business day immediately
prior to
the date of the transaction, or the business day of the transaction,
if
the transaction was completed after the close of trading on such
day.
|
|
4
|
All
transactions of all selling stockholders on October 31, 2001, represent
purchases of the Company's 4% Convertible Subordinated Notes due
August
31, 2006, which were convertible into common stock at the rate
of $6.00
per share. Said notes were paid in full on the due date, without
the
conversion of the notes by any of the selling stockholders or any
of their
affiliates or Company affiliates.
|
|
5
|
Based
on shares outstanding as reported in the Company's balance sheet
as of
9/30/01 which is included in the Company's Quarterly Report on
Form 10-Q
for the Quarter Ended 9/30/01.
|
|
6
|
Based
on the number of shares outstanding as reported in the Company's
Quarterly
Report on Form 10-Q for the Quarter Ended September 30, 2006, increased
by
the 379,167 shares issued on January 8, 2007, to Regal Medical
Supply,
LLC, in payment for certain assets and business acquired on that
date.
|
|
7
|
The
numbers of shares reported for Messrs. Peter A. Asch, Richard Asch,
Joseph
Candido and Lawrence Litke include an aggregate of 68,981 shares
that were
issued to them in May 2007 as a result of adjustments to the purchase
price of the capital stock of Twincraft, Inc., based on a post-closing
audit of Twincraft, in accordance with the terms of the stock purchase
agreement between the Company and Messrs. Peter Asch, Richard Asch,
Candido and Litke dated as of November 14, 2006, which closed on
January
23, 2007. Messrs. Peter Asch, Richard Asch, Candido and Litke may
be
entitled to receive additional shares of the Company's common stock
pursuant to certain provisions of the aforesaid purchase agreement,
if
Twincraft achieves certain financial targets in either of the years
ended
December 31, 2007 and 2008.
|
|
8
|
As
of January 5, 2001, as reported by the Company in its Quarterly
Report on
Form 10-Q for the quarter ended November 25,
2000.
|
|
9
|
Determined
by deducting 1,046,053 shares, reported as owned by affiliates
identified
in the Company's Proxy Statement filed June 30, 2000, in connection
with
its 2000 Annual Meeting of Stockholders, from 2,613,181 shares,
the number
of shares outstanding as set forth in the Company's Quarterly Report
on
Form 10-Q for the quarter ended November 25, 2000. The number of
shares
owned by affiliates does not include the numbers of shares acquirable
under options or other rights to acquire the Company's common
stock.
|
|
10
|
Langer
Partners, LLC, and Kanders & Company, Inc., is each controlled by Mr.
Warren B. Kanders. Mr. Kanders is the Chairman of the Board of
Directors
of the Company and a beneficial holder of more than 10% of the
Company's
common stock.
|
|
11
|
These
options were exercised in full by Langer Partners, LLC, on May
14,
2001.
|
|
12
|
The
transaction on 2/13/01 was the close of a tender offer by persons
including Langer Partners, LLC, and pursuant to an agreement with
the
Company, upon the close of the tender offer, the Company granted
such
persons, including Langer Partners, LLC, options to purchase an
aggregate
of 1,400,000 shares of common stock at a price that was greater than
the market price of the common stock on the date of commencement
of the
tender offer. Immediately prior to the close of the tender offer,
the
Company was controlled by persons other than Langer Partners, LLC,
and the
close of the tender offer resulted in a change of control of Company.
The
options were exercised on 5/14/01 at a price equal to the price
paid in
the tender offer.
|
|
13
|
All
transactions by all selling stockholders on September 30, 2004,
represent
purchases of the Company's 7% senior subordinated notes due September
30,
2009. Each purchaser of such notes was also awarded warrants, at
the rate
of 1 warrant for each $50 of principal amount of notes purchased;
the
warrants are for a term expiring September 30, 2009, at an exercise
price
of $0.02 per share. The notes were prepaid in full on June 15,
2005, and
the warrants remain outstanding in accordance with their
terms.
|
|
14
|
Based
on shares outstanding as reported in the Company's balance sheet
as of
9/30/04 which is included in the Company's Quarterly Report on
Form 10-Q
for the Quarter Ended 9/30/04.
|
|
15
|
Determined
by excluding 2,884,715 shares of outstanding common stock held
by Langer
Partners, LLC and the directors of the Company as of 9/30/04 (
i.e.,
Messrs. Burtt R. Ehrlich, Jonathan Foster, Arthur Goldstein, Andrew
H.
Meyers, Gregory Nelson, and Thomas Strauss) and their respective
affiliates, from the total number of shares outstanding. Such persons,
including Langer Partners, LLC, and their respective affiliates,
also held
options to acquire an aggregate of 295,206 shares, and $2,600,000
of the
Company's 4% convertible notes due 8/31/06, which were convertible
at the
rate of $6.00 per share into 433,334 shares of common stock. Neither
of
these amounts of shares were included in the number of shares outstanding.
The principal of the notes was paid at maturity, without any
conversions.
|
|
16
|
Acquirable
upon exercise of warrants sold with 7% Senior Subordinated Notes
due
September 30, 2009. The warrants were issued to the purchasers
of the
notes at the rate of 20 warrants for each $1,000 of principal of
the
notes. The exercise price of the warrants is $0.02 per share. The
7%
Senior Subordinated Notes were repaid in full on June 15,
2005.
|
|
17
|
These
shares were issued as a conditional restricted stock award which
would
become effective if Mr. Kanders continued to serve as Chairman
of the
Board through September 1, 2005; such condition was fulfilled;
the shares
shall vest on November 12, 2007, if Mr. Kanders continues to serve
as a
director of the Company through such
date.
|
|
18
|
These
shares are acquirable under an option awarded to Kanders & Company,
Inc., having an exercise price equal to the fair market value of
the
common stock on the date of grant. The options were awarded in
connection
with a Consulting Agreement made on the date of grant between the
Company
and Kanders & Company. The options provided for vesting in three equal
consecutive annual tranches commencing on November 12, 2005. These
options
were cancelled on November 12, 2005, and options to purchase a
like number
of shares at the same exercise price were awarded to Mr. Warren
B. Kanders
see the following note.
|
|
19
|
These
shares are acquirable under an option awarded to Kanders & Company,
Inc., having an exercise price of $7.50, and the shares are subject
to a
lock-up agreement which expires in three equal consecutive annual
tranches
commencing November 12, 2005.
|
|
20
|
The
shares acquirable under this option are subject to a lock-up agreement
which expires upon the earlier of a change of control (in which
case the
lock-up expires in full), or in three equal consecutive annual
tranches
commencing April 1, 2008.
|
|
21
|
This
is a restricted stock award under the Company's 2005 Stock Incentive
Plan
and vests in full if and when the Company achieves EBITDA of $10,000,000
in any trailing period of 4 consecutive calendar
quarters.
|
|
22
|
The
number of shares issued to Regal Medical Supply, LLC, on January
8, 2007,
was reduced by 45,684 shares on March 20, 2007, to 333,483 shares,
in
accordance with certain post-closing adjustments under the agreement
by
which the Company acquired certain assets and business of Regal
Medical
Supply, LLC.
|
Shares
Previously Registered for the Selling Stockholders
The
following table sets forth certain information about the aggregate numbers
of
shares previously registered for resale by the selling stockholders and their
affiliates, and the numbers of shares registered for sale and covered by this
prospectus.
|
Shares
outstanding as of December 7, 2006, prior to issuance of 5% Convertible
Subordinated Notes due December 7, 2011, held by persons other
than the
selling stockholders, affiliates of the selling stockholders, and
affiliates of the Company
|
|
|
7,715,363
|
|
|
Shares
registered for resale by the selling stockholders and their affiliates
in
prior registration statements
|
|
|
2,660,223
|
|
|
Shares
registered for resale currently held by the selling stockholders
and their
affiliates
|
|
|
1,865,218
|
|
|
Shares
previously registered for resale by the selling stockholders and
their
affiliates that have been sold
|
|
|
0
|
|
|
Shares
registered for resale on behalf of the selling stockholders and
their
affiliates in this prospectus
|
|
|
7,597,004
|
|
|
1.
|
The
decrease in the number of shares registered for resale and the number
of
shares registered for resale and currently held is the result of
the
payment in full, on the due date, of the principal and interest of
the
Company's 4% convertible notes due August 31, 2006 (the "4% Convertible
Notes"). The selling stockholders and their affiliates held 4% Convertible
Notes that were, prior to payment of the 4% Notes, convertible into
795,005 shares of common stock.
|
DESCRIPTION
OF CAPITAL STOCK
We
are
authorized to issue an aggregate of 50,250,000 shares of capital stock,
consisting of 50,000,000 shares of common stock, $0.02 par value, and 250,000
shares of preferred stock, $1.00 par value.
Common
Stock
The
holders of our common stock are entitled to one vote for each share on all
matters voted on by our stockholders, including the election of directors.
No
holders of our common stock have any right to cumulative voting. Subject to
any
preferential rights of any outstanding series of our preferred stock created
by
our Board of Directors, the holders of our common stock will be entitled to
such
dividends as may be declared from time to time by our Board of Directors from
funds available therefrom, and upon liquidation will be entitled to receive
pro
rata all of our assets available for distribution to such holders. We currently
do not pay cash dividends on our common stock.
In
the
event of a liquidation, dissolution or winding up, the holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference and other amounts owed to the holders
of our preferred stock. Holders of our common stock have no preemptive rights.
There are no redemption or sinking fund provisions applicable to our common
stock.
Warrants
As
of
November 16, 2007, we had outstanding warrants to purchase 95,000 shares of
our
common stock at an exercise price of $0.02 per share (110,000 of which were
originally issued to the holders of our 7% senior subordinated notes due
September 30, 2007 (of which 25,000 have been exercised), and 10,000 of
which were issued to Wm Smith Securities, Incorporated, in connection with
private placement services rendered in connection with the sale of the 7% senior
subordinated notes), subject to adjustments under certain circumstances, which
are currently exercisable . The warrants expire September 30, 2009. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares underlying the warrants upon the
occurrence of events, including any recapitalization, reclassification, stock
dividend, stock split, stock combination or similar transaction. (The 7% notes
were repaid in June 2005.)
Convertible
Notes
On
December 8, 2006, we sold $28,880,000 of the Notes, in a private placement.
Of
the shares being registered under the registration statement of which this
prospectus is a part, 6,195,165 are acquirable upon conversion of the Notes.
The
Notes are convertible at any time, at the option of the holders, into our common
stock at a conversion price, as adjusted to date, of $4.6617 per share and
are
subordinated to all of our existing or future senior indebtedness. The Company
has the right to call the Notes at any time after December 7, 2007, if
(i) the common stock acquirable upon conversion of the Notes is
reregistered under the Securities Act of 1933, as amended, and (ii) the
average closing price of the common stock for any 20 trading days in the
30-trading-day period preceding the call is equal to or greater than $7.00
per
share. The Company also has the right to call the Notes in the period from
December 7, 2007 through December 7, 2009, at a price of 105% of the principal
amount of the Notes, and thereafter at a price of 100% of the Notes. The Notes
contain anti-dilution provisions providing for pro-rata adjustments in the
event
of a stock dividend, stock split or reclassification of shares of our common
stock, and a weighted-average adjustment in the event of the issuance of common
stock, options, warrants or other securities convertible into or exchangeable
for common stock at prices below the conversion price under the 5% convertible
notes then in effect, and weighted-average adjustments in the event of
distributions of securities, assets or cash (other than cash dividends paid
out
of retained earnings) to the holders of our common stock. The Company has the
intention and a reasonable basis to believe that it will have the financial
ability, to make all payments under the Notes.
Registration
Rights
In
connection with the sale of the Notes, we have agreed to use our best efforts
to
file a shelf registration statement for the shares of our common stock
acquirable upon conversion of the notes by September 30, 2007.
In
connection with the issuance of the 1,068,356 shares issued to the sellers
of
the Twincraft capital stock (
i.e.,
Messrs.
Peter Asch, Richard Asch, Joseph Candido and Lawrence Litke, all of whom are
selling stockholders under this prospectus), we agreed to register such shares
not later than December 23, 2007. We have also agreed to issue additional shares
that may be issuable to them under certain earn-out provisions of the purchase
agreement by which we acquired the Twincraft capital stock.
In
connection with the issuance of the 333,483 shares issued in the acquisition
of
Regal, we agreed to register such shares not later than December 8,
2007.
Preferred
Stock
We
currently have no shares of preferred stock outstanding. Our Board of Directors
is authorized, without further stockholder action, to issue up to 250,000 shares
of our preferred stock, in one or more series. Our Board of Directors is
authorized to fix for each such series the voting power and the designations,
preferences and relative, participating, optional, or other rights of each
such
series, and the qualifications, limitations or restrictions thereof, as are
stated in the resolutions adopted by the Board of Directors and as are permitted
by the Delaware General Corporation Law (the "DGCL"). The rights of the holders
of our common stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that may be issued in the future.
The issuance of our preferred stock, while providing desirable flexibility
in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third-party to acquire a majority
of our outstanding voting stock.
Anti-Takeover
Effects of Certain Provisions of Delaware Law and Our Certificate of
Incorporation and Bylaws
Certain
provisions of the Certificate of Incorporation and Bylaws could have an
anti-takeover effect. These provisions are intended to enhance the likelihood
of
continuity and stability in the composition of the Board of Directors and in
the
policies formulated by the Board and to discourage an unsolicited takeover
of us
if the Board of Directors determine that such takeover is not in the best
interests of us and our stockholders. However, these provisions could have
the
effect of discouraging certain attempts to acquire us or remove incumbent
management even if some or a majority of stockholders deemed such an attempt
to
be in their best interests.
The
provisions in the Certificate of Incorporation and the Bylaws include:
(1) a procedure which requires stockholders to nominate directors in
advance of a meeting to elect such directors; and (2) the authority to
issue additional shares of preferred stock without stockholder approval.
The
DGCL
contains statutory "anti-takeover" provisions, including Section 203 of the
DGCL which applies automatically to a Delaware corporation unless that
corporation elects to opt-out as provided in Section 203. We, as a Delaware
corporation, have not elected to opt-out of Section 203 of the DGCL. Under
Section 203 of the DGCL, a stockholder acquiring more than 15% of the
outstanding voting shares of a corporation (an "Interested Stockholder") but
less than 85% of such shares may not engage in certain business combinations
with the corporation for a period of three years subsequent to the date on
which
the stockholder became an Interested Stockholder unless prior to such date,
the
board of directors of the corporation approves either the business combination
or the transaction which resulted in the stockholder becoming an Interested
Stockholder, or the business combination is approved by the board of directors
and by the affirmative vote of at least two-thirds of the outstanding voting
stock that is not owned by the Interested Stockholder.
Limitation
of Liability and Indemnification of Officers and Directors
Pursuant
to provisions of the DGCL, we have adopted provisions in our Certificate of
Incorporation that provide that our directors shall not be personally liable
for
monetary damages to us or our stockholders for a breach of fiduciary duty as
a
director to the full extent that the Act permits the limitation or elimination
of the liability of directors. We have also entered into separate
indemnification agreements with each of our directors and executive officers
which provide significant additional protection to such persons. In addition,
we
have in effect a directors and officers liability insurance policy indemnifying
our directors and officers and the directors and officers of our subsidiaries
within a specific limit for certain liabilities incurred by them, including
liabilities under the Securities Act. We pay the entire premium of this policy.
Our Certificate of Incorporation also contains a provision for the
indemnification by us of all of our directors and officers, to the fullest
extent permitted by the DGCL.
Transfer
Agent and Registrar
Registrar
and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016, is the
transfer agent and registrar for our common stock.
PLAN
OF DISTRIBUTION
The
selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of our common stock
or interests in shares of our common stock received after the date of this
prospectus from a Selling Stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of our common stock or interests
in shares of our common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These dispositions
may be at fixed prices, at prevailing market prices at the time of sale, at
prices related to the prevailing market price, at varying prices determined
at
the time of sale, or at negotiated prices.
|
|
|
market
transactions in accordance with the rules of The Nasdaq Stock Market
or
any other available markets or exchanges;
|
|
|
|
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
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;
|
|
|
|
short
sales entered into after the date of this prospectus;
|
|
|
|
writing
or settlement of options or other hedging transactions, whether through
an
options exchange or otherwise;
|
|
|
|
distributions
to the partners and/or members of the selling stockholders;
|
|
|
|
redemptions
or repurchases of interests owned by partners and/or members of the
selling stockholders;
|
|
|
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per share;
|
|
|
|
a
combination of any such methods of sale; and
|
|
|
|
any
other method permitted pursuant to applicable law.
|
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of our common
stock in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also sell shares of our common stock
short and deliver these securities to close out their short positions, or loan
or pledge our common stock to broker-dealers that in turn may sell these
securities. The selling stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution
may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
Short
selling occurs when a person sells shares of stock which the person does not
yet
own and promises to buy stock in the future to cover the sale. The general
objective of the person selling the shares short is to make a profit by buying
the shares later, at a lower price, to cover the sale. Significant amounts
of short selling, or the perception that a significant amount of short sales
could occur, could depress the market price of our common stock. In contrast,
purchases to cover a short position may have the effect of preventing or
retarding a decline in the market price of our common stock, and together with
the imposition of the penalty bid, may stabilize, maintain or otherwise affect
the market price of our common stock. As a result, the price of our common
stock
may be higher than the price that otherwise might exist in the open market.
If
these activities are commenced, they may be discontinued at any time. These
transactions may be effected on The Nasdaq Stock Market or any other available
markets or exchanges.
The
aggregate proceeds to the selling stockholders from the sale of our common
stock
offered by them will be the purchase price of our common stock less discounts
or
commissions, if any. Each of the selling stockholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of our common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act,
provided that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of our common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act.
Any discounts, commissions, concessions or profits they earn on any resale
of
the shares may be underwriting discounts and commissions under the Securities
Act. Selling stockholders who are "underwriters" within the meaning of
Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act.
To
the
extent required, the shares of our common stock to be sold, the names of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealers or underwriters, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In
order
to comply with the securities laws of some states, if applicable, our common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states our common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
We
have
advised the selling stockholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In
connection with this offering, some selling stockholders may also engage in
passive market making transactions in our common stock on The Nasdaq Stock
Market. Passive market making consists of displaying bids on The Nasdaq Stock
Market limited by the prices of independent market makers and effecting
purchases limited by those prices in response to order flow. Rule 103 of
Regulation M under the Exchange Act limits the amount of net purchases that
each passive market maker may make and the displayed size of each bid. Passive
market making may stabilize the market price of our common stock at a level
above that which might otherwise prevail in the open market and, if commenced,
may be discontinued at any time.
In
addition, we will make copies of this prospectus (as it may be supplemented
or
amended from time to time) available to the selling stockholders for the purpose
of satisfying the prospectus delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
EXPERTS
The
consolidated financial statements and related financial statement schedule
of
Langer, Inc., as of and for the years ended December 31, 2006 and 2005,
incorporated in this prospectus by reference from the Company's Annual Report
on
Form 10-K for the year ended December 31, 2006, have been audited by
BDO Seidman, LLP, an independent registered public accounting firm, as stated
in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The
financial statements and related financial statement schedule of Langer, Inc.,
for the year ended December 31, 2004 incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 2006, have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The
financial statements and related financial statement schedule of Twincraft,
Inc., as of for the years ended December 31, 2006, 2005, 2004 and 2003,
incorporated in this prospectus by reference from Amendment No. 1 filed April
9,
2007, of the Company's Current Report on Form 8-K filed January 29, 2007, have
been audited by Gallagher, Flynn & Company, LLP, an independent registered
public accounting firm, as stated in their reports, which is incorporated herein
by reference, and have been so incorporated in reliance upon the reports of
such
firm given upon their authority as experts in accounting and
auditing.
The
validity of the shares of Langer common stock offered by this prospectus will
be
passed upon by Kane Kessler, P.C., New York, New York, as counsel to Langer.
MATERIAL
CHANGES
There
have been no material changes in our affairs since December 31, 2006, that
have
not been described in our Annual Report on form 10-K filed April 2, 2007, as
amended by Amendment No. 1 thereof filed April 30, 2007, or in the Current
Reports, Quarterly Reports and Proxy Statements filed with the Securities and
Exchange Commission which are incorporated herein by reference.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
expenses to be paid by us in connection with the distribution of the Common
Stock, par value $0.01 per share, of Langer, Inc. (the "Registrant") being
registered are as set forth in the following table:
|
Registration
Fee—Securities and Exchange Commission
|
|
$
|
3,175
|
|
|
*Legal
Fees and Expenses
|
|
|
125,000
|
|
|
*Accounting
Fees and Expenses
|
|
|
42,200
|
|
|
*Printing
Fees and Expenses
|
|
|
10,000
|
|
|
*Blue
Sky Fees
|
|
|
10,000
|
|
|
*Miscellaneous
|
|
|
10,000
|
|
|
|
|
|
|
|
|
*Total
|
|
$
|
200,375
|
|
_________________
*
Estimated.
Item
14. Indemnification of Directors and Officers
We
are a
Delaware corporation. Subsection (a) of Section 145 of the General
Corporation Law of the State of Delaware (the "DGCL") empowers a corporation
to
indemnify any current or former director, officer, employee or agent of the
corporation, or any individual serving at the corporation's request as a
director, officer, employee or agent of another organization, who was or is
a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts
paid
in settlement actually and reasonably incurred by the person in connection
with
such action, suit or proceeding provided that such director, officer, employee
or agent acted in good faith and in a manner he reasonably believed to be in,
or
not opposed to, the best interests of the corporation, and, with respect to
any
criminal action or proceeding, provided further that such director, officer,
employee or agent had no reasonable cause to believe his conduct was unlawful.
Subsection
(b) of Section 145 of the DGCL empowers a corporation to indemnify any
current or former director, officer, employee or agent who was or is a party
or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or any individual serving at the corporation's
request as a director, officer, employee or agent of another organization
against expenses (including attorneys' fees) actually and reasonably incurred
by
the person in connection with the defense or settlement of such action or suit
provided that such director, officer, employee or agent acted in good faith
and
in a manner reasonably believed to be in, or not opposed to, the best interests
of the corporation, except that no indemnification may be made in respect to
any
claim, issue or matter as to which such director, officer, employee or agent
shall have been adjudged to be liable to the corporation unless and only to
the
extent that the Court of Chancery or the court in which such action or suit
was
brought shall determine upon application that, despite the adjudication of
liability but in view of all of the circumstances of the case, such director
or
officer is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 145
further provides that to the extent a present or former director or officer
has
been successful in the defense of any action, suit or proceeding referred to
in
subsections (a) and (b) of
Section 145
or in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by
him in connection therewith; that indemnification and advancement of expenses
provided for by, or granted pursuant to, Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of
a
current or former director, officer, employee or agent of the corporation,
or
any individual serving at the corporation's request as a director, officer
or
employee of another organization, against any liability asserted against him
or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Our
certificate of incorporation provides that we shall, to the fullest extent
permitted by the DGCL, indemnify all persons acting as officers and directors
of
Langer from and against all expenses, liabilities, or other matters covered
by
the DGCL.
As
permitted by the DGCL, our certificate of incorporation provides that, to the
fullest extent permitted by the DGCL, no director shall be personally liable
to
us or to our stockholders for monetary damages for breach of his fiduciary
duty
as a director. Delaware law does not permit the elimination of liability
(a) for any breach of the director's duty of loyalty to us or our
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) in respect of
certain unlawful dividend payments or stock redemptions or repurchases or
(d) for any transaction from which the director derives an improper
personal benefit. The effect of this provision in the certificate of
incorporation is to eliminate our rights and the rights of our stockholders
(through stockholders' derivative suits on behalf of us) to recover monetary
damages against a director for breach of fiduciary duty as a director thereof
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (a) - (d), inclusive,
above. These provisions will not alter the liability of directors under federal
securities laws.
We
have
also entered into separate indemnification agreements with each of our directors
and executive officers which provide significant additional protection to such
persons. In addition, we have in effect a directors and officers' liability
insurance policy indemnifying our directors and officers and the directors
and
officers of our subsidiaries within a specific limit for certain liabilities
incurred by them, including liabilities under the Securities Act. We pay the
entire premium of this policy.
We
believe that our certificate of incorporation and bylaw provisions, our
directors and officers liability insurance policy and our indemnification
agreements are necessary to attract and retain qualified persons to serve as
our
directors and officers.
Item
15. Recent Sales of Unregistered Securities.
On
January 23, 2007, the Company issued an aggregate of 999,375 shares of its
common stock to the stockholders of Twincraft, Inc., a Vermont corporation,
in
exchange for all the issued and outstanding capital stock of Twincraft, which
were valued for purposes of the transaction at $4.00 per share. The total price
payable on such date for the Twincraft capital stock was $26.7 million, and
the
balance of the purchase price was paid in cash. On or about May 15, 2007,
pursuant to the post-closing adjustment provisions of the agreement for the
purchase of the Twincraft capital stock, the Company issued an additional 68,981
shares of common stock to the former stockholders of Twincraft. None of the
foregoing shares were registered under the Securities Act in reliance upon
the
exemption from registration provided by Section 4(2) of that Act and Regulation
D promulgated under that section, which exempts transactions by an issuer not
involving any public offering. (The foregoing shares are being registered under
this registration statement.)
On
January 8, 2007, the Company issued an aggregate of 379,167 shares of its common
stock in exchange for certain assets of Regal Medical Supply, LLC, a North
Carolina limited liability company, which were initially valued at approximately
$1,600,000. In accordance with the terms of the agreement between the Company
and Regal Medical Supply, LLC, the purchase price was adjusted based on a
post-closing audit, and Regal Medical Supply, LLC, returned 45,684 shares to
the
Company on or about March 20, 2007. None of the foregoing shares were registered
under the Securities Act of 1933, in reliance upon the exemption from
registration provided by Section 4(2) of that Act and Regulation D promulgated
under that section, which exempts transactions by an issuer not involving any
public offering. (The foregoing shares are being registered under this
registration statement.)
On
December 8, 2006, the Company sold $28,880,000 principal amount of its 5%
convertible subordinated notes due December 7, 2011, in a private placement
to
approximately 25 investors. On the date of sale, the notes were immediately
convertible into 6,080,000 shares of Common Stock at the rate of $4.75 per
share, which rate has been adjusted in accordance with the provisions of the
notes, so that the notes are now convertible into 6,195,165 shares at the rate
of $4.6617 per share. The purchasers represented to the Company that they are
"accredited investors" as that term is defined in Regulation D promulgated
by
the Securities and Exchange Commission under the Securities Act. The sale of
the
Notes and the shares acquirable upon conversion of the note were exempt from
the
registration requirements of the Securities Act by Section 4(2) thereof. (The
shares of common stock acquirable upon conversion of the notes are the shares
being registered in this registration statement.)
On
November 16, 2004, we issued a warrant to purchase 10,000 shares of our
common stock to Wm Smith Securities, Incorporated, as consideration for private
placement services rendered to us in connection with the sale of our 7% senior
subordinated notes due September 30, 2004. Such warrants have an exercise
price of $0.02 per share, subject to adjustment under certain circumstances,
and
are exercisable commencing the earlier of (i) six months after the
refinancing or prepayment of the 7% senior subordinated notes, or
(ii) September 30, 2005. These warrants expire September 30,
2009. The warrants were issued pursuant to an exemption provided by
Section 4(2) of the Securities Act of 1933. We agreed to use our best
efforts to file a shelf registration statement for the shares underlying these
warrants by December 31, 2005.
As
of
November 12, 2004, we issued 16,302 shares of our common stock as
consideration for recruitment services, including future services provided
or to
be provided by DHR International, Inc. The shares of common stock were issued
pursuant to an exemption provided by Section 4(2) of the Securities Act of
1933.
On
November 12, 2004, we granted to: (i) Kanders &
Company, Inc., a company controlled by Warren B. Kanders, Chairman of our
Board of Directors, options to purchase 240,000 shares of common stock;
(ii) W. Gray Hudkins, who at that time was our Chief Operating Officer and
who is now our President and Chief Executive Officer, options to purchase
150,000 shares of our common stock and 40,000 shares of restricted stock; and
(iii) Steven Goldstein, who at that time was our Executive Vice President,
options to purchase 60,000 shares of common stock, and also options to purchase
40,000 shares of common stock under the 2001 Stock Option Plan which share
are
registered under our Registration Statement on Form S-8 which was filed on
December 5, 2003). The options are exercisable at $7.50 per share, vesting
in three equal annual installments commencing on the first anniversary of the
date of grant. The shares of restricted stock granted to Mr. Hudkins will
vest in three equal annual installments commencing on the first anniversary
of
the grant date. Such non-plan options and restricted stock were issued pursuant
to an exemption provided by Section 4(2) of the Securities Act of 1933.
Item
16. Exhibits and Financial Statements.
(a)
Exhibits.
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
3.1
|
|
Agreement
and Plan of Merger dated as of May 15, 2002, between Langer, Inc.,
a New
York corporation, and Langer, Inc., a Delaware corporation (the surviving
corporation), incorporated herein by reference to Appendix A of our
Definitive Proxy Statement for the Annual Meeting of Stockholders
held on
June 27, 2002, filed with the Securities and Exchange Commission
on May
31, 2002.
|
|
|
|
|
|
3.2
|
|
Certificate
of Incorporation, incorporated herein by reference to Appendix B
of our
Definitive Proxy Statement for the Annual Meeting of Stockholders
held on
June 27, 2002, filed with the Securities and Exchange Commission
on May
31, 2002.
|
|
|
|
|
|
3.3
|
|
By-laws,
incorporated herein by reference to Appendix C of our Definitive
Proxy
Statement for the Annual Meeting of Stockholders held on June 27,
2002,
filed with the Securities and Exchange Commission on May 31,
2002.
|
|
|
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|
4.1
|
|
Specimen
of Common Stock Certificate, incorporated herein by reference to
our
Registration Statement of Form S-1 (File No. 2- 87183).
|
|
|
|
|
|
5.2
|
|
Opinion
of Kane Kessler, P.C., regarding the validity of our Common Stock
being
registered.**
|
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
|
|
10.1
|
|
Employment
Agreement between Langer, Inc. and Andrew H. Meyers, dated as of
February
13, 2001, incorporated herein by reference to, Exhibit 10.6 of our
Annual
Report on Form 10-K filed on May 29, 2001 (File No.
000-12991).+
|
|
|
|
|
|
10.2
|
|
Employment
Agreement between Langer, Inc. and Steven Goldstein, dated as of
November
15, 2004.†+
|
|
|
|
|
|
10.3
|
|
Consulting
Agreement between Langer, Inc. and Kanders & Company, Inc., dated
November 12, 2004.†+
|
|
|
|
|
|
10.4
|
|
Option
Agreement between Langer, Inc. and Kanders & Company, Inc., dated
February 13, 2001, incorporated herein by reference to Exhibit (d)(1)(G)
to the Schedule TO (File Number 005-36032).+
|
|
|
|
|
|
10.5
|
|
Registration
Rights Agreement between Langer, Inc. and Kanders & Company, Inc.,
dated February 13, 2001, incorporated herein by reference to Exhibit
(d)(1)(I) to the Schedule TO (File Number 005-36032).
|
|
|
|
|
|
10.6
|
|
Indemnification
Agreement between Langer, Inc. and Kanders & Company, Inc., dated
February 13, 2001, incorporated herein by reference to Exhibit (d)(1)(J)
to the Schedule TO (File Number 005-36032).
|
|
|
|
|
|
10.7
|
|
The
Company’s 2001 Stock Incentive Plan incorporated herein by reference to
Exhibit 10.18 of our Annual Report on Form 10-K for the fiscal year
ended
December 31, 2001.+
|
|
|
|
|
|
10.8
|
|
Langer
Biomechanics Group Retirement Plan, restated as of July 20, 1979
incorporated by reference to our Registration Statement of Form S-1
(File
No. 2-87183).
|
|
|
|
|
|
10.9
|
|
Agreement,
dated March 26, 1992, and effective as of March 1, 1992, relating
to our
401(k) Tax Deferred Savings Plan incorporated by reference to our
Form
10-K for the fiscal year ended February 29, 1992.
|
|
|
|
|
|
10.10
|
|
Form
of Indemnification Agreement for Langer, Inc.’s executive officers and
directors, incorporated by reference to Exhibit 10.23 of our Annual
Report
on Form 10-K for the fiscal year ended February 28,
2001.
|
|
|
|
|
|
10.11
|
|
Copy
of Lease related to Langer, Inc.’s Deer Park, NY facilities incorporated
by reference to Exhibit 10(f) of our Annual Report on Form 10-K for
the
fiscal year ended February 28, 1993.
|
|
|
|
|
|
10.12
|
|
Copy
of Amendment to Lease of Langer, Inc.’s Deer Park, NY facility dated
February 19, 1999.††
|
|
|
|
|
|
10.13
|
|
Asset
Purchase Agreement, dated May 6, 2002, by and among Langer, Inc.,
GoodFoot
Acquisition Co., Benefoot, Inc., Benefoot Professional Products,
Inc.,
Jason Kraus, and Paul Langer, incorporated herein by reference to
Exhibit
2.1 of our Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 13, 2002.
|
|
|
|
|
|
10.14
|
|
Registration
Rights Agreement, dated May 6, 2002, among Langer, Inc., Benefoot,
Inc.,
Benefoot Professional Products, Inc., and Dr. Sheldon Langer,
incorporated herein by reference to Exhibit 10.1 of our Current Report
on
Form 8-K, filed with the Securities and Exchange Commission on May
13,
2002.
|
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
|
|
10.15
|
|
Promissory
Note, dated May 6, 2002, made by Langer, Inc. in favor of Benefoot,
Inc.,
incorporated herein by reference to Exhibit 10.2 of our Current Report
on
Form 8-K, filed with the Securities and Exchange Commission on May
13,
2002.
|
|
|
|
|
|
10.16
|
|
Promissory
Note, dated May 6, 2002, made by Langer, Inc. in favor of Benefoot
Professional Products, Inc., incorporated herein by reference to
Exhibit
10.3 of our Current Report on Form 8-K, filed with the Securities
and
Exchange Commission on May 13, 2002.
|
|
|
|
|
|
10.17
|
|
Stock
Purchase Agreement, dated January 13, 2003, by and among Langer,
Inc.,
Langer Canada Inc., Raynald Henry, Micheline Gadoury, 9117-3419 Quebec
Inc., Bi-Op Laboratories Inc., incorporated herein by reference to
Exhibit
2.1 of our Current Report on Form 8- K filed with the Securities
and
Exchange Commission on January 13, 2003.
|
|
|
|
|
|
10.18
|
|
Employment
Agreement between Langer, Inc. and Joseph Ciavarella dated as of
February
16, 2004, incorporated herein by reference to Exhibit 10.33 of our
Annual
Report on Form 10-K for the year ended December 31,
2003.+
|
|
|
|
|
|
10.19
|
|
Option
Agreement between Langer, Inc. and Joseph P. Ciavarella dated as
of March
24, 2004, incorporated herein by reference to Exhibit 10.34 of our
Annual
Report on Form 10-K for the year ended December 31,
2003.+
|
|
|
|
|
|
10.20
|
|
Stock
Purchase Agreement, dated as of September 22, 2004, by and among
Langer,
Inc., LRC North America, Inc., SSL Holdings, Inc., and Silipos, Inc.,
incorporated herein by reference to Exhibit 2.1 of our Current Report
on
Form 8-K filed with the Securities and Exchange Commission on October
6,
2004.
|
|
|
|
|
|
10.21
|
|
Stock
Pledge and Agency Agreement, dated September 30, 2004, by and among
Langer, Inc., SSL Holdings, Inc., and Pepper Hamilton LLP., incorporated
herein by reference to Exhibit 4.4 of our Current Report on Form
8-K filed
with the Securities and Exchange Commission on October 6,
2004.
|
|
|
|
|
|
10.22
|
|
$7,500,000
Secured Promissory Note due March 31, 2006, incorporated herein by
reference to Exhibit 4.5 of our Current Report on Form 8-K filed
with the
Securities and Exchange Commission on October 6, 2004.
|
|
|
|
|
|
10.24
|
|
$3,000,000
Promissory Note due December 31, 2009, incorporated herein by reference
to
Exhibit 4.6 of our Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 6, 2004.
|
|
|
|
|
|
10.25
|
|
Note
and Warrant Purchase Agreement, dated September 30, 2004, by and
among
Langer, Inc., and the investors named therein, incorporated herein
by
reference to Exhibit 4.1 of our Current Report on Form 8-K filed
with the
Securities and Exchange Commission on October 6, 2004.
|
|
|
|
|
|
10.26
|
|
Form
of 7% Senior Subordinated Note due September 30, 2007, incorporated
herein
by reference to Exhibit 4.2 of our Current Report on Form 8-K filed
with
the Securities and Exchange Commission on October 6,
2004.
|
|
|
|
|
|
10.27
|
|
Form
of Warrant to purchase shares of the common stock of Langer, Inc.,
incorporated herein by reference to Exhibit 4.3 of our Current Report
on
Form 8-K filed with the Securities and Exchange Commission on October
6,
2004.
|
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
|
|
10.28
|
|
Employment
Agreement between Langer, Inc. and W. Gray Hudkins, dated as of November
15, 2004.†+
|
|
|
|
|
|
10.29
|
|
Amendments
dated as of November 12, 2004, October 28, 2004, September 31, 2004,
May
28, 2004, March 30, 2004, January 30, 2004 and December 1, 2003,
to
Employment Agreement dated as of February 13, 2001, between us and
Andrew
H. Meyers.†+
|
|
|
|
|
|
10.30
|
|
Stock
Option Agreement between Langer, Inc. and W. Gray Hudkins, dated
November
12, 2004.†+
|
|
|
|
|
|
10.31
|
|
Stock
Option Agreement between Langer, Inc. and Steven Goldstein, dated
November
12, 2004.†+
|
|
|
|
|
|
10.32
|
|
Restricted
Stock Agreement between Langer, Inc. and W. Gray Hudkins, dated November
12, 2004.†+
|
|
|
|
|
|
10.33
|
|
Supply
Agreement, dated as of September 20, 1999, by and between Silipos,
Inc.,
and Poly-Gel, L.L.C. incorporated by reference to Exhibit 10.1 to
our
Quarterly Report on Form 10-Q for the nine months ended September
30,
2004.
|
|
10.34
|
|
Form
of 4% Convertible Subordinated Note due September 31, 2006, incorporated
by reference to Exhibit 99.3 of our Current Report on Form 8-K Filed
with
the Securities and Exchange Commission on November 13,
2001.
|
|
|
|
|
|
10.35
|
|
Letter
Agreement dated October 31, 2001, between Langer Partners, LLC and
Oracle
Management.†
|
|
|
|
|
|
10.36
|
|
Stock
Option Agreement between Langer, Inc. and Kanders & Company, Inc.
dated November 12, 2004.†
|
|
|
|
|
|
10.37
|
|
Patent
License Agreement, including amendment no. 1 thereto, between Applied
Elastomerics, Inc. and SSL Americas, Inc., dated effective November
30,
2001.
|
|
|
|
|
|
10.38
|
|
Assignment
and Assumption Agreement, dated as of September 30, 2004, by and
between
SSL Americas, Inc. and Silipos, Inc.
|
|
|
|
|
|
10.39
|
|
License
Agreement, dated as of January 1, 1997, by and between Silipos, Inc.
and
Gerald P. Zook.
|
|
|
|
|
|
10.40
|
|
Copy
of Lease between 366 Madison Inc. and Silipos, Inc., dated April,
1995;
Lease Modification and Extension Agreement, dated November 1, 1995;
and
Second Lease Modification and Extension Agreement, dated December
16,
1997.
|
|
|
|
|
|
10.41
|
|
Copy
of Sublease between Calamar Enterprises, Inc. and Silipos, Inc.,
dated May
21, 1998; First Amendment to Sublease between Calamar Enterprises,
Inc.
and Silipos, Inc., dated July 15, 1998; and Second Amendment to Sublease
between Calamar Enterprises, Inc. and Silipos, Inc., dated March
1,
1999.
|
|
|
|
|
|
10.42
|
|
Lease
dated December 19, 2005, between the Company (as tenant) and 41 Madison,
L.P., of office space at 41 Madison Avenue, New York, N.Y., incorporated
herein by reference to the Exhibit 10.1 of the Company’s Current Report on
Form 8-K filed December 22, 2005.
|
|
|
|
|
|
10.43
|
|
Form
of Amendment to Stock Option Agreement, incorporated herein by reference
to the Exhibit 10.1 of the Company’s Current Report on Form 8-K filed
December 27, 2005.
|
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
|
|
10.45
|
|
Form
of Amendment to Restricted Stock Award Agreement, incorporated herein
by
reference to the Exhibit 10.2 of the Company’s Current Report on Form 8-K
filed December 27, 2005.
|
|
|
|
|
|
10.46
|
|
Employment
Agreement dated as of September 18, 2006, between the Company and
Sara
Cormack, incorporated herein by reference to the Exhibit 10.2 of
the
Company’s Current Report on Form 8-K filed September 18,
2006.+
|
|
|
|
|
|
10.47
|
|
Form
of Note Purchase Agreement dated as of December 7, 2006, among the
Company
and the purchasers of the Company’s 5% Convertible Notes Due December 7,
2011, including letter amendment dated as of December 7, 2006, without
exhibits, incorporated herein by reference to the Exhibit 10.1 of
the
Company’s Current Report on Form 8-K filed December 14,
2006.
|
|
|
|
|
|
10.48
|
|
Form
of the Company’s 5% Convertible Note Due December 7, 2011, incorporated
herein by reference to the Exhibit 10.2 of the Company’s Current Report on
Form 8-K filed December 14, 2006.
|
|
|
|
|
|
10.49
|
|
Registration
Rights Agreement dated as of January 8, 2007, by and between Langer,
Inc.,
and Regal Medical Supply, LLC, incorporated herein by reference to
the
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed January 12,
2007.
|
|
|
|
|
|
10.50
|
|
Asset
Purchase Agreement dated as December 15, 2006, by and among Langer,
Inc.,
Regal Acquisition Co., Regal Medical Supply, LLC, John Eric Shero,
William
Joseph Warning, John P Kenney, Richard Alan Nace, Linda Ann Lee,
Carl
David Ray, and Roy Kelley, incorporated herein by reference to the
Exhibit
10.2 of the Company’s Current Report on Form 8-K filed January 12,
2007.
|
|
|
|
|
|
10.51
|
|
Registration
Rights Agreement dated as of January 23, 2007, by and between the
Company,
Peter A. Asch, Richard D. Asch, A. Lawrence Litke, and Joseph M.
Candido,
incorporated herein by reference to the Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed January 29, 2007.
|
|
|
|
|
|
10.52
|
|
Employment
Agreement dated January 23, 2007, between Twincraft, Inc. and Peter
A.
Asch, incorporated herein by reference to the Exhibit 10.2 of the
Company’s Current Report on Form 8-K filed January 29,
2007.+
|
|
|
|
|
|
10.53
|
|
Employment
Agreement dated January 23, 2007, between Twincraft, Inc. and A.
Lawrence
Litke, incorporated herein by reference to the Exhibit 10.3 of the
Company’s Current Report on Form 8-K filed January 29,
2007.+
|
|
|
|
|
|
10.54
|
|
Employment
Agreement dated January 23, 2007, between Twincraft, Inc. and Richard.
Asch, incorporated herein by reference to the Exhibit 10.4 of the
Company’s Current Report on Form 8-K filed January 29,
2007.+
|
|
|
|
|
|
10.55
|
|
Consulting
Agreement dated January 23, 2007, between Twincraft, Inc. and Fifth
Element LLC, incorporated herein by reference to the Exhibit 10.5
of the
Company’s Current Report on Form 8-K filed January 29,
2007.+
|
|
|
|
|
|
10.56
|
|
Lease
Agreement dated January 23, 2007, between Twincraft, Inc. and Asch
Partnership, incorporated herein by reference to the Exhibit 10.6
of the
Company’s Current Report on Form 8-K filed January 29,
2007.
|
|
|
|
|
|
10.57
|
|
Lease
dated October 1, 2003 and as amended January 23, 2006, between Twincraft,
Inc. and Asch Enterprises, LLC, incorporated herein by reference
to the
Exhibit 10.7 of the Company’s Current Report on Form 8-K filed January 29,
2007.
|
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
|
|
10.58
|
|
Stock
Purchase Agreement dated as of November 14, 2006, by and among Langer,
Inc., Peter A. Asch, Richard D. Asch, A. Lawrence Litke, and Joseph
M.
Candido, incorporated herein by reference to the Exhibit 10.8 of
the
Company’s Current Report on Form 8-K filed January 29,
2007.
|
|
|
|
|
|
10.59
|
|
Employment
Agreement dated as of January 16, 2006, between the Company and Kathryn
P.
Kehoe.+
|
|
|
|
|
|
10.60
|
|
Loan
and Security Agreement dated as of May 11, 2007, between Wachovia
Bank,
National Association, and Langer, Inc., Silipos, Inc., Regal Medical,
Inc., and Twincraft, Inc., incorporated herein by reference to Exhibit
10.1 of the Company's Current Report on Form 8-K filed May 15,
2007.
|
|
|
|
|
|
10.61
|
|
Employment
Agreement dated as of July 26, 2007, between the Company and Kathleen
P.
Bloch, incorporated herein by reference to Exhibit 10.1 of the Company's
Current Report on Form 8-K filed July 27, 2007.+
|
|
|
|
|
|
10.62
|
|
Employment
Agreement dated as of October 1, 2007, between the Company and W.
Gray
Hudkins, incorporated herein by reference to Exhibit 10.1 of the
Company's
Current Report on Form 8-K filed October 12, 2007.+
|
|
|
|
|
|
21.1
|
|
Subsidiaries
of the Registrant.†††
|
|
|
|
|
|
23.4
|
|
Consent
of Kane Kessler, P.C. (included Exhibit 5.2).**
|
|
|
|
|
|
23.5
|
|
Consent
of BDO Seidman, LLP.
|
|
|
|
|
|
23.6
|
|
Consent
of Deloitte & Touche LLP.
|
|
|
|
|
|
23.7
|
|
Consent
of Gallagher, Flynn & Company, LLP
|
|
|
|
|
|
24.1
|
|
Power
of Attorney.*
|
|
|
|
|
|
24.2
|
|
Power
of Attorney.
|
|
*
|
Previously
filed with Registration Statement on Form S-3 (File No. 333-139882)
filed
with the Securities and Exchange Commission on January 9,
2007.
|
|
|
|
|
**
|
To
be filed by amendment.
|
|
|
|
|
†
|
Incorporated
by reference to our Registration Statement on Form S-1 (File No.
333-120718) filed with the Securities and Exchange Commission on
November
23, 2004.
|
|
|
|
|
††
|
Incorporated
by reference to Amendment No. 2 of our Registration Statement on
Form S-1
(File No. 333-120718), filed with the Securities and Exchange Commission
on February 11, 2005.
|
|
|
|
|
†††
|
Incorporated
by reference to our Annual Report on Form 10-K for the year ended
December
31, 2006, filed with the Securities and Exchange Commission on April
2,
2007.
|
|
|
|
|
+
|
This
exhibit represents a management contract or compensation
plan.
|
|
|
(b)
|
Financial
statement schedules per Regulation S-X and Item 11(e).
None.
|
Item
17. Undertakings.
1.
The
undersigned Registrant hereby undertakes:
|
|
(a)
|
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;
|
|
|
(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 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in
the effective registration
statement;
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|
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(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement;
|
|
|
(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; and
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(c)
|
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.
|
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2.
|
The
undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's
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 fide offering thereof.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Deer Park, State of
New
York, on this 19th day of November, 2007.
|
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Langer,
Inc.
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|
|
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By:
|
/s/
W. Gray Hudkins
|
|
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W.
Gray Hudkins
|
|
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President
and Chief Executive Officer
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|
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By:
|
/s/
Kathleen P. Bloch
|
|
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Kathleen
P. Bloch
|
|
|
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Vice
President and Chief Financial
Officer
|
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on
the
dates indicated:
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
W. Gray Hudkins
|
|
President,
Chief Executive Officer
|
|
November
19, 2007
|
|
W.
Gray Hudkins
|
|
(principal
executive officer) and Director
|
|
|
|
|
|
|
|
|
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/s/
Kathleen P. Bloch
|
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Vice
President and Chief Financial
|
|
|
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Kathleen
P. Bloch
|
|
Officer
(principal financial and accounting officer)
|
|
|
|
|
|
|
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*
|
|
Director
|
|
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Warren
B. Kanders
|
|
|
|
|
|
|
|
|
|
|
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*
|
|
Director
|
|
|
|
Peter
A. Asch
|
|
|
|
|
|
|
|
|
|
|
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*
|
|
Director
|
|
|
|
Stephen
M. Brecher
|
|
|
|
|
|
|
|
|
|
|
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*
|
|
Director
|
|
|
|
Burtt
R. Ehrlich
|
|
|
|
|
|
|
|
|
|
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*
|
|
Director
|
|
|
|
Stuart
P. Greenspon
|
|
|
|
|
|
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By:
|
/s/
W. Gray Hudkins, Attorney-in-Fact
|
|
|
|
W.
Gray Hudkins, Attorney-in-Fact
|
Exhibit
Index
|
23.5
|
|
Consent
of BDO Seidman, LLP.
|
|
|
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|
23.6
|
|
Consent
of Deloitte & Touche LLP.
|
|
|
|
|
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23.7
|
|
Consent
of Gallagher, Flynn & Company, LLP
|
|
|
|
|
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24.2
|
|
Power
of Attorney.
|
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