RULE NO.424(B)(1), RULE 430A(A)
FILE NOS. 33-64469, 33-68092
AND 33-89590
PROSPECTUS
TOP SOURCE TECHNOLOGIES, INC.
This Prospectus relates to an aggregate of 804,783 shares of common stock
(including shares of common stock underlying options, warrants and convertible
notes), $.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 securityholders of the Company (the "Selling
Stockholders"). Of the 804,783 shares of common stock covered by this
Prospectus, a total of 302,000 shares underlie 9% Senior Subordinated
Convertible Notes ("Notes") sold to managed accounts of the Company's principal
stockholder. Because the Notes are not convertible until on or after June 9,
1996 at $10.00 per share, the number of shares of common stock held by the
Company's principal stockholders and percentages do not give effect to
conversion of the Notes. However, the December 1, 1995 Selling Stockholders'
table does include the shares of common stock underlying the Notes. See
"Selling Stockholders." Collectively, the shares of common stock being offered
by the Selling Stockholders is 2.9% of the shares outstanding as of November 2,
1995. Prior to this offering, the Company's officers, directors and principal
stockholders beneficially own 25.9% 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 25.5% of the Company's common
stock assuming exercise of their vested options and warrants. The Company's
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 4,803,194 shares of
common stock, which includes 22,100 shares of common stock underlying
unexercised warrants. On November 3, 1995, the closing price of the Company's
common stock on the American Stock Exchange was $8.56.
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. Additionally, to the extent that
Notes are converted, the Company will not have to repay the principal of such
Notes up to a maximum of $3,020,000. All of the expenses of this offering,
estimated at $31,052.63, 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 December 1, 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 three 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, and 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 and caused a significant loss during
1995. 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 several
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. For the OSAs, one United States design patent
was issued in May 1995 which has been assigned to the Company, and in November
1995 the Company was notified that the United States Patent and Trademark office
allowed two additional United States patents. In addition, steps have been
taken to protect trade secrets through appropriate confidentiality agreements.
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
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
1 There are an additional 542,042 unvested options which
are not currently exercisable.
2 The shares underlying these warrants may be offered
for sale pursuant to this Prospectus.
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 804,783 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 2,057,000 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 10 months of calendar 1995,
average daily volume of the Company's common stock has been approximately
112,000 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 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. Pursuant to this Prospectus, the Company is registering
3 These warrants and the shares underlying them may be
offered for sale pursuant to this Prospectus.
the shares of common stock underlying the Notes 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
14, 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. Further, in
November 1995 the Company was notified that the United States Patent and
Trademark Office allowed two additional patent applications relating to OSA
technology.
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. The Company recently hired a new
Controller 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 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 and Notes 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, up to 68,000 shares of common stock may be offered for sale by the
Selling Stockholders on the November 13, 1995 table and up to 302,000 shares of
common stock issuable upon conversion of the Notes (on or after June 9, 1996)
may be offered for sale by the Selling Stockholders on the December 1, 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 370,000 (6) 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<PAGE>
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.
SECURITIES CONTAINED IN THE REGISTRATION STATEMENT
DECLARED EFFECTIVE DECEMBER 1, 1995
Percentage
Ownership Securities Ownership Owned
Selling Prior to Being After After
Stockholder Offering Offered Offering Offering
Batrus & Co.8
Shares of Common Stock 5,000 5,000 None 0
Broad, Norman - Account G8
Shares of Common Stock 2,000 2,000 None 0
Nations Bank Trust Co.
NA C/F Lois England 8%
Charitable Remainder Annuity Trust8
Shares of Common Stock 12,500 12,500 None 0
Nations Bank Trust Co.
NA C/F Richard England 8%
Charitable Remainder Annuity Trust8
Shares of Common Stock 12,500 12,500 None 0
Futernick, Morris Family Foundation8
Shares of Common Stock 3,500 3,500 None 0
The Ganz Family Foundation8,9
Shares of Common Stock 7,250 3,500 3,750 *
Ganz, Elinor, IRA #1 8,10
Shares of Common Stock 53,100 12,500 40,600 *
The Nancy and Charles Ganz Family
Supporting Foundation8,11
Shares of Common Stock 3,750 2,500 1,250 *
Ganz, Pauline Revocable Trust8
Shares of Common Stock 4,500 2,500 2,000 *
Gillman, Arthur M.D.
Joyce S. Gillman Co-Trustees,
Revocable Living Trust U/A
DTD 4-01-948
Shares of Common Stock 4,000 4,000 None 0
Goldstein, Bernice8
Shares of Common Stock 10,000 10,000 None 0
Green Haft Trust F/B/O Richard J. Haft8
Shares of Common Stock 12,500 12,500 None 0
Haft, Richard J.8
Shares of Common Stock 2,000 2,000 None 0
Haft-Gillman, Joyce8
Shares of Common Stock 2,500 2,500 None 0
Harvith, Erwin Trust U/A
DTD 6-28-72
Sylvia Harvith Trustee8
Shares of Common Stock 3,000 3,000 None 0
Horowitz, Bernice and Arthur8
Shares of Common Stock 3,500 3,500 None 0
Calhoun & Company FBO Lewis A.
Imermn Suc. Trustee U/A FBO
Juditz Horowitz8
Shares of Common Stock 3,500 3,500 None 0
Kane Investments8
Shares of Common Stock 2,500 2,500 None 0
Kaplan, Donald A. Revocable Trust #3
Albert S. Reidel Under Trust 11-12/858
Shares of Common Stock 5,000 5,000 None 0
Kaplan, Donald A. IRA8
Shares of Common Stock 5,000 5,000 None 0
Lipschutz, Frank Trust8
Shares of Common Stock 14,500 14,500 None 0
Lipschutz, May Trust8
Shares of Common Stock 12,000 12,000 None 0
Mac & Company8
Shares of Common Stock 3,500 3,500 None 0
The Louise and Morton Macks
Family Foundation8
Shares of Common Stock 5,000 5,000 None 0
Marshall, Elaine T., Trustee8
Shares of Common Stock 10,000 10,000 None 0
Marshall, E. Pierce, Successor
Trustee Eleanor P. Marshall
Trust Dtd 12/26/798
Shares of Common Stock 10,000 10,000 None 0
Budd and Nanette Mayer Foundation, Inc.8
Shares of Common Stock 2,000 2,000 None 0
The Peggy Meyerhoff
Pearlstone Fdn U/A 9/5/918
Shares of Common Stock 2,000 2,000 None 0
Pearlstone Family Fund8
Shares of Common Stock 15,000 15,000 None 0
Pearlstone Family Fund8
Shares of Common Stock 15,000 15,000 None 0
Pearlstone Foundation for Jewish Living8
Shares of Common Stock 15,000 15,000 None 0
Pearlstone Institute for Living Judaism8
Shares of Common Stock 15,000 15,000 None 0
Dean Witter C/F FBO
Reagan, Kaaren, IRA8
Shares of Common Stock 2,500 2,500 None 0
Smith Barney R/O Custodian for
Roberson, Clive E., M.D.8
Shares of Common Stock 14,000 14,000 None 0
Schreiber, Alice A.8
Shares of Common Stock 2,500 2,500 None 0
Slade, Inc.8
Shares of Common Stock 12,500 12,500 None 0
Slavin, Richard, IRA R/O8
Shares of Common Stock 2,500 2,500 None 0
Slavin, Richard and Jane8
Shares of Common Stock 3,500 3,500 None 0
Steinberg, Joy, Trustee
Joy Steinberg Rev. Trust Dtd 2/5/928
Shares of Common Stock 2,500 2,500 None 0
Steinberg, Milton, Trustee
Milton Steinberg Rev. Trust Dtd 2/5/928
Shares of Common Stock 2,500 2,500 None 0
Sorenson, Harvey R., Trustee
Eleanor P. Marshall Stevens
Charitable Trust Investment Partnership8
Shares of Common Stock 1,500 1,500 None 0
Sorenson, Harvey R., Trustee
Eleanor P. Marshall Stevens
Charitable Trust Investment Partnership8
Shares of Common Stock 8,500 8,500 None 0
Tecce, Frederick D.8
Shares of Common Stock 10,000 10,000 None 0
Thomas, R.J.8
Shares of Common Stock 7,500 7,500 None 0
Vision Associates8
Shares of Common Stock 3,000 3,000 None 0
8 Consists of shares of common stock underlying Notes. The Notes may
not be converted and shares issued prior to June 9, 1996. Currently,
the Notes are held in a discretionary account managed by Ganz Capital
which has investment power over these securities. If the Notes are
converted at a time when the account is still managed by Ganz Capital,
it will not have voting power over these securities.
9 Mr. Ganz, president of Ganz Capital, the Company's principal
stockholder, is a co-trustee and beneficiary of the foundation.
10 Ms. Ganz is a director of Ganz Capital, the Company's principal
stockholder.
11 Mr. Ganz is president of Ganz Capital, the Company's principal
stockholder.
*Less than 1 %.
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 included
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 included 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 authorized
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 authorized by the
Company or any of the Selling
Stockholders.
This Prospectus does not con- TOP SOURCE TECHNOLOGIES, INC.
stitute an offer to sell or a
solicitation of an offer to
buy any security other than
the securities offered by this
Prospectus, or an offer to 804,783 SHARES
sell or a solicitation of an
offer to buy any securities by
any person in any jurisdiction OF
in which such offer or solic-
itation would be unlawful.
Neither the delivery of this COMMON STOCK
Prospectus nor any sale made
hereunder shall, under any AND
circumstances, imply that the
information in this Prospectus 20,200 WARRANTS
is correct as of any time sub-
sequent to the date of this
Prospectus.
________________
PROSPECTUS
________________
________________
TABLE OF CONTENTS
DECEMBER 1, 1995
Page
Available Information . 4
Documents Incorporated by
Reference . . . . . . 6
Risk Factors . . . . . 9
Recent Developments . . 25
Selling Stockholders . 28
Plan of Distribution . 36
Legal Matters . . . . . 37
Experts . . . . . . . . 38
