FORWARD LOOKING STATEMENTS

Some of the information in this prospectus may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and may be subject to the safe harbor created by that section.  You can identify these statements by noting the use of forward-looking terms like “believes,” “expects,” “plans,” “estimates” and other similar words.  Risks, uncertainties or assumptions that are difficult to predict may affect these kinds of statements.  The preceding risk factors and other cautionary statements could cause our actual operating results to differ materially from those expressed in any forward-looking statement.  We caution you to keep in mind the preceding risk factors and other cautionary statements and to refrain from placing undue reliance on any forward-looking statements.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy these reports, proxy statements and other information at the public reference facilities maintained by the SEC at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549 and you can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet Web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, like Derma Sciences, that file electronically with the SEC.  Additional information about Derma Sciences can also be found at our Web site at http://www.dermasciences.com.

The SEC allows us to “incorporate by reference” the information from the documents we file with them which means that we can disclose important information to you by referring you to those documents.  The information which we incorporate by reference is part of this prospectus.  Additional information that we file with the SEC will automatically update previous information.  We incorporate the following documents by reference into this prospectus:

(a)

Our registration statement on Form 8-A effective May 13, 1994.

(b)

Our registration statement on Form S-1/A effective August 18, 2008.

 

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(c)

Our registration statement on Form S-1 effective February 16, 2010.

(d)

Our current report on Form 8-K relative to our common stock becoming listed on the Nasdaq Capital Market filed February 11, 2010.

(e)

Our current reports on Form 8-K relative to the purchase of the worldwide rights to Medihoney filed February 24, 2010 and March 1, 2010.

(f)

Our current reports on Form 8-K relative to an amendment to our financing arrangement with GE Business Financial Services Inc. filed March 1, 2010 and April 1, 2010.

(g)

Our current report on Form 8-K relative to termination of an executive’s employment filed April 1, 2010.

(h)

Our current report on Form 8-K relative to the election of directors and the approval of the retention of our independent registered public accounting firm for the period ending December 31, 2010 filed June 2, 2010.

(i)

Our annual report on Form 10-K filed March 31, 2010 for the year ended December 31, 2009.

(j)

Our notice of annual meeting of shareholders and definitive proxy statement filed April 14, 2010 relative to the election of directors and ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2010.

(k)

Our quarterly report on Form 10-Q filed May 12, 2010 for the quarter ended March 31, 2010.

All documents filed by Derma Sciences pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this prospectus and prior to the filing of a post effective amendment to the registration statement which indicates that all shares of common stock offered by this registration statement have been sold, or which deregisters all shares of common stock then remaining unsold, are incorporated by reference into this prospectus from the date of filing of these documents.  Any statement contained in this prospectus or in a document incorporated in this prospectus by reference will be considered modified or replaced for purposes of this prospectus if the statement is modified or replaced by a statement in a later document that also is incorporated by reference in this prospectus.

This prospectus is part of a registration statement we filed with the SEC under the Securities Act of 1933. As permitted by the rules and regulations of the SEC, this prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules that were filed with it.  The statements contained in this prospectus as to the contents of any contract or any other document are not necessarily complete.  We qualify any statement by reference to the copy of the contract or document filed as an exhibit to the registration statement.  If you would like a copy of any document incorporated in this prospectus by reference (other than exhibits unless these exhibits are specifically incorporated by reference in a document), you can call or write to us at our principal executive offices, Attention:  John E. Yetter, CPA, Vice President and Chief Financial Officer, at 214 Carnegie Center, Suite 300, Princeton, New Jersey 08540, telephone (609) 514-4744.  We will provide this information upon written or oral request and without charge to any person, including a beneficial owner, to whom a copy of this prospectus is delivered.

 

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We have not authorized any dealer, salesperson or other individual to give any information or to make any representation not contained or incorporated by reference in this prospectus.  If you receive any of that kind of information or if any of those types of representations are made to you, you must not rely on the information or representations as having been authorized by Derma Sciences.  Also, you must not consider that the delivery of this prospectus or any sale made under it implies that the affairs of Derma Sciences have remained unchanged since the date of this prospectus or that the information contained in this prospectus is correct or complete as of any time after the date of this prospectus.

This prospectus and any supplement to this prospectus do not constitute an offer to sell or a solicitation of an offer to buy any securities covered by this prospectus to any person in any jurisdiction in which this offer or solicitation is unlawful.

USE OF PROCEEDS

All of the net proceeds from the sale of the shares will go to the selling shareholders who offer and sell their shares.  Accordingly, we will not receive any proceeds from the sale of the shares.

SELLING SHAREHOLDERS

On April 2, 2008, we privately sold to eight institutional investors 762,501 shares of our common stock at $8.00 per share (the “Common Stock”).  The Common Stock was “bundled” with five-year warrants to purchase one share of common stock at a per share price of $9.60 (the “Warrants”) in the ratio of one warrant for each two shares of Common Stock purchased.  In addition, Warrants to purchase 17,813 shares of Common Stock were issued to Oppenheimer & Co. Inc., New York, New York, in partial compensation for its services as placement agent for the Common Stock and Warrants.  Common stock potentially issuable to investors and Oppenheimer & Co. Inc. upon exercise of the Warrants (the “Underlying Common Stock”) is in the amount of 399,064 shares.  The term “selling shareholders” refers both to investors and Oppenheimer & Co. Inc.  At the time of acquisition of the Common Stock and Warrants, no selling shareholder had any agreements or understandings, directly or indirectly, with any person relative to distribution of these securities.

The Common Stock and Underlying Common Stock were registered pursuant to a registration statement filed with the Securities and Exchange Commission, on August 18, 2008.  We agreed with the selling shareholders to use our best efforts to keep the registration statement effective until the earlier of (1) such time as all of the Common Stock and Underlying Common Stock have been disposed of pursuant to and in accordance with the registration statement, or (2) the date on which the Common Stock and Underlying Common Stock may be sold pursuant to Rule 144(b)(1)(i) of the Securities Act.  We do not know whether and when the selling shareholders will sell all or any of these securities.

 

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The following table presents information regarding the selling shareholders’ ownership of our common stock as of the date of this prospectus.  We determine each selling shareholder’s pre-offering ownership by assuming that all warrants held by the selling shareholder have been exercised.  We determine each selling shareholder’s post-offering ownership by assuming that all of the shares offered by this registration statement are sold.  No selling shareholder has had any position, office or other material relationship with Derma Sciences, or any of its affiliates, during the past three years other than as an owner of our securities:

Selling Shareholders/ Beneficial Owners (1)		Shares Beneficially Owned				Shares Offered Hereby				Shares  to be Owned After Offering				Percentage of Outstanding Shares to be Owned After Offering
1837 Partners Ltd. Frances E. Tuite and Blair R. Haarlow Principals RMB Capital Managers, LLC			69,181				61,454	(2)			7,727				*
1837 Partners QP L.P. Frances E. Tuite and Blair R. Haarlow Principals RMB Capital Managers, LLC			90,653				62,550	(3)			28,103				*
1837 Partners L.P. Frances E. Tuite and Blair R. Haarlow Principals RMB Capital Managers, LLC			158,344				157,248	(4)			1,096				*
Granite Creek Flexcap I, LP Mark Radzik Managing Partner Granite Creek Partners, L.L.C.			93,750				93,750	(5)			0				*

 

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Selling Shareholders/ Beneficial Owners (1)		Shares Beneficially Owned				Shares Offered Hereby				Shares  to be Owned After Offering				Percentage of Outstanding Shares to be Owned After Offering
Iroquois Master Fund Ltd. Joshua N. Silverman General Partner Iroquois Capital LP			72,917				46,875	(6)			26,042				*
LB I Group Inc. Jeffrey Ferrell Senior Vice President LB I Group Inc.			1,379,463				375,000	(7)			1,004,463				14.9	%
Oppenheimer & Co. Inc. Kee Colen Managing Director Oppenheimer & Co. Inc.			17,813				17,813	(8)			0				*
Wanger Long Term Opportunity Fund II, LP Eric D. Wanger Managing Member Wanger Investment Management, LLC			115,000				112,500	(9)			2,500				*
WHI Select Fund, L.P.			713,548				234,375	(10)			479,173				7.2	%
Patricia Lanigan Portfolio/Fund Administrator William Harris Investors, Inc.
Total Shares			2,710,669				1,161,565				1,549,104

   

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* Less than 1 percent.

(1)  The term “Beneficial Owners” refers to those entities and individuals that maintain voting and dispositive authority relative to the shares.

(2)  Shares offered hereby consist of 40,969 shares of outstanding Common Stock and 20,485 shares of Common Stock issuable upon exercise of Series K Warrants.

(3)  Shares offered hereby consist of 41,700 shares of outstanding Common Stock and 20,850 shares of Common Stock issuable upon exercise of Series K Warrants.

(4)  Shares offered hereby consist of 104,832 shares of outstanding Common Stock and 52,416 shares of Common Stock issuable upon exercise of Series K Warrants.

(5)  Shares offered hereby consist of 62,500 shares of outstanding Common Stock and 31,250 shares of Common Stock issuable upon exercise of Series K Warrants.

(6)  Shares offered hereby consist of 31,250 shares of outstanding Common Stock and 15,625 shares of Common Stock issuable upon exercise of Series K Warrants.

 

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(7)  LB I Group Inc. is a wholly owned subsidiary of Lehman Brothers Inc. which is a registered broker-dealer.  LB I Group Inc. has represented to us that:  (i) it is not acting as an underwriter in connection with the sale of the Common Stock or Underlying Common Stock, (ii) it purchased the Common Stock and Underlying Common Stock it is offering under this prospectus in the ordinary course of business, and (iii) at the time of such purchase, it had no agreements or understandings, directly or indirectly, with any person to distribute the Common Stock and Underlying Common Stock.  Lehman Brothers Holdings Inc., a public reporting company, is the parent company of Lehman Brothers Inc.  Shares offered hereby consist of 250,000 shares of outstanding Common Stock and 125,000 shares of Common Stock issuable upon exercise of Series K Warrants.

(8)  Shares offered hereby consist of 17,813 shares of Common Stock issuable upon exercise of Series K Warrants.

(9)  Shares offered hereby consist of 75,000 shares of outstanding Common Stock and 37,500 Common Stock issuable upon exercise of Series K Warrants.

(10)  Shares offered hereby consist of 156,250 shares of outstanding Common Stock and 78,125 shares of Common Stock issuable upon exercise of Series K Warrants.

PLAN OF DISTRIBUTION

The selling shareholders, including donees, pledgees, transferees or other successors-in-interest selling shares of Common Stock or Underlying Common Stock (collectively, the “Registered Shares”) received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their Registered Shares on any stock exchange, market or trading facility on which the Registered Shares are traded or in private transactions.  These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.  To the extent any of the selling shareholders gift, pledge or otherwise transfer the Registered Shares, such transferees may offer and sell the Registered Shares from time to time under this prospectus, provided that this prospectus has been amended under Rule 424(b)(3) or other applicable provision of the Securities Act to include the name of such transferee in the list of selling shareholders under this prospectus.

The selling shareholders may use any one or more of the following methods when disposing of Registered Shares:

·

Ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·

Block trades in which the broker-dealer will attempt to sell the Registered Shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

·

Purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

An exchange distribution in accordance with the rules of the applicable exchange;

 

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·

Privately negotiated transactions;

·

Short sales;

·

Through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·

A combination of any such methods of sale; and

·

Any other method permitted pursuant to applicable law.

The selling shareholders may, from time to time, pledge or grant a security interest in some or all of the Registered Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Registered Shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.

In connection with the sale of the Registered Shares, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Registered Shares in the course of hedging the positions they assume.  The selling shareholders may also sell shares of our common stock short and deliver the Registered Shares to close out their short positions, or loan or pledge the Registered Shares to broker-dealers that in turn may sell same.  The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of Registered Shares which such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling shareholders from the sale of the Registered Shares offered by them will be the purchase price of the common stock less discounts or commissions, if any.  Each of the selling shareholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of Registered Shares to be made directly or through agents.  We will not receive any of the proceeds from this offering.  Upon any exercise of the Warrants by payment of cash, however, we will receive the exercise price of the Warrants.

The selling shareholders also may resell all or a portion of the Registered Shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

 

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We have advised the selling shareholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of Registered Shares in the market and to the activities of the selling shareholders and their affiliates.  In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling shareholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.  The selling shareholders may indemnify any broker-dealer that participates in transactions involving the sale of the Registered Shares against certain liabilities, including liabilities arising under the Securities Act.

We have agreed to indemnify the selling shareholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the Registered Shares.

LEGAL MATTERS

For the purposes of this offering, Hedger & Hedger, 2 Fox Chase Drive, P.O. Box 915, Hershey, Pennsylvania, 17033, is giving its opinion on the validity and non-assessability of the shares.

EXPERTS

The consolidated financial statements of Derma Sciences, Inc. as of and for the years ended December 31, 2009 and 2008 appearing in Derma Sciences, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14.  Other Expenses of Issuance and Distribution.

The following table sets forth expenses (estimated except for the registration fee) in connection with the offering described in the registration statement:

SEC registration fee		$	365
Accounting fees and expenses			10,000
Legal fees and expenses			40,000
Printing expenses			2,500
Miscellaneous			1,000
Total		$	53,865

Item 15.  Indemnification of Directors and Officers.

Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of 1988 empower the Company, and the bylaws of the Company provide that it shall have the power, to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or in the case of actions undertaken other than in his official capacity, not opposed to, the best interest of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; except that, in the case of an action or suit by or in the right of the Company, no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Company unless and only to the extent that the court in which such action or suit was brought shall determine that such person is fairly and reasonably entitled to indemnity for proper expenses.

Item 16.  Exhibits.

Exhibit Number		Description
4		Form of Securities Purchase Agreement (previously filed as Exhibit 10.01 to the Company’s Form 8-K relative to the Company’s private sale of 762,500 shares of common stock and warrants to purchase 381,250 shares of common stock filed April 7, 2008 and incorporated by reference herein)
5		Opinion of Hedger & Hedger regarding the legality of the securities being registered
23.1		Consent of Ernst & Young LLP
23.2		Consent of Hedger & Hedger (included in its opinion filed as Exhibit 5)

Item 17.  Undertakings.

The undersigned Registrant undertakes:

(l)      To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)       To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

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(ii)      To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and

(iii)      To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (l)(i) and (l)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

(2)     That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)     To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)     That, for purposes of determining any liability under the Securities Act of 1933 each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

[Signatures on next page]

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 21st day of June, 2010.

	DERMA SCIENCES, INC.
	By:	/s/  Edward J. Quilty
		Edward J. Quilty
		President and Chief Executive Officer

POWER OF ATTORNEY

Know all men by these presents, that each person whose signature appears below constitutes and appoints each of Edward J. Quilty and John E. Yetter as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits to be filed also, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature		Capacity in Which Signed		Date
/s/  Edward J. Quilty		President, Chief Executive Officer and		June 21, 2010
Edward J. Quilty		Chairman of the Board of Directors
		(Principal Executive Officer)
/s/  John E. Yetter, CPA		Vice President and Chief Financial Officer		June 21, 2010
John E. Yetter, CPA		(Principal Financial and Accounting Officer)
*		Director		June 21, 2010
Srini Conjeevaram
*		Director		June 21, 2010
Stephen T. Wills, CPA, MST
*		Director		June 21, 2010
James T. O’Brien
*		Director		June 21, 2010
C. Richard Stafford, Esq.
*		Director		June 21, 2010
Richard J. Keim
*		Director		June 21, 2010
Robert J. Moussa

 

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		Director		June 21, 2010
Bruce F. Wesson
/s/  Brett D. Hewlett		Director		June 21, 2010
Brett D. Hewlett

*By:	/s/  Edward J. Quilty
	Edward J. Quilty
	Attorney-in-Fact

 

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