Spinoff aerospace/defense concern will launch public stock offering.

A 9-month-old spinoff aerospace/defense contractor is losing no time diversifying its technology into commercial businesses -- and plans an initial public offering next month.

Torrance-based Hi-Shear Technology Corp., a spinoff of New Hills, N.Y.-based Hi-Shear Industries Inc., spent the first nine months of its independent existence doing government work and lining up deals to take fledgling commercial products to market. And right now, it is lining up to take itself to market on Wall Street.

Chief Financial Officer George Trahan said spinning off from Hi-Shear Industries Inc., which supplies rivots and other fasteners to the aircraft and automotive industry, has brought the multiple benefits of name recognition, flexibility and smaller size.

"It (the split) has freed us from investment constraints that the parent put on us," he said, "and our small size has enabled us to qualify for small business programs."

Management reported that sales in June through October of last year -- the firm's first five months of independence -- exceeded $2.5 million. Gross profits were $726,000, or about 28 percent of sales. However, due to cost allocations from the former parent company, amortization of goodwill and other expenses, the company posted a net loss of $714,000 for the period.

Hi-Shear Technology's 2-million-share IPO will be priced next month at an estimated $5-$7 a share, according to the latest estimate by its Century City-based underwriter, Baraban Securities Inc., and then debut on the NASDAQ. Baraban Chairman Stuart Greenberg will become a director of the company upon completion of the offering.

Following the IPO, the company will have 7 million shares of common stock outstanding. More than 70 percent will be held by Chairman and President Thomas Mooney and Trahan, who is also a director of the firm.

Most of the offering's net proceeds will be used to market and develop the company's growing lines of commercial products. These include a prototype for a line of low-cost, light-weight emergency rescue equipment and a line of high-security electromechanical locks for top-secret government installations.

The company's traditional product line was introduced in the 1950s so that its former parent could cash in on the emerging U.S. space program. By 1984, the product line evolved into a subsidiary specializing in hardware that fastened, separated and released components or structures on command, like the electronic firing systems found on the Space Shuttle.

In response to the government's defense and aerospace cutbacks, two HSI executives, Thomas Mooney and Trahan, presented a business diversification and expansion plan to the HSI board in 1992. The plan called for using the subsidiary's technical expertise to develop commercial products and go after government contracts outside the defense and space arenas.

HSI would not commit the capital resources to diversify, so Mooney and Trahan bought the subsidiary last June 1 for $4.1 million. The money was provided by the principals and a loan from a Santa Monica commercial bank.

Mooney owns 55.5 percent of Hi-Shear Technology's stock, and Trahan holds the remaining 44.5 percent.

So far, aerospace and defense products provide all of Hi-Shear Technology's revenues. During the first five months it was independent, said company officials, backlog orders more than doubled to $11.8 million as of last Oct. 21 from $4.3 million on June 1.

Meanwhile, company officials said, Hi-Shear Technology has been preparing to enter the commercial sector, helped along, in part, by federal government projects aimed at small companies and conversion programs.

In October 1993, the federal Technology Reinvestment Program, which is aimed at defense industry conversion, awarded the firm a grant of $784,000 towards production of emergency rescue equipment that would be smaller, lighter and less costly than the "Jaws of Life" type of equipment currently in use. The device weighs in just over 11 pounds, can be packed in a briefcase, and uses a power cartridge to drive the cutting blade. This cartridge was originally developed to power a separation device on the Space Shuttle.

White House officials said the Hi-Shear Technology project was chosen because "in addition to saving lives ... commercialization of this technology will help preserve a part of the pyrotechnic industry that remains critical to the national defense."

The company's "auto (metal) cutters" prototype was tested by the Torrance Fire Department last month for use in extricating victims trapped in cars or caught behind machinery, explained fire department Captain Paul De Millo.

Right now, he said, Hi-Shear Technology is modifying its product to accommodate the fire department's evaluation, as well as "working on a cutter that can cut through concrete reinforcement bars." The latter, he noted, could come in handy after an earthquake.

Hi-Shear Technology's management expects to begin shipping emergency rescue equipment before year-end 1994.

The production of electromechanical locks has also become a company priority, due to the Defense Appropriations Act of 1993, which set new specifications for high-security locks.

The company is working on an agreement with LaFard Inc., a Torrance-based commercial lock manufacturer, to license technology meeting these specifications. Hi-Shear Technology officials cite government reports estimating there are 250,000 high-security safes in use today, with 24,000 per year expected to be produced in the near future.

The firm has also entered into an agreement with TRW Inc., to deliver production prototypes of igniter assemblies for a second generation of automotive airbags -- another industry sparked by government regulation. Deliveries of the prototypes began last month, with production slated for 1997. Hi-Shear Technology has 105 full-time employees, the majority of whom are engineers and technicians. It expects to expand its staff to include more production and specialized personnel.