Top Source Announces Terms of Agreement With Onkyo

29 July 1999

Top Source Announces Terms of Agreement With Onkyo for Sale of Automotive Subsidiary's Assets

    PALM BEACH GARDENS, Fla.--July 29, 1999--Top Source Technologies, Inc. (AMEX: TPS) announced today the terms of its previously disclosed July 15th agreement with Onkyo America ("Onkyo') for the sale of substantially all of the assets of the Company's Top Source Automotive, Inc. ("TSA") subsidiary. Onkyo has agreed to pay $9,000,000 in cash and $1,000,000 of convertible preferred stock for TSA's assets. Closing of the transaction, which is expected to occur by September 17, 1999, is subject to the signing of a definitive agreement, Onkyo's obtaining financing and customary due diligence.
    On August 14, 1998, the Company signed an agreement to sell TSA's assets to NCT Audio, Inc. ("NCT") no later than March 31, 1999. Due to NCT's inability to raise the necessary financing by that date, the Company sold NCT two extensions, the last of which expired on July 15, 1999. To date, NCT has paid the Company approximately $3,520,000 in cash, which is non-refundable, and has forfeited $125,000 in minority earnings in TSA. Additionally, NCT owes the Company approximately $215,000 in unpaid extension fees relating to the second extension. Under the terms of the August 1998 agreement, NCT is obligated to sell its 15% equity stake in TSA on a pro-rata basis, if TSA is sold to another company.
    David Natan, Vice President and CFO stated, "The combination of NCT payments and penalty fees received to date, combined with Onkyo's purchase consideration when the anticipated closing occurs, will result in the Company having received a total of $12,350,000 in cash and convertible preferred stock for the TSA assets. Retaining a stake in Onkyo with our convertible preferred stock holdings, will give the Company significant future upside potential.
    Additionally, due to NCT's delays, we have received substantial cash flow contributions from TSA operations. On an overall basis, after considering actual cash we will receive, interest earned on deposits, forfeited NCT minority earnings, and the time value of money, we believe that the Onkyo deal is superior to the NCT deal of $10,000,000 in cash, and from $0 up to a maximum of $6,000,000 in potential contingent earn-out payments over two years."
    Will Willis, Chairman, President and CEO, commented, "Our OSA marketing and sales efforts have been hindered by cash constraints resulting from delays in the sale of TSA. The substantial amount of cash we expect to receive at the closing will enable us to accelerate our OSA sales efforts, and will improve our balance sheet. Additionally, by maintaining an equity position in Onkyo, we afford our shareholders an opportunity to share in Onkyo's future success."
    Shinobu Shimojima, President and CEO of Onkyo America, commented, "Based on financing proposals we have in hand and the progress we have made so far, we are confident that we will be able to close the transaction by September 17, 1999."
    Top Source Technologies, Inc. develops, assembles, and markets sophisticated technologies including the patented MotorCheck(TM) On-Site Analyzer, "an oil analysis mini-lab in a box," and proprietary Overhead Sound Systems.

    Forward-Looking Statements

    The statements discussed in this press release relating to the Company's expectation that it anticipates closing the TSA transaction with Onkyo by September 17, 1999 is a forward-looking statement within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The results anticipated by this forward-looking statement may not occur. Important factors that could cause actual results to differ materially from this forward-looking statement include the successful completion of due diligence by Onkyo, the ability of Onkyo to obtain financing, and unexpected legal, accounting and other issues that could delay the signing of a definitive agreement. Investors should also consider information contained in documents filed by the Company with the Securities and Exchange Commission.