SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (date of earliest event reported): September 27, 1995
TOP SOURCE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or other jurisdiction of incorporation)
1-11046 84-1027821
(Commission File Number) (IRS Employer Identification No.)
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
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
Top Source Technologies, Inc. (the "Company") has an on-site oil
analyzer ("OSA") line of credit with the First Union National Bank
which requires the Company, among other things, to pay Thermo Jarrell
Ash ("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 (the "Bank")
and to fund OSA operating costs, in June 1995, the Company sold
approximately $2 million of convertible notes (of a total offering of
$3 million) to clients of Ganz Capital Management, Inc., the Company's
principal stockholder. The Company expects the balance of the
proceeds before September 30, 1995. The notes pay 9% per annum
interest and are convertible after June 5, 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 Bank by $250,000 to $750,000 and as of September 15, 1995 had no
balance outstanding. The Company has not used this line of credit
since June 1, 1995. The Bank has issued a commitment to increase the
working capital line by $750,000 to $1,500,000 subject to completion
of documentation. The Company is expanding its bank facility in order
to be able to finance the roll-out of the OSAs.
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. S. 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.
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.
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 United Testing Group, Inc. ("UTG"),
a subsidiary of the Company. 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
approximately $200,000 in the quarter ended September 30, 1995. From
July 1995 through September 19, 1995, a total of 376,560 stock options
have been exercised primarily by terminated employees raising gross
proceeds of $1,190,370.
In mid-August 1995, the Company resumed the roll-out of its OSAs
by delivering retrofitted units and new units. 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. 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.
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOP SOURCE TECHNOLOGIES, INC.
(Registrant)
By (Signature and Title): /s/ Stuart Landow
Stuart Landow, President (Chief
Executive Officer)
Dated: September 27, 1995
