As filed with the Securities and Exchange Commission on June 4, 1998.
Registration No. 33- ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Registration Statement Under
The Securities Act of 1933
TOP SOURCE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1027821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7108 Fairway Drive, Suite 200, Palm Beach Gardens, FL 33418
(561) 775-5756
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Mr. William C. Willis, Jr., President
TOP SOURCE TECHNOLOGIES, INC.
7108 Fairway Drive, Suite 200
Palm Beach Gardens, FL 33418
(561) 775-5756
(Name, address, including zip code, and telephone number, including area code
of agent for service)
Copy to:
Michael D. Harris, Esq.
Michael Harris, P.A.
712 U.S. Highway One, Suite 400
North Palm Beach, Florida 33408-7146
(561) 844-3600
Approximation date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to rule 415 under the
Securities Act of 1933 ("Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box.
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Proposed
maximum maximum
Title of each class offering aggregate Amount of
of securities Amount to be price per offering registration
to be registered registered share price fee
Common Stock 3,500,000(1) $1.032(2) $3,612,000 $1,245.52
($.001 par value)
</TABLE>
TOTAL REGISTRATION FEE $1,245.52
(1) Consists of shares of common stock to be issued upon conversion of 5%
Series A Convertible Preferred Stock ("Preferred Stock") an exercise of
warrants and as a dividend to holders of Preferred Stock.
(2) Estimated solely for the purpose of computing the registration fee
based on the average of the high and low price of the Registrant's
common stock in the consolidated reporting system on the American Stock
Exchange on June 1, 1998.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
- ------------------------------------------------------------------------------
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<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
Heading in
Form S-3 Item Numbers and Caption Prospectus
1. Forepart of the Registration Statement and
Outside Front Cover of Prospectus................. Cover Page of
Form S-3 and
Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front and
Outside Back
Cover Pages of
Prospectus
3. Summary Information, Risk Factors.................. Not Applicable
and Ratio of Earning to Fixed Charges.............. and Risk Factors
4. Use of Proceeds.................................... Cover Page of
Prospectus
5. Determination of Offering Price.................... Cover Page of
Prospectus
6. Dilution........................................... Not Applicable
7. Selling Security Holders........................... Selling
Stockholders
8. Plan of Distribution............................... Cover Page of
Prospectus and
Plan of
Distribution
9. Description of Securities to be Registered......... Documents
Incorporated by
Reference and
Description of
Preferred Stock
and Warrants
10. Interests of Named Experts and Counsel............. Legal Matters
and Experts
11. Material Changes................................... Not Applicable
12. Incorporation of Certain Information By Reference.. Documents
Incorporated by
Reference
13. Disclosure of Commission Position on .............. Part II
Indemnification for Securities Act Liabilities
14. Other Expenses of Issuance and Distribution........ Part II
15. Indemnification of Directors and Officers.......... Part II
16. Exhibits and Financial Statement Schedules......... Part II
17. Undertakings....................................... Part II
<PAGE>
PROSPECTUS
TOP SOURCE TECHNOLOGIES, INC.
This Prospectus relates to an aggregate of 1,283,961 shares of common
stock, $.001 par value per share (the "Common Stock"), of Top Source
Technologies, Inc. (the "Company") being offered for sale by certain
stockholders of the Company (the "Selling Stockholders"). These shares are
issuable upon the conversion of 5% Series A Preferred Stock (the "Preferred
Stock") sold to two investors in May 1998, as dividends to be declared on the
Preferred Stock and the exercise of warrants (the "Warrants") at $1.10 per share
issued in May 1998. As of the date of this Prospectus, the Company's officers
and directors as a group beneficially own 4.4% of the Company's Common Stock.
Based upon information available to the Company, the only stockholder
beneficially owning 5% or more of the Company's Common Stock is a registered
investment advisor. According to a Schedule 13-G filed by the investment advisor
on January 28, 1997, as the result of investment power over the accounts of its
clients, the advisor and its affiliates are the beneficial owners of 2,079,700
shares of Common Stock, none of which are being offered for sale pursuant to
this Prospectus. The Company has no current information concerning the current
beneficial ownership of this investment advisor. On June 1, 1998, the closing
price of the Company's stock on the American Stock Exchange was $1.0625.
All of the shares of Common Stock 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 approximately $110,000 in connection with the exercise
of 100,000 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 $6,350 will be borne by the Company.
The Company has been advised by the Selling Stockholders that the
Common Stock 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.
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.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith to files 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 at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street N.W., Washington, D.C.
20549. The Commission maintains a World Wide Web site that contains reports,
proxy statements and other information regarding registrants including the
Company that file electronically with the Commission. The address of the site is
http:\\www.sec.gov. 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 a Registration Statement
under the Securities Act with respect to the Common Stock offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement certain parts of which are omitted in accordance with
the rules of the Commission. For further information with respect to the Company
and the Common Stock offered hereby, reference is made to the Registration
Statement 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 Statement, 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,
7108 Fairway Drive, Suite 200, Palm Beach Gardens, Florida, 33418-3757, (561)
775-5756.
<PAGE>
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, 1997 and all amendments thereto;
(b) The Company's quarterly reports on Form 10-Q for the
quarters ended December 31, 1997 and March 31, 1998;
(c) The Company's proxy statement dated January 28, 1998
filed pursuant to Section 14 of the Exchange Act;
(d) The description of the Company's Common Stock filed by the
Company predecessor, Top Source, Inc., a Colorado corporation,
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;
(e) 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
(f) All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since the filing of the
Form 10-K for the year ended September 30, 1997.
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.
<PAGE>
RISK FACTORS
The shares of Common Stock 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. All statements, trend analysis and other
information contained in this Prospectus relating to the possible sale of Top
Source Automotive, Inc. ("TSA"), the future profitability of TSA, the ability of
the Company to achieve profitability, development of the company's OSA-II, as
defined, the receipt of future orders for the sale of overhead sound systems
("OHSS") from Chrysler Corporation ("Chrysler"), the ability of the Company to
enter into strategic alliances or develop new technologies and the Company's
future compliance with debt covenants as well as other statements including
words such as "seek", "anticipate", "believe", "plan", "estimate", "expect",
"intend" and other similar expressions constitute forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of
this Prospectus. These statements are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such
forward-looking statements. Such risks and uncertainties include those
identified in this "Risk Factors" section as well as the following: the ability
of the Company to locate a suitable buyer for TSA, the ability of the Company to
reach an agreement with the buyer and the ability of the buyer to fund its
commitment; potential changes by Chrysler in the placement of its speakers in
Jeep(R) Wranglers or decline in production levels at Chrysler for vehicles
installing OHSS; the Company's ability to market OSA-IIs; the acceptance of the
OSA/OSA-II technology by the marketplace; a general tendency of large
corporations not to change from known technology to emerging new technology, the
ability of the Company's personnel to complete development of the OSA-II; the
reliability of the OSA-II technology over an extended period of time; the
Company's ability to attract major strategic partners for OSA-II and for TSA if
the Company is unable to sell it; and other matters which may increase the
Company's current losses and thereby cause it to exceed the 1.5 to 1.0 debt to
equity ratio required by a loan agreement.
Historical Losses. Since inception, the Company has never reported
income from operations. The Company has provided cash to support its operations
from the income generated by its automotive subsidiary, Top Source Automotive,
Inc. ("TSA"), the sale of the assets of United Testing Group, Inc. in 1996, the
sale of securities pursuant to private placements and the exercise of stock
options and warrants and from borrowings from institutional lenders. As
described below, TSA has lost and is losing substantial revenues from Chrysler
Corporation ("Chrysler") and the Company is seeking to sell TSA. However, TSA
will remain profitable unless Chrysler discontinues or materially reduces its
business relationship with the Company beyond that described below. The Company
has shifted its primary focus toward the sale of its On-Site Oil Analyzer
("OSA") which was introduced in 1994 and its second- generation machine, OSA-II,
which the Company is currently completing development. However, the Company has
generated only limited revenues from the sale and lease of OSAs. Revenue for TSI
for the year ended September 30, 1997 was $403,853 and $197,350 for the six
months ended March 31, 1998. The identifiable assets relating to the oil
analysis services segment were approximately $4,251,700 which includes the net
value of the capitalized database of $2,178,600 at March 31, 1998. In order to
achieve profitability, for which no assurances can be given, the Company is
relying upon its ability to market and sell OSA-IIs in sufficient numbers to pay
its substantial fixed and other expenses. There can be no assurances that the
Company will be profitable from operations in the future. The Company believes
that their marketing efforts will be successful. However, if the Company is
unable to meet goals or to have the necessary resources to sustain their
marketing activities it could have a material adverse effect on the Company's
business, the carrying value of the above listed assets, as well as the
financial condition of the Company. The company will continue to evaluate the
success of the new marketing efforts as well as the carrying value of the
related assets.
Reliance on On-Site Oil Analyzer. For several years, the Company has
concentrated on sale and marketing of OSAs but with only limited success. Under
the direction of the Company's new president, the number of OSAs sold and leased
in the past year has increased. Additionally, the Company augmented its
technical expertise by the hiring of Dr. John Coates who has developed a second
generation machine known as the OSA-II. The OSA-II is substantially smaller and
anticipated to be quicker and cheaper than the OSA. Moreover, the OSA-II does
not require the Company to rely upon an outside corporation to manufacture or
assemble the machines. Because the Company is relying upon one product, there is
a substantially increased degree of risk to investors.
Development of OSA-II. The Company is in the final phase of developing
its new OSA-II and expects that such development shall be completed by July
1998. However, as with the development of any new product, unforeseen delays
occur and problems may be discovered. Sophisticated computer software and
complex machines often encounter developmental difficulties or "bugs" which only
become apparent subsequent to wide-spread commercial use. Problems which may
arise in the operation of the OSA-IIs could have a material adverse effect upon
the Company's future operations.
Inability to Market OSA-IIs. The Company has devoted substantial resources
and different approaches to marketing the OSAs. These marketing efforts have not
been successful. Although the Company's marketing efforts over approximately the
last year have increased the number of OSAs being used, the Company has only
received two orders for multiple machines. These two orders consist of
short-term leases for five OSAs and four OSAs, respectively, to be placed at
different locations of the two customers in the United States. Without the
receipt of numerous orders for multiple OSA-IIs, it is not likely that the
Company can profitably market and sell OSA-IIs.
Dependence on Chrysler. Historically, the Company has derived almost all of
its revenues from the sale of its patented Overhead Sound Systems ("OHSS") to
Chrysler by TSA. In 1997, Chrysler discontinued using the OHSS on its Jeep(R)
Cherokee vehicles and in November 1998, Chrysler will discontinue using the OHSS
on its Jeep(R) Grand Cherokee vehicles. TSA expects to continue assembling the
OHSS for the Jeep(R) Wrangler through at least model year 2002. There can be no
assurances that Chrysler will continue to order the OHSS from TSA. If Chrysler
discontinues using the OHSS on the Jeep(R) Wrangler, it will have a material
adverse effect upon the Company at least until the Company generates significant
revenues from OSA-II.
Sale of TSA. Although the Company has announced that it is seeking to
sell TSA and has reported that it has received a non-binding letter of intent
from a potential acquiror, as of the date of this Prospectus the Company is
uncertain as to whether this acquiror will pay the initial cash deposit
anticipated to be received, if at all, within the next few week or if the
Company does receive such deposit, whether the acquiror will reach a definitive
agreement with the Company and close on such agreement. There can be no
assurances that the Company will sell TSA.
Changing Technology; Competitive Factors. The OSAs represented 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. Essentially,
the OSAs analyze (and the OSA-IIs are designed to analyze) oil at the end user's
location thereby avoiding the need to send petroleum samples to a central
laboratory. The OSAs and OSA-IIs utilize complex computer software. In general,
the computer industry is subject to rapid and significantly changing technology
including potential introduction of new products and technologies which may have
a material adverse impact upon the Company's ability to market and sell OSA-IIs.
The Company believes that it has a significant advantage over potential
competitors as a result of its experience over a four-year period with the OSAs,
the Company's proprietary database and the proprietary nature of the resulting
technology including the development of the OSA-IIs. No assurances, however, 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. TSA has relied upon the sale
of OHSS enclosures which are covered by a patent license limited to the United
States and Canada. The Company has obtained patents covering various features of
the OSAs which are applicable to the OSA-IIs. The Company has applied for
additional patents covering various features of the OSA-IIs. In addition, steps
have been taken to protect trade secrets through appropriate confidentiality
agreements. There can be no assurances that the patent applications for the
OSA-II will be granted. The failure by the Company to obtain patents and protect
its 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
software for the OSAs and OSA-IIs has been independently developed by it, and
that such technology does not infringe on the patents or violate the proprietary
rights of others, there can be no assurance that the Company 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 OSA-IIs. Patent and
technology disputes are common with high technology products and services.
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 to sell equity in suitable products and technologies to these 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. The Company's Restated Certificate of
Incorporation (the "Certificate Provisions") contains various provisions
designed to deter a third party from launching a hostile takeover for the
Company. In addition, the Company has adopted a Shareholder Rights Plan (the
"Rights Plan"). As used in this Prospectus, the Certificate Provisions and the
Rights Plan are collectively referred to as the "Anti-Takeover Provisions". The
Certificate Provisions 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) making it difficult to remove
directors for "cause" by requiring a super-majority vote 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 15% 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
accumulates 15 percent or more 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 15th day after a public announcement that beneficial ownership of ownership
of 15% or more of the Company's voting stock has been accumulated by single
acquiror or group (with certain exceptions), under specified circumstances.
The Anti-Takeover Provisions generally 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 affect
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. The Company is currently dependent upon
the efforts of the key members of its management team consisting of Mr. William
C. Willis, Jr., the Company's president and chief executive officer, and Mr.
David Natan, the Company's chief financial officer. In addition, the Company is
dependent upon Dr. John Coates who is in charge of the group who developed the
OSA-II. In the event that one or more of these persons ceases to be employed by
the Company, it may have a material adverse effect upon the Company.
Competition. Competition in the automotive business and the oil
analysis business is intense. With regard to the Company's OHSS business, while
the Company has no direct competition with another business which manufactures
overhead speaker enclosures, interior trim suppliers have a substantial
competitive advantage as a result of their relationships with automobile
manufacturers and their substantially greater degree of financial strength,
management depth and engineering expertise. By offering automobile manufacturers
the opportunity to deal with one primary supplier, an interior trim supplier can
offer alternative speaker placement and thereby compete directly with the
Company. With regard to the OSA-II, while the Company is not aware of any other
business that markets and sells an on-site oil analysis instrument, the
Company's oil analysis subsidiary, Top Source Instruments, Inc., competes with
various oil analysis laboratories located throughout the United States. These
laboratories sometimes offer service through Federal Express or other express
delivery couriers and provides facsimile or other rapid delivery of oil analysis
reports to the customers.
Liquidity Considerations. In 1995, the Company issued $3,020,000 in 9%
Senior Subordinated Convertible Notes (the "Notes"). These Notes contain a debt
to equity ratio that cannot exceed 1.5 to 1.0. As of March 31, 1998, this ratio
was 1.23 which meant that the Company was in compliance with the ratio. However,
due to the Company's historical losses, due to the uncertainty and timing of OSA
revenues, and as a result of the one-time charge, the Company expects to report
in connection with the resignation of the Chairman of its Board of Directors,
Mr. Stuart Landow, as an employee, there is a possibility that the Company will
exceed this ratio during the quarter ended June 30, 1998 or thereafter. In the
event that the ratio is not met and the Company is unable to receive a waiver
from the representative of the noteholders, Mr. G. Jeff Mennen, a member of the
Company's Board of Directors, has agreed to guarantee to infuse a sufficient
amount of money into the Company to permit it to maintain compliance with this
debt to equity ratio through October 1, 1998 or, alternatively, he will
refinance the Notes. In consideration for this guarantee, the Company issued to
Mr. Mennen 50,000 10-year warrants exercisable at $2.00 per share. Mr. Mennen
has the right to compel the Company to file a registration statement covering
the shares of Common Stock underlying such warrants or to include the shares of
Common Stock in registration statement filed by the Company on behalf of others.
<PAGE>
SELLING STOCKHOLDERS
Table of Selling Stockholders
The following table sets forth information furnished by the Selling
Stockholders, with respect to the number of shares of the Company's Common
Stock, including the 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. No Selling Stockholder has held any
position, office, or had a material relationship with the Company within the
past three years. For further information on the Preferred Stock and Warrants,
See "Description of Preferred Stock and Warrants".
<TABLE>
<S> <C> <C> <C> <C>
Percentage
Ownership Securities Ownership Owned
Selling Prior to Being After After
Stockholder Offering Offered Offering Offering
Excalibur Limited Partnership(1),(2),(3) 880,919 880,919 None 0
Gundyco in Trust for RRSP
550-98866-19(1),(4),(5) 378,042 378,042 None 0
H&H Securities Limited(6) 8,200(3) 8,200 None 0
Holding Company LTD.(7) 8,400 8,400 None 0
San Rafael Consulting Group(8) 8,400 8,400 None 0
</TABLE>
(1) Assumes conversion of Preferred Stock at 85% of the current bid
price of $1.00 per share.
(2) Includes 52,500 shares of Common Stock underlying Warrants which
are exercisable as of the date of this Prospectus. Also includes
4,890 shares of Common Stock issuable as a dividend as of June 30,
1998. Does not include 78,750 shares underlying Warrants which are
not currently exercisable.
(3) Does not include shares of Common Stock obtainable upon conversion
of up to 1,050 shares of Preferred Stock which the Selling
Stockholder is obligated to purchase at a price per share of
$1,000.
(4) Includes 22,500 shares of Common Stock underlying Warrants which
are currently exercisable as of the date of this Prospectus. Also
includes 2,601 shares of Common Stock issuable as a dividend as of
June 30, 1998. Does not include 33,750 shares underlying Warrants
which are not currently exercisable.
(5) Does not include shares of Common Stock obtainable upon conversion
of up to 450 shares of Preferred Stock which the Selling
Stockholder is obligated to purchase at a price per share of
$1,000.
(6) Represents 8,200 shares of Common Stock underlying Warrants which
are exercisable as of the date of this Prospectus. Does not include
12,300 shares underlying Warrants which are not currently
exercisable.
(7) Represents 8,400 shares of Common Stock underlying Warrants which
are exercisable as of the date of this Prospectus. Does not include
12,600 shares underlying Warrants which are not currently
exercisable.
(8) Represents 8,400 shares of Common Stock underlying Warrants which
are exercisable as of the date of this Prospectus. Does not include
12,600 shares underlying Warrants which are not currently
exercisable.
<PAGE>
DESCRIPTION OF PREFERRED STOCK AND WARRANTS
The Company entered into an agreement with two investors (both of whom
are Selling Stockholders) to sell to such investors up to 2,500 shares of
Preferred Stock. The shares of Preferred Stock are convertible into Common Stock
as described below, pay an annual dividend of 5% in cash or Common Stock of the
Company as described below, contain a liquidation preference equal to the $1,000
per share purchase price together with accrued dividends (the "Stated Value"),
are redeemable by the Company under certain circumstances as described below and
contain no voting rights except as otherwise required by law.
Two Selling Stockholders purchased 1,000 shares of Preferred Stock in
May 1998. The holders of the Preferred Stock have the right to convert such
shares cumulatively at any time after August 5, 1998 pursuant to the following
restrictions: 25% after August 5, 1998, an additional 25% after September 4,
1998 and an additional 25% after October 4, 1998 and the remaining 25% after
November 3, 1998. The conversion formula provides that the Preferred Stock may
be converted into a number of shares of Common Stock equal to the Stated Value
divided by the conversion price which is equal to the lesser of (i) $1.10 per
share of Common Stock, or (ii) a formula declining from 85% of the average
closing bid price to 80% of the average closing bid price. The minimum number of
shares of Common Stock which may be issued upon conversion of the Preferred
Stock is approximately 909,091 shares. Such number can be substantially higher
depending upon the future bid price of the Company's Common Stock. The Preferred
Stock automatically converts into Common Stock two years after issuance.
The Preferred Stock pays an annual dividend of 5% commencing on June 30,
1998 at the option of the Company payable in cash or shares of Common Stock. The
Company intends to issue shares of Common Stock because it is prohibited from
paying cash dividends under the terms of an agreement with a principal lender.
The Preferred Stock provides the holders with a per share liquidation preference
equal to the Stated Value. The Company may redeem the Preferred Stock prior to
conversion by paying the holders 120% of the Stated Value per share or
$1,200,000 (not including accrued dividends).
The two Selling Stockholders who purchased the Preferred Stock are
obligated to purchase up to an aggregate of additional $1,500,000 of the
Company's Preferred Stock in tranches of $500,000 on similar terms and
conditions commencing on 90, 150 and 210 days, respectively, from the date of
this Prospectus. If a Selling Stockholder fails to purchase its pro-rata share
of the additional shares of the Preferred Stock within 30 days of the foregoing
dates, such Selling Stockholder shall forfeit its rights and preferences and the
Preferred Stock held by it shall have minimal value. The foregoing obligation of
the Selling Stockholders to purchase an aggregate of $500,000 on each of the
three dates is subject to the average bid price of the Company's Common Stock
being not less than $1.00 and the average daily sales volume being not less than
40,000 shares over a 20-trading day period prior to the date of each purchase.
The Company has issued to the Selling Stockholders 250,000 Warrants
exercisable at $1.10 per share through May 7, 2001. Each Warrant entitles the
holder to purchase one share of Common Stock. The Warrants were issued to the
Selling Stockholders in connection with a purchase by two of the Selling
Stockholders of the Preferred Stock. Each Warrant converts into one share of the
Company's common stock. An aggregate of 100,000 Warrants are currently
exercisable and an aggregate of 50,000 additional Warrants first become
exercisable commencing 90, 150 and 210 days, respectively, from the date of this
Prospectus. After this later date, subject to prior exercise, all 250,000
Warrants shall be exercisable until they expire on May 7, 2001.
<PAGE>
PLAN OF DISTRIBUTION
All of the shares of Common Stock are offered for sale 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 $275,000 in connection with the exercise of up to 250,000 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 shares
of Common Stock 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.
<PAGE>
LEGAL MATTERS
The legality of the securities to be offered hereby will be passed upon
for the Company by Michael Harris, P.A., 712 U.S. Highway One, Suite 400, North
Palm Beach, Florida 33408-7146. Attorneys employed by that law firm are the
beneficial owners of 31,000 shares of Common Stock.
<PAGE>
EXPERTS
The financial statements and schedule 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.
<PAGE>
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 constitute 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 sell or a solicitation of an offer to buy any
securities by any person in any jurisdiction in which such offer or solicitation
would be unlawful. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, imply that the information in this
Prospectus is correct as of any time subsequent to the date of this Prospectus.
----------------
TABLE OF CONTENTS
Page
Available Information....................... 4
Documents Incorporated by
Reference.................................. 6
Risk Factors................................ 9
Selling Stockholders........................21
Description of Preferred
Stock and Warrants........................23
Plan of Distribution........................26
Legal Matters...............................27
Experts.....................................28
TOP SOURCE TECHNOLOGIES, INC.
1,283,961 Shares
of
Common Stock
----------------
Prospectus
----------------
___________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in
connection with the issuance and distribution of the securities being
registered. All of the amounts shown are estimates except the Commission
registration fee. Such expenses will be paid by the Company. None of these
expenses will be paid by the Selling Stockholders.
Registration fee ........................................ $1,245.52
Printing expenses........................................ $ 100.00
Accounting fees and expenses............................. $2,500.00
Legal fees and expenses (other than Blue Sky)............ $2,500.00
Blue Sky fees and expenses............................... $ .00
Miscellaneous............................................ $ 4.48
Total......................................... $6,350.00
Item 15. Indemnification of Directors and Officers.
The Company's amended and restated certificate of incorporation
provides that the Company shall indemnify its current and former officers and
directors against expenses reasonably incurred by or imposed upon them in
connection with or arising out of any action, suit or proceeding in which they
may be involved or to which they may be made parties by reason of their being or
having been a director or officer of the Company, or at its request, of any
other corporation which it is a stockholder or creditor and from which such
officers and directors are not entitled to be indemnified by (whether or not
they continue to be directors or officers at the time of imposing or incurring
such expense), except in respect of matters as to which they shall be finally
adjudged in such action, suit or proceeding liable for negligence or misconduct.
In the event of settlement of any such action, suit or proceeding,
indemnification shall be provided only in connection with such matters covered
by the settlement as to which the Company is advised by counsel that the persons
to be indemnified did not commit a breach of duty. The foregoing right of
indemnification shall not be exclusive of other rights to which such persons may
be entitled.
In addition, the Company has entered into indemnification agreements
with its executive officers and directors. These agreements provide that the
Company shall indemnify its executive officers and directors, if by reason of
their corporate status, they are or are threatened to be made parties to any
third-party proceedings, to the fullest extent provided by Delaware law. The
agreements provide for indemnification against expenses, judgments, penalties,
fines and amounts paid in settlement, actually and reasonably incurred by them
or on their behalf in connection with such proceeding or any claim, issue or
matter therein if (i) they acted in good faith; (ii) they reasonably believed in
the case of conduct in their official capacity with the Company that their
conduct was in the Company's best interests or in all other cases, that their
conduct was at least not opposed to the Company's best interests; (iii) with
respect to any criminal proceeding, they had no reasonable cause to believe
their conduct was unlawful; and (iv) with respect to an employee benefit plan
they reasonably believed their conduct to be in the best interests of the
participants and/or beneficiaries of the plan. The indemnification agreements
also provide indemnification in direct and derivative actions provided such
officers or directors acted in good faith and in a manner they reasonably
believed to be not opposed to the best interests of the Company. Such officers
or directors are not entitled to indemnification in connection with any
proceeding charging improper personal benefits to such officers or directors,
whether or not involving action in their official capacity, in which they were
judged liable on the basis that personal benefit was improperly received by
them.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE
COMPANY HAS BEEN INFORMED THAT IN THE OPINION OF THE SECURITIES AND
EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS
EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
Item 16. Exhibits.
4.0 Form of Common Stock Certificate*
4.1 Certificate of Designation of Rights and Preferences**
4.2 Form of Warrant**
4.3 Form of Private Securities Subscription Agreement**
5.0 Opinion of Michael Harris, P.A.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Michael Harris, P.A.***
* Contained in Registration Statement on Form 8-A filed
March 12, 1992.
** Contained in Form 10-Q for the period ended
March 31, 1998 filed on May 20, 1998 (Item 6,
Exhibit 10.1).
*** Contained in Opinion of Michael Harris, P.A.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any Prospectus required by section
10(a)(3) of the Securities Act of 1933
(the "Securities Act");
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(5) The undersigned Registrant hereby undertakes to deliver or
cause to be delivered with the Prospectus, to each person to
whom the Prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the
Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c under the Exchange Act;
and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in
the prospectus, to deliver, or cause to be delivered to each
person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial
information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions (see Item 15 above), or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirement for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Palm Beach Gardens, State of Florida, on this
____ day of June, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: /s/ WILLIAM C. WILLIS, JR.
William C. Willis, Jr.
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
Name Title Date
/s/ William C. Willis, Jr. Director June 4, 1998
- ---------------------------
William C. Willis, Jr.
/s/ David Natan Chief Financial June 4, 1998
- -----------------
David Natan Officer and Director
/s/ Ronald P. Burd Director June 4, 1998
- --------------------
Ronald P. Burd
/s/ Stuart Landow Director June 4, 1998
Stuart Landow
<PAGE>
/s/ G. Jeff Mennen Director June 4, 1998
- ---------------------------
G. Jeff Mennen
/s/ L. Kerry Vickar Director June 4, 1998
- ---------------------------
L. Kerry Vickar
<PAGE>
EXHIBIT INDEX
Exhibit No.
4.0 Form of Common Stock Certificate*
4.1 Certificate of Designation of Rights and Preferences**
4.2 Form of Warrant**
4.3 Form of Private Securities Subscription Agreement**
5.0 Opinion of Michael Harris, P.A.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Michael Harris, P.A.***
* Contained in Registration Statement on Form 8-A filed
March 12, 1992.
** Contained in Form 10-Q for the period ended
March 31, 1998 filed on May 20, 1998 (Item 6,
Exhibit 10.1).
*** Contained in Opinion of Michael Harris, P.A.
<PAGE>
EXHIBIT 5.0
MICHAEL HARRIS, P.A.
Attorneys at Law
712 U.S. HIGHWAY ONE, SUITE 400
NORTH PALM BEACH, FLORIDA 33408
Telephone: (561) 844-3600
Facsimile: (561) 845-0108
E-Mail Address: [email protected]
Michael D. Harris
Beth J. Harris
June 4, 1998
Top Source Technologies, Inc.
7108 Fairway Drive, Suite 200
Palm Beach Gardens, FL 33418-3757
Re: Top Source Technologies, Inc./SEC
Dear Sirs:
You have advised us that Top Source Technologies, Inc. (the "Company") is filing
with the United States Securities and Exchange Commission a Registration
Statement on Form S-3, with respect to 3,500,000 shares of common stock, par
value $.001 per share.
In connection with the filing of this Registration Statement, you have requested
us to furnish you with our opinion as to the legality of (i) such of the
Company's shares as are presently outstanding; and (ii) such securities as shall
be offered by the Company itself pursuant to the Prospectus which is part of the
Registration Statement.
You have advised us that as of June 2, 1998, the Company's authorized capital
consists of 50,000,000 shares of common stock, par value $.001, of which
28,782,177 shares have been issued. You have further advised us that the Company
has received valid consideration for the issuance of these shares.
After having examined the Company's Amended and Restated Certificate of
Incorporation, Certificate of Designation of Rights and Preferences, Bylaws,
Minutes, the Private Securities Subscription Agreements, Warrants and the
Reports and Proxy Statement incorporated by reference in the Prospectus, we are
of the opinion that up to 3,500,000 shares of common stock which may be offered
by the Selling Stockholders pursuant to the Registration Statement and
accompanying Prospectus, upon conversion of the 5% Series A Convertible
Preferred Stock (the "Preferred Stock"), payment of dividends to holders of
Preferred Stock and exercise of the Warrants issued by the Company, will be
fully paid and non-assessable, duly authorized and validly issued.
We consent to the use of our name in the Prospectus under the caption "Legal
Matters".
Very truly yours,
MICHAEL HARRIS, P.A.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As Independent Public Accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN, LLP
West Palm Beach, Florida
June 3, 1998
<PAGE>
