SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A NO.1
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarterly Period Ended June 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to
Commission File Number 1-11046
TOP SOURCE TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1027821
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
2000 PGA BLVD., SUITE 3200, PALM BEACH GARDENS, FLORIDA 33408
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407)775-5756
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class
Common stock, $.001 par value Outstanding at August 1, 1995
27,421,697 shares
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1995
(Unaudited) and September 30, 1994 . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations for the
Three and Nine Months Ended June 30, 1995 and 1994
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 1995 and 1994
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Unaudited Interim Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 5-8
ITEM 2. Management's Discussion and Analysis of Interim
Financial Condition and Results of Operations . . . . . . 8-10
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 10
i
TOP SOURCE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1995 AND SEPTEMBER 30, 1994
(UNAUDITED)
June 30, September
ASSETS 1995 1994
Current Assets: (restated)
Cash and cash equivalents 1,146,002 1,429,362
Accounts receivable trade (net of allowance of
$88,135 and $150,000 at June 30,1995 and
September 30, 1994, respectively) 3,379,169 3,363,560
Advances to officers 45,000 40,000
Inventories 642,096 356,498
Prepaid expenses 351,076 307,605
Other 116,326 262,875
------------ ------------
Total current assets 5,679,669 5,759,900
Property and equipment, net 2,967,527 2,204,858
Manufacturing and distribution rights and patents, net 374,620 376,799
Capitalized database, net 2,758,402 2,916,527
Intangible assets relating to businesses acquired, net 4,799,936 4,869,746
Deferred income tax assets, net 2,270,000 2,270,000
Other assets, net 836,653 82,125
------------ -----------
TOTAL ASSETS 19,686,807 18,479,955
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 1,696,352 1,605,322
Accrued liabilities 464,269 657,779
Deferred service revenue 350,000 624,642
Note payable-affiliate --- 88,042
------------ ------------
Total current liabilities 2,510,621 2,975,785
Senior convertible notes 2,060,000 ---
------------ ------------
Total liabilities 4,570,621 2,975,785
Commitments and contingencies
Stockholders' equity:
Preferred stock-$.10 par value, 5,000,000 shares
authorized; none outstanding --- ---
Common stock-$.001 par value, 50,000,000 shares
authorized; 27,354,917 and 26,716,395 shares issued
June 30 and September 30, respectively 27,355 26,716
Additional paid-in capital 26,081,421 25,214,445
Accumulated deficit (10,860,805) (9,605,206)
Treasury stock-at cost; 87,534 shares (131,785) (131,785)
------------ ------------
Total stockholders' equity 15,116,186 15,504,170
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 19,686,807 18,479,955
============ ============
See accompanying notes to unaudited interim consolidated financial statements.
TOP SOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1995 AND 1994 (UNAUDITED)
1995 1994
------------ ------------
Product sales 3,673,738 2,231,749
Service revenue 1,238,822 1,703,185
Other --- ---
------------ ------------
Net sales 4,912,560 3,934,934
Cost of product sales 2,233,218 1,348,400
Cost of services 1,155,417 1,349,992
Other --- ---
------------ ------------
Cost of sales 3,388,635 2,698,392
------------ ------------
Gross profit 1,523,925 1,236,542
Expenses:
General and administrative 1,456,372 1,207,980
Selling and marketing 502,811 285,507
Professional fees 38,925 93,088
Depreciation and amortization 111,549 115,956
Research and development 12,362 33,969
------------ ------------
Total expenses 2,122,019 1,736,500
------------ ------------
Loss from operations (598,094) (499,958)
Other income (expense):
Interest income 9,964 18,475
Interest expense (16,481) ---
Interest expense-affiliate --- (1,198)
Other income, net 207,305 ---
------------ ------------
Net other income 200,788 17,277
------------ ------------
Net loss before income taxes (397,306) (482,681)
Income tax benefit --- 188,232
------------ ------------
Net loss (397,306) (294,449)
============ ============
Net loss per weighted average common share
outstanding (0.01) (0.01)
============ ============
Weighted average common shares outstanding 27,255,444 26,255,980
============ ============
See accompanying notes to unaudited interim consolidated financial statements.
TOP SOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1995
AND 1994 (UNAUDITED)
1995 1994
------------ ------------
Product sales 10,636,033 6,469,994
Service revenue 4,070,038 5,128,811
Other --- 29,643
------------ ------------
Net sales 14,706,071 11,628,448
------------ ------------
Cost of product sales 6,542,952 3,811,002
Cost of services 3,566,129 3,631,636
Other --- 9,771
------------ ------------
Cost of sales 10,109,081 7,452,409
------------ ------------
Gross profit 4,596,990 4,176,039
Expenses:
General and administrative 4,120,399 2,607,015
Selling and marketing 1,303,840 822,100
Professional fees 209,694 310,108
Depreciation and amortization 396,287 275,149
Research and development 32,340 93,123
------------ ------------
Total expenses 6,062,560 4,107,495
------------ ------------
Income (loss) from operations (1,465,570) 68,544
Other income (expense):
Interest income 37,621 22,839
Interest expense (18,908) (68,304)
Interest expense-affiliate --- (9,202)
Other income, net 191,258 267,872
------------ ------------
Net other income 209,971 213,205
------------ ------------
Net income (loss) before income taxes (1,255,599) 281,749<PAGE>
Income tax benefit --- 2,408,232
------------ ------------
Net income (loss) (1,255,599) 2,689,981
============ ============
Net loss per weighted average common share
outstanding (0.05)
============
Weighted average common shares outstanding 27,193,954
============
Net income per common and common
equivalent share:
Primary 0.10
============
Fully diluted 0.10
Common and common equivalent shares: ============
Primary 28,131,958
============
Fully diluted 28,132,953
============
See accompanying notes to unaudited interim consolidated financial statements.
TOP SOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1995
and 1994
(UNAUDITED)
1995 1994
OPERATING ACTIVITIES: ------------ ------------
Net income (loss) (1,255,599) 2,689,981
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 685,584 322,867
Amortization 274,565 268,016
Discount amortization --- 52,052
Amortization of deferred officers' compensation --- 13,950
Disposal of equipment 34,846 45,151
Deferred income taxes --- (2,408,232)
Advances to officers (45,000) (100,000)
Repayments from officer 40,000 100,000
Increase in accounts receivable, net (15,609) (1,062,945)
Increase in inventories (285,598) (145,248)
Increase in prepaid expenses (43,471) (120,597)
Decrease (increase) in other assets 123,301 (208,634)
Decrease in accounts payable and accrued liabiliti (377,122) (172,482)
------------ ------------
Net cash used in operating activities (864,103) (726,121)
INVESTING ACTIVITIES:
Purchases of property and equipment, net (1,567,099) (996,877)
Additions to patent costs (41,732) (93,800)
Increase in other assets (650,000) ---
Purchase of businesses, net --- (135,656)
------------ ------------
Net cash used in investing activities (2,258,831) (1,226,333)
FINANCING ACTIVITIES:
Proceeds from sale of common stock, net 867,616 4,567,009
Proceeds from borrowings 4,460,000 600,000
Repayments of borrowings (2,488,042) (1,627,616)
------------ ------------
Net cash provided by financing activities 2,839,574 3,539,393
------------ ------------
Net increase (decrease) in cash and cash equivalents (283,360) 1,586,939
Cash and cash equivalents at beginning of period 1,429,362 362,351
------------ ------------
Cash and cash equivalents at end of period 1,146,002 1,949,290
============ ============
See accompanying notes to unaudited interim consolidated financial statements.
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements of Top Source Technologies, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included in the accompanying financial statements.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. The results of operations of any interim period are not
necessarily indicative of the results of operations for the fiscal year. For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K/A No. 2 Amendment for the
year ended September 30, 1994. Certain fiscal year 1994 amounts have been
reclassified to conform to current year presentation.
2. INVENTORIES
Inventories consisted of the following:
June 30 September 30
1995 1994
Raw materials $ 417,965 $ 292,211
Finished goods 224,131 64,287
$ 642,096 $ 356,498
3. INCOME TAXES
In February 1992, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for
Income Taxes". The Company implemented SFAS No. 109 in fiscal 1994 by
accounting for the cumulative effect of the change in the period of adoption.
The cumulative effect upon adoption was not material. SFAS No. 109 changed the
method of computing deferred income taxes from a deferred method to a liability
method. Under the liability method, deferred income taxes are determined based
on temporary differences between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect during the years in which the
differences are expected to reverse, and on available tax carryforwards.
At June 30, 1995, the Company's balance sheet reflected a deferred income
tax asset of $2,270,000 and had net operating loss carryforwards of
approximately $12,000,000 which may be used to offset future tax, if any. The
Company has recorded a deferred income tax benefit and related deferred income
tax asset based on the pre-tax loss in the first nine months of fiscal 1995. A
valuation allowance in the same amount has been established since the Company's
assessment of future taxable income is unchanged from September 30. 1994. The
Company has determined based on expected future taxable income, which can be
predicted with reasonable certainty, that it is more likely than not that the
net deferred tax assets at June 30, 1995 will be realized before the expiration
of the underlying net operating loss carryforwards which will begin expiring in
2001.
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3. INCOME TAXES, CONT'D
The Company estimates future taxable income by projecting the results of
its business activities based on known factors existing at the current date.
The Company's estimate of future taxable income changed from the beginning of
fiscal 1994 due to: (1) greater certainty regarding the Company's OHSS units for
Jeep(R) Cherokee production installation (this application began in September
1993); (2) greater penetration in the Jeep(R) Grand Cherokee OHSS application
being attained; (3) the decision by Chrysler to convert its Toledo facility to
full utilization for Jeep(R) Cherokee production, thereby increasing the number
of units the Company would be supplying (previously the Toledo facility produced
not only Jeep(R) Cherokees but also other Chrysler models; and (4) progress,
during mid-fiscal year 1995, in gaining new vehicle applications for the OHSS.
4. SALE OF ENGINE FUEL ECONOMY EMISSIONS CONTROL REDUCTION SYSTEM TECHNOLOGY
("EFECS") TO ADRENALINE, INC.
On May 10, 1995, the Company entered into an agreement with Adrenaline,
Inc. ("Adrenaline"), the original inventor of the Engine Fuel Economy Emission
Control Reduction System ("EFECS") technology, to sell the proprietary
technology back to Adrenaline. The agreement extends until such time as the
patent rights expire due to the passage of time or otherwise, unless the license
to Adrenaline from M.I.T. under the Patent Agreement is terminated. Under the
terms of the agreement the Company assigned its interest in this technology in
return for future royalties. Beginning in December 31, 1996, the Company will
receive an annual royalty equal to the greater of (i)$50,000, or (ii) an amount
based upon royalties received from sublicensing and a percentage of Adrenaline's
net sales derived from the technology. After the Company receives $400,000 in
cumulative royalty payments, the Company will receive (i) 25% of any royalty
income received by Adrenaline from sublicensing and (ii) 2% of Adrenaline's net
sales of the technology. This technology is currently being tested by a major
automotive company, and the Company believes that this technology is viable. As
of October 25, 1995, Adrenaline had not commenced marketing this technology. At
such time as Adrenaline generates revenues in the future, the agreement permits
Adrenaline to withhold paying the Company prospective royalty payments in the
event a patent infringement suit is brought challenging the technology.
Adrenaline is further permitted to withhold paying royalties until the patent
litigation is terminated. To the extent that Adrenaline has paid the Company
any royalties, it will not be obligated to reimburse Adrenaline for such sums.
Because of the contingent nature of the agreement, the Company intends to record
all future royalty income on a cash basis.
5. CORRECTION OF REVENUE RECOGNITION PROCEDURES FOR THE COMPANY'S OIL
ANALYSIS SEGMENT
Effective April 1, 1995, the Company changed its method of revenue
recognition for its oil analysis test kits (oil analysis service segment).
Previously, the Company recorded revenue from the advance billing of
unprocessed test kits mailed to customers to collect oil samples. After April
1, 1995, the Company began correctly recognizing revenue at the time the oil
analysis service is rendered.
Through the use of computer modeling techniques, creation of a new software
program to track test kits by identification numbers, and based on an analytic
review of the activity of major customers, the Company has determined that
retroactive application of this revised method to correct the accounting error
from using the previous method from the period October 1, 1993 through September
30, 1994 would have resulted in a
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
5. CORRECTION OF REVENUE RECOGNITION PROCEDURES FOR THE COMPANY'S OIL
ANALYSIS SEGMENT CONT'D
cumulative zero net change in net income for the period. Due to the large number
of sample
s processed, the capabilities of the computer system during this period and the
cost prohibitive nature of manually reconstructing records, the effect on
quarterly financial reporting for this period ended September 30, 1994 is
indeterminable. Consequently, the Company has not restated quarterly financial
results for the period ended September 30, 1994. In order to reflect the change
in revenue recognition method, the caption in the liability section of the
Company's balance sheet at September 30, 1994 was changed from "Accrued Testing
Costs" to "Deferred Service Revenue". Advance billings for oil analysis
services will now be considered deferred revenue until such time as the oil
analysis is rendered.
Application of the correct method of recording oil service revenue for the
period October 1, 1994 through June 30, 1995 results in an increase of
approximately $273,000 in revenue and net income of .01 per share over the
previous method. This increase is included in the year to date revenue and
income for the nine month period in the accompanying financial statements for
the period ended June 30, 1995. Approximately $110,000 and .00 per share of the
total increase in revenue and net income of $273,000 occurred in the Company's
current reporting period from April 1, 1995 to June 30, 1995, and is reflected
in the accompanying financial statements for the quarter ended June 30, 1995.
Since the quarterly impact of the retroactive application of this change is
indeterminable for the year ended September 30, 1994, the Company's Management's
Discussion and Analysis section (Item 2) relating to revenue, gross margin and
net income has been expanded to reflect operating performance with and without
this adjustment. After April 1, 1995, the Company implemented a new computer
order entry system to track samples from the time of mailing unprocessed kits
until the delivery sample results, and has instituted new internal control and
accounting procedures to ensure proper prospective accounting treatment.
6. LEGAL PROCEEDINGS
On April 20, 1994, the Company initiated a suit in U.S. District in
Atlanta, Georgia against Professional Service Industries, Inc.("PSI") for
failure to honor contractual obligations relating to oil testing samples sold
prior to the Company's purchase of PSI on July 16, 1993. On June 26, 1995, PSI
paid the Company $229,500, without any conditions attached, in anticipation of
the Company dismissing the lawsuit against PSI. The Company believes that the
amount received from PSI does not constitute an accord and satisfaction of the
amount which PSI owes to United Testing Group, Inc. ("UTG"). The Company
believes that PSI owes the Company an additional $444,648 plus interest and
legal fees. The Company's counsel believes that the Company's suit is with
merit.
The amount of $229,500 has been classified in the Company's financial
statements for the quarter ended June 30, 1995 as "Other Income." The Company
has not recorded any receivables or income related to the potential recovery of
additional amounts in this suit.
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
7. SENIOR CONVERTIBLE NOTES
On June 9, 1995, the Company entered into an agreement with advisory
clients of Ganz Capital Management, Inc. ("Ganz") whereby the holders would
purchase $3,016,500 in convertible notes from the Company. In June 1995, the
Company issued $2,060,000 of nine percent (9%) convertible notes maturing in
June 2000. After June 9, 1996, the notes can be prepaid by the Company without
penalty, and can be converted by the holders into fully registered shares of the
Company's common stock at a conversion price of $10 per share. The Company
issued the remaining $956,500 in notes and received the related proceeds on
October 12, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenue for the three and nine month periods ended June 30, 1995,
including the adjustment for deferred service revenue (outlined in Note 5), was
$4,912,560 and 14,706,071, respectively, compared to $3,934,934 and $11,628,448,
respectively, for the same periods in 1994. Total revenue excluding deferred
service revenue for the three and nine month periods ended June 30, 1995 was
$4,802,560 and $14,432,440, respectively, compared to $3,934,934 and
$11,628,448, respectively, for the same period in 1994. The increase in revenue
for the three and nine month periods ended June 30, 1995 is attributable to an
increase of approximately 65% in product sales at the Company's Top Source
Automotive, Inc. subsidiary ("TSA") of the Overhead Sound Systems ("OHSS") for
both periods offset by a decrease in oil analysis sales at UTG of
approximately $464,363 and $1,058,773 respectively,including the adjustment
for deferred revenue; and $574,363 and $1,332,404 excluding the adjustment.
The increase in the comparable sales volume of OHSS units is attributable
to an increased installation rate and sales of OHSS products for the Chrysler's
Jeep(R) Wrangler and Jeep(R) Cherokee vehicles as well as increased deliveries
to Chrysler Venezuela for Jeep(R) Cherokee and Jeep(R) Grand Cherokee
applications.The decrease in comparable sales volume for oil analysis
services at UTG is primarily attributable to the loss of several major oil
analysis customers. The Company is aggressively attempting to replace the lost
customers by offering expanded services to existing customers and by acquiring
new customers. There can be no assurances that these efforts will be successful.
In the third quarter of 1995, the rollout of OSAs paused due to technical
difficulties which the Company believes are now resolved. On August 11, 1995,
the rollout resumed with the shipment of the first redesigned unit. The Company
anticipates that the resumed rollout will be successful. However, the timing
and number of units to be deployed is indeterminable.
Gross profit margins, excluding the adjustment for deferred service revenue
for the three and nine months ended June 30, 1995, were 29.4% and 30.0%,
respectively, compared to 31.4% and 35.9% for the same period. The decrease in
margins below comparable levels in the prior year is attributable to a decline
in gross margins in oil analysis services partially offset by the increasing
volume of higher margin OHSS sales as a percentage of total sales.
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONT'D
RESULTS OF OPERATIONS CONT'D
Selling, general and administrative expenses and professional fees
("S,G,A") excluding OSA expenses for the three and nine months ended June 30,
1995 were $1,395,451 and $4,253,236, respectively, compared to $1,466,472 and
$3,459,868, respectively, for the same periods in 1994. The comparable OSA
expenses for the three and nine month periods ended June 30, 1995 were $602,657
and $1,380,697 compared to $120,103 and $279,355 for the same period in 1994.
The increased OSA expenses are attributable to an increase in personnel,
technical staff and development costs necessary to support the anticipated
rollout of the OSA units discussed above.
Depreciation and amortization increased 44.0% for the nine months ended
June 30, 1995, compared to the same period ended June 30, 1994. This increase
is due to the purchase of $1,567,099 in capital assets during the nine months
ended June 30, 1995. Depreciation expense includes $242,324 of depreciation
related to prototype OSA units. Depreciation and amortization of $563,862 was
allocated to cost of sales as it directly relates to the products and services
sold during the nine months ended June 30, 1995.
The decrease in research and development from $93,123 to $32,340 for the
nine months ended June 30, 1994 compared to the same period ended June 30, 1995,
respectively, is primarily attributable to the elimination of research and
development expenses related to the Acceleration Restraint Curve Safety Seat
("ARCS") technology.
Interest expense decreased $49,396 for the nine months ended June 30, 1995
compared to the same period ended June 30, 1994 due to expensing, in 1994,
approximately $52,052 of interest relating to the unamortized discount on
certain notes payable that were paid prior to their maturity date.
Net income (loss) including the adjustment for deferred service revenue for
the three and nine months ended was $(397,306) and $(1,255,599), respectively,
compared to $(294,449) and $2,689,981, respectively. Net (loss) excluding the
adjustment for deferred service was $(507,306) and $(1,529,230).
The decrease in net income for the three month period ended June 30, 1995
compared to the same period in 1994 is attributable to a decline in
profitability for oil analysis services at UTG, increased expenses relating to
the rollout of OSA units, offset by increased profits at TSA and the recovery of
approximately $229,500 in connection with a lawsuit (see Note 6). The amount of
$229,500 has been classified as other income in the accompanying financial
statements. Subsequent to the end of the third quarter, senior management of
the Company concluded that reductions in operating costs from current levels
were necessary. The Company is currently in the process of reducing or
eliminating unnecessary expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $(864,103) for the nine month
period ended June 30, 1995. This usage of cash is attributable to a net
operating loss excluding depreciation and amortization, of $295,450, a decrease
in accounts payable and accrued liabilities of $377,122 and an increase in
current assets of $191,531.
Net cash used in investing activities was $(2,258,831) of which $1,567,099
was used for purchases of equipment and $650,000 was a deposit made to the
manufacturer of the OSA units.
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
LIQUIDITY AND CAPITAL RESOURCES, INC.
Net cash provided by financing activities was $2,839,574 which included net
proceeds from sales of common stock through exercise of stock options of
$867,616, and net proceeds of $1,971,958 from borrowings as discussed below.
The Company has bank financing from First Union National Bank of Florida,("the
Bank"). This credit facility consists of a line of credit of $750,000 for
working capital, and an additional line of credit of $4,500,000 to be used
exclusively for the purchase of OSAs. The entire facility bears interest at .85%
over the prime rate, is governed by specific financial covenants and ratios
limiting accessibility, and is secured by substantially all of the assets of the
company. The maximum utilization of the working capital line of credit occurred
in May 1995 in the amount of $550,000. This amount was subsequently repaid in
June 1995. At August 11, 1995, no amounts were outstanding on either line. On
August 3, 1995, the Bank, pending completion of appropriate documentation,
increased the company's working capital line from $750,000 to $1,500,000. The
Company believes the facility, which expires on January 31, 1996, will be
renewed.
On June 9, 1995, the Company entered into an agreement with advisory
clients of Ganz Capital Management, Inc. ("Ganz") whereby the holders would
purchase $3,016,500 in convertible notes from the Company. In June 1995, the
Company issued $2,060,000 of nine per cent (9%) convertible notes maturing in
June 2000. After June 9, 1996, the notes can be prepaid by the Company without
penalty, and can be converted by the holders into fully registered shares of the
Company's common stock at a conversion price of $10 per share. The Company
issued the remaining $956,500 in notes and received the related proceeds in
October 1995. The proceeds from these notes will be used to fund operations and
the deployment of the OSAs.
For the three month period ended June 30, 1995, the Company's cash flow
from operations was approximately breakeven. Based on current cash balances,
current bank lines, additional note proceeds and future cash flows from
operations, the Company believes it has sufficient cash flow to fund its
operations and finance the deployment of a substantial number of OSA units.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
10.29 Note Purchase Agreement dated as of June 9, 1995
Regarding 9% Senior Subordinated Convertible Notes Due June
9, 2000 by and among Top Source Technologies, Inc.,
Purchasers and Ganz Capital Management, Inc.
10.30 Agreement by and between Top Source Technologies, Inc.,
dated May 10, 1995, Adrenaline, Inc. and Edward Van Duyne
(EFECS Technology)
B. REPORTS ON FORM 8-K
A Form 8-K was filed dated April 13, 1995 in connection with
updating other events. No other reports on Form 8-K were filed
during the quarter ended June 30, 1995.
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TOP SOURCE TECHNOLOGIES, INC.
By: /s/ David Natan October 30, 1995
David Natan Date
Vice President and Chief
Financial Officer
