U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-11038
BOATRACS, INC.
(Exact name of small business issuer as specified in its charter)
California 33-0644381
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6440 Lusk Blvd., Suite D201, San Diego, CA 92121
(Address of Principal Executive Offices)
(619) 587-1981
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes X No __
APPLICABLE ONLY TO CORPORATE FILERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 12,577,710 shares of
common stock as of November 1, 1995.
Transitional Small Business Disclosure Format (check one): Yes __ No X
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOATRACS, INC.
Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
l995 1994 l995 1994
REVENUES:
Communications systems $410,242 $240,365 $1,129,164 $614,899
Messaging 379,913 189,068 939,667 476,886
TOTAL REVENUES 790,155 429,433 2,068,831 1,091,785
OPERATING EXPENSES:
Communications systems 297,866 158,837 764,956 463,106
Messaging 228,049 123,405 577,496 324,907
Selling, general and
administrative 373,466 192,212 1,089,608 468,845
TOTAL OPERATING EXPENSES 899,381 474,454 2,432,060 1,256,858
(LOSS) FROM OPERATIONS (109,226) (45,021) (363,229) (165,073)
OTHER
Interest expense 2,048 10,499 16,069 23,427
Interest income 7,845 0 14,938 0
NET (LOSS) ($103,429) ($55,520) ($364,360) ($188,500)
NET (LOSS) PER SHARE ($0.01) ($0.01) ($0.03) ($0.02)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,386,699 9,500,000 10,838,994 9,500,000
See Notes to
Financial Statements
BOATRACS, INC.
BALANCE SHEETS (Unaudited)
ASSETS September 30 December 31
1995 1994
CURRENT ASSETS:
Cash $441,679 $531,753
Short Term Investments 1,803,098 0
Investment in common stock 1,898 1,898
Accounts receivable (net of
allowance for uncollectible
accounts of $18,297 and $6,376) 396,560 192,392
Inventories 40,615 11,531
Prepaid expenses and other assets 17,219 8,394
TOTAL CURRENT ASSETS 2,701,069 745,968
NOTE RECEIVABLE 54,000 9,000
PROPERTY at cost (net of
accumulated depreciation of
$54,692 and $37,165) 59,175 30,184
ORGANIZATIONAL COSTS (net of
accumulated amortization of
$73,322 and $64,766) 0 8,556
DEPOSIT IN ESCROW 0 50,000
TOTAL $2,814,244 $843,708
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $921,650 $354,860
Current portion of capital
lease obligation 1,349 1,783
TOTAL CURRENT LIABILITIES 922,999 356,643
LONG TERM LIABILITIES
Capital lease obligation 0 730
Deferred compensation 369,230 369,230
Long-term debt 0 368,421
TOTAL LONG TERM LIABILITIES 369,230 738,381
TOTAL LIABILITIES 1,292,229 1,095,024
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
authorized 1,000,000 shares,
no shares issued and outstanding
Common stock, no par value,
authorized 100,000,000 shares;
issued and outstanding
12,577,710 and 9,500,000 4,158,575 1,379,412
Accumulated deficit (1,995,088) (1,630,728)
Note receivable for Common
Stock issued (641,472) 0
TOTAL SHAREHOLDERS'
EQUITY (DEFICIT) 1,522,015 (251,316)
TOTAL $2,814,244 $843,708
See Notes to Financial Statements
BOATRACS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30
1995 1994
Operating activities:
Net (loss) ($364,360) ($188,500)
Adjustment to reconcile net (loss)
to net cash used in operating
activities:
Depreciation and amortization 26,083 17,877
Accrued interest on long-term debt 15,837 20,928
Bad debt expense 16,671 0
Changes in assets & liabilities:
Short Term Investments (1,803,098) 0
Accounts receivable (220,840) (27,389)
Inventories (29,084) 3,316
Prepaid expenses & other assets (8,825) (68,587)
Accounts payable and accrued expenses 566,791 13,299
Deferred compensation 0 69,230
Net cash (used) by operating activities (1,800,825) (159,826)
Investing activities:
Purchases of Capital Equipment (46,518) (12,228)
Financing activities:
Proceeds from issuance of
common stock 1,876,542 50,000
Proceeds from issuance of
long-term debt 0 236,417
Reduction of note receivable
re stock issuance 95,528 0
Issuance of note receivable (45,000) 0
Pay-off of Note Payable and
accrued interest (168,637) 0
Payments on lease obligation (1,164) (1,007)
Net cash provided by financing
activities 1,757,269 285,410
Net increase (decrease) in cash (90,074) 113,356
Cash at beginning of period 531,753 50,362
Cash at end of period $441,679 $163,718
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Common Stock for note receivable
issued $737,000 $0
Conversion of Promissory Note
and interest to Equity 215,621 0
Conversion of Deposit to Equity (50,000) 0
TOTAL $902,621 $0
See Notes to Financial Statements
BOATRACS, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the three months and year to date ended September 30, 1995 are not
necessarily indicative of the results that may be expected for any other
interim period or for the year ending December 31, 1995.
NOTE 2 - NET (LOSS) PER SHARE
Net (Loss) per share is computed based on the weighted average number of
common shares outstanding during each period including common stock
equivalents. All shares of common stock issued within twelve months of the
merger were considered to be outstanding for all periods presented through
December 31, 1994. Net (loss) per share is unchanged on a fully diluted
basis for all periods presented.
NOTE 3 - NOTE RECEIVABLE
During October 1994, the Company entered into an agreement with a Canadian
company whereby it agreed to advance up to $20,000. The agreement was
amended during the second and third quarters of 1995, increasing the advance
available to $54,000. Advances bear interest at 9% per annum and are due
December 31, 1995. Advances under the agreement totaled $54,000 at
September 30, 1995.
In May, 1995 the Company signed a Memorandum of Understanding with the
Canadian company to form a new Company in Canada in which the Company will
have a minority interest. The new Company will be incorporated in Canada
and will be granted exclusive rights for the marketing, distribution and
sale of the BOATRACS System in the Canadian provinces of Ontario, Quebec,
New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador.
The Canadian company, which had served as the exclusive distributor for
BOATRACS in Eastern Canada, will provide message monitoring for BOATRACS
in Eastern Canada. The note has been classified as long term as a majority
of the note will be converted to equity when the final agreement is
concluded.
NOTE 4 - LONG-TERM DEBT
Notes Payable - During 1992 the Company issued two notes payable aggregating
$260,000. Principal and interest, accrued at 7.5% per annum, totaled
$297,328 at December 31, 1993. In October 1994, $158,221 of the outstanding
principal and accrued interest were extinguished through the conversion into
267,884 shares of newly issued common stock of the Company. The notes were
held by the Company's President and Chief Operating Officer.
The remaining outstanding balance of such notes was repaid in the third
quarter totaling $168,636 including $10,415 of accrued interest. The notes
bore interest at 7.5% per annum.
NOTE 5 - AGREEMENTS WITH QUALCOMM INCORPORATED
On March 31, 1995, the Company entered into a Subscription Agreement and an
Amendment (#6) to the License and Distribution Agreement with QUALCOMM
Incorporated, the Company's supplier of OmniTRACS Satellite-based
communications and tracking equipment. Through these two agreements QUALCOMM
acquired 1,112,265 shares, or 10%, of BOATRACS, Inc. common stock increasing
the shares outstanding at that date to 11,122,651. The shares were issued
for a total consideration of $737,000 which will be paid by providing
discounts on future purchases of OmniTRACS equipment and message units from
QUALCOMM. The transaction was recorded as a note receivable for shares
issued which are reduced as discounts are earned. At September 30, 1995,
a total of $95,528 discounts had been earned reducing the receivable balance
to $641,472.
NOTE 6 - REGISTRATION STATEMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION
On May 3, 1995, the Company filed a registration statement on Form S-1 with
the Securities Exchange Commission which became effective on July 6, 1995,
registering shares held by certain shareholders of old BOATRACS, Inc., the
Company's sole supplier and shares which were converted into common stock
from a Promissory Note by a director of the Company on June 15, 1995.
A total of 4,840,222 shares were registered. The Company did not receive
any proceeds from the transaction.
On October 31,1995, the Company filed a second registration statement with
the Securities Exchange Commission registering an additional 1,275,375 newly
issued shares which were issued to new and existing shareholders in
September 1995. Proceeds net of commissions in the amount of $1,904,312
were raised from the Private Placement Offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company has distribution rights in the United States for marine
application of the OmniTRACS system of satellite-based communications and
tracking systems manufactured by QUALCOMM Incorporated("QUALCOMM").
The OmniTRACS system provides confidential two-way communications between
vessels at sea and base stations on land or with other vessels and is
effective while a vessel is within the satellite's "footprint," which extends
roughly 200 to 400 miles offshore of the continental United States.
The system also allows for hourly position tracking and monitoring and,
using supplementary products, can provide engine performance and fuel
consumption monitoring.
The Company was incorporated in California in 1982 under the name First
National Corporation as a bank holding company. From 1982 to 1993, the
Company provided, through its wholly-owned subsidiaries, business and
individual banking services and certain corporate trust services.
On November 9, 1993, First National Corporation filed a voluntary petition
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of California.
On January 12, 1995, the Company (formerly First National Corporation)
merged with BOATRACS, Inc., (Old "BOATRACS"), a California corporation formed
in 1990 to be a distributor in the United States marine market of the
OmniTRACS satellite-based communications and tracking system manufactured
by QUALCOMM. The merger of Old BOATRACS with and into the Company
(the "merger") was implemented pursuant to a Plan and Agreement of
Reorganization that was approved by the Bankruptcy Court. First National
Corporation had no significant assets or operations at the effective date
of the Merger. The Company intends to operate and continue the business
of Old BOATRACS.
For the three months ended September 30, 1995 and 1994
Total revenues for the quarter ended September 30, 1995 were $790,155, an
increase of $360,722 or 84% as compared to total revenues of $429,433 for
the quarter ended September 30, 1994.
Communications systems revenues, which consists of revenues from the sale
of the BOATRACS system and related software, were $410,242 or 51.9% of
total revenues, an increase of $169,877 or 70.7% compared to $240,365 or
56.0% of total revenues in the third quarter of 1994. The increase in
communication systems revenues primarily reflects increased sales of
communication units to vessels in the third quarter of 1995 compared to
the same period in 1994. Messaging revenues were $379,913 or 48.1% of
total revenues, an increase of $190,845 or 100.9% compared to $189,068 or
44.0% of total revenues in the third quarter of 1994. The increase in
revenues reflects an overall increase in messaging services provided by
the Company as a result of growth in the number of BOATRACS systems installed
on vessels and increased customer usage.
Communications systems expenses were $297,866 or 72.6% of communications
systems revenues for the quarter ended September 30, 1995, an increase of
$139,029 or 87.5%, compared to $158,837 which represented 66.1% of
communications systems revenues in the corresponding quarter of the prior
year. The dollar increase in expenses primarily reflects the increase in
sales of BOATRACS systems. The increase in communications systems expenses
as a percentage of communications systems revenues is primarily due to
sales mix, and more discounts and commissions given on volume sales.
Messaging expenses were $228,049 or 60.0% of messaging revenues for the
quarter ended September 30, 1995, an increase of $104,644 or 84.8%, compared
to $123,405 which represented 65.3% of messaging revenues in the
corresponding quarter of the prior year. The dollar increase in costs
reflects increased messaging services rendered due to increased BOATRACS
systems installed on vessels. The decrease in messaging costs as a
percentage of messaging revenues is due to the continuing increase in
revenues over the relatively fixed costs of providing this service.
Selling, general and administrative expenses were $373,466 or 47.3% of
total revenues for the quarter ended September 30, 1995, an increase of
$181,254 or 94.3%, compared to $192,212 or 44.8% of total revenues in the
prior corresponding quarter. The increased dollar amount is primarily
attributable to additional expenses incurred, including legal and accounting
expenses connected with the preparation of Securities and Exchange Commission
filings and a Private Placement Agreement concluded in September 1995, the
hiring of additional administrative and sales personnel and general increases
in operating expenses associated with the Company's growth. In addition, the
Company has been actively pursuing commencing operations in Europe and has
incurred costs as a result of these efforts. The Company also has been
developing software to facilitate customer operations. The costs are written
off as incurred.
Interest expense for the quarter ended September 30, 1995 was $2,048 or
.3% of total revenues, a decrease of $8,451 compared to $10,499 which was
2.4% of total revenues in the prior corresponding quarter. The dollar
decrease reflects the effects of a decrease in average outstanding debt
balances over the corresponding quarter in the prior year.
Other income of $7,845 in the quarter ended September 30, 1995, represents
interest earned on cash investments.
For the nine months ended September 30, 1995 and 1994
Total revenues for the nine months ended September 30, 1995, were $2,068,831,
an increase of $977,046 or 89.5% as compared to total revenues of $1,091,785
for the nine months ended September 30, 1994.
Communications systems revenues, which consists of revenues from the sale of
the BOATRACS system and related software, were $1,129,164 or 54.6% of total
revenues, an increase of $514,265 or 83.6% compared to $614,899 or 56.3% of
total revenues for the nine months ended September 30, 1994. The increase
in communications systems revenues primarily reflects overall increased
sales for the nine months ended September 30, 1995, although communications
systems revenues in the first quarter of 1995 were less than the first
quarter in the prior year. Messaging revenues were $939,667 or 45.4% of
total revenues, an increase of $462,781 or 97% compared to $476,886 or 43.7%
of total revenues for the nine months ended September 30, 1994. The increase
in messaging revenues reflects a continuing increase in messaging services
provided by the Company to its customers as a result of growth in the number
of BOATRACS systems installed on vessels and increased customer usage.
Communications systems expenses were $764,956 or 67.8% of communications
systems revenues for the nine months ended September 30, 1995, an increase
of $301,850 or 65.2% compared to $463,106 which represented 75.3% of
communications systems revenues in the corresponding nine months of the
prior year. The dollar increase in expenses primarily reflects the increase
in sales of BOATRACS systems. The decrease in communications systems
expenses as a percentage of communications systems revenues is primarily
due to sales mix, discounts and commissions given on volume sales.
Messaging expenses were $577,496 or 61.5% of messaging revenues for the
nine months ended September 30, 1995, an increase of $252,589 or 77.7%
compared to $324,907 which represented 68.1% of messaging revenues in the
corresponding nine months of the prior year. The dollar increase reflects
increased messaging services rendered due to increased BOATRACS systems
installed on vessels. The decrease in messaging costs as a percentage of
messaging revenues is due to the continuing increase in revenues over the
relatively fixed costs of providing this service.
Selling, general and administrative expenses were $1,089,608 or 52.7% of
total revenues for the for the nine months ended September 30, 1995, an
increase of $620,763 or 132.4% compared to $468,845 or 42.9% of total
revenues in the corresponding nine months of the prior year. The increased
dollar amount is primarily attributable to expenses incurred on travel in
connection with potential expansion into foreign and local markets,
additional expenses, including legal and accounting expenses connected with
the Merger and preparation of Securities and Exchange Commissions filings,
the hiring of additional finance, administrative and sales personnel and
general increases in operating expenses associated with the Company's growth.
In addition, the Company has been actively pursuing commencing operations
in Europe and has incurred costs as a result of these efforts. The Company
also has been developing software to facilitate customer operations.
The costs are written off as incurred.
Interest expense for the nine months ended September 30, 1995, was $16,069
or .8% of total revenues, a decrease of $7,358 compared to $23,427 in the
nine months of the prior year. The increase relates to lower outstanding
debt balances.
Other income of $14,938 relates to bank interest earned on cash investments.
Liquidity and Capital Resources
The Company's cash balance at September 30, 1995 was $441,679, a decrease
of $90,074 over the December 31, 1994 cash balance of $531,753.
At September 30, 1995, working capital was $1,778,070, an increase of
$1,388,745 from the working capital of $389,325 at December 31, 1994.
Cash of $1,800,825 was used through operating activities, cash of $46,518
was used through investing activities and cash of $1,757,269 was provided
through financing activities in the first nine months of 1995.
Accounts receivable increased $216,090 at September 30, 1995 compared to
December 31, 1994, due to the increased sales in the third quarter not yet
paid for. Inventory increased $29,084 at September 30, 1995, compared to
year end primarily due to increased units and components on hand being
used as evaluation units. Prepaid expenses were $8,825 higher primarily
due to prepaid insurance and other miscellaneous prepaids. Notes receivable
increased $45,000 at September 30, 1995 compared to year end due to monies
loaned in connection with a Promissory Note (see note 3). Accounts payable
and other accrued expenses increased $566,790 at September 30, 1995, compared
to year end primarily due to payables due to the supplier of Boatracs
communications and messaging systems. Notes payable and accrued interest
decreased $168,636 at September 30, compared to year end due to the loans
being paid off and by $215,621 due to a Promissory Note being converted
into common stock. Reduction of note receivable for common stock issued
in the amount of $95,528 relates to discounts received on purchases of
equipment and messaging from the supplier as provided in accordance with
the terms of the Note. (See note E.)
The Company anticipates making capital expenditures in excess of $50,000
during 1995. To date the Company has financed its working capital needs
through private loans, the issuance of stock and cash generated from
operations. Expansion of the Company's business may require a commitment
of additional funds. To the extent that the net proceeds of recent private
financing activities and internally generated funds are insufficient to
fund the Company's operating requirements, it may be necessary for the
Company to seek additional funding, either through collaborative arrangements
or through public or private financing. There can be no assurance that
additional financing will be available on acceptable terms or at all.
If additional funds are raised by issuing equity securities, dilution to
the existing shareholders may result. If adequate funds are not available,
the Company's business would be adversely affected.
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
Inapplicable
Item 2. Changes in Securities
Inapplicable
Item 3. Defaults Upon Senior Securities
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable
Item 5. Other Information
Inapplicable
Item 6. Exhibits and Reports on Form 8-K
Item
(a)(1) Exhibit 11 - Computation re Net Income (Loss)
per share (filed herewith).
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands, except earnings per share data)
Primary and Fully Diluted
Earnings (Loss) per Share:
Three Months Nine Months
ended September 30 ended September 30
1995 1994 1995 1994
Net loss ($103) ($56) ($364) ($189)
Weighted average common
shares outstanding:
Weighted average
common shares 11,387 7,976 10,839 7,976
Common shares issued
during the year
ended December,
1994 (1) 0 1,524 0 1,524
TOTAL 11,387 9,500 10,839 9,500
Earnings (Loss) per share ($0.01) ($0.0l) ($0.03) ($0.02)
(1) Represents shares of common stock issued within 12 months of the merger.
Such shares are considered to be outstanding for all periods presented
in the same manner as a stock split.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOATRACS, Inc.
Registrant
November 13, 1995 Michael Silverman
_______________ _____________________________
Date Michael Silverman
Chief Executive Officer
November 13, 1995 Annette Friskopp
_______________ _____________________________
Date Annette Friskopp
Chief Operating Officer
November 13, 1995 Dale Fisher
_______________ _____________________________
Date Dale Fisher
Chief Financial Officer
