EX-99 13 mpti-ex991_14.htm EX-99.1 mpti-ex991_14.htm

Exhibit 99.1

APPENDIX A

PRELIMINARY INFORMATION STATEMENT FILED BY M-TRON INDUSTRIES, INC. WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 2022; TO BE AMENDED

PRELIMINARY AND SUBJECT TO COMPLETION

INFORMATION STATEMENT

M-tron Industries, Inc.

COMMON STOCK, PAR VALUE $0.01 PER SHARE

This information statement is being furnished by The LGL Group, Inc., a Delaware corporation (the “Company”), in connection with its spin-off (the “spin-off”) of M-tron Industries, Inc., a Delaware corporation (“Mtron,” “we,” “us” and “our”).  Mtron is currently a wholly-owned subsidiary of the Company but, as described below, will become a separate, publicly-traded company as a result of the spin-off.  Mtron is an operating subsidiary engaged in the manufacture of electronic components and its business includes the operations of Piezo Technology, Inc., M-tron Asia, LLC and other related subsidiaries.  It has design and manufacturing facilities in Orlando, Florida and Yankton, South Dakota.

The Company will continue as a separate, publicly-traded company following the spin-off, with its business consisting of the operation of its subsidiary, Precise Time and Frequency, LLC, a Delaware limited liability company and manufacturer of time and frequency instruments.  It has a design and manufacturing facility in Wakefield, Massachusetts.

To effect the spin-off, the Company will distribute shares of common stock, par value $0.01 per share, of Mtron (“Mtron Common Stock”) held by it on a pro rata basis to the Company’s stockholders (the “distribution”).  As a stockholder of the Company, you will receive one share of Mtron Common Stock for each share of the Company’s common stock, par value $0.01 per share, held of record by you as of 5:00 P.M., Eastern time, on [•][•], 2022, the record date for the distribution (such date and time, the “record date”).  As a result, the stockholders of the Company prior to the spin-off will become the stockholders of Mtron after the spin-off.

We expect that the distribution will occur on [•] [•], 2022 (the “distribution date”).  Immediately after the distribution, Mtron will be a separate, publicly-traded company.  The spin-off will not impact your holdings of the Company’s common stock, and, accordingly, your proportionate interest in the Company will not change as a result of the spin-off.  The distribution is intended to be tax-free for U.S. federal income tax purposes.  See “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off.”

The Company held a special meeting of its stockholders on June 21, 2022 and received approval of the proposed spin-off by the required vote of the stockholders.  You do not need to pay any consideration, exchange or surrender your existing shares of the Company’s common stock or take any other action to receive your shares of Mtron Common Stock.

Prior to the spin-off, the Company will own all of the outstanding shares of Mtron Common Stock.  Accordingly, there is no current trading market for Mtron Common Stock.  We intend to list Mtron Common Stock on the NYSE American, under the symbol “MPTI”.  We expect that the Mtron Common Stock will be listed on the NYSE American on or promptly after the distribution date. However, there is no assurance that an active public market for Mtron Common Stock will develop or be sustained after the spin-off.  If an active public market does not develop or is not sustained, it may be difficult for Mtron’s stockholders to sell their shares of Mtron Common Stock at a price that is attractive to them, or at all.  It is expected that a limited trading in the over-the-counter market, commonly known as a “when-issued” trading market, for shares of Mtron Common Stock will begin one trading day before the record date and that “regular way” trading of the Mtron Common Stock will begin the first day of trading after the distribution date.

The Company’s common stock is listed on the NYSE American.  It is anticipated that, beginning on the record date and continuing until the time of the distribution, there will be two markets in shares of the Company’s common stock on the NYSE American: a “regular-way” market and an “ex-distribution” market.  Shares of the Company’s common Stock that trade on the “regular-way” market will trade with an entitlement to the shares of Mtron Common Stock to be distributed in the spin-off in respect thereof.  Shares of the Company’s common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of Mtron Common Stock.  Therefore, if a stockholder sells shares of the Company’s common stock in the “regular-way” market on or prior to the time of the distribution, such stockholder will also be selling the right to receive the shares of Mtron Common Stock that such stockholder would have otherwise received in the spin-off in respect of the shares of the Company’s common stock being sold.  If a stockholder owns shares of the Company’s common stock on the record date and sells those shares on the “ex-distribution” market on or prior to the time of the distribution, such stockholder will continue to be entitled to receive the shares of Mtron Common Stock which are distributed in the spin-off in respect of the shares of the Company’s common stock being sold.

You are encouraged to consult with your broker, financial and/or tax advisors regarding the specific implications of selling your shares of the Company’s common stock prior to or on the distribution date.

Mtron is an “emerging growth company” as defined under applicable U.S. federal securities laws and, as such, has provided more limited disclosures in this information statement than an issuer that would not so qualify and also intends to elect to comply with the reduced public company reporting requirements for emerging growth companies in its future filings for so long as it is permitted to do so.  See “Summary—Implications of Being an Emerging Growth Company.”

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 14.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this information statement is truthful or complete.  Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities.

The date of this information statement is [•] [•], 2022.

This information statement was first mailed to the Company’s stockholders on or about [•] [•], 2022.

 

 


 

 

 

Table of Contents

 

Summary

1

Questions and Answers About the Spin-Off

4

Summary of the Spin-Off

10

Risk Factors

13

Cautionary Statement Regarding Forward-Looking Statements

25

The Spin-Off

27

Dividend Policy

34

Capitalization

35

Selected Historical Combined Financial Data

36

Unaudited Pro Forma Financial Statements

37

Business

43

Management’s Discussion and Analysis of Financial Condition and Results of Operations

47

Certain Relationships and Related Party Transactions

52

Management

53

Executive Compensation

59

Director Compensation

64

Security Ownership of Certain Beneficial Owners and Management

65

Description of Capital Stock

66

Where You Can Find More Information

70

Index to Combined Financial Statements

F-1

Report of Independent Registered Public Accounting Firm

F-2

 

 

 

 


 

 

Summary

The following is a summary of material information discussed in this information statement.  This summary may not contain all the details concerning the spin-off or other information that may be important to you.  To better understand the spin-off and Mtron’s business and financial position, you should carefully review this entire information statement.  Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the condensed combined financial statements and combined financial statements of Mtron, assumes the completion of all the transactions referred to in this information statement in connection with the spin-off.  Unless the context otherwise requires, references in this information statement to “Mtron”, “we”, “us” and “our” and “our company” refer to M-tron Industries, Inc., a Delaware corporation.  References in this information statement to “the Company” refer to The LGL Group, Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the spin-off, Mtron and its consolidated subsidiaries), unless the context otherwise requires.

References in this information statement to the historical assets, liabilities, products, businesses or activities of Mtron are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the businesses of Mtron as they have been conducted as part of the Company’s organization.

You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover.  Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except as required by law.

This information statement describes our business, our relationship with the Company, and how this transaction affects the Company’s stockholders, and provides other information to assist you in evaluating the benefits and risks of the spin-off and holding or disposing of the shares of Mtron Common Stock received in connection with the spin-off.

The Company

The Company is The LGL Group, Inc., a Delaware corporation.  The Company was incorporated in 1928 under the laws of the State of Indiana and reincorporated under the laws of the State of Delaware in 2007, and is a diversified holding company with subsidiaries engaged in the design, manufacturing and marketing of highly-engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits and in the design of high performance frequency and time reference standards that form the basis for timing and synchronization in various applications.  The Company operates through its two principal subsidiaries, (1) M-tron Industries, Inc., which includes the operations of Piezo Technology, Inc., M-tron Asia, LLC and other subsidiaries (collectively, referred to herein as “Mtron”), which represents its electronic components segment, and (2) Precise Time and Frequency, LLC, a Delaware limited liability company, which represents its electronics instruments segment.

The Company is a publicly-traded company.  Its common stock is listed on the NYSE American under the ticker symbol “LGL.” The Company will own all of the shares of Mtron Common Stock issued and outstanding prior to the distribution.  Immediately following the distribution, the Company will not own any shares of Mtron Common Stock.  Instead, the stockholders of the Company prior to the spin-off will become the stockholders of Mtron after the spin-off.

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Mtron

Originally founded in 1965, Mtron designs, manufactures and markets highly-engineered, high reliability frequency and spectrum control products.

These component-level devices are used extensively in electronic systems for applications in defense, aerospace, earth-orbiting satellites, down-hole drilling, medical devices, instrumentation, industrial devices and global positioning systems as well as in infrastructure equipment for the telecommunications and network equipment industries.  As an engineering-centric company, Mtron provides close support to the customer throughout its products’ entire life cycle, including product design, prototyping, production and subsequent product upgrades.  This collaborative approach has resulted in the development of long-standing business relationships with its blue-chip customer base.

All of Mtron’s production facilities are ISO 9001:2008 certified, ITAR registered and Restriction of Hazardous Substances (“RoHS”) compliant.  In addition, its U.S. production facilities in Orlando, Florida and Yankton, South Dakota are AS9100 Rev D and MIL-STD-790 certified.

Mtron also has design and manufacturing facilities in Orlando, Florida and Yankton, South Dakota.

The Spin-Off

On August 12, 2021, the Company announced that its Board of Directors had authorized its management to explore a potential spin-off of Mtron’s business into a newly created and separately traded public Company.  In connection with the contemplated spin-off, Mtron will enter into a number of agreements with the Company, including a Separation and Distribution Agreement, a Transitional Administrative and Management Services Agreement, and a Tax Indemnity and Sharing Agreement. These agreements will provide the terms and conditions of the separation of the Company’s businesses between the Company and Mtron and will govern various ongoing arrangements between the Company and Mtron upon completion of the spin-off.

As described in further detail below, completion of the spin-off is subject to a number of conditions, including approval of the distribution and all related transactions by the Company’s Board of Directors (and such approval not having been withdrawn) and approval by the Company’s stockholders of the proposed spin-off, to permit the distribution in the manner contemplated herein.  Subject to the satisfaction of the conditions to completion of the spin-off, we expect that the distribution will occur on [•] [•], 2022.  Immediately after the distribution, Mtron will be a separate, publicly-traded company and the Company will not own any shares of Mtron Common Stock.

We intend to list Mtron Common Stock on the NYSE American under the symbol “MPTI”.  We expect that the Mtron Common Stock will be listed on the NYSE American on or promptly after the distribution date.

The distribution is intended to be tax-free for U.S. federal income tax purposes.  See “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off.”

Risk Factors

You should carefully read the section of this information statement entitled “Risk Factors” for an explanation of the risks and uncertainties associated with the business and investments of Mtron, as well as the risks and uncertainties related to the spin-off and to ownership of Mtron Common Stock.

Implications of Being an Emerging Growth Company

Mtron qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).  As such, it may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced financial disclosure and reduced disclosure about its executive compensation arrangements.  In addition, as an emerging growth company, Mtron is exempt from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments, and from the auditor attestation requirement in the assessment of its internal control over financial reporting.  Mtron is permitted to, and intends to, take advantage of these exemptions until it no longer qualifies for such exemptions.  It will cease to be an emerging growth company upon the earliest of:

     the last day of the fiscal year in which it has $1.07 billion or more in annual revenues;

     the last day of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”);

     the date on which it has issued more than $1.0 billion in non-convertible debt securities during the previous three-year period; and

     the date on which it is deemed to be a “large accelerated filer” (which is the last day of the fiscal year during which the total market value of common equity securities held by non-affiliates is $700 million or more, calculated as of the end of the second quarter (June 30) of such fiscal year).

Mtron may choose to take advantage of some, but not all, of the exemptions available to it.  Mtron has taken advantage of certain reduced reporting obligations in this information statement.  Accordingly, the information contained herein may be different than the information you receive from other public companies.

In addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for complying with new or revised accounting standards.  This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  Mtron has decided at this time to take advantage of the extended transition periods  available under the JOBS Act for complying with new or revised accounting standards.

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Corporate Information

M-tron Industries, Inc. is a Delaware corporation.  Its principal executive offices are located at 2525 Shader Road, Orlando, Florida 32804.  Its telephone number is (407) 298-2000.  Its corporate website is www.mtronpti.com.  Information contained on, or connected to, Mtron’s website or the Company’s website does not and will not constitute part of this information statement or the registration statement on Form 10, of which this information statement is a part.

 


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Questions and Answers About the Spin-Off

The following provides a summary of certain of the terms of the spin-off.  For a more detailed description of the matters described below, see “The Spin-Off.”

Q: What is the spin-off?

 

A: The spin-off is the method by which Mtron will separate from the Company.  To complete the spin-off, the Company will distribute to its stockholders all of the shares of Mtron Common Stock.  We refer to this as the “distribution.” Following the spin-off, Mtron will be a separate company from the Company, and the Company will not retain any ownership interest in Mtron.  The separation of Mtron from the Company and the distribution of Mtron Common Stock are intended to provide you with equity investments in two separate companies, each able to focus on its own respective business and distinct business strategy and capital allocation policy.  The two separate companies will be (i) Mtron, which, as described in further detail below, is engaged in the manufacture of electronic components and its business includes the operations of Piezo Technology, Inc., M-tron Asia, LLC, and other subsidiaries of Mtron and (ii) the Company, which continues to own and operate its subsidiary, Precise Time and Frequency, LLC, a Delaware limited liability company and manufacturer of time and frequency instruments.

Q: What is Mtron?

 

A: Mtron is currently a wholly-owned subsidiary of the Company.  Originally founded in 1965, Mtron designs, manufactures and markets highly-engineered, high reliability frequency and spectrum control products.  These component-level devices are used extensively in electronic systems for applications in defense, aerospace, earth-orbiting satellites, down-hole drilling, medical devices, instrumentation, industrial devices and global positioning systems as well as in infrastructure equipment for the telecommunications and network equipment industries.

Q: What will I receive in the spin-off?

A: As a stockholder of the Company, in connection with the spin-off, you will receive one share of Mtron Common Stock for each share of the Company’s common stock that you own as of the record date.  See “Description of Capital Stock”.

The spin-off will not impact your holdings of the Company’s common stock and, accordingly, your proportionate interest in the Company will not change as a result of the spin-off.

In addition, holders of unvested restricted stock awards of the Company’s common stock that are outstanding on the distribution date will retain such restricted stock awards and receive one restricted share of Mtron Common Stock for each share of the Company’s common stock subject to such restricted stock awards held on the record date.  The restricted shares of Mtron Common Stock will be subject to the same terms and conditions, including, without limitation, vesting conditions, as contained in the Company’s restricted stock award agreement relating to the shares of the Company’s common stock in respect of which the restricted shares of Mtron were received.  As of May 6, 2022, a total of 26,283 shares of the Company’s common stock are subject to outstanding restricted stock awards, all of which are held by the Company’s executive officers or by the Company on behalf of the executive officers until vesting.

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Q: What will be the voting rights of the Mtron stock I receive in the spin-off?

 

A: The shares of Mtron Common Stock that you will receive in the spin-off will have the same voting rights as the respective shares of the Company’s common stock that you currently hold.  As a general matter, holders of Mtron Common Stock will vote as one class on the election of directors and most other matters submitted to a vote of Mtron’s stockholders.  In addition, the holders of Mtron Common Stock will each be entitled to a separate class vote under limited circumstances provided by Delaware law.  See “Description of Capital Stock” for additional information.

Q: What is the record date for the distribution?

A: The record date for the distribution will be 5:00 p.m.  Eastern Time on [•] [•], 2022, which date and time we refer to as the “record date.”

Q: When will the distribution occur?

A: We expect that shares of Mtron Common Stock will be distributed on or about [•] [•], 2022, which we refer to as the “distribution date.” It is expected that the distribution agent, acting on behalf of the Company, may require up to one week after the distribution date to fully distribute the shares of Mtron Common Stock to the Company’s stockholders.

Q: Is stockholder approval required for the spin-off?

A: Yes. Stockholder approval of the spin-off itself is required by Delaware law. It will involve a transfer of substantially all assets of the Company.

Q: What do stockholders need to do to participate in the distribution?

A: You do not need to take any action to receive your shares of Mtron Common Stock in the spin-off, but you are encouraged to read this entire information statement carefully.  You will not be required make any payment to the Company for the new shares or to surrender any shares of the Company’s common stock that you currently own in order to participate in the spin-off.  However, your receipt of shares of Mtron Common Stock in connection with the spin-off is intended to be tax-free for U.S. federal income tax purposes.

Q: Will fractional shares be distributed in the spin-off?

A: Because the distribution ratio is one share of Mtron Common Stock for each share of the Company’s common stock, no fractional shares will result from, or be distributed in, the spin-off.

Q: What are the U.S. federal income tax consequences of the distribution to the Companys stockholders?

A: The distribution is intended to be tax-free for U.S. federal income tax purposes.  We believe that the Company’s stockholders should not recognize gain or loss as a result of the distribution and no amount should be included in their income as a result of the distribution. The Company’s stockholders are urged to consult with their tax advisors with respect to the U.S. federal, state and local or foreign tax consequences, as applicable, of the distribution.  See “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off.”

Q: Why has the Company decided to spin-off Mtron?

A: The Company’s Board of Directors has determined that the separation of Mtron from its other business is in the best interests of the Company’s stockholders.  The Board believes that separating Mtron from the Company will, among other things:

     allow each company to pursue its own distinct business strategy and optimal capital allocation policy, independent of the other, which would better position each company to maximize value over the long-term;

     permit each company to tailor its strategic plans and pursue growth opportunities consistent with the key commercial markets served by each company, respectively;

     enable each company to more efficiently raise and allocate capital, including through debt or equity offerings, based on the fundamentals of their separate businesses;

 

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     provide each company with greater flexibility to use stock as a currency for mergers, acquisitions and joint ventures;

     provide the Company’s current stockholders with equity investments in two separate, publicly traded companies, including that reflect risks and prospects of their underlying respective businesses; and

     enable investors to make investment decisions based on each company’s individual performance and potential, and enhance the likelihood that the market will value each company appropriately.

Q: Are there risks associated with the spin-off and ownership of Mtron Common Stock?

A: Yes.  There are a number of risks associated with the spin-off of Mtron and ownership of Mtron Common Stock.  We discuss these risks under “Risk Factors.”

Q: Are there conditions to completion of the spin-off?

A: Yes.  Completion of the spin-off is subject to the following conditions:

     The Company’s Board of Directors, in its sole and absolute discretion, shall have authorized and approved the spin-off (and such authorization and approval shall not have been withdrawn, as described below);

     The approval of the Company’s stockholders of the spin-off in the contemplated manner;

     Mtron’s registration statement on Form 10, of which this information statement is a part, shall have been declared effective by the U.S. Securities and Exchange Commission (the “SEC”) and shall not be the subject of any stop order or proceedings seeking a stop order, and this information statement shall have been sent to the Company’s stockholders as of the close of business on the record date, all necessary permits and authorizations under the Securities Act and the Exchange Act relating to the issuance and trading of shares of Mtron Common Stock shall have been obtained and be in effect, and such shares shall have been approved for listing on the NYSE American, subject to official notice of issuance; and

     No court or other governmental authority having jurisdiction over the Company or Mtron shall have issued or entered any order, and no applicable law shall have been enacted or promulgated, in each case, that is then in effect and has the effect of permanently restraining, enjoining or otherwise prohibiting the consummation of the spin-off.

We are not aware of any material regulatory requirements that must be complied with or any material regulatory or third party approvals that must be obtained, other than compliance with SEC rules and regulations, including the SEC’s declaration of effectiveness of Mtron’s registration statement on Form 10, and the approval for listing of Mtron Common Stock the NYSE American, subject to official notice of issuance.

Q: Can the Companys Board of Directors decide to terminate the spin-off even if all of the conditions have been satisfied?

A: Yes.  Until the distribution has occurred, the Company’s Board of Directors has the right to terminate the spin-off, even if all of the other conditions have been satisfied, if the Company’s Board of Directors determines, in its sole and absolute discretion, that the spin-off is not in the best interests of the Company and its stockholders or that market conditions or other circumstances are such that the separation of Mtron and the Company is otherwise no longer advisable at that time.

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Q: When will I be able to trade my shares of Mtron Common Stock? What will the market price be?

A: Prior to the spin-off, the Company will own all of the outstanding shares of Mtron Common Stock.  Accordingly, there is no current trading market for Mtron Common Stock.  We intend to list Mtron Common Stock on the NYSE American under the symbol “MPTI”.  We expect that the Mtron Common Stock will be listed on the NYSE American on or promptly after the distribution date. However, there is no assurance that an active public market for Mtron Common Stock will develop or be sustained after the spin-off.  If an active public market does not develop or is not sustained, it may be difficult for Mtron’s stockholders to sell their shares of Mtron Common Stock at a price that is attractive to them, or at all.  It is expected that limited trading in the over-the-counter market, commonly known as a “when-issued” trading market, for shares of Mtron Common Stock will begin one trading day before the record date and that “regular way” trading of the Mtron Common Stock will begin the first day of trading after the distribution date.

We cannot predict what the market price will be for Mtron Common Stock prior to, on or after the distribution date.  It is possible that some of the Company’s stockholders may sell the shares received in connection with the spin-off because, among other things, Mtron’s business or strategies do not fit their investment objectives or because Mtron Common Stock may not be included in certain indices.  The market price of Mtron Common Stock may fluctuate significantly, including during the period before the market has analyzed fully the business and financial characteristics of Mtron separate from the Company.

Q: Does Mtron expect to pay dividends after the spin-off?

A: No.  It is not anticipated that Mtron will pay cash dividends on its common stock following the spin-off.  Mtron currently intends to retain any earnings for use in the operation of its business.

Q: Will my shares of the Companys common stock continue to trade after the spin-off?

A: Subject to continued compliance with applicable listing standards and requirements, it is expected that, following the spin-off, the Company’s common stock will continue to trade on the NYSE American.

Q: If I sell my shares of the Companys common stock prior to the distribution, will I still be entitled to receive shares of Mtron in the distribution?

A: It is anticipated that, beginning on the record date and continuing until the time of the distribution, there will be two markets in shares of the Company’s common stock on the NYSE American: a “regular-way” market and an “ex-distribution” market.  Shares of the Company’s common stock that trade on the “regular-way” market will trade with an entitlement to the shares of Mtron Common Stock to be distributed in the spin-off in respect thereof.  Shares of the Company’s common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of Mtron Common Stock.  Therefore, if a stockholder sells shares of the Company’s common stock in the “regular-way” market on or prior to the time of the distribution, such stockholder will also be selling the right to receive the shares of Mtron Common Stock that such stockholder would have otherwise received in the spin-off in respect of the shares of the Company’s common stock being sold.  If a stockholder owns shares of the Company’s common stock on the record date and sells those shares on the “ex-distribution” market on or prior to the time of the distribution, such stockholder will continue to be entitled to receive the shares of Mtron Common Stock which are distributed in the spin-off in respect of the shares of the Company’s common stock being sold.

You are encouraged to consult with your broker or financial advisor regarding the specific implications of selling your shares of the Company’s common stock prior to or on the distribution date.

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Q: Will the spin-off affect the market price of the Companys common stock?

 

A: It is possible that the market price of the Company’s common stock will be affected by the spin-off because such stock will no longer reflect the benefits, risks or rewards associated with Mtron and its subsidiaries.  There is no assurance as to how the market will respond to the spin-off, including the agreements entered into in connection with the spin-off and the relationship between the Company and Mtron following the spin-off.  We cannot provide you with any assurance as to the price at which shares of the Company’s common stock or shares of Mtron Common Stock will trade following the spin-off.

Q: What will be the relationship between the Company and Mtron after the spin-off?

A: Immediately following the spin-off, Mtron will be a separate, publicly-traded company, and the Company will have no continuing stock ownership interest in Mtron.  In connection with the spin-off, Mtron will enter into a Separation and Distribution Agreement and several other agreements with the Company which will provide the terms and conditions of the separation of the businesses and will govern various ongoing arrangements between the Company and Mtron after completion of the spin-off.

Following the spin-off, there will be limited overlap between executive management of the Company and Mtron. It is expected that following the Spin-off, the following executive officers of the Company will resign and be appointed to serve as executive officers of Mtron. Michael J. Ferrantino will serve as chief executive officer, James W. Tivy will serve as chief financial officer and Linda M. Biles will serve as vice-president, controller of Mtron. To replace these positions, Marc J. Gabelli will be appointed and serve as the Company’s chief executive officer, Ivan Arteaga will be its chief financial officer, and James W. Tivy will be its chief accounting officer.

It is currently anticipated that in connection with the Spin-off, two members of the Board of Directors of the Company, Bel Lazar and John S. Mega, will resign as directors and will be appointed to serve as directors of Mtron.  It is also anticipated that the Company’s chairman of the board, Marc J. Gabelli, will be appointed to serve as a director and as non-executive chairman of the board of Mtron, and that Michael J. Ferrantino will also be appointed to serve as a director of Mtron. As a result of the anticipated resignations, the Company’s Board of Directors will consist of Marc J. Gabelli, as chairman of the board, Timothy J. Foufas, Donald H. Hunter, Manjit Kalha, Ivan Arteaga, and Michael J. Ferrantino. See “Management” for additional information.

Q: How will the Companys indebtedness and cash be allocated, paid or transferred in connection with the spin-off?

A: Mtron will assume the indebtedness of or related to it and its subsidiaries in connection with the spin-off, which had no outstanding indebtedness of as of March 31, 2022.

As of March 31, 2022, the Company had approximately $21.7 million of cash and cash equivalents.  In connection with the spin-off, the Company will contribute to Mtron $1.5 million of cash and cash equivalents, other than $20.2 million of cash and cash equivalents and marketable securities with a current value of approximately $22.8 million which will be retained by the Company for use in the operation of its business.

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Q: What will Mario J. Gabellis and Marc J. Gabellis ownership and voting percentage of Mtron be immediately following the distribution?

Mario J. Gabelli and Marc J. Gabelli will have the same beneficial ownership and voting interest in Mtron immediately following the spin-off as they have with respect to the Company immediately prior to the spin-off, or 1,042,612 and 844,883 shares, respectively.  In the aggregate, these shares currently represent approximately 35.0% of the Company’s total outstanding common stock.  As a result, they will have the same voting power with respect to Mtron and will have a significant influence in the election of directors and the vote on any other matter presented for approval by Mtron’s stockholders.

Q: Do the Companys executive officers and directors have interests in the spin-off that may be different from or in addition to the interests of the Companys other stockholders?

Yes.  You should be aware that the executive officers and directors of the Company have interests in the spin-off that may differ from, or may be in addition to, the interests of the Company’s stockholders generally.  As previously described, following the spin-off, there will be an overlap between directors of the Company and Mtron. Marc J. Gabelli will serve as a chief executive officer and as a director and chairman of the Company and as a director and non-executive chairman of Mtron.  Michael J. Ferrantino will also serve as a director of the Company and as a director and chief executive officer of Mtron. James W. Tivy will serve as chief accounting officer of the Company and chief financial officer of Mtron. The Company’s directors currently receive annual cash fees and stock awards for their service on the Company’s Board, and it is anticipated that those who will also serve on the Mtron’s board of directors and receive fees for doing so as determined by the compensation committee of Mtron’s board.

Q: Will I have appraisal rights in connection with the spin-off?

A: No.  Stockholders of the Company will not have any appraisal rights in connection with the spin-off.

Q: Who will be the transfer agent for Mtrons Common stock after the spin-off?

A: It is expected that Computershare Inc. will be the transfer agent for Mtron’s Common stock after the spin-off.

Q: Who is the distribution agent for the spin-off?

A: Computershare Inc. will be the distribution agent for the spin-off.

Q: Where can I get more information?

A: If you have any questions relating to the spin-off, you should contact the distribution agent at:

Computershare

211 Quality Circle, Suite 210

College Station, TX 77845

Toll free number: (877) 868-8027

TDD Hearing Impaired: (800) 952-9245

Foreign Stockholders: (201) 680-6578

TDD Foreign Stockholders: (781) 575-4592

 


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Summary of the Spin-Off

Distributing Company

The LGL Group, Inc., a Delaware corporation.  Immediately after the distribution, the Company will not own any shares of Mtron Common Stock.

Distributed/Spin-Off Company

M-tron Industries, Inc., a Delaware corporation, which is currently a wholly-owned subsidiary of the Company.  Such corporation will become a separate, publicly-traded company as a result of the spin-off.

Separation of Businesses

In connection with the spin-off, the Company will continue to own and operate its subsidiary, Precise Time and Frequency, LLC, and will hold cash and other investments.

If the spin-off is completed, Mtron will be a separate, publicly-traded company engaged in the manufacture and marketing of frequency and spectrum control products directly and through its Piezo Technology, Inc., M-tron Asia, LLC and related subsidiaries.

Distributed Securities

The shares of Mtron Common Stock to be distributed in the spin-off will constitute all of the issued and outstanding shares of Mtron Common Stock immediately following the distribution.

Based on the number of shares of the Company’s common stock expected outstanding as of the record date, Mtron expects that 5,390,470 shares of Mtron Common Stock will be distributed in the spin-off.  However, the actual number of shares of Mtron Common Stock to be distributed in the spin-off will be determined based on the actual number of shares of the Company’s common stock outstanding as of the record date.

Record Date

5:00 P.M., Eastern time, on [•] [•], 2022.

Distribution Date

[•], [•], 2022.

Distribution Ratio

Each stockholder of the Company will receive one share of Mtron Common Stock for each share of the Company’s common stock held by such stockholder as of the record date.

The Distribution

On or before the distribution date, the Company will release the shares of Mtron Common Stock to the distribution agent to distribute to the Company’s stockholders.  The shares will be distributed in book-entry form, which means that no physical share certificates will be issued.  We expect that it may take the distribution agent up to one week following the distribution date to electronically issue shares of Mtron Common Stock to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form.

You will not be required to make any payment, surrender or exchange of your shares of the Company’s common stock or take any other action to receive your shares of Mtron Common Stock.

However, the Company is seeking the approval of its stockholders in order to effect the spin-off in the contemplated manner.  The Company intends to hold a special meeting of its stockholders to approve these actions and has distributed a separate proxy statement which contains information regarding the proposed spin-off and name change and the special meeting.  Completion of the spin-off is conditioned upon stockholder approval of the spin-off and certain other conditions described below.

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No Fractional Shares

Because the distribution ratio is one share of Mtron Common Stock for each share of the Company’s common stock, no fractional shares will result from, or be distributed in, the spin-off.

Conditions to the Spin-Off

Completion of the spin-off is subject to the following conditions:

     the Company’s Board of Directors of, in its sole and absolute discretion, shall have authorized and approved the spin-off (and such authorization and approval shall not have been withdrawn, as described below);

     the approval of the Company’s stockholders of the spin-off in the manner contemplated;

     Mtron’s registration statement on Form 10, of which this information statement is a part, shall have been declared effective by the SEC and shall not be the subject of any stop order or proceedings seeking a stop order, and this information statement shall have been sent to the Company’s stockholders as of the close of business on the record date, all necessary permits and authorizations under the Securities Act and the Exchange Act relating to the issuance and trading of shares of Mtron Common Stock shall have been obtained and be in effect, and such shares shall have been approved for listing on the NYSE American, subject to official notice of issuance; and

     No court or other governmental authority having jurisdiction over the Company or Mtron shall have issued or entered any order, and no applicable law shall have been enacted or promulgated, in each case, that is then in effect and has the effect of permanently restraining, enjoining or otherwise prohibiting the consummation of the spin-off.

We are not aware of any material regulatory requirements that must be complied with or any material regulatory or third party approvals that must be obtained, other than compliance with SEC rules and regulations, including the SEC’s declaration of effectiveness of Mtron’s registration statement on Form 10, and the approval for listing of Mtron Common Stock on the NYSE American.

Trading of Shares

We intend to list Mtron Common Stock on the NYSE American under the symbol “MPTI”.  We expect that the Mtron Common Stock will be listed on the NYSE American on or promptly after the distribution date.

It is expected that a limited trading in the over-the-counter market, commonly known as a “when-issued” trading market, for shares of Mtron Common Stock will begin one trading day before the record date and that “regular way” trading of the Mtron Common Stock will begin the first day of trading after the distribution date.

It is anticipated that, beginning on the record date and continuing until the time of the distribution, there will be two markets in shares of the Company’s common stock on the NYSE American: a “regular-way” market and an “ex-distribution” market.  Shares of the Company’s common Stock that trade on the “regular-way” market will trade with an entitlement to the shares of Mtron Common Stock to be distributed in the spin-off in respect thereof.  Shares of the Company’s common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of Mtron Common Stock.  Therefore, if a stockholder sells shares of the Company’s common stock in the “regular-way” market on or prior to the time of the distribution, such stockholder will also be selling the right to receive the shares of Mtron Common Stock that such stockholder would have otherwise received in the spin-off in respect of the shares of the Company’s common stock being sold.  If a stockholder owns shares of the Company’s common stock on the record date and sells those shares on the “ex-distribution” market on or prior to the time of the distribution, such stockholder will continue to be entitled to receive the shares of Mtron Common Stock which are distributed in the spin-off in respect of the shares of the Company’s common stock being sold.

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You are encouraged to consult with your broker or financial advisor regarding the specific implications of selling your shares of the Company’s Common Stock prior to or on the distribution date.

Material U.S. Federal Income Tax Consequences

The distribution is intended to be tax-free under Section 355 of the Internal Revenue Code of 1986, as amended.  We believe that the Company’s stockholders should not recognize gain or loss as a result of the distribution and no amount should be included in their income as a result of the distribution for U.S. federal income tax purposes.  The Company has not obtained a tax opinion with respect to the tax consequences of the spin-off.  Neither the Company nor Mtron has applied for a private letter ruling from the Internal Revenue Service (the “IRS”) with respect to the tax consequences of the distribution.  Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to the Company, Mtron or the Company’s stockholders.  The Company’s stockholders are urged to consult with their tax advisors with respect to the U.S. federal, state and local or foreign tax consequences, as applicable, of the distribution.

For a more detailed discussion of the federal income tax consequences of the spin-off, see “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off” and “Risk Factors—Risks Relating to the Spin-Off—The distribution of our common stock may not qualify for tax-free treatment.”

Separation and Distribution Agreement and other Spin-Off Documents

In connection with the spin-off, Mtron will enter into a Separation and Distribution Agreement and several other agreements with the Company, which will provide the terms and conditions of the separation of the businesses of the Company between the Company and Mtron and will govern various ongoing arrangements between the Company and Mtron upon completion of the spin-off.  The Separation and Distribution Agreement and other agreements expected to be entered into with the Company in connection with the spin-off are described in further detail under “The Spin-Off—Relationship Between Mtron and the Company.”

Dividend Policy

It is not anticipated that Mtron will pay cash dividends on its common stock following the spin-off.  Mtron currently intends to retain any earnings for use in the operation of its business.

Distribution Agent

Computershare, Inc. will be the distribution agent for the spin-off.

Risk Factors

There are a number of risks and uncertainties related to the spin-off of Mtron (including its business and investments and it being a separate, publicly-traded company following the spin-off) and ownership of Mtron Common Stock.  You should carefully read the factors set forth in the section of this information statement entitled “Risk Factors.”

 


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Risk Factors

You should carefully consider each of the following risks and uncertainties, which we believe are the principal risks that Mtron faces and of which we are currently aware, and all of the other information in this information statement.  Some of the risks and uncertainties described below relate to Mtron’s business.  Other risks relate principally to the spin-off, the securities markets and the ownership of Mtron Common Stock.  If any of the following events actually occur, Mtron’s business, financial condition or results of operations, and the liquidity and trading price of Mtron Common Stock, could be materially adversely affected.  Additional risks and uncertainties that we do not presently know about or currently believe are not material may also adversely affect Mtron’s business, financial condition and results of operations.

Risks Relating to Our Business

We are dependent on a single line of business.

We are engaged only in the design, manufacture and marketing of standard and custom-engineered electronic components that are used primarily for the control of frequency and spectrum of signals in electronic circuits.  Until we diversify our product offerings, we will remain dependent on our single electronic components line of business.

Given our reliance on this single line of business, any decline in demand for this product line or failure to achieve continued market acceptance of existing and new versions of this product line may harm our business and financial condition.  Additionally, unfavorable market conditions affecting this line of business would likely have a disproportionate impact on us in comparison with certain competitors, who have more diversified operations and multiple lines of business.  Should this line of business fail to generate sufficient sales to support ongoing operations, there can be no assurance that we will be able to develop or acquire alternate business lines.

Our operating results vary significantly from period to period.

We experience fluctuations in our operating results.  Some of the principal factors that contribute to these fluctuations include changes in demand for our products; our effectiveness in managing manufacturing processes, costs and inventory; our effectiveness in engineering and qualifying new product designs with our OEM customers and in managing the risks associated with offering those new products into production; changes in the cost and availability of raw materials, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules; macroeconomic and served industry conditions; and events that may affect our production capabilities, such as labor conditions and political instability.  In addition, due to the prevailing economic climate and competitive differences between the various market segments which we serve, the mix of sales between our communications, networking, aerospace, defense, industrial and instrumentation market segments may affect our operating results from period to period.

Our acquisitions may reduce earnings, require it to obtain additional financing and expose it to additional risks.

Our business strategy includes future acquisitions of operating companies.  Some of these acquisitions may be material.  While we seek to make acquisitions in companies that provide opportunities for growth, our investments or acquisitions may not prove to be successful or, even if successful, may not initially generate income, or may generate income on an irregular basis or over a long time period.  Accordingly, our results of operations may vary significantly on a quarterly basis and from year to year as a result of acquisitions.  Acquisitions will also expose us to the risks of the businesses acquired.  Acquisitions entail numerous risks, including those involving:

 

Difficulties in integrating business operations and assimilating the acquired businesses’ management;

 

Unforeseen expenses or liabilities, which may lead losses;

 

Challenges associated with entering new markets in which we have no or limited prior experience;

 

Delays in achieving anticipated synergies and profitability;

 

The potential loss of key employees of acquired businesses;

 

The incurrence of significant due diligence expenses relating to acquisitions, including with respect to those that are not completed.

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In addition, to the extent that operating businesses are acquired outside the United States or the State of Florida, there will be additional risks related to compliance with foreign regulations and laws including tax laws, labor laws, currency fluctuations and geographic economic conditions.

In addition, there may be significant competition for investments and acquisitions, which could increase the costs associated with the investments or acquisitions.  Substantial costs are incurred in connection with the evaluation of potential acquisition and investment opportunities whether or not the acquisitions or investments are ultimately consummated.  Further, funding of such investments or acquisitions may require additional debt or equity financing, which will subject us to the risks and uncertainties described in these risk factors with respect to those activities in the immediately following risk factors.  If we require additional financing in the future, the financing may not be available when needed or on favorable terms, if at all.

We have a large customer that accounts for a significant portion of our revenues, and the loss of this customer, or decrease in the customers demand for our products, could have a material adverse effect on our results of operations.

In 2021, our largest customer, a commercial aerospace and defense company, accounted for $7,838,000, or 29.4%, of our total revenues, compared to $7,802,000, or 26.0%, of the Company’s total revenues in 2021.  Our second largest customer in 2021, a defense contractor, accounted for $3,138,000, or 11.8%, of the Company's total revenues, compared to $5,550,000, or 18.5%, of the Company’s total revenues in 2020. The loss of either of these customers, or a decrease in their demand for our products, could have a material adverse effect on our results.

A relatively small number of customers account for a significant portion of our accounts receivable, and the insolvency of any of these customers could have a material adverse impact on our liquidity.

As of December 31, 2021, four of our largest customers accounted for approximately $2,568,000, or 62.3% of accounts receivable. The insolvency of any of these customers could have a material adverse impact on our liquidity.

Our order backlog may not be indicative of future revenues.

Our order backlog is comprised of orders that are subject to specific production release, orders under written contracts, oral and written orders from customers with which we have had long-standing relationships and written purchase orders from sales representatives.  Our customers may order products from multiple sources to ensure timely delivery when backlog is particularly long and may cancel or defer orders without significant penalty.  They also may cancel orders when business is weak and inventories are excessive.  As a result, we cannot provide assurances as to the portion of backlog orders to be filled in a given year, and our order backlog as of any particular date may not be representative of actual revenues for any subsequent period.

Our future rate of growth and profitability are highly dependent on the development and growth of the communications, networking, aerospace, defense, instrumentation and industrial markets, which are cyclical.

In 2021, the majority of our revenues were derived from sales to manufacturers of equipment for the defense, aerospace, instrumentation and industrial markets for frequency and spectrum control devices, including indirect sales through distributors and contract manufacturers.  During 2022 and 2023, we expect a significant portion of our revenues to continue to be derived from sales to these manufacturers.  Often OEMs and other service providers within these markets have experienced periods of capacity shortage and periods of excess capacity, as well as periods of either high or low demand for their products.  In periods of excess capacity or low demand, purchases of capital equipment may be curtailed, including equipment that incorporates our products.  A reduction in demand for the manufacture and purchase of equipment for these markets, whether due to cyclical, macroeconomic or other factors, or due to our reduced ability to compete based on cost or technical factors, could substantially reduce our net sales and operating results and adversely affect our financial condition.  Moreover, if these markets fail to grow as expected, we may be unable to maintain or grow our revenues.  The multiple variables which affect the communications, networking, aerospace, defense, instrumentation and industrial markets for our products, as well as the number of parties involved in the supply chain and manufacturing process, can impact inventory levels and lead to supply chain inefficiencies.  As a result of these complexities, we have limited visibility to forecast revenue projections accurately for the near and medium-term timeframes.

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The market share of our customers in the communications, networking, aerospace, defense, instrumentation and industrial markets may change over time, reducing the potential value of our relationships with our existing customer base.

We have developed long-term relationships with our existing customers, including pricing contracts, custom designs and approved vendor status.  If these customers lose market share to other equipment manufacturers in the communications, networking, aerospace, defense, instrumentation and industrial markets with whom we do not have similar relationships, our ability to maintain revenue, margin or operating performance may be adversely affected.

If we are unable to introduce innovative products, demand for our products may decrease.

Our future operating results are dependent on our ability to develop, introduce and market innovative products continually, to modify existing products, to respond to technological change and to customize some of our products to meet customer requirements.  There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that it will be unable to develop and market new products and applications in a timely or cost-effective manner to satisfy customer demand.

Our markets are highly competitive, and we may lose business to larger and better-financed competitors.

Our markets are highly competitive worldwide, with low transportation costs and few import barriers.  We compete principally on the basis of product quality and reliability, availability, customer service, technological innovation, timely delivery and price.  Within the industries in which we compete, competition has become increasingly concentrated and global in recent years.

Many of our major competitors, some of which are larger than us, and potential competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer support capabilities.  If we are unable to successfully compete against current and future competitors, our operating results will be adversely affected.

Our success depends on our ability to retain key management and technical personnel and attracting, retaining, and training new technical personnel.

Our future growth and success will depend in large part upon our ability to recruit highly-skilled technical personnel, including engineers, and to retain our existing management and technical personnel.  The labor markets in which we operate are highly competitive and some of our operations are not located in highly populated areas.  As a result, we may not be able to recruit and retain key personnel.  Our failure to hire, retain or adequately train key personnel could have a negative impact on our performance.

We purchase certain key components and raw materials from single or limited sources and could lose sales if these sources fail to fulfill our needs for any reason, including the inability to obtain these key components or raw materials due to the COVID-19 outbreak.

If single-source components or key raw materials were to become unavailable on satisfactory terms, and we could not obtain comparable replacement components or raw materials from other sources in a timely manner, our business, results of operations and financial condition could be harmed.  On occasion, one or more of the components used in our products have become unavailable, resulting in unanticipated redesign and related delays in shipments.  The COVID-19 outbreak has caused a global pandemic that has disrupted supply chains and the ability to obtain components and raw materials around the world for all companies, including Mtron.  We cannot give assurance that we will be able to obtain the necessary components and raw materials necessary to conduct our business during the COVID-19 pandemic, and we also cannot give assurance that similar delays will not occur in the future.  In addition, our suppliers may be impacted by compliance with environmental regulations including RoHS and Waste Electrical and Electronic Equipment (“WEEE”), which could disrupt the supply of components or raw materials or cause additional costs for us to implement new components or raw materials into our manufacturing processes.

As a supplier to U.S. Government defense contractors, we are subject to a number of procurement regulations and other requirements and could be adversely affected by changes in regulations or any negative findings from a U.S. Government audit or investigation.

A number of our customers are U.S. Government contractors.  As one of their suppliers, we must comply with significant procurement regulations and other requirements.  Under applicable federal regulations for defense contractors, we are required to

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comply with the Cybersecurity Maturity Model Certification (“CMMC”) program in the next several years and other similar cybersecurity requirements.  We also maintain registration under the International Traffic in Arms Regulations for all of our production facilities.  One of those production facilities must comply with additional requirements and regulations for our production processes and for selected personnel in order to maintain the security of classified information.  These requirements, although customary within these markets, increase our performance and compliance costs.  If any of these various requirements change, our costs of complying with them could increase and reduce our operating margins.  To the extent that we are unable to comply with the CMMC or other requirements, our business with the Department of Defense or our prime customers could be at risk.

We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. Government and its agencies such as the Defense Contract Audit Agency and Defense Contract Management Agency.  These agencies review our performance under our contracts, our cost structure and our compliance with applicable laws, regulations, and standards, as well as the adequacy of, and our compliance with, our internal control systems and policies.  Systems that are subject to review include our purchasing systems, billing systems, property management and control systems, cost estimating systems, compensation systems and management information systems.

Any costs found to be improperly allocated to a specific contract will not be reimbursed or must be refunded if already reimbursed.  If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business as a supplier to contractors who sell products and services to the U.S. Government.  In addition, our reputation could be adversely affected if allegations of impropriety were made against us.

From time to time, we may also be subject to U.S. Government investigations relating to our or our customers’ operations and products, and we and our customers are expected to perform in compliance with a vast array of federal laws, including the Truth in Negotiations Act, the False Claims Act, the International Traffic in Arms Regulations promulgated under the Arms Export Control Act, and the Foreign Corrupt Practices Act.  We or our customers may be subject to reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition, or result in a diminution in revenue from our customers, if we or our customers are found to have violated the law or are indicted or convicted for violations of federal laws related to government security regulations, employment practices or protection of the environment, or are found not to have acted responsibly as defined by the law.  Such convictions could also result in suspension or debarment from serving as a supplier to government contractors for some period of time.  Such convictions or actions could have a material adverse effect on us and our operating results.  The costs of cooperating or complying with such audits or investigations may also adversely impact our financial results.

Our products are complex and may contain errors or design flaws, which could be costly to correct.

When we release new products, or new versions of existing products, they may contain undetected or unresolved errors or defects.  The vast majority of our products are custom designed for requirements of specific OEM systems.  The expected business life of these products ranges from less than one year to more than 10 years depending on the application.  Some of the customizations are modest changes to existing product designs while others are major product redesigns or new product platforms.

Despite testing, errors or defects may be found in new products or upgrades after the commencement of commercial shipments.  Undetected errors and design flaws have occurred in the past and could occur in the future.  These errors could result in delays, loss of market acceptance and sales, diversion of development resources, damage to our reputation, product liability claims and legal action by our customers and third parties, failure to attract new customers and increased service costs.

Communications and network infrastructure equipment manufacturers increasingly rely upon contract manufacturers, thereby diminishing our ability to sell our products directly to those equipment manufacturers.

There is a continuing trend among communications and network infrastructure equipment manufacturers to outsource the manufacturing of their equipment or components.  As a result, our ability to persuade these OEMs to utilize our products in customer designs could be reduced and, in the absence of a manufacturer’s specification of our products, the prices that we can charge for them may be subject to greater competition.

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Future changes in our environmental liability and compliance obligations may increase costs and decrease profitability.

Our present and past manufacturing operations, products, and/or product packaging are subject to environmental laws and regulations governing air emissions, wastewater discharges, and the handling, disposal and remediation of hazardous substances, wastes and other chemicals.  In addition, more stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any future regulations might require, or the cost of compliance that would be associated with such regulations.

Environmental laws and regulations may cause us to change our manufacturing processes, redesign some of our products, and change components to eliminate some substances in our products in order to be able to continue to offer them for sale.

We have significant international operations and sales to customers outside of the United States that subject us to certain business, economic and political risks.

We have office and manufacturing space in Noida, India, and a sales office in Hong Kong.  Additionally, foreign revenues (primarily relating to Malaysia) accounted for 27.7% of our combined revenues for the first quarter of 2022 and 21.5% of our combined revenues for the 2021 year.  We anticipate that sales to customers located outside of the United States will continue to be a significant part of our revenues for the foreseeable future.  Our international operations and sales to customers outside of the United States subject our operating results and financial condition to certain business, economic, political, health, regulatory and other risks, including but not limited to:

 

Political and economic instability in countries in which our products are manufactured and sold;

 

Expropriation or the imposition of government controls;

 

Responsibility to comply with anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;

 

Sanctions or restrictions on trade imposed by the United States Government;

 

Export license requirements;

 

Trade restrictions;

 

Currency controls or fluctuations in exchange rates;

 

High levels of inflation or deflation;

 

Difficulty in staffing and managing non-U.S. operations;

 

Greater difficulty in collecting accounts receivable and longer payment cycles;

 

Changes in labor conditions and difficulties in staffing and managing international operations;

 

The impact of the current COVID-19 outbreak; and

 

Limitations on insurance coverage against geopolitical risks, natural disasters and business operations.

Additionally, to date, very few of our international revenue and cost obligations have been denominated in foreign currencies.  As a result, changes in the value of the United States dollar relative to foreign currencies may affect our competitiveness in foreign markets.  We do not currently engage in foreign currency hedging activities, but may do so in the future to the extent that we incur a significant amount of foreign-currency denominated assets or liabilities.

We rely on information technology systems to conduct our business, and disruption, failure or security breaches of these systems could adversely affect our business and results of operations.

We rely on information technology (“IT”) systems in order to achieve our business objectives.  We also rely upon industry accepted security measures and technology to securely maintain confidential information maintained on our IT systems.  However, our portfolio of hardware and software products, solutions and services and our enterprise IT systems may be vulnerable to damage or disruption caused by circumstances beyond our control such as catastrophic events, power outages, natural disasters, computer system or network failures, computer viruses, cyber-attacks or other malicious software programs.  The failure or disruption of our IT systems to perform as anticipated for any reason could disrupt our business and result in decreased performance, significant remediation costs, transaction errors, loss of data, processing inefficiencies, downtime, litigation and the loss of suppliers or customers.  A significant disruption or failure could have a material adverse effect on our business operations, financial performance and financial condition.

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Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources.  These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.  The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to customer relationships.  As our reliance on technology increases, so will the risks posed to our information systems, both internal and those we outsource.  There is no guarantee that any processes, procedures and internal controls we have implemented or will implement will prevent cyber intrusions, which could have a negative impact on our financial results, operations, business relationships or confidential information.

If we fail to correct any material weakness that our independent registered public accounting firm identifies in our internal control over financial reporting or otherwise fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on our system of internal control.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.  We are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies.

If we identify material weaknesses in our internal control over financial reporting in the future, if we cannot comply with the requirements of the Sarbanes-Oxley Act in a timely manner or attest that our internal control over financial reporting is effective, or if our independent registered public accounting firm cannot express an opinion as to the effectiveness of our internal control over financial reporting when required, we may not be able to report our financial results accurately and timely.  As a result, investors, counterparties and consumers may lose confidence in the accuracy and completeness of our financial reports.  Accordingly, access to capital markets and perceptions of our creditworthiness could be adversely affected, and the market price of our common stock could decline.  In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission (the “SEC”) or other regulatory authorities, which could require additional financial and management resources.  These events could have a material and adverse effect on our business, operating results, financial condition and prospects.

The ongoing effects of the COVID-19 pandemic and associated global economic disruption and uncertainty have affected, and may further affect, our business, results of operations and financial condition.

Our results of operations are affected by certain economic factors, including the downturn in the avionics market and closure of our facilities located in Noida, India on March 23, 2020.  This facility resumed limited operations on May 7, 2020 and was in full operation at the end of June 2020.  The broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain as well as the extent to which it will affect our revenues and earnings.  Although we believe that after the spin-off we will have sufficient liquidity and capital resources to effectively continue operations for the foreseeable future, continued deterioration of worldwide credit and financial markets may limit our ability to raise capital and financing may not be available to us in sufficient amounts, on acceptable terms, or at all.  If we are unable to access sufficient capital on acceptable terms, our business could be adversely impacted.

In an effort to protect the health and safety of our employees, we implemented various measures to reduce the impact of COVID-19 across our organization, while also working to maintain business continuity.  Consistent with government guidelines and mandates, these initiatives included the adoption of social distancing policies, work-at-home arrangements, and suspending employee travel.  Currently, while a few of our administrative employees are working remotely from home in an effort to reduce the spread of the virus, most of our employees are unable to work from home as we are primarily a manufacturer of products for the defense and aerospace industries and our employees’ work must be performed within a controlled environment.  A decline in the health and safety of our employees, including key employees, or material disruptions to their ability to work either remotely or at one of our manufacturing facilities, could negatively affect our ability to operate our business normally and have a material adverse impact on our results of operations or financial condition.

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To the extent that COVID-19 continues to spread and affect the employee base or operations of our materials providers, disruptions in the provision of, or the inability to provide, materials to us could negatively impact our business operations.

We may issue additional securities and incur additional indebtedness at our company or our subsidiaries.

We may in the future seek to raise funds through the issuance of debt or equity securities.  There is generally no restriction on our ability to issue debt or equity securities, which are pari passu or have a preference over its common stock.  After the spin-off, authorized but unissued shares of our capital stock will be available for issuance from time to time at the discretion of our board of directors, and any such issuance may be dilutive to our stockholders.

Substantial sales of Mtron Common Stock could adversely affect the market prices of such securities.

Substantial sales of Mtron Common Stock, including sales of shares by significant stockholders and management, could adversely affect the market prices of such shares.  Management has in the past and may in the future enter into Rule 10b5-1 plans pursuant to which a significant number of shares are sold into the open market.

Risks Relating to the Spin-Off

We may be unable to achieve some or all of the expected benefits of the spin-off, and the spin-off may adversely affect our business.

As a new, publicly-traded company, we may be more susceptible to market fluctuations and other adverse events attendant to our separation from the Company.  Our performance may not meet expectations for a variety of reasons.  As a subsidiary of the Company, we enjoyed certain benefits, including economies of scope and scale in costs, employees and business relationships.  These benefits may not be as readily achievable as a stand-alone company.  There can be no assurance that the spin-off will not adversely affect our business.

The distribution of Mtron Common Stock may not qualify for tax-free treatment.

There is a risk that the distribution may not qualify for tax-free treatment and, accordingly, will be a taxable transaction to the Company’s stockholders.  While the distribution is intended to be tax-free under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”), and while we believe that the Company’s stockholders should not recognize gain or loss as a result of the distribution and that no amount should be included in their income as a result of the distribution for U.S. federal income tax purposes, the Company has not obtained, and does not expect to obtain, a tax opinion with respect to the tax consequences of the spin-off.  Furthermore, neither the Company nor Mtron has applied or will apply for a private letter ruling from the Internal Revenue Service (the “IRS”) with respect to the tax consequences of the distribution.  Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to the Company, Mtron or the Company’s stockholders.  If the distribution is determined to be taxable for U.S. federal income tax purposes, the receipt of Mtron Common Stock in the spin-off is expected to be treated as a distribution of property in an amount equal to the fair market value of the stock received.  We believe that a reasonable approach to determine the fair market value of the shares of Mtron Common Stock received would be to use the volume-weighted average price of Mtron Common Stock on the first full trading day following the distribution.  In such circumstances, the distribution of Mtron Common Stock in the spin-off would be treated as ordinary dividend income to the extent considered paid out of the Company’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles).  Distributions in excess of the Company’s current year and accumulated earnings and profits will be treated as a non-taxable return of capital, which reduces basis, to the extent of the holder’s basis in its shares of the Company’s common stock, as applicable, and thereafter as capital gain.  The amount of those earnings and profits is not determinable at this time because it will depend on the Company’s income for the entire tax year in which the distribution occurs.  For more information regarding the potential U.S. federal income tax consequences to you of the distribution, see the section entitled “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off.”

Our ability to meet our capital needs may be harmed by the loss of financial support from the Company, and we may not be able to obtain funds necessary to operate our business.

Our ability to meet our capital needs, which turn on our financial condition and future prospects, may be harmed after the completion of the spin-off, and we will not be able to access financial support from the Company following the spin-off.  To the extent

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we seek funds through accessing equity or debt capital markets, as a standalone company, the cost of financing will depend on many factors, among other things, such as our performance and financial market conditions generally.  Accordingly, we may not be able to obtain financing or otherwise raise funds necessary to operate our business on favorable terms, or at all.  If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay or scale back our acquisition activity and planned capital expenditures, which could adversely impact our business and prospects.  In addition, to the extent debt financing, if available, is obtained, we may be subject to operating and financial covenants that may restrict our operations and if we cannot generate sufficient cash flow from operations to meet future debt payment obligations, we may be required to attempt to restructure or refinance such debt, raise additional capital or take other actions such as selling assets, or reducing or delaying capital expenditures.  There is no assurance that we will be able to effect any such actions or do so on satisfactory terms, if at all, or that such actions would be permitted by the terms of our indebtedness.  Further, to the extent that we raise additional funds by issuing equity securities, our stockholders would experience dilution, which may be significant and could cause the market price of Mtron Common Stock to decline.

Mtron may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as a separate, publicly traded company, and we may experience increased costs after the spin-off.

Following the spin-off, the Company will have no obligation to provide us with assistance other than the obligations and services contained in the agreements between the Company and Mtron relating to the spin-off, including the Separation and Distribution Agreement and other agreements described under “The Spin-Off – Relationship Between Mtron and the Company.” These services do not include every service that we have received from the Company in the past, and the Company is only obligated to provide the services for limited periods following completion of the spin-off.  The agreements relating to such services and to the spin-off were agreed to prior to the spin-off, at a time when our business was still operated as part of the Company’s organization, and we did not have an independent board of directors or management team representing our interests with respect to such agreements.

Following the spin-off and the expiration of the aforementioned agreements, we will need to provide internally or obtain from unaffiliated third parties the services we will no longer receive from the Company.  These services may include, without limitation, legal, accounting, information technology, human resources and other infrastructure support, the effective and appropriate performance of which may be critical to our operations. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those received from the Company.  We may be unable to successfully establish the infrastructure or implement the changes necessary to operate independently, or may incur additional costs that could adversely affect us.  If we fail to obtain the quality of services necessary to operate effectively or incur greater costs in obtaining these services, our business, financial condition and results of operations may be adversely affected.

As a public company, we will be subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).  These requirements may place a strain on our systems and resources.  The Exchange Act requires that we file reports and statements with the SEC, including annual, quarterly and current reports.  Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight.  We intend to implement additional procedures and processes to address the standards and requirements applicable to public companies, but these procedures may not be successful and the costs associated with compliance may be greater than anticipated.

We do not have an operating history as a standalone company apart from the Companys organization, and our historical and pro forma financial information may not be a reliable indicator of our future results.

The historical financial information Mtron has included in this information statement has been derived from the Company’s consolidated financial statements and accounting records and does not necessarily reflect what our financial position, results of operations and cash flows would have been had Mtron been a separate, stand-alone entity during the periods presented.  The Company did not account for Mtron, and Mtron was not operated, as a separate, stand-alone company for the periods presented.  Actual costs that may have been incurred if Mtron had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure, and materiality thresholds would have been significantly lower.  In addition, the historical information may not be indicative of what our results of operations, financial position and cash flows will be in the future.  For example, following the spin-off, changes may occur in our cost structure, debt financing and interest expense, funding and operations, including changes in our tax structure, and we will incur increased costs associated with being a stand-alone public company.

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Additionally, in preparing the unaudited pro forma combined financial statements contained in this information statement, Mtron based the pro forma adjustments on available information and assumptions that Mtron believes are reasonable and factually supportable; however, the assumptions may prove not to be accurate.  Also, our unaudited pro forma combined financial statements do not give effect to various ongoing additional costs Mtron may incur in connection with being a stand-alone public company.  Accordingly, the unaudited pro forma combined financial statements do not reflect what our financial condition, results of operations or cash flows would have been as a stand-alone public company and is not necessarily indicative of our future financial condition or results of operations.

The spin-off could give rise to disputes or other unfavorable effects, which could have a material adverse effect on our business, financial position and results of operations.

Disputes with third parties could arise out of the distribution, and we could experience unfavorable reactions to the distribution from employees, investors, or other interested parties.  These disputes and reactions could have a material adverse effect on our business, financial position, and results of operations.  In addition, following the spin-off, disputes between Mtron and the Company could arise in connection with the Separation and Distribution Agreement and other agreements to be entered into between Mtron and the Company in connection with the spin-off as described under “The Spin-Off – Relationship Between Mtron and the Company.”

We may have been able to receive better terms from unaffiliated third parties than the terms provided in our agreements with the Company.

The agreements related to our separation from the Company were negotiated in the context of our separation from the Company while we were still a wholly-owned subsidiary.  Accordingly, they may not reflect terms that would have been reached between unaffiliated parties.  The terms of the agreements we negotiated in the context of the separation related to, among other things, indemnities and other obligations between the Company and Mtron.  Had these agreements been negotiated with unaffiliated third parties, they might have been more favorable to Mtron.

Our potential indemnification obligations pursuant to the Separation and Distribution Agreement could have material adverse effects.

Under the Separation and Distribution Agreement, we have an obligation to indemnify the Company for liabilities associated with our business and any breach of our obligations under the Separation and Distribution Agreement and other agreements to be entered into between Mtron and the Company in connection with the spin-off as described under “The Spin-Off – Relationship between Mtron and the Company.” The costs associated with any such indemnification could be significant and have a material adverse effect on our results and financial condition.

Our current or prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial condition on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them.

Our customers, suppliers or other companies with whom we conduct business may need assurances that our financial condition on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them.  If any of them are not satisfied with our financial stability and cease doing business with Mtron, our business, financial condition and results of operations could be materially adversely affected.

After the separation, certain of Mtron’s directors and officers may have actual or potential conflicts of interest because of their positions or relationships with the Company.

After the separation, Marc J. Gabelli will serve as Mtron’s non-executive chairman of the board and will also serve as chairman of the board and chief executive officer of the Company, Michael J. Ferrantino will serve as Mtron’s chief executive officer and as a director on our board and also as a director of the Company, and James W. Tivy will serve as Mtron’s chief financial officer and also as chief accounting officer of the Company.  Such dual roles could create, or appear to create, potential conflicts of interest when the Company and our officers and directors face decisions that could have different implications for the two companies.

In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between the Company and Mtron regarding the terms of the agreements governing the separation and the relationship thereafter between the

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companies.  The Company’s executive officers and other personnel who serve as directors or executive management of Mtron may interpret these agreements in their capacity as the Company’s employees in a manner that would adversely affect the business of Mtron.

The aggregate post-distribution value of the Mtron Common Stock and the Companys common stock may not equal or exceed the pre-spin-off value of the Companys common stock.

After the spin-off, the Company’s common stock will continue to be listed and traded on the NYSE American under the symbol “LGL.” The Mtron Common Stock is expected to be listed on the NYSE American under the symbol “MPTI.” We cannot assure you that the combined value of the Company’s common stock and Mtron Common Stock after the spin-off will be equal to or greater than the value of the Company’s common stock prior to the spin-off.  Until the market has fully evaluated the business of the Company without the business of Mtron, the value of the Company’s common stock may fluctuate significantly.  Similarly, until the market has fully evaluated the business of Mtron, the value of Mtron Common Stock may fluctuate significantly.

Risks Relating to Mtron Common Stock

There is no existing market for Mtron Common Stock and an active trading market may not develop or be sustained after the spin-off.  If the price of Mtron Common Stock fluctuates significantly following the spin-off, stockholders could incur substantial loss of their investment.

There currently is no public market for Mtron Common Stock and there can be no assurance that an active trading market will develop as a result of the spin-off or be sustained in the future.  The lack of an active market may make it more difficult for you to sell your stock and could lead to the price of the stock being depressed or more volatile.  The price at which Mtron Common Stock may trade after the spin-off cannot be predicted.  The price of Mtron Common Stock could fluctuate widely in response to:

 

our quarterly and annual operating results;

 

changes in our business and the market’s perception of our business;

 

changes in the businesses, earnings estimates or market perceptions of our competitors or customers;

 

changes in our key personnel;

 

changes in general market or economic conditions; and

 

changes in the legislative or regulatory environment.

In addition, the stock market has at times experienced extreme price and volume fluctuations that have significantly affected the quoted prices of securities.  The changes often appear to occur without regard to specific operating performance.  The price of Mtron Common Stock could fluctuate based upon factors that have little or nothing to do with our business or our performance, and these fluctuations could materially reduce the price of Mtron Common Stock.

Substantial sales of Mtron Common Stock may occur in connection with the spin-off, which could cause the price of the common stock to decline.

Other than stockholders that are affiliates of the Company, stockholders of the Company receiving shares of Mtron Common Stock in the distribution generally may sell those shares immediately in the public market.  The Company’s stockholders may decide to sell the shares received in the distribution for any reason, including if, among other things, if Mtron Common Stock does not fit their investment objectives.  Sales of significant amounts of Mtron Common Stock or a perception in the market that such sales will occur may reduce the market price of the stock.

Mario J. Gabellis and Marc J. Gabellis stock ownership position may adversely affect the market price of Mtron Common Stock.

Mario J. Gabelli and Marc J. Gabelli will have the same beneficial ownership and voting interest in Mtron immediately following the spin-off as they have with respect to the Company immediately prior to the spin-off; they will beneficially own 1,042,612 and 844,883 shares, respectively, which in the aggregate represents 35.0% of the total outstanding shares of the Company’s common stock.  The Company’s officers, directors and 10% or greater stockholders control approximately 39.0% of the voting power of the outstanding shares of the Company’ common stock.  These Company stockholders will have the same voting power with respect to

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Mtron and will have a significant influence in the election of directors and the vote on any other matter presented for approval by our stockholders.  This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of Mtron Common Stock.  This concentration of ownership may not be in the best interests of all of our stockholders.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company more difficult, which acquisition may be beneficial to our stockholders.

Provisions in our certificate of incorporation and by-laws, as well as provisions of the Delaware General Corporation Law (“DGCL”), may discourage, delay or prevent a merger, acquisition or other change in control of the Company, even if such a change in control would be beneficial to our stockholders.  These provisions include prohibiting our stockholders from fixing the number of directors and establishing advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors.

Additionally, Section 203 of the DGCL prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with Mtron for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.  Mtron has not opted out of the restrictions under Section 203, as permitted under DGCL.

Our certificate of incorporation will contain an exclusive forum provision, which could impair the ability of stockholders to obtain a favorable judicial forum for certain disputes with us or our directors, officers or other employees and be cost-prohibitive to stockholders.

Our certificate of incorporation will contain an exclusive forum provision which provides that, unless our board of directors consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over an action or proceeding, then another court of the State of Delaware or, if no court of the State of Delaware has jurisdiction, then the United States District Court for the District of Delaware) will be the sole and exclusive forum for “Covered Proceedings,” which include: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees, agents and stockholders to us or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or bylaws; and (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware.  Further, unless we select or consent to the selection of an alternative forum, to the fullest extent permitted by law,   the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Our exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.  The exclusive forum provision will also provide that if any Covered Proceeding is filed in a court other than a court located within the State of Delaware in the name of any stockholder, then such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the exclusive forum provision and (b) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the action as agent for such stockholder.  Notwithstanding the foregoing, stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

The exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees or be cost-prohibitive to stockholders, which may discourage such lawsuits against us and our directors, officers and other employees.  While the Delaware courts have determined that such choice of forum provisions are facially valid, there is uncertainty regarding whether a court would enforce the exclusive forum provision and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum. In such instance, we would expect to assert vigorously the validity and enforceability of the exclusive forum provisions of our certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. If a court were to find the exclusive forum provision to be inapplicable or unenforceable in an action, Mtron may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our financial condition and operating results.

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We do not plan to pay dividends on our common stock.

Our dividend policy will be established by our board of directors based on our financial condition, results of operations and capital requirements, as well as other business considerations that the board considers relevant.  Further, the terms of our indebtedness may limit or prohibit the payments of dividends.  We do not currently anticipate paying any cash dividends for the foreseeable future.

Utilizing the reduced disclosure requirements applicable to Mtron may make Mtron Common Stock less attractive to investors.

Mtron qualifies as an “emerging growth company” and is therefore eligible to utilize certain reduced reporting and other requirements that are otherwise applicable generally to public companies.  Pursuant to these reduced disclosure requirements, Mtron is not required to, among other things, provide certain disclosures regarding executive compensation, hold stockholder advisory votes on executive compensation or obtain stockholder approval of any golden parachute payments, and Mtron has reduced financial disclosure obligations.  Mtron may remain an emerging growth company for up to five full fiscal years following the spin-off.  Mtron would cease to be an emerging growth company, and, therefore, become ineligible to rely on the above exemptions, if it (a) has more than $1.07 billion in annual revenue in a fiscal year, (b) issue more than $1 billion of non-convertible debt over a three-year period or (c) become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur after: (i) we have filed at least one annual report; (ii) we have been an SEC-reporting company for at least 12 months; and (iii) the market value of Mtron Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter (June 30).  We cannot predict if investors will find Mtron Common Stock less attractive because we may rely on these exemptions.

Mtron also qualifies as a “smaller reporting company” under the Exchange Act in which case Mtron would be eligible to utilize the reduced disclosure requirements available to smaller reporting companies even after Mtron ceases to be an emerging growth company.  The reduced disclosure requirements available to smaller reporting companies are similar to those available to emerging growth companies, including reduced financial and executive compensation disclosures.  Under current SEC rules, Mtron will be a smaller reporting company if, as of the end of the third fiscal quarter following the completion of the spin-off (the quarter ending September 30, 2022 assuming the spin-off is completed prior to such date), the total market value of our common equity securities held by non-affiliates is less than $200 million.

Mtron intends to utilize the reduced reporting requirements and available exemptions for so long as we are permitted to do so.  Investors may find Mtron Common Stock to be less attractive as a result of our utilization of the reduced disclosure requirements and exemptions, which may have a material, adverse effect on the trading market and market price of Mtron Common Stock.


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Cautionary Statement Regarding Forward-Looking Statements

This information statement and other materials that Mtron has filed, or will file, with the SEC contain, or will contain, “forward-looking statements.” Forward-looking statements are those that do not relate strictly to historical or current facts and can be identified by use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” “believes,” “will,” “should,” “would,” “may,” “could” or the negative of these terms or similar expressions or future or conditional verbs.  Forward-looking statements include, among others, statements relating to our future financial performance, business prospects and strategy, anticipated financial position, liquidity and capital needs, market potential, and other events or developments that Mtron expects or anticipates will occur in the future and statements expressing general views about future operating results or conditions.  These statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are impossible or difficult to predict.  Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements as a result of various factors, including, without limitation, those set forth below.

With respect to Mtron generally, the various factors include, but are not limited to:

 

risks and uncertainties relating to public health issues, including, in particular, the COVID-19 pandemic, as it is not currently possible to accurately assess the expected duration and effects of the pandemic on our business (these include required closures of retail locations, business restrictions, “shelter in place” and “stay at home” orders and advisories, volatility in the global and national economies and equity, credit, and commodities markets, worker absenteeism, quarantines, and other health-related restrictions; the duration and severity of the COVID-19 pandemic and the impact on demand for our products and services, levels of business confidence, and supply chains; actions governments, businesses, and individuals take in response to the pandemic and their impact on economic activity and business investment and spending, which will impact our ability to successfully carry out business operations; the pace of recovery when the COVID-19 pandemic subsides; competitive conditions; our liquidity and the availability of capital; the effects and duration of steps Mtron takes in response to the COVID-19 pandemic; the risk of heightened litigation as a result of actions taken in response to the COVID-19 pandemic; and the impact of the COVID-19 pandemic on businesses, and their views towards the industries in which Mtron operates);

 

risks and uncertainties affecting us and our results, operations, markets, products, services and business strategies, and the risks and uncertainties associated with our ability to successfully implement our currently anticipated plans, and our ability to generate earnings under the current business strategy;

 

risks associated with acquisitions, asset or subsidiary dispositions, or debt or equity financings which Mtron may consider or pursue from time to time;

 

risks of cybersecurity threats, including the potential misappropriation of assets or confidential information, corruption of data or operational disruptions;

 

the updating of, and developments with respect to, technology, including the cost involved in updating our technology and the impact that any failure to keep pace with developments in technology could have on our operations or competitive position and our information technology expenditures may not result in the expected benefits;

 

our ability to compete effectively in the highly competitive industries in which it operates;

 

our ability to maintain the integrity of internal or customer data, the failure of which could result in damage to our reputation and/or subject us to costs, fines or lawsuits;

 

our relationships with key customers and suppliers may be materially diminished or terminated;

 

the preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions, and any changes in estimates, judgments and assumptions used could have a material adverse impact on the financial condition and operating results of us or our subsidiaries;

 

the impact on our combined financial statements and internal control over financial reporting of the adoption of new accounting standards;

 

audits of our or our subsidiaries’ federal or state tax returns, including that they may result in the imposition of additional taxes;

 

damage to the reputation of Mtron or any of its subsidiaries could harm our business, financial condition and results of operations;

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our business is subject to various governmental regulations, laws and orders, compliance with which may cause Mtron to incur significant expenses, and any noncompliance could subject Mtron to civil or criminal penalties or other liabilities;

 

the outcome of litigation, inquiries, investigations, examinations or other legal proceedings is inherently uncertain and could subject Mtron to significant monetary damages or restrictions on our ability to do business;

 

environmental liabilities and their impact on our financial condition and operating results;

 

risks that natural disasters and other acts of god may adversely impact our financial condition and operating results; and

 

any damage to physical assets or interruption of access to physical assets or operations resulting from public health issues, such as the recent coronavirus outbreak, or from hurricanes, earthquakes, fires, floods, windstorms or other natural disasters, which may increase in frequency or severity due to climate change or other factors.

Risks and uncertainties related to the spin-off include, but are not limited to:

 

the risk that some or all of the anticipated benefits related to the spin-off may not be achieved when or to the extent expected, or at all;

 

the risk that Mtron may need additional capital in the future; however, such capital may not be available to Mtron on reasonable terms, if at all;

 

our historical and pro forma financial information is not necessarily representative of the results Mtron would have achieved as a separate, publicly-traded company and may not be a reliable indicator of its future results;

 

the spin-off could give rise to disputes or other unfavorable effects, which could have a material adverse effect on our business, financial position and results of operations; and

 

Mtron and the Company may be required to indemnify each other for certain liabilities; however, there can be no assurance that any indemnities from the Company will be sufficient to insure Mtron against the full amount of such liabilities or that the Company’s ability to satisfy its indemnification obligations will not be impaired in the future, and any indemnification obligations Mtron may have could materially adversely affect our results and financial condition;

 

no market for Mtron Common Stock currently exists and an active trading market may not develop or be sustained after the spin-off and the price of Mtron Common Stock, once publicly-traded, may be volatile, including until the public is able to fully analyze our business, operations and results separate from the Company; and

 

adverse conditions in the stock market, the public debt market and other capital markets or the economy generally, and the impact of such conditions on our activities and results, and the price and liquidity of Mtron Common Stock.

In addition to the foregoing, reference is made to the other risks and uncertainties inherent to our business and activities, including those discussed under “Risk Factors” and elsewhere in this information statement.  These and other factors disclosed in this information statement are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in or implied by any of the forward-looking statements.  Other unknown or unpredictable factors could cause our actual results to differ materially from those expressed in or implied by any of the forward-looking statements.  Given these uncertainties, you are cautioned not to place undue reliance on forward-looking statements.  These statements should be considered only after carefully reading this entire information statement and in conjunction with the other information contained herein.

The forward-looking statements contained in this information statement are made only as of the date of this information statement.  Except to the extent required by law, we do not undertake, and specifically disclaim any obligation, to update any forward-looking statements or to publicly announce the results of any revisions to any of such statements, including to reflect future events or developments.  In addition, past performance may not be indicative of future results, and comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, and all such information should only be viewed as historical data.

You should read this information statement and the materials that we reference in this information statement and have filed with the SEC as exhibits to the registration statement on Form 10, of which this information statement is a part, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.  We qualify all forward-looking statements by these cautionary statements.


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The Spin-Off

Reasons for the Spin-off

The Company’s Board of Directors has determined that the separation of Mtron from the Company is in the best interests of the Company’s stockholders.  The Company’s Board of Directors believes that the separation will, among other things:

 

allow each company to pursue its own distinct business strategy and optimal capital allocation policy, independent of the other, which would better position each company to maximize value over the long-term;

 

permit each company to tailor its strategic plans and pursue growth opportunities consistent with the key commercial markets served by each company, respectively;

 

enable each company to more efficiently raise and allocate capital, including through debt or equity offerings, based on the fundamentals of their separate business;

 

provide each company with greater flexibility to use stock as a currency for mergers, acquisitions and joint ventures;

 

provide the Company’s current stockholders with equity investments in two separate, publicly traded companies, including that reflect risks and prospects of their underlying respective businesses; and

 

enable investors to make investment decisions based on each company’s individual performance and potential, and enhance the likelihood that the market will value each company appropriately.

Mechanics of the Spin-off

The Company is the owner of all of the issued and outstanding shares of Mtron Common Stock.  The spin-off will be effected through the pro rata distribution by the Company to its stockholders of 100% of the shares of Mtron Common Stock held by the Company.  As a stockholder of the Company, you will receive one share of Mtron Common Stock for each share of the Company’s common stock held of record by you as of 5:00 P.M., Eastern time, on May 6, 2022 (such time and date being referred to as the “record date” for the distribution).  The spin-off will not impact your holdings of the Company’s common stock and, accordingly, your proportionate interest in the Company will not change as a result of the spin-off.  The distribution is intended to be tax-free for U.S. federal income tax purposes.  See “Material U.S. Federal Income Tax Consequences of the Spin-Off” below.

Based on the number of shares of the Company’s common stock expected outstanding as of the record date, we expect that 5,390,470 shares of Mtron Common Stock will be distributed in the spin-off.  However, the actual number of shares of Mtron Common Stock to be distributed in the spin-off will be determined based on the actual number of shares of the Company’s common stock outstanding as of the record date.

On or before the distribution date, the Company will release the shares of Mtron Common Stock to the distribution agent to distribute to the Company’s stockholders.  The shares will be distributed in book-entry form, which means that no physical share certificates will be issued.  We expect that it may take the distribution agent up to one week following the distribution date to electronically issue shares of Mtron Common Stock to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form.

No stockholder will be required to pay any consideration, exchange or surrender its existing shares of the Company’s common stock or take any other action to receive their shares of Mtron Common Stock.  However, the Company is seeking the approval of its stockholders in order to effect the spin-off in the contemplated manner.  The Company intends to hold a special meeting of its stockholders to approve these actions and has distributed a separate proxy statement which contains information regarding the proposed spin-off and name change and the special meeting.  Completion of the spin-off is conditioned upon stockholder approval of the spin-off and certain other conditions described below.

Relationship between Mtron and the Company

The separation of businesses of Mtron and the Company in connection with the spin-off and the relationship between Mtron and the Company following the spin-off will be governed by a Separation and Distribution Agreement, a Transitional Administrative and Management Services Agreement, and a Tax Indemnity and Sharing Agreement, each as entered into between Mtron and the Company in connection with the spin-off.  These agreements are intended to facilitate the separation of businesses between the

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Company and Mtron in connection with the spin-off and the operation of Mtron and the Company as separate companies after the spin-off.  The following is a summary of the Separation and Distribution Agreement and Transitional Administrative and Management Services Agreement.  The summaries are not complete and are qualified in their entirety by reference to the actual agreements or instruments, copies of which are filed as exhibits to the registration statement on Form 10, of which this information statement forms a part.  We encourage you to read the full text of these agreements.

Separation and Distribution Agreement

The Separation and Distribution Agreement (the “Separation Agreement”) will contain the key provisions relating to the separation of our business from that of the Company and the distribution of the Mtron Common Stock. The Separation Agreement will identify the assets to be transferred, liabilities to be assumed and contracts to be assigned to us by the Company and by us to the Company in the spin‑off and describe when and how these transfers, assumptions and assignments will occur. The Separation Agreement will also include procedures by which the Company and we will become separate and independent companies. In addition, we will enter into certain ancillary agreements with the Company governing various interim and ongoing relationships between the Company and us following the distribution date. These ancillary agreements include a Transitional Administrative and Management Services Agreement and several other agreements with the Company.

We and the Company intend to execute the Separation Agreement and the ancillary agreements on or before the distribution date; however, they will not be effective until the distribution date. The Separation Agreement may be amended if both parties agree in writing.

Recapitalization and Separation

The Separation Agreement will provide that, subject to the terms and conditions contained in the Separation Agreement and before the distribution,

 

Mtron and the Company will cause a recapitalization of Mtron by means of stock split or stock dividend such that after the record date and before the distribution date the number of shares of Mtron Common Stock issued and outstanding immediately before the distribution date will equal the number of shares of the Company’s common stock issued and outstanding as of the record date, which Mtron Common Stock owned by the Company will constitute all of the issued and outstanding capital stock of Mtron.

 

the Company will take, and will cause Mtron to take, all actions necessary to, as of the distribution date, amend and restate Mtron’s certificate of incorporation and Mtron’s bylaws

Distribution of Shares

The Company will distribute to its stockholders all the shares of Mtron Common Stock that it owns on the terms described in this information statement. The Company’s obligation to consummate the distribution is subject to the following conditions:

 

the stockholders of the Company approved at a special meeting of stockholders the transfer of substantially all assets of the Company pursuant to the Separation and Distribution Agreement in accordance with the General Corporation Law of the State of Delaware;

 

the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, with no stop order in effect with respect to the Form 10;

 

this information statement shall have been mailed to the holders of the Company’s common stock;

 

the actions and filings, if any, necessary under securities and blue sky laws of the states of the United States and any comparable laws under any foreign jurisdictions must have been taken and become effective;

 

the approval for listing of the Mtron Common Stock on the NYSE American, subject to official notice of issuance, shall have been obtained;

 

no order, injunction, decree or regulation issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the spin‑off will be in effect and no other event outside the Company’s control will have occurred or failed to occur that prevents the consummation of the spin‑off; and

 

no event or development has occurred or exists that, in the judgment of the Company’s Board, in its sole discretion, makes the spin‑off inadvisable.

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Mutual Release

As of the time of the distribution, each party will release the other party and their respective affiliates and their directors, officers, employees and agents from all claims, demands and liabilities, in law and in equity, against such other party, which such releasing party has or may have had relating to events, circumstances or actions taken by such other party prior to the distribution. This release does not apply to claims arising from the Separation Agreement.

Indemnification

From and after the distribution, the Company will indemnify Mtron and its directors, officers, employees, agents and affiliates (collectively, the “Mtron indemnitees”) against all losses, liabilities and damages incurred or suffered by any of the Mtron indemnitees arising out of:

 

the Company’s business;

 

the failure or alleged failure of the Company or any of its subsidiaries to pay, perform or otherwise discharge in due course any of Company liabilities;

 

a breach by the Company of any of its obligations under the Separation Agreement; and

 

any untrue statement or alleged untrue statement of a material fact: (i) contained in any document filed with the SEC by the Company pursuant to any securities rule, regulation or law, (ii) otherwise disclosed by the Company or its subsidiaries to investors or potential investors in the Company or its subsidiaries or (iii) furnished to any Mtron indemnitee by the Company or any of its subsidiaries for inclusion in any public disclosures to be made by any Mtron indemnitee; or any omission or alleged omission to state in any information described in clauses (i), (ii) or (iii) a material fact necessary to make the statements not misleading. The indemnity described in this paragraph will be available only to the extent that Mtron losses are caused by any such untrue statement or omission or alleged untrue statement or omission, and the information which is the subject of such untrue statement or omission or alleged untrue statement or omission was not supplied after the distribution by Mtron or its agent.

From and after the distribution, Mtron will indemnify the Company and its directors, officers, employees, agents and affiliates (collectively, “Company indemnitees”) against all losses, liabilities and damages incurred or suffered by any of the Company indemnitees arising out of:

 

Mtron’s business;

 

the failure or alleged failure of Mtron or any of its subsidiaries to pay, perform or otherwise discharge in due course any of Mtron liabilities;

 

a breach by Mtron of any of its obligations under the Separation Agreement; and

 

any untrue statement or alleged untrue statement of a material fact: (i) contained in any document filed with the SEC by Mtron following the distribution pursuant to any securities rule, regulation or law, (ii) otherwise disclosed following the distribution by Mtron or its subsidiaries to investors or potential investors in Mtron or its subsidiaries or (iii) furnished to any Company indemnitee by Mtron or any of its subsidiaries for inclusion in any public disclosures to be made by any Company indemnitee; or any omission or alleged omission to state in any information described in clauses (i), (ii) or (iii) a material fact necessary to make the statements not misleading. The indemnity described in this paragraph will be available only to the extent that Company losses are caused by any such untrue statement or omission or alleged untrue statement or omission, and the information which is the subject of such untrue statement or omission or alleged untrue statement or omission was not supplied by the Company or its agent.

Further Assurances

Each of the parties will agree to cooperate with the other and use commercially reasonable efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual obligations to consummate and make effective the transactions contemplated by the Separation Agreement and the ancillary agreements.

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Other Matters

Other matters governed by the Separation Agreement include, without limitation, access to financial and other records and information, confidentiality and resolution of disputes between the parties relating to the Separation Agreement, the ancillary agreements and the agreements and transactions contemplated thereby.

Transitional Administrative and Management Services Agreement

Concurrently with our separation from the Company, we will enter into the Transitional Administrative and Management Services Agreement (the “Transitional Services Agreement”) pursuant to which the Company will provide Mtron with a variety of services, and Mtron will provide payroll services to the Company, following the spin-off. Among the principal services that the Company will provide to us are:

• accounting, financial reporting and consolidation services;

• treasury services, including, without limitation, insurance and risk management services and administration of benefits; and

• tax planning, tax return preparation, recordkeeping and reporting services.

In providing the services pursuant to the Transitional Services Agreement, the Company may, subject to the prior written consent of Mtron, employ consultants and other advisers in addition to utilizing its own employees. In addition, Mr. Tivy, our chief accounting officer, will directly or indirectly supervise employees of Mtron that may provide services to the Company pursuant to the Transitional Services Agreement.

Services provided by the Company to Mtron or by Mtron to the Company under the Transitional Services Agreement will be charged at the rates indicated, or cost, where no rates are indicated.

The Transitional Services Agreement has a term of twelve months, and may be extended in whole or in part by agreement of the parties. The Transitional Services Agreement is terminable by either party on 30 days’ prior written notice to the other party.

Trading of Mtron Common Stock

The Company will own all of the outstanding shares of Mtron Common Stock prior to the spin-off.  Accordingly, there is no current trading market for Mtron Common Stock. The Mtron Common Stock has been approved for listing on the NYSE American, under the symbol “MPTI”.  The Company expects that the Mtron Common Stock will be listed on the NYSE American on or promptly after the distribution date.  However, there are no assurances that an active public market for Mtron Common Stock will develop or be sustained after the distribution.  If an active public market does not develop or is not sustained, it may be difficult for our stockholders to sell their shares of Mtron Common Stock at a price that is attractive to them, or at all.

It is expected that a limited trading in the over-the-counter market, commonly known as a “when-issued” trading market, for shares of Mtron Common Stock will begin one trading day before the record date.  “When-issued” trading refers to a transaction made conditionally because the security has been authorized but not yet issued.  Generally, shares may trade in the over-the-counter on a “when-issued” basis after they have been authorized but not yet formally issued, which is often initiated by participants in the over-the-counter market prior to the record date relating to the issuance of such shares.  Any “when-issued” transactions in Mtron Common Stock will be settled after the shares of Mtron Common Stock have been issued to the Company’s stockholders.  It is expected that “when-issued” trading in Mtron Common stock will end and “regular way” trading will begin on the first trading day following the distribution date.  “Regular way” trading refers to trading after a security has been issued.

We cannot predict the trading prices for Mtron Common Stock when trading begins.  Those prices will be determined by the marketplace.  Prices at which trading in Mtron Common Stock occurs may fluctuate significantly.  Trading prices for Mtron Common Stock may be influenced by many factors, including our operating results, investor perception of Mtron, market fluctuations and general economic conditions.  In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the performance of many stocks and that have often been unrelated or disproportionate to the Company’s operating performance.  These are just some of the factors that may adversely affect the market price of Mtron Common Stock.  See “Risk Factors” for further discussion of risks which may impact Mtron and the trading price of its common stock.

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Shares of Mtron Common Stock received by the Company’s stockholders in connection with the spin-off will be freely transferable, except for shares received by persons who may be deemed to be our affiliates under the Securities Act.  The Company’s stockholders that receive shares of Mtron Common Stock in the spin-off and are deemed affiliates of Mtron will be permitted to sell their shares of Mtron Common Stock only pursuant to an effective registration statement under the Securities Act or in accordance with Rule 144 of the Securities Act or another exemption from the registration requirements of the Securities Act.

Trading of the Company’s common stock Between the Record Date and the Distribution Date

The Company’s common stock is listed on the NYSE American under the trading symbol “LGL”.  It is anticipated that, beginning on the record date and continuing until the time of the distribution, there will be two markets in shares of the Company’s common stock on the NYSE American: a “regular-way” market and an “ex-distribution” market.  Shares of the Company’s common stock that trade on the “regular-way” market will trade with an entitlement to the shares of Mtron Common Stock to be distributed in the spin-off in respect thereof.  Shares of the Company’s common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of Mtron Common Stock.  Therefore, if a stockholder sells shares of the Company’s common stock in the “regular-way” market on or prior to the time of the distribution, such stockholder will also be selling the right to receive the shares of Mtron Common Stock that such stockholder would have otherwise received in the spin-off in respect of the shares of the Company’s common stock being sold.  If a stockholder owns shares of the Company’s common stock on the record date and sells those shares on the “ex-distribution” market on or prior to the time of the distribution, such stockholder will continue to be entitled to receive the shares of Mtron Common Stock which are distributed in the spin-off in respect of the shares of the Company’s common stock being sold.

Material U.S. Federal Income Tax Consequences of the Spin-Off

The following is a discussion of material U.S. federal income tax consequences of the distribution of Mtron Common Stock to “U.S. holders” (as defined below) of the Company’s common stock. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Regulations promulgated thereunder, rulings and other administrative pronouncements issued by the Internal Revenue Service (the “IRS”), and judicial decisions, all as in effect on the date of this information statement, and all of which are subject to change at any time, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. This discussion applies only to U.S. holders of shares of the Company’s common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion is based upon the assumption that the distribution, together with certain related transactions, will be consummated in accordance with the separation documents and as described in this information statement. This summary is for general information only and is not tax advice. It does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of its particular circumstances or to holders subject to special rules under the Code (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, partners in partnerships that hold the Company’s common stock, pass-through entities, traders in securities who elect to apply a mark-to-market method of accounting, shareholders who hold the Company’s common stock as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated investment” or “constructive sale transaction,” individuals who receive the Company’s common stock upon the exercise of employee stock options or otherwise as compensation, holders who are liable for alternative minimum tax or any holders who actually or constructively own more than 5% of the Company’s common stock). This discussion also does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax.

If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds the Company’s common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the separation and distribution.

For purposes of this discussion, a “U.S. holder” is any beneficial owner of the Company’s common stock that is, for U.S. federal income tax purposes:

 

an individual who is a citizen or a resident of the United States;

 

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

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a trust, if (a) a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (b) it has a valid election in place under applicable Treasury Regulations to be treated as a United States person.

THE FOLLOWING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SEPARATION AND DISTRIBUTION UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION ONLY. ALL HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

The Company has not sought and does not intend to seek a ruling from the IRS with respect to the treatment of the distribution and certain related transactions for U.S. federal income tax purposes and there can be no assurance that the IRS will not assert that the distribution is taxable. The Company believes that the distribution of Mtron Common Stock to effect the spin-off is a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) of the Code. The Company does not plan to obtain an opinion of tax counsel or other tax advisors with respect to the distribution.

Notwithstanding the Company’s intention to treat the spin-off as tax-free for U.S. federal income tax purposes, the IRS could assert that the distribution does not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in asserting this position, the Company, Mtron and the Company’s stockholders could be subject to significant U.S. federal income tax liability. Please refer to “Material U.S. Federal Income Tax Consequences if the Distribution is Taxable” below.

Material U.S. Federal Income Tax Consequences if the Distribution Qualifies as a Transaction that is Generally Tax-Free Under Sections 355 and Sections 368(a)(1)(D) of the Code

Assuming the distribution qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, the U.S. federal income tax consequences of the distribution are as follows:

 

no gain or loss will be recognized by, and no amount will be includible in the income of the Company as a result of the distribution;

 

no gain or loss will be recognized by (and no amount will be included in the income of) U.S. holders of the Company’s common stock upon the receipt of Mtron Common Stock in the distribution, except with respect to any cash received in lieu of fractional shares of Mtron Common Stock (as described below);

 

the aggregate tax basis of the Company’s common stock and the Mtron Common Stock received in the distribution (including any fractional share interest in Mtron Common Stock for which cash is received) in the hands of each U.S. holder of the Company’s common stock immediately after the distribution will equal the aggregate basis of the Company’s common stock held by the U.S. holder immediately before the distribution, allocated between the Company’s common stock and Mtron Common Stock (including any fractional share interest in Mtron Common Stock for which cash is received) in proportion to the relative fair market value of each on the date of the distribution; and

 

the holding period of Mtron Common Stock received by each U.S. holder of the Company’s common stock in the distribution (including any fractional share interest in Mtron Common Stock for which cash is received) will generally include the holding period at the time of the distribution for the Company’s common stock with respect to which the distribution is made.

If a U.S. holder of the Company’s common stock holds different blocks of the Company’s common stock (generally shares of the Company’s common stock purchased or acquired on different dates or at different prices), such holder should consult its tax advisor regarding the determination of the basis and holding period of shares of Mtron Common Stock received in the distribution in respect of particular blocks of the Company’s common stock.

Material U.S. Federal Income Tax Consequences if the Distribution is Taxable

As discussed above, the Company has not sought and does not intend to seek a ruling from the IRS with respect to the treatment of the distribution for U.S. federal income tax purposes. Notwithstanding the Company’s intention to treat the distribution as tax-free for U.S. federal income tax purposes, the IRS could assert that the distribution does not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in asserting this position, some or all of the consequences described above would not apply and the Company, Mtron and the Company’s stockholders could be subject to significant U.S. federal income tax liability. In addition, certain events that may or may not be within the control of the Company or Mtron could cause the distribution not to qualify for tax-free treatment for U.S. federal income tax purposes.

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If the distribution fails to qualify as a tax-free transaction for U.S. federal income tax purposes under Section 355 and Section 368(a)(1)(D) of the Code, in general, the Company would recognize taxable gain as if it had sold the Mtron Common Stock in a taxable sale for its fair market value (unless the Company and Mtron jointly make an election under Section 336(e) of the Code with respect to the distribution, in which case, in general, (a) the Company would recognize taxable gain as if Mtron had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of the Mtron Common Stock and the assumption of all Mtron liabilities and (b) Mtron would obtain a related step up in the basis of its assets) and the Company’s stockholders who receive Mtron Common Stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

Even if the distribution were to otherwise qualify as tax-free under Sections 355 and 368(a)(1)(D) of the Code, it may result in taxable gain to the Company under Section 355(e) of the Code if the distribution were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50% or greater interest (by vote or value) in the Company or Mtron. For this purpose, any acquisitions of the Company or Mtron shares within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although Mtron or the Company may be able to rebut the presumption depending on the circumstances.

In connection with the distribution, Mtron and the Company will enter into a Tax Indemnity and Sharing Agreement pursuant to which Mtron will be responsible for certain liabilities and obligations following the distribution. In general, under the terms of the tax matters agreement, if the distribution, together with certain related transactions, were to fail to qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code (including as a result of Section 355(e) of the Code) if such failure were the result of actions taken after the distribution by the Company or Mtron, then the party responsible for such failure will be responsible for all taxes imposed on the Company to the extent such taxes result from such actions. For a discussion of the tax matters agreement, see “Certain Relationships and Related Person Transactions—Tax Matters Agreement.” Mtron’s indemnification obligations to the Company under the tax matters agreement are not expected to be limited in amount or subject to any cap. If Mtron is required to indemnify the Company and its subsidiaries and their respective officers and directors under the circumstances set forth in the tax matters agreement, Mtron may be subject to substantial liabilities.

Backup Withholding and Information Reporting

Payments of cash to U.S. holders of the Company’s common stock in lieu of fractional shares of Mtron Common Stock may be subject to information reporting and backup withholding (currently, at a rate of 24%), unless such U.S. holder delivers a properly completed IRS Form W-9 certifying such U.S. holder’s correct taxpayer identification number and certain other information, or otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability provided that the required information is timely furnished to the IRS.

THE FOREGOING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SEPARATION AND DISTRIBUTION UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SEPARATION AND DISTRIBUTION OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF STOCKHOLDERS. HOLDERS OF THE COMPANY’S COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

 

 

Reason for Furnishing this Information Statement 

We are furnishing this information statement to you, as a stockholder of the Company entitled to receive shares of Mtron Common Stock in the spin-off, for the sole purpose of providing you with information about the spin-off and Mtron.  This information statement is not, and you should not consider it, an inducement or encouragement to buy, hold or sell any securities of the Company or Mtron.  We believe that the information in this information statement is accurate as of the date set forth on the cover.  Changes may occur after that date and neither the Company nor Mtron undertakes any obligation to update the information except as may be required by law.

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Dividend Policy

In advance of the spin-off, Mtron is expected to declare and pay to the Company as its sole stockholder a special dividend in the amount of $2,758,000, which will eliminate the amount currently due from the Company of $2,698,000 and result in a $60,000 net cash dividend payment. As a result of the dividend, Mtron will have a cash balance of $1,500,000 upon the completion of the spin-off.  Following the spin-off, dividends by Mtron will be at the discretion of our board of directors based on our financial condition, results of operations and capital requirements, and considerations that our board of directors consider relevant.  In addition, the terms of agreements governing our indebtedness, whether existing at the time of the spin-off or subsequently entered into, may limit or prohibit dividend payments.  It is currently expected that, for the foreseeable future following the spin-off, we will retain any earnings for use in the operation of our business.  Accordingly, Mtron does not anticipate paying any cash dividends on our common stock for the foreseeable future.


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Capitalization

The following table presents our cash and cash equivalents and capitalization as of March 31, 2022 on a historical basis and on a pro forma basis to give effect to the spin-off and the related transactions and events described in this information statement as if the spin-off and such related transactions and events had occurred on March 31, 2022.  We are providing the following capitalization table for informational purposes only.  You should not construe it as indicative of our capitalization or financial condition had the spin-off and the related transactions and events been completed on the date assumed.  The capitalization table below also may not reflect the capitalization or financial condition that would have resulted had Mtron been operated as a separate company apart from the Company’s organization at that date or our future capitalization or financial condition.  You should read the table below in conjunction with the financial and other information included in the sections of this information statement entitled “Unaudited Pro Forma Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our historical financial statements and accompanying notes included elsewhere in this information statement.

 

As of March 31, 2022

 

 

 

Actual

 

 

Pro Forma

(Unaudited)

 

 

 

(in thousands, except

share amounts)

 

Cash and cash equivalents

(1)

$

1,560

 

 

$

1,500

 

Equity:

 

 

 

 

 

 

 

 

Common Stock, par value $.01 per share; 30,000,000 shares authorized, 5,323,973 shares issued and outstanding, pro-forma

(3)

 

 

 

 

53

 

Paid-in capital

(2, 3)

 

 

 

 

13,564

 

Net investment by LGL Group, Inc.

(3)

 

17,708

 

 

 

 

Total Equity

 

 

17,708

 

 

 

13,617

 

Total capitalization

 

$

17,708

 

 

$

13,617

 

 

 

(1)

Reflects an expected cash amount of exactly $1,500,000 following the $2,758,000 expected dividend to LGL, which retires the $2,698,000 balance due from related party and decreases the pro forma cash balance by $60,000.

 

(2)

Reflects the effect of the $2,758,000 expected dividend along with the expected reduction in deferred tax assets of $1,333,000 at the time of separation.

 

(3)

At separation, LGL’s net investment in us will be eliminated to reflect the distribution of our common stock to LGL’s shareholders, at an exchange ratio of one share of our common stock for every share of LGL common stock.

35

 

 


 

 

Selected Historical COMBINED Financial DATA

The following table presents selected historical combined financial data for the periods indicated below. We derived the selected historical combined financial data as of and for the quarters ended March 31, 2022 and 2021 from our unaudited interim combined financial statements included elsewhere in this information statement. We derived the selected historical combined financial data as of December 31, 2021 and 2020, and for each of the years in the two-year period ended December 31, 2021 and 2020, from our audited combined financial statements included elsewhere in this information statement. In management’s opinion, the unaudited combined financial data has been prepared on the same basis as our audited combined financial statements and includes all adjustments necessary for a fair statement of the data for the periods presented.

The historical statements of operations reflect allocations of general corporate expenses from the Company, including, but not limited to, executive management, accounting, and other shared services.  These expenses have been allocated to Mtron on the basis of direct usage when identifiable, while the remainder of the expenses, including costs related to executive compensation, were allocated primarily on a pro-rata basis based on segment revenues.  Management considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to, Mtron.  The allocations may not, however, reflect the expenses Mtron would have incurred as a stand-alone public company for the periods presented.  Actual costs that may have been incurred if Mtron had been a stand-alone public company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.  The financial statements included in this information statement may not necessarily reflect our financial position, results of operations and cash flows as if Mtron had operated as a stand-alone public company during all periods presented.  Accordingly, our historical results may not be a reliable indicator of its future performance or financial condition.

In presenting the financial data in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” included elsewhere in this information statement for a detailed discussion of the accounting policies that management believes require subjective and complex judgments that could potentially affect reported results.

The selected historical financial data presented below should be read in conjunction with our audited combined financial statements included elsewhere in this information statement and the financial and other information contained in the sections of this information statement entitled “Unaudited Pro Forma Financial Statements,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Quarter Ended

 

 

Fiscal Year Ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

 

December 31,

2021

 

 

December 31,

2020

 

Summary of Operations

 

(in thousands, except for percentage of revenues)

 

Revenues

 

$

7,691

 

 

$

6,254

 

 

$

26,694

 

 

$

29,984

 

Gross Margin

 

 

2,872

 

 

 

1,997

 

 

 

9,336

 

 

 

10,296

 

Gross Margin % of revenues

 

 

37.3

%

 

 

31.9

%

 

 

35.0

%

 

 

34.3

%

Operating Income

 

 

814

 

 

 

302

 

 

 

2,114

 

 

 

3,030

 

Net Income

 

 

619

 

 

 

281

 

 

 

1,582

 

 

 

2,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

1,560

 

 

$

2,526

 

 

$

2,635

 

 

$

2,456

 

Total Assets

 

 

20,806

 

 

 

18,125

 

 

 

20,006

 

 

 

17,918

 

Working Capital

 

 

9,359

 

 

 

8,710

 

 

 

9,081

 

 

 

8,930

 

Net Cash (Used in) Provided by Operating Activities

 

 

(160

)

 

 

809

 

 

 

2,960

 

 

 

3,906

 

Capital Expenditures

 

 

207

 

 

 

55

 

 

 

1,099

 

 

 

407

 

Equity

 

 

17,708

 

 

 

15,302

 

 

 

16,849

 

 

 

14,974

 


36

 

 


 

 

Unaudited Pro Forma Financial Statements

The unaudited pro forma combined financial statements set forth below have been derived from our historical annual financial statements, including our unaudited combined balance sheet as of March 31, 2022, and our unaudited combined statement of operations for the quarter ended March 31, 2022 and for the year ended December 31, 2021, which are included elsewhere in this information statement.  Our historical combined financial statements include allocations of certain expenses from the Company, including expenses for costs related to functions such as tax, accounting, general management, executive services and centrally managed employee benefit arrangements.

The unaudited pro forma combined financial statements consist of an unaudited pro forma combined statement of operations for the quarter ended March 31, 2022 and for the year ended December 31, 2021 and an unaudited pro forma combined balance sheet as of March 31, 2022. The unaudited pro forma combined financial statements should be read in conjunction with our historical audited combined financial statements and the related notes, “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement.

The unaudited pro forma combined statements of operations have been prepared to include transaction accounting, and autonomous entity adjustments to reflect the financial condition and results of operations as if Mtron were a separate stand-alone entity as if the spin-off had occurred or became effective as of January 1, 2021, the beginning of our most recently completed fiscal year. The unaudited pro forma combined balance sheet has been prepared to give effect to the adjustments as though the spin-off had occurred as of March 31, 2022. The unaudited pro forma combined financial statements constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Special Note Regarding Forward-Looking Statements.”

The unaudited pro forma combined financial statements presented below have been derived from our historical audited combined financial statements and the unaudited combined interim financial statements included elsewhere in this information statement and do not purport to represent what our financial position and results of operations would have been had the separation of Mtron from the Company occurred on the dates indicated and are not necessarily indicative of our future financial position and future results of operations. In addition, the unaudited pro forma combined financial statements are provided for illustrative and informational purposes only. The pro forma adjustments are based on available information and assumptions that management believes are reasonable; however, such adjustments are subject to change.

The Company did not account for us as, and we were not operated as, an independent, publicly traded company for the periods presented. Our unaudited pro forma combined financial statements have been prepared to reflect transaction accounting, and autonomous entity adjustments as if Mtron were a separate stand-alone and publicly traded entity.

Transaction accounting adjustments that reflect the effects of Mtron’s legal separation from LGL include:

 

The contribution by the Company of the companies that comprise Mtron and the retention by the Company of certain specified assets and liabilities reflected in our historical combined financial statements, in each case, pursuant to the Separation and Distribution Agreement;  

 

The anticipated post-separation capital structure, including: (i) the Mtron expected cash dividend to LGL; and (ii) the issuance and distribution in kind of our common stock to holders of LGL common stock;  

 

The impact of, and transactions contemplated by, the Separation and Distribution Agreement, Tax Matters Agreement, and other agreements related to the separation of Mtron from the Company and the provisions contained therein

 

The resulting elimination of LGL’s net investment in us; and

 

Transaction costs specifically related to the separation.

 

Autonomous entity adjustments of incremental expense or other changes necessary to reflect the operations and financial position of Mtron as an autonomous entity when Mtron was previously part of LGL include the following adjustments:

 

The impact of, and transactions contemplated by, the Transition Services Agreement related to the separation of Mtron from the Company and the provisions contained therein; and

 

The operating expenses that were reported in our historical audited combined statements of operations included allocations of certain Company costs, including expenses for costs related to functions such as tax, accounting, general management, executive services and centrally managed employee benefit arrangements, and other related costs that benefit us. The costs

37

 

 


 

 

for these resources which Mtron will incur directly upon and following the spin-off, and which had been previously only partially allocated to us, will be allocated on a pro forma basis to reflect the total amounts actually paid for these resources.

The Company expects that Management Adjustments for dis-synergies representing the significant estimates of costs of being an independent, publicly traded company would necessarily include $165,000 and $767,000 in estimated expenses for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively, with expected tax benefits of $36,000 and $193,000 for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively. These Management Adjustments include costs based on estimated expenses paid by LGL which were not allocated to Mtron as a standalone entity, but which would be expected to be incurred upon and following our expected listing and operation as a publicly traded company.

Management Adjustments for the significant estimates of costs of being an independent, publicly traded company include the following adjustments:

 

Costs to perform financial reporting, tax, regulatory compliance, corporate governance, treasury, legal and investor relations activities;  

 

Compensation, including equity-based awards, and benefits with respect to new and existing positions; and

 

Insurance premiums, including D&O insurance and an increase to liability premiums.

The pro forma financial information presented herein reflects all Management’s Adjustments that are, in management’s opinion, necessary to a fair statement of the pro forma financial information presented.

Subject to the terms of the Separation and Distribution Agreement, the Company will pay all nonrecurring third-party costs and expenses related to the separation and incurred prior to the completion of the separation. Such nonrecurring amounts are expected to include third-party legal and accounting fees, and similar costs. After the completion of the separation, subject to the terms of the Separation and Distribution Agreement, the Transition Services Agreement and other agreements entered into between the Company and us in connection with the separation, all costs and expenses related to the separation incurred by either the Company or us will be borne by the party incurring the costs and expenses unless otherwise agreed between the Company and us.

Our retained cash balance is subject to adjustments prior to and following the completion of the separation. The following unaudited pro forma combined balance sheet reflects the adjustments as of March 31, 2022, but such adjustments represent a financial projection and are subject to change upon implementation of the spin-off.

 

38

 

 


 

 

MTRON BUSINESS OF THE LGL GROUP, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of March 31, 2022

(Dollars in Thousands, Except Share and Par Value Amounts)

 

 

Historical

 

Transaction

accounting

adjustments

 

Autonomous

entity

adjustments

 

 

Pro Forma

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,560

 

$

(60

)

$

 

(a)

$

1,500

 

Accounts receivable, net of allowance of $131

 

 

4,900

 

 

 

 

 

 

 

4,900

 

Inventories, net

 

 

5,652

 

 

 

 

 

 

 

5,652

 

Prepaid expenses and other current assets

 

 

215

 

 

 

 

 

 

 

215

 

Total Current Assets

 

 

12,327

 

 

(60

)

 

 

 

 

12,267

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

536

 

 

 

 

 

 

 

536

 

Buildings and improvements

 

 

4,869

 

 

 

 

 

 

 

4,869

 

Machinery and equipment

 

 

18,383

 

 

 

 

 

 

 

18,383

 

Gross property, plant and equipment

 

 

23,788

 

 

 

 

 

 

 

23,788

 

Less:  accumulated depreciation

 

 

(20,347

)

 

 

 

 

 

 

(20,347

)

Net property, plant and equipment

 

 

3,441

 

 

 

 

 

 

 

3,441

 

Right-of-use lease asset

 

 

202

 

 

 

 

 

 

 

202

 

Due from related party

 

 

2,698

 

 

(2,698

)

 

 

(b)

 

 

Intangible assets, net

 

 

139

 

 

 

 

 

 

 

139

 

Deferred income tax asset

 

 

1,998

 

 

(1,333

)

 

 

(c)

 

665

 

Other assets

 

 

1

 

 

 

 

 

 

 

1

 

Total Assets

 

$

20,806

 

$

(4,091

)

$

 

 

$

16,715

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,458

 

$

 

$

 

 

$

1,458

 

Accrued compensation and commissions expense

 

 

914

 

 

 

 

 

 

 

914

 

Other accrued expenses

 

 

596

 

 

 

 

 

 

 

596

 

Total Current Liabilities

 

 

2,968

 

 

 

 

 

 

 

2,968

 

Long-term lease liability

 

 

130

 

 

 

 

 

 

 

130

 

Total Liabilities

 

 

3,098

 

 

 

 

 

 

 

3,098

 

Contingencies (Note N)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value - 30,000,000 shares authorized;

5,323,973 shares issued and outstanding at March 31, 2022

 

 

 

 

53

 

 

 

(d)

 

53

 

Paid-in capital

 

 

 

 

13,564

 

 

 

(d)

 

13,564

 

Net investment by LGL Group, Inc.

 

 

17,708

 

 

(17,708

)

 

 

(d)

 

 

Total Stockholders' Equity

 

 

17,708

 

 

(4,091

)

 

 

 

 

13,617

 

Total Liabilities and Stockholders' Equity

 

$

20,806

 

$

(4,091

)

$

 

 

$

16,715

 

 

See Notes to Unaudited Pro Forma Combined Financial Statements

39

 

 


 

MTRON BUSINESS OF THE LGL GROUP, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

Quarter Ended March 31, 2022

(Dollars in Thousands, Except Per Share Amounts)

 

 

Historical

 

Transaction

accounting

adjustments

 

Autonomous

entity

adjustments

 

 

Pro Forma

 

REVENUES

 

$

7,691

 

$

 

$

 

 

$

7,691

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing cost of sales

 

 

4,819

 

 

 

 

 

 

 

4,819

 

Engineering, selling and administrative

 

 

2,058

 

 

 

 

7

 

(e)

 

2,065

 

OPERATING INCOME

 

 

814

 

 

 

 

(7

)

 

 

807

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(3

)

 

 

 

 

 

 

(3

)

Other expense, net

 

 

(17

)

 

 

 

 

 

 

(17

)

Total other expense, net

 

 

(20

)

 

 

 

 

 

 

(20

)

INCOME (LOSS) BEFORE INCOME TAXES

 

 

794

 

 

 

 

(7

)

 

 

787

 

Income tax expense (benefit)

 

 

175

 

 

 

 

(2

)

(f)

 

173

 

NET INCOME

 

$

619

 

$

 

$

(5

)

 

$

614

 

Basic per share information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in

basic earnings per share calculation

 

 

 

 

 

 

 

 

 

 

(g)

 

5,323,973

 

Basic pro forma net income per share

 

 

 

 

 

 

 

 

 

 

(g)

$

0.12

 

Diluted per share information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in

diluted earnings per share calculation

 

 

 

 

 

 

 

 

 

 

(h)

 

5,323,973

 

Diluted pro forma net income per share

 

 

 

 

 

 

 

 

 

 

(h)

$

0.12

 

 

See Notes to Unaudited Pro Forma Combined Financial Statements

 

 

40

 

 


 

 

MTRON BUSINESS OF THE LGL GROUP, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

Year Ended December 31, 2021

(Dollars in Thousands, Except Per Share Amounts)

 

 

Historical

 

Transaction

accounting

adjustments

 

Autonomous

entity

adjustments

 

 

Pro Forma

 

REVENUES

 

$

26,694

 

$

 

$

 

 

$

26,694

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing cost of sales

 

 

17,358

 

 

 

 

 

 

 

17,358

 

Engineering, selling and administrative

 

 

7,222

 

 

 

 

(5

)

(e)

 

7,217

 

OPERATING INCOME

 

 

2,114

 

 

 

 

5

 

 

 

2,119

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(12

)

 

 

 

 

 

 

(12

)

Other expense, net

 

 

11

 

 

 

 

 

 

 

11

 

Total other expense, net

 

 

(1

)

 

 

 

 

 

 

(1

)

INCOME BEFORE INCOME TAXES

 

 

2,113

 

 

 

 

5

 

 

 

2,118

 

Income tax Expense (benefit)

 

 

531

 

 

 

 

1

 

(f)

 

532

 

NET INCOME

 

$

1,582

 

$

 

$

4

 

 

$

1,586

 

Basic per share information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in

basic earnings per share calculation

 

 

 

 

 

 

 

 

 

 

(g)

 

5,323,973

 

Basic pro forma net income per share

 

 

 

 

 

 

 

 

 

 

(g)

$

0.30

 

Diluted per share information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in

diluted earnings per share calculation

 

 

 

 

 

 

 

 

 

 

(h)

 

5,323,973

 

Diluted pro forma net income per share

 

 

 

 

 

 

 

 

 

 

(h)

$

0.30

 

 

See Notes to Unaudited Pro Forma Combined Financial Statements


41

 

 


 

 

Notes to Unaudited Pro Forma Combined Financial Statements

 

(a)

Represents an adjustment to reflect an expected dividend in the amount of $2,758,000 to the Company, less amounts contained within the intercompany receivable from the Company, as noted in note (b) below.

 

(b)

At the time of the separation, we will no longer have amounts due from related party of $2,698,000. Accordingly, we have removed this amount from the unaudited pro forma combined balance sheet as of March 31, 2022.

 

(c)

At the time of separation, the Company will retain the net liabilities associated with the uncertain tax positions related to its various tax filings and certain deferred tax assets relating to tax credits and net operating loss carryforwards. At March 31, 2022, this amount was expected to be $1,333,000, leaving Mtron with deferred tax assets of $669,000.

 

(d)

Reflects the reclassification of the Company’s net investment in us, which was recorded in net investment by LGL, into paid-in capital and common stock to reflect the assumed issuance of 5,323,973 shares of our common stock with $0.01 par value per share pursuant to the Separation and Distribution Agreement immediately prior to the separation. We have assumed the number of outstanding shares of our common stock based on the number of shares of the Company’s common stock outstanding on March 31, 2022, and a distribution ratio of one share of our common stock for each share of the Company’s common stock.

 

(e)

Reflects Autonomous Entity Adjustments of $27,000 and $107,000 in expected charges to LGL under the Transitional and Administrative Services Agreement for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively, offset by the removal of $34,000 and $102,000 of related expenses incurred by LGL but not fully allocated to Mtron for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

 

(f)

Reflects the related income taxes incurred in respect of the related adjustments for (e) above, based on the tax rate for each respective period.

 

(g)

Pro forma basic earnings per share (EPS) and pro forma weighted average number of shares outstanding are based on the number of the Company’s basic weighted average shares outstanding for the quarter ended March 31, 2022, reflecting the expected 1:1 distribution of our common stock.

 

(h)

Pro forma diluted EPS and pro forma diluted weighted average number of shares outstanding are based on the number of basic shares of our common stock as described in Note (d) above. The actual dilutive effect following the completion of the Separation will depend on various factors, including employees who may change employment between the Company and Mtron and the impact of equity-based compensation arrangements. While we cannot fully estimate the dilutive effects at this time, we do not anticipate that any such equity-based grants will have a material dilutive impact.

 

(i)

Reconciliation of pro forma net income from continuing operations after giving effect to Management’s Adjustments:

Management Adjustments for dis-synergies representing the significant estimates of costs of being an independent, publicly traded company would necessarily include $165,000 and $767,000 in estimated expenses for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively, with expected tax benefits of $36,000 and $193,000 for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

Pro Forma net income from continuing operations, after Management’s Adjustments, would be $485,000 and $1,012,000 for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively, or $0.09 per share and $0.19 per share for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively on a basic and diluted basis.

 

 

 


42

 

 


 

 

Business

You should read the following business description in conjunction with our audited combined financial statements and related notes appearing elsewhere in this information statement.

General

Mtron, an operating company originally founded in 1965, along with its subsidiaries, designs, manufactures and markets highly-engineered, high reliability frequency and spectrum control products. These electronic components ensure reliability and security in aerospace and defense communications, low noise and base accuracy for laboratory instruments, and synchronous data transfers throughout the wireless and Internet infrastructure.

The Company’s operations include those related to its manufacturing operations in Yankton, South Dakota and those of its two principal subsidiaries; (1) Piezo Technology, Inc. ("PTI") and (2) M-tron Asia, LLC ("Mtron Asia"). PTI is a manufacturer with its principal administrative, sales, and manufacturing operations in Orlando, Florida, and directly owns Piezo Technology India Private, Ltd., which operates a manufacturing plant located in Noida, India. Mtron Asia is a holding company that owns M-tron Industries, Ltd., which operates a sales office in Hong Kong, a special administrative region of China.

Mtron has operations in Orlando, Florida; Yankton, South Dakota; and Noida, India, and has sales offices in Austin, Texas and Hong Kong. Mtron and its subsidiaries currently operate together as a single group under the MtronPTI brand (“Mtron PTI”).

Subsidiary Name

 

State or Country of Organization

 

M-tron Industries, Inc. Investment

 

Piezo Technology, Inc.

 

Florida

 

 

100.0

%

Piezo Technology India Private Ltd.