Rule 424(b)(1), Rule 430A(a)
File Nos. 33-68092 and 33-89590
PROSPECTUS
TOP SOURCE TECHNOLOGIES, INC.
This Prospectus relates to an aggregate of 502,783 shares of
common stock (including shares of common stock underlying options
and warrants), $.001 par value per share and 20,200 warrants
exercisable at $4.00 (collectively the "Securities") of Top
Source Technologies, Inc. (the "Company") being offered for sale
by certain stockholders of the Company (the "Selling
Stockholders"). Collectively, the shares of common stock being
offered by the Selling Stockholders is 1.8% of the shares
outstanding as of November 2, 1995. Prior to this offering, the
Company's officers, directors and principal stockholders
beneficially own 25.1% of the Company's common stock assuming
exercise of vested options and warrants. Upon completion of this
offering and assuming all shares offered hereby are sold, the
Company's officers, directors and principal stockholders will
beneficially own 24.9% of the Company's common stock assuming
exercise of their vested options and warrants. One principal
stockholder, Ganz Capital Management, Inc. ("Ganz Capital") is a
registered investment advisor. As the result of investment power
over the accounts of its clients, it and its affiliates,
including two funds under common control with Ganz Capital, are
the beneficial owners of 4,420,740 shares of common stock,
including 22,100 shares of common stock underlying unexercised
warrants which are being offered for sale pursuant to this
Prospectus. See "Recent Developments". On October 30, 1995, the
closing price of the Company's stock on the American Stock
Exchange was $7.375.
All of the Securities are offered for the respective
accounts of the Selling Stockholders as listed in this Prospectus
under "Selling Stockholders". This Prospectus will also cover
sales of less than 500 shares by donees and pledgees of the
Selling Stockholders. The Company will receive none of the
proceeds from the sale of the shares of common stock by the
Selling Stockholders. However, the Company will receive a
maximum of approximately $516,515 in connection with the exercise
of 193,000 options and 80,700 warrants, the underlying shares of
which are covered by this Prospectus. Such proceeds will be used
for general corporate purposes. All of the expenses of this
offering, estimated at $95,000, will be borne by the Company.
The Company has been advised by the Selling Stockholders
that the Securities may be offered and sold from time to time by
or on behalf of the Selling Stockholders, in or through
transactions or distributions (including crosses and block
transactions) on the American Stock Exchange or in the over-the-
counter market at market prices prevailing at the time of sale,
or at negotiated prices, and in connection therewith commissions
may be paid to brokers. Brokers participating in such
transactions may act as agents for the Selling Stockholders. The
Selling Stockholders, and any brokers participating in this
offering may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, and any commissions received by them
may be deemed to be underwriting compensation.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is November 13, 1995
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith is required to file reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements
and other information concerning the Company can be inspected and
copied at the Public Reference Room maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the Commission's regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60604-2511, and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of this
material may also be obtained from the Public Reference Section
of the Commission, 450 Fifth Street N.W., Washington, D.C. 20549,
at prescribed rates. Reports, proxy statements and other
information concerning the Company can also be inspected at the
offices of the American Stock Exchange, Inc., 86 Trinity Place,
New York, New York 10006.
The Company has filed with the Commission two Registration
Statements under the Securities Act of 1933 with respect to the
Securities offered by this Prospectus. This Prospectus does not
contain all the information set forth in the Registration
Statements certain parts of which are omitted in accordance with
the rules of the Commission. For further information with
respect to the Company and the Securities offered hereby,
reference is made to the Registration Statements including the
exhibits. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily
complete and, where the contract or other document has been filed
as an exhibit to the Registration Statements each such statement
is qualified in all respects by reference to the applicable
document filed with the Commission.
The Company will provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus
is delivered, upon written or oral request of such person, a copy
of any or all of the information that has been incorporated by
reference in this Prospectus (other than exhibits). Requests
should be directed to the Company at its principal executive
offices, 2000 PGA Boulevard, Suite 3200, Palm Beach Gardens,
Florida 33408, telephone (407) 775-5756.
DOCUMENTS INCORPORATED BY REFERENCE
On October 6, 1992, the Company's change of domicile merger
from Colorado to Delaware became effective. Top Source, Inc., a
Colorado corporation merged into its wholly-owned subsidiary Top
Source Technologies, Inc., formerly known as Top Source, Inc., a
Delaware corporation. The specifics of the merger are described
in the Form 8-B filed with the Commission on November 14, 1992,
which is specifically incorporated by reference into this
Prospectus. As a result of the change of domicile merger, the
Form 8-A which is incorporated by reference herein, was filed
with the Commission by the Company's predecessor, Top Source,
Inc., a Colorado corporation.
The following documents filed with the Commission are hereby
specifically incorporated by reference into this Prospectus:
(a) The Company's annual report on Form 10-K for the fiscal
year ended September 30, 1994 and all amendments
thereto including Amendment No. 1 to Form 10-K filed
May 4, 1995, Amendment No. 2 to Form 10-K filed May 31,
1995 and Amendment No. 3 to Form 10-K filed September
28, 1995;
(b) The Company's quarterly reports on Form 10-Q for the
quarters ended December 31, 1994, March 31, 1995 and
June 30, 1995, Amendment No. 1 to Form 10-Q for the
quarters ended December 31, 1994 and March 31, 1995,
each filed September 28, 1995, and Amendment No. 1 to
Form 10-Q for the quarter ended June 30, 1995 filed
October 30, 1995;
(c) The Company's proxy statement dated January 20, 1995
filed pursuant to Section 14 of the Exchange Act;
(d) The Company's report on Form 8-K filed September 28,
1995;
(e) The Company's report on Form 8-K filed May 3, 1995;
(f) The Company's report on Form 8-K filed January 6, 1995;
(g) The Company's reports on Form 8-K filed July 20, 1993,
Form 8-K/A No. 1 filed August 9, 1993, Form 8-K/A No. 2
filed September 7, 1993, Form 8-K/A No. 3 filed
November 16, 1993 and Form 8-K/A No. 4 filed December
22, 1993;
(h) The description of the Company's common stock which is
contained in the registration statement on Form 8-A
filed on March 12, 1992, File No. 1-11046, including
any amendments or reports filed for the purpose of
updating such description;
(i) The description of the Company's Shareholders' Rights
Plan which is contained in the registration statement
on Form 8-A filed on May 10, 1995, File No. 1-11046, as
amended by Amendment No. 1 on Form 8-A/A filed on July
17, 1995 and any other amendments or reports filed for
the purpose of updating such description;
(j) The description of the Company's change of domicile
merger which is contained in the registration statement
on Form 8-B filed on November 14, 1992 and any
amendments and reports thereto; and
(k) All other reports filed by the Company pursuant to
Section 13(a) or 15(d) of the Exchange Act since
September 30, 1994. In addition, all documents
subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the termination of the offering made by this
Prospectus shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained
in a document incorporated or deemed to be incorporated
by reference in this Prospectus shall be deemed to be
modified or superseded for purposes of this Prospectus
to the extent that a statement contained in this
Prospectus or in any other subsequently filed document
which also is or is deemed to be incorporated by
reference in this Prospectus or in a supplement hereto
modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a
part of this Prospectus.
RISK FACTORS
The Securities offered hereby involve a high degree of risk,
including, but not necessarily limited to the risk factors
described below. Each prospective investor should carefully
consider the following risk factors inherent in and affecting the
business of the Company and this offering before making an
investment decision.
HISTORICAL LOSSES AND ANTICIPATED LOSS FOR FISCAL 1995.
Although the Company reported net income of approximately $2.0
million for fiscal 1994 as a result of an approximately $2.3
million income tax benefit consisting primarily of the reduction
in the valuation allowance, since inception it has never earned
income from operations. For fiscal 1994, the Company lost
$486,294 from operations and at September 30, 1994 had an
accumulated deficit of approximately $9.6 million. For the
fiscal years ended September 30, 1993 and 1992, the Company
sustained net losses of approximately $3.6 and $2.1 million,
respectively. See Item 8. "Financial Statements and
Supplementary Data" of the Form 10-K, as amended, for the year
ended September 30, 1994, which is incorporated by reference in
this Prospectus. The Company reported net losses from operations
for the quarters ended December 31, 1994, March 31, 1995 and June
30, 1995, and expects to report a comparable quarterly loss from
operations in the fourth quarter. There can be no assurances
that the Company will be profitable from operations in the
future.
DIFFICULTIES IN INTRODUCTION OF ON-SITE OIL ANALYZER. The
Company has commenced marketing a new product (the "Roll-Out")
which is a unique on-site oil analyzer ("OSA"). The Company has
developed the OSA in conjunction with Thermo Jarrell Ash
Corporation ("TJA"), a subsidiary of Thermo Instrument Systems
Inc., for use in the petrochemical, automotive and equipment
service industries. The Company began its Roll-Out of the OSAs
in December 1994. The Company believes that the OSAs represent a
substantial future opportunity and, accordingly, it is devoting
significant resources to supporting its introduction. In the
initial Roll-Out, the Company and its customers encountered
hardware and software difficulties which resulted in the Company
suspending the Roll-Out. To support the Roll-Out, TJA has
shifted assembly to a Western assembly plant and devoted
resources to correcting the initial design problems. Similarly,
the Company has devoted substantial effort to enhance operating
and analytical software. By mid-August 1995, the Company began
the resumption of the Roll-Out. As of the date of this
Prospectus, two non-functioning OSAs have been returned to TJA
and credits issued, and a large majority of the remaining 14
units delivered have been retrofitted. Moreover, TJA has shipped
the first three improved OSAs assembled by TJA at its Western
assembly plant. Although three retrofitted units are currently
generating revenue, the amounts are not currently material.
Pending continued successful operation of the first three units,
the Company has been notified by a multinational oil company,
which has installed two OSAs used in process control at two parts
of a refinery and one for equipment maintenance, that it wishes
to use OSAs at nine of its refineries and expand the OSAs to
other parts of the refineries. The Company will be required to
recruit additional personnel to assist in the installation of
OSAs at other refineries and in the expansion to other parts of
the refineries. Expansion will require additional analytical
software development in order to properly test new petrochemical
products. The analytical software has successfully been
developed for this new process control application. The Company
is awaiting the refinery's construction of an equipped trailer
and completion of the reliability evaluations. Additionally, the
Company is continuing to modify marketing approaches in order to
stimulate other initial customers to increase their utilization
of the OSAs. The Company is expending significant amounts in
developing and rolling-out the OSAs which is adversely affecting
operating results during the current fiscal year. As disclosed
in the first risk factor, the Company expects to report a loss
from operations for fiscal 1995 on a consolidated basis. This is
partially due to a conscious decision by the Company to invest
significantly greater amounts of expenses to accelerate the
deployment of OSAs. There can be no assurance that over a
sustained period the OSAs will generate a substantial increase in
revenue for the Company or create income from operations.
UNCERTAINTY OF PRODUCT DEVELOPMENT. The OSAs are complex
instruments utilizing hardware and software developed by TJA and
software developed by the Company over more than a two year
period. The OSAs underwent beta testing during fiscal 1994 and,
as a result, various changes were made to meet the particular
requirements of OSA customers and to correct problems that were
discovered. Beta testing refers to the process through which
early versions of a new product are shipped to customers so as to
further refine the product. As is common with sophisticated
computer software and complex instruments, developmental
difficulties or problems only become apparent subsequent to
widespread commercial use. Problems which may arise in the
operation of OSAs could have a material adverse effect upon the
Company's future operations. As stated in the risk factor
immediately above, the initial OSAs contained first-stage
hardware and software problems which the Company has been working
to eliminate during the current fiscal year. Continued
modifications have been made to correct design problems in the
hardware. Although the Company believes that the OSAs are now
fully operational based upon performance over the last two
months, no assurances can be given that these design problems
have been corrected.
CHANGING TECHNOLOGY; COMPETITIVE FACTORS. The OSAs
represent a technological breakthrough affecting the oil analysis
industry. Oil analysis is a 50-year old technology which is
widely used for diagnostic and preventative maintenance programs
for equipment by various industries. It is also used for quality
control and pipeline monitoring in the petroleum industry. The
Company currently operates three oil analysis laboratories and
believes it is one of the largest providers of such laboratory
based service in the United States. Essentially, the OSAs
analyze oil at the end user's location thereby avoiding the need
to send petroleum samples to a central laboratory (including the
laboratories operated by the Company). The OSAs utilize complex
computer software. Although the Company believes that it has a
significant advantage over potential competitors as a result of
over two years of research and development in conjunction with
TJA and the proprietary nature of the resulting technology, no
assurance can be given that either a comparable or more advanced
on-site oil analyzer will not be developed in the future by one
or more third parties.
PATENTS AND PROPRIETARY INFORMATION. Historically, the
Company generated almost all of its revenue from products subject
to patents and patent applications exclusively licensed to the
Company. During fiscal 1995, the Company anticipates that
approximately 70% of its revenue came from its Overhead Sound
Systems ("OSS"). The Company's OSS is covered by a patent
license limited to the United States and Canada. The Company and
TJA have each applied for patents covering various features of
the OSAs, and a United States design patent was issued in May
1995 which has been assigned to the Company. In addition, steps
have been taken to protect trade secrets through appropriate
confidentiality agreements. There can be no assurance that the
remaining patent applications for the OSAs will be granted. The
failure by the Company or TJA to obtain patents and protect their
respective trade secrets could have a material adverse effect on
the Company by increasing the likelihood of competition. In
addition, other companies may independently develop equivalent or
superior technologies and may obtain patent or similar rights
with respect to them. Although the Company believes that the
hardware and software technology for the OSAs has been
independently developed by it and TJA, and that such technology
does not infringe on the patents or violate the proprietary
rights of others, there can be no assurance that the OSAs will
not be determined to infringe upon the patents or proprietary
rights of others, or that patents or proprietary rights of others
will not have a material adverse effect on the ability of the
Company to commercialize the OSAs. Patent and technology
disputes are common with high technology products and services
and litigation costs can be high.
DEPENDENCE ON THIRD-PARTY MANUFACTURER. The Company and TJA
recently entered into an agreement for the development,
manufacture and marketing of the OSAs. Under this agreement, TJA
has the exclusive manufacturing rights for the OSAs and the
Company has the exclusive marketing rights for the automotive,
petrochemical and equipment service industries. The Company's
ability to meet commitments for delivery of the OSAs is partially
dependent upon TJA's ability and willingness to manufacture OSAs
in a workmanlike and timely manner. As stated above, there have
been problems resulting from assembly and software defects that
delayed the Company's Roll-Out of the OSAs. There can be no
assurance that such delays will not occur in the future or that
operational problems with the OSAs will not occur. The Company's
prospects could be adversely affected to the extent any such
problems result in failures by the Company to meet customer
orders on a timely basis or failures to deliver OSAs that provide
the contracted-for services. Additionally, due to the
proprietary technology of the OSAs, the Company may not be able
to locate other qualified third party manufacturers in the event
that TJA fails to comply with the agreement.
NEED TO MANAGE GROWTH. The Company anticipates that it will
grow substantially during the fiscal year which began October 1,
1995. In order to support such growth, the Company must recruit
new personnel to support the Roll-Out of the OSAs. The Company
is seeking persons with the appropriate technical expertise to
develop and engineer changes to the OSAs designed to serve the
petrochemical industry and to supervise the installation of OSAs
at customer sites. Additionally, the Company needs to add
persons to sell and market the OSAs. In addition to the
anticipated growth resulting from the need to properly support
the OSAs, the Company has moved into a new and larger Detroit,
Michigan area assembly facility to meet increased orders for its
OSS. The Company's success depends in part on its ability to
manage this growth, integrate the operations of its three
analysis laboratories and substantially expand its OSS assembly
operation. The Company has retained a new chief financial
officer and made substantial reductions in personnel and other
expenses designed to reverse the substantial operating losses
that the Company has incurred. No assurances can be given that
the Company will be able to manage this growth and achieve
operating profits. See "Recent Developments".
RELIANCE ON MAJOR CUSTOMER. The Company has traditionally
relied upon Chrysler and in fiscal 1995, the Company estimates
that approximately 70% of the Company's net revenue came from
Chrysler. Although the Company anticipates that Chrysler will
remain its single largest customer during fiscal 1996, if the OSA
Roll-Out is successful, this reliance upon Chrysler will be
materially lessened during fiscal 1996 and in subsequent years
Chrysler will account for increasingly lower percentages of the
Company's revenue. However, there can be no assurance that the
revenue from OSAs will increase as expected. For that reason,
the loss of Chrysler as a customer, or impairment of the
Company's reputation with the industries it serves, could have a
material adverse effect upon the Company. No assurance can be
given that the Company will supply Chrysler with OSS units in the
future.
GOVERNMENTAL REGULATION. The Company's industrial oil
analysis laboratories routinely dispose of used oil in the
ordinary course of business and as such are subject to federal,
state and local regulations. To handle this oil disposal, UTG
hires a licensed, insured third party. The Company believes that
UTG and its predecessors are and have been in material compliance
with all rules and regulations of the federal, state and local
environmental agencies. Environmental compliance costs are not
expected to have a material effect on the financial condition and
results of operations of the Company. However, in the event of
significant changes in statutes or regulations or unforeseen
problems in connection with the storage of the used oil, the
transportation of the used oil or the disposal thereof, site
environmental compliance costs may have a material adverse affect
on the Company.
NEW TECHNOLOGIES AND OTHER CONSIDERATIONS. In order to
expand its current product line, the Company may continue to seek
new technologies and products. This aspect of the Company's
business involves a number of special risks. Because of these
risks, the Company will seek capital input and strategic partners
in order to reduce the risks to investors. Also, the Company
will seek to avoid substantial and long-term expense associated
with the necessary research and development. Assuming that the
Company is able to enter into agreements with such partners and
that those partners will be able to carry out the necessary
research and development, there is the risk that the technologies
will not perform as expected or be cost effective. Assuming
successful research and development, there remains the risks of
being able to market the products and locate industry partners or
others able to manufacture the products according to stringent
quality control standards and in a viable economic manner. There
can be no assurance that the Company will be able to successfully
locate such technologies and if so, will be able to find
strategic partners able to develop and market new technologies.
Finally, there is the risk that while the Company is seeking to
commercialize a new technology, a competitor will develop
technologies which are more commercially viable thereby reducing
the viability of the Company's products.
ANTI-TAKEOVER CONSIDERATIONS. In 1993, the Company's
stockholders approved five amendments to the Company's
Certificate of Incorporation (the "1993 Amendments").
Additionally, on December 13, 1994, the Company's Board of
Directors (without seeking stockholder approval) adopted a
Shareholder Rights Plan (the "Rights Plan"), collectively, the
"Anti-Takeover Provisions". The 1993 Amendments consist of: (i)
empowering the Board of Directors, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock
in one or more series, with such designations, preferences,
special rights, qualifications, limitations and restrictions as
the Board may determine; (ii) establishing a classified Board of
Directors whereby election of the directors is staggered and each
year approximately one-third of the directors are elected for a
three year term; (iii) requiring a super-majority vote to remove
directors for "cause" of either: (1) 75% of the stockholders or
(2) 66-2/3% of the stockholders and the majority of the
"disinterested directors"; (iv) providing that stockholder action
taken by written consent in lieu of a meeting is prohibited
unless such consent is signed by the holders of at least two-
thirds of the stock; and (v) restricting stockholder nomination
of directors to any stockholder with the power to vote at least
10% of the outstanding voting securities of the Company who
timely complies with specific notice procedures. In connection
with the Rights Plan, the Board declared a dividend of one
Preferred Stock Purchase Right (the "Rights") for each
outstanding share of the Company's common stock. The Rights
permit the holders (stockholders of the Company) to purchase
Series A Junior Preferred Stock. Holders of Rights have the
right to acquire stock of the Company or an "acquiring entity" at
half of market value. The Rights only become exercisable in the
event, with certain exceptions, an acquiring party becomes
beneficial owner of 15% percent or more (or 20% percent or more
in the case of stockholders who beneficially owned more than 10%
as of December 13, 1994) of the Company's voting stock. These
Rights may be redeemed by the Company at $.01 per Right prior to
the close of business on the 10th day after a public announcement
that beneficial ownership of ownership of 15% or more (or 20% or
more in the case of beneficial owners of 10% or more on December
13, 1994) of the Company's voting stock has been accumulated by
single acquirer or group (with certain exceptions), under
specified circumstances.
The Anti-Takeover Provisions may make it more difficult or
discourage a proxy contest or the assumption of control by a
holder of a substantial block of the Company's common stock
because it is more difficult to remove the incumbent Board.
Thus, the Anti-Takeover Proposals have the effect of: (i)
entrenching incumbent management, and (ii) discouraging a third
party from making a tender offer at a premium over the market
price or otherwise attempting to obtain control of the Company
even though such an attempt could be desired by a substantial
member of the Company's stockholders. The Anti-Takeover
Provisions were not intended to prevent a takeover of the Company
on terms which are beneficial to the stockholders and will not do
so. They may, however, deter an attempt to acquire the Company
in a manner or on terms that the Board of Directors determines
not to be in the best interest of its stockholders.
DEPENDENCE ON KEY PERSONNEL. While in the past the Company
has been dependent upon certain members of its management team
and key consultants, it has taken steps to reduce this
dependence. It has exposed certain key middle management members
to the duties of key executive officers and caused such middle
management members to develop relationships with key customers,
suppliers and other persons. As a result of these steps, the
Company believes that it has lessened its dependence upon key
personnel and accordingly it has reduced the key man life
insurance policies so that the Company now owns $900,000 policies
insuring the lives of Messrs. Stuart Landow and Christer Rosen,
President and Executive Vice President, respectively, of the
Company.
COMPETITION. Competition in the automotive business and the
oil analysis business is intense; however, the Company is not
selling and has no intention to sell its products and services
directly to consumers. With regard to the Company's OSS
business, it believes it has no significant competition. The
Company holds patents on the overhead mounting system. If a
customer chooses to use such system it must come to the Company.
The primary factor involved in whether or not a customer will
choose to use an overhead mounting system rather than a
traditional speaker system is cost. In this regard, the Company
believes that its OSS system results in a reduced cost of
production. With regard to UTG's industrial oil analysis
business, significant competition exists. However, the Company
believes its extensive database of tests provides it with a
significant competitive edge. However, due to service problems,
which arose in connection with, and price competition which
became evident after, the Company's 1993 oil analysis
acquisitions and the consolidation of two distinct operations,
UTG lost business from existing customers. While the Company
believes it offers viable products/services and meets the needs
of its customers in all aspects of its business, there can be no
assurance that other products and services superior to those of
the Company will not be developed or offered in the future by
competitors.
OUTSTANDING OPTIONS AND WARRANTS. There are outstanding
vested options (including options which vest in the 60 days
following the date of this Prospectus) and currently exercisable
warrants to purchase 2,458,408 shares of the Company's common
stock some of which are exercisable below the current market
price1. The range of the exercise prices is from approximately
$.28 to $8.75 per share. The following represents the number of
outstanding vested options and currently exercisable warrants
outstanding at November 2, 1995 and their exercise prices:
No. of Options Approximate
or Warrants Exercise Price
5,000 Options $.28
805,000 Options .53
30,000 Options .56
100,000 Options 1.50
50,000 Options 1.78
500,000 Options 2.065
1 There are an additional 542,250 unvested options which
are not currently exercisable.
300,000 Options 2.13
44,000 Options 2.19
16,000 Options 2.38
25,000 Options 2.69
50,000 Options 3.13
25,000 Options 3.38
5,000 Options 3.50
67,500 Options 4.75
18,000 Options 6.125
197,500 Options 6.50
12,833 Options 6.625
75,000 Options 6.75
15,625 Options 6.9375
10,000 Options 7.50
6,250 Options 8.25
20,000 Options 8.75
60,500 Warrants2 1.00
20,200 Warrants3 4.00
For the life of all such options and warrants, the holders
thereof will have the opportunity to profit from a rise in the
market price of the Company's common stock, with a resulting
dilution in the interest of holders of common stock. The terms
on which the Company will be able to obtain additional capital
during the life of such options and warrants may be adversely
affected, and the holders of such options and warrants may be
expected to exercise their rights at a time when the Company
would, in all likelihood, be able to obtain any needed capital by
a new offering of securities on terms more favorable to the
Company than those provided by such options and warrants.
POSSIBLE VOLATILITY OF COMMON STOCK PRICES. The stock
market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating
performance of any particular company. Moreover, the Company's
common stock has historically been subject to periodic price and
volume swings which have been unrelated to the Company's results
of operations. Various factors and events including future
announcements of technological innovations or new products by the
Company or its competitors, developments or disputes concerning,
among other things, patents or proprietary rights, publicity
regarding actual or potential results relating to products under
development by the Company or its competitors, regulatory
developments in the United States, and economic and other
external factors, as well as fluctuations in the Company's
financial results, may have a significant impact on the market
price of the shares of common stock and the Company's business.
POTENTIAL FUTURE SALES. As of November 2, 1995 the Company
had issued and outstanding 27,773,977 shares of common stock, of
which 4,060,286 shares were "restricted securities", as that term
is defined under Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities Act"). In addition to the
502,783 shares covered by this Prospectus, a total of 3,784,699
outstanding shares of restricted common stock may currently be
publicly sold under Rule 144 and a total of up to 1,028,691
2 The shares underlying these warrants may be offered
for sale pursuant to this Prospectus.
3 These warrants and the shares underlying them may be
offered for sale pursuant to this Prospectus.
shares of common stock underlying outstanding options may be sold
under three current Registration Statements under Form S-8
permitting immediate resale. Future sales of shares made
pursuant to registration statements, under Rule 144 or under
Regulation S may have an adverse effect on the then prevailing
market price of the common stock and adversely affect the
Company's ability to obtain future financing in the capital
markets. In this regard, for the first eight months of calendar
1995, average daily volume of the Company's common stock has been
approximately 99,500 shares.
NO DIVIDENDS. The Company intends to retain future
earnings, if any, to finance its growth. Accordingly, any
potential investor who anticipates the need for current dividends
from his investment should not purchase any of the shares offered
hereby.
RECENT DEVELOPMENTS
The Company's OSA line of credit with the First Union
National Bank requires the Company, among other things, to pay
TJA $1.9 million in order to be able to draw on the line. To
date, the Company has paid approximately $1.2 million. To meet
the remainder of its obligation to First Union National Bank and
to fund OSA operating costs, in June 1995, the Company sold
approximately $2 million of convertible notes to clients of Ganz
Capital, the Company's principal stockholder. The Company closed
the balance of the note offering on October 12, 1995 raising
aggregate gross proceeds of $3,020,000 including the
approximately $2,000,000 previously received. The notes pay 9%
per annum interest and are convertible on or after June 9, 1996
into shares of the Company's common stock at $10.00 per share.
The Company has agreed to register the shares of common stock to
permit public sale in the event of conversion.
The Company has increased its working capital line of credit
with the First Union National Bank (the "Bank") by $250,000 to
$1,500,000 and as of November 1, 1995 had no balance outstanding.
The Company has not used this line of credit since June 1, 1995.
The Company has expanded its bank facility in order to be able to
finance the Roll-Out of the OSAs and purchase OSAs from TJA based
upon orders received from customers.
In May 1995, the United States Patent Office issued a design
patent covering the Company's OSAs which has been assigned to the
Company by Mr. Carlton Joyce, the inventor. Mr. Joyce is
President of the Company's OSA subsidiary and a member of the
Company's Board of Directors.
Effective June 30, 1995, the Company hired Mr. David Natan
as its new Vice President of Finance (chief financial officer)
replacing Mr. James P. Samuels. Mr. Natan had been Chief
Financial Officer of MBf USA, Inc. since November 1992. From
August 1987 through October 1992, Mr. Natan was Treasurer and
Controller of Jewel Masters, Inc. Mr. Natan receives a salary at
the annual rate of $125,000 per year and a $600 per month
automobile allowance. He also received a grant of 93,750
incentive and non-qualified stock options exercisable at $6.9375
per share. In addition, the Company's chief accounting officer,
Mr. W. Earl Somerville, resigned as of mid-August 1995. Mr.
Natan has assumed Mr. Somerville's duties temporarily. The
Company is actively seeking to hire a new Controller and expects
to replace Mr. Somerville at a savings of approximately $50,000
per year.In August 1995, the Company commenced a program which
at current operating levels will reduce expenditures by
approximately $1,750,000 over the next 12 months. To the extent
new employees are added to support the OSA Roll-Out, these
savings will be reduced. Because the Company intends to closely
monitor the OSA Roll-Out and only add new employees as is
warranted by the OSA business, the Company cannot predict the
cost of such new employees. However, it is anticipated that such
costs would be less than incremental OSA revenue although no
assurances can be given. Much of the savings will occur through
the reduction of personnel employed by UTG. Additionally, the
Company's former chief financial officer (Mr. James P. Samuels)
had also been president of UTG. In August 1995, he resigned as
president of UTG and as an employee of the Company. The Company
is seeking to hire a general manager for UTG's oil analysis
laboratories. As the result of these personnel cuts, the Company
will incur non-recurring payroll expenses of approximately
$200,000 in the quarter ended September 30, 1995 of which
approximately $100,000 represents cash outlays expended during
the quarter. Approximately $100,000 was accrued at September 30,
1995 which will be paid by December 31, 1995.
From July 1995 through September 19, 1995, a total of
376,560 stock options were exercised primarily by terminated
employees
raising gross proceeds of $1,527,588 and as of September 19,
1995, the Company's cash balance was approximately $1,500,000.
This balance does not give effect to the receipt of an additional
$960,000 in senior note proceeds as of October 12, 1995.
In mid-August 1995, the Company resumed the Roll-Out of its
OSAs by delivering retrofitted units and new units. See "Risk
Factors - Difficulties in Introduction of On-Site Analyzer".
Although no assurances can be given, the initial results appear
promising and the OSAs are working as anticipated. Additionally,
an OSA has been delivered to a second multi-national oil company.
SELLING STOCKHOLDERS
TABLE OF SELLING STOCKHOLDERS
The following tables set forth information furnished by the
selling stockholders listed in the tables which follow,
collectively referred to as the "Selling Stockholders", with
respect to the number of shares of the Company's common stock,
warrants exercisable at $4.00 per share and shares of common
stock underlying the warrants owned by each Selling Stockholder
on the date of this Prospectus, the shares offered hereby, and
the number and percentage of outstanding shares to be owned by
each Selling Stockholder after the offering. Up to 234,783
shares of common stock and 20,200 warrants exercisable at $4.00
per share may be offered for sale by the Selling Stockholders on
the January 12, 1994 table, and up to 68,000 shares of common
stock may be offered for sale by the Selling Stockholders on the
November 13, 1995 table pursuant to this Prospectus. Except as
indicated in the footnotes to the tables of Selling Stockholders,
no Selling Stockholder has held any position, office, or had a
material relationship with the Company within the past three
years.
SECURITIES CONTAINED IN THE REGISTRATION STATEMENT
DECLARED EFFECTIVE JANUARY 12, 1994
Percentage
Ownership Securities Ownership Owned
Selling Prior to Being After After
Stockholder Offering Offered Offering Offering
Appleton Associates
Shares of Common Stock 64,000 64,000 None 0
British Far East Ltd.
Shares of Common Stock 14,583 14,583 None 0
Underlying Options
Comegys, Robert4
Shares of Common Stock 5,000 5,000 None 0
Durham, Dee4
Shares of Common Stock 3,000 3,000 None 0
Gosman, Abraham D.5
$4.00 Warrants 8,100 8,100 None 0
Shares of Common Stock 8,100 8,100 None 0
Underlying Warrants
Griffin, Marvin4
Shares of Common Stock 4,000 4,000 None 0
Hochberg, Samuel and Brenda
$4.00 Warrants 1,600 1,600 None 0
Shares of Common Stock 1,600 1,600 None 0
Underlying Warrants
Joyce, Carlton S.
Shares of Common Stock 170,0006 170,000 200,000 *
Learn, David4
Shares of Common Stock 4,000 4,000 None 0
Muller, Paul E.4
Shares of Common Stock 7,000 7,000 None 0
Orman, Margaret Palmbaum
$4.00 Warrants 4,900 4,900 None 0
Shares of Common Stock 4,900 4,900 None 0
Underlying Warrants
Palmbaum, Paul R. Trust
Shares of Common Stock 2,000 2,000 None 0
$4.00 Warrants 1,600 1,600 None 0
Shares of Common Stock 1,600 1,600 None 0
Underlying Warrants
R. Weil & Associates
Shares of Common Stock 136,000 136,000 None 0
Rodriguez, Mario F.
Shares of Common Stock 5,000 5,000 None 0
$4.00 Warrants 4,000 4,000 None 0
Shares of Common Stock 4,000 4,000 None 0
Underlying Warrants
4 An employee of the Company. Consists of shares
underlying options.
5 Held in a discretionary account managed by Ganz Capital
which has investment power but not voting power over
these shares.
6 Mr. Joyce is a director of the Company and President of
the Company's OSA subsidiary. Consists of 200,000
shares which may be sold pursuant to Rule 144 and
170,000 shares underlying options, 100,000 of which are
currently vested.
* Less than 1%.
SECURITIES CONTAINED IN THE REGISTRATION STATEMENT
DECLARED EFFECTIVE NOVEMBER 13, 1995
Percentage
Ownership Securities Ownership Owned
Selling Prior to Being After After
Stockholder Offering Offered Offering Offering
Bryan & Yen PSP7
Shares of Common Stock 10,000 10,000 None 0
Underlying $1.00 Warrants
Endonic Assn. Pension
Shares of Common Stock 5,000 5,000 None 0
Underlying $1.00 Warrants
Horowitz, Judith
Shares of Common Stock 6,000 6,000 None 0
Kaplan, Larry I.
Shares of Common Stock 20,000 20,000 None 0
Underlying $1.00 Warrants
Katims, Dr. and Weissman, Dr.7
Shares of Common Stock 4,000 4,000 None 0
Underlying $1.00 Warrants
MLH Holding Limited Partnership
Shares of Common Stock 20,000 20,000 None 0
Underlying $1.00 Warrants
Philadelphia Heart Pension
Shares of Common Stock 1,500 1,500 None 0
Underlying $1.00 Warrants
Speilman, Scott R., IRA
Shares of Common Stock 1,500 1,500 None 0
7 Held in a discretionary account managed by Ganz Capital
which has investment power but not voting power over
these shares.
PLAN OF DISTRIBUTION
All of the Securities are offered for the respective
accounts of the Selling Stockholders as listed in this Prospectus
under "Selling Stockholders". The Company will receive none of
the proceeds from the sale of the shares of common stock by the
Selling Stockholders. However, the Company will receive a
maximum of $516,515 in connection with the exercise of 193,000
options and 20,200 warrants, the underlying shares of which are
covered by this Prospectus. Such proceeds will be used for
general corporate purposes.
The Company has been advised by the Selling Stockholders
that the Securities may be offered and sold from time to time by
or on behalf of the Selling Stockholders, in or through
transactions or distributions (including crosses and block
transactions) on the American Stock Exchange, or in the over-the-
counter market at market prices prevailing at the time of sale,
or at negotiated prices, and in connection therewith commissions
may be paid to brokers. Brokers participating in such
transactions may act as agents for the Selling Stockholders. The
Selling Stockholders, and any brokers participating in this
offering may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commissions received by them may be
deemed to be underwriting compensation.
LEGAL MATTERS
The legality of the securities to be offered hereby will be
passed upon for the Company by Cohen, Chernay, Norris, Weinberger
& Harris, 712 U.S. Highway One, Fourth Floor, North Palm Beach,
Florida 33408-7146. Attorneys employed by that law firm are the
beneficial owners of 36,000 shares of common stock.
EXPERTS
The financial statements and schedules of Top Source
Technologies, Inc. incorporated by reference in this Prospectus
and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent certified public accountants, as
indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said
report.
The financial statements of Spectro/Metrics, Inc.
incorporated by reference in this Prospectus and elsewhere in the
registration statement have been audited by Williams, Cook &
Reed, P.C., independent public accountants as indicated in their
report with respect thereto, and are incorporated by reference
herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
No dealer, salesperson or
other person has been autho-
rized to give any information
or to make any representations
other than those contained in
this Prospectus, and, if given
or made, such information or
representations must not be
relied upon as having been au- TOP SOURCE TECHNOLOGIES, INC.
thorized by the Company or any
of the Selling Stockholders.
This Prospectus does not con-
stitute an offer to sell or a
solicitation of an offer to 502,783 SHARES
buy any security other than
the securities offered by this
Prospectus, or an offer to OF
sell or a solicitation of an
offer to buy any securities by
any person in any jurisdiction COMMON STOCK
in which such offer or solic-
itation would be unlawful. AND
Neither the delivery of this
Prospectus nor any sale made 20,200 WARRANTS
hereunder shall, under any
circumstances, imply that the
information in this Prospectus
is correct as of any time sub-
sequent to the date of this ________________
Prospectus.
PROSPECTUS
________________
________________
NOVEMBER 13, 1995
TABLE OF CONTENTS
Page
Available Information . 4
Documents Incorporated by
Reference . . . . . . 6
Risk Factors . . . . . 9
Recent Developments . . 24
Selling Stockholders . 27
Plan of Distribution . 30
Legal Matters . . . . . 31
Experts . . . . . . . . 32
