As filed with the Securities and Exchange Commission on May 3, 1996
Registration No. 333-1817
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933
BOATRACS, INC.
(Exact name of registrant as specified in its charter)
California 5060 33-0644381
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
6440 Lusk Boulevard, Suite D201
San Diego, California 92121
(619) 587-1981
(Address and telephone number of registrant's principal executive offices)
________________________________
Michael Silverman, President
BOATRACS, Inc.
6440 Lusk Boulevard, Suite D201
San Diego, California 92121
(619) 587-1981
(Name, address and telephone number of agent for service)
__________________________________
It is requested that copies of communications be sent to:
Norman L. Smith, Esq.
Solomon Ward Seidenwurm & Smith
401 B Street, Suite 1200
San Diego, California 92101
__________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement
becomes effective, which time is to be determined by the Selling
Securityholders. All of the Securities offered hereby are
offered for the account of the Selling Securityholders.
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, check the following
box./X
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering./
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering./
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box./
<PAGE>
CROSS REFERENCE SHEET
Registration Statement Item and Caption Prospectus Heading
1.Forepart of the Registration Statement and Out-
side Front Cover Page of Prospectus............ Cover Page
of Registration
Statement; Cover Page
2.Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front Cover
and Outside Back Cover
Pages
3.Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges..................... Prospectus Summary;
Risk Factors
4.Use of Proceeds..................................... *
5.Determination of Offering Price................. Cover Page; Plan of
Distribution
6.Dilution............................................ *
7.Selling Security Holders.......................... Selling Shareholders
8.Plan of Distribution............................... Cover Page; Plan of
Distribution
9.Description of Securities to be Registered.... Description of Capital
Stock
10.Interests of Named Experts and Counsel..... Legal Matters; Experts
11.Information with Respect to the Registrant..... Prospectus Summary;
The Company; Risk
Factors; Dividend
Policy; Selected
Financial Data;
Management's Discussion
and Analysis of
Financial Condition and
Results of Operations;
Business; Management;
Certain Transactions;
Principal Shareholders;
Description of Capital
Stock; Shares Eligible
for Future Sale; Market
Information; Financial
Statements
12. Disclosure of Commission Position on Indem-
nification for Securities Act Liabilities........ Description of Capital
Stock
_______________
*Not Applicable
<PAGE>
PROSPECTUS
6,111,385 Shares
BOATRACS, INC.
Common Stock
__________________________
This Prospectus relates to 6,111,385 shares (the
"Shares") of common stock, no par value (the "Common
Stock"), of BOATRACS, Inc., a California corporation
formerly known as First National Corporation (the
"Company" or "BOATRACS"). The Shares are held by certain
of the former shareholders of BOATRACS, Inc., a
California corporation ("Old BOATRACS"), which merged
with and into the Company effective January 12, 1995 (the
"Merger") and by the Company's sole supplier
(collectively, the "Selling Shareholders"). See "Selling
Shareholders."
The Company will not receive any proceeds from the
sale of Shares by the Selling Shareholders. All expenses
incurred in connection with this offering are being borne
by the Company, other than any commissions or discounts
paid or allowed by the Selling Shareholders to
underwriters, dealers, brokers or agents.
The Selling Shareholders have not advised the
Company of any specific plans for the distribution of the
Shares, but it is anticipated that the Shares may be sold
from time to time in transactions (which may include
block transactions) in the over-the-counter market at the
market prices then prevailing. Sales of the Shares may
also be made through negotiated transactions or
otherwise. The Selling Shareholders and the brokers and
dealers through which the sales of the Shares may be made
may be deemed to be "underwriters" within the meaning set
forth in the Securities Act of 1933, as amended, and
their commissions and discounts and other compensation
may be regarded as underwriters' compensation. See "Plan
of Distribution."
The Company's Common Stock is quoted on the OTC
Bulletin Board under the symbol "BTRK."
For a discussion of certain factors relating to an
investment in the Common Stock, see "Risk Factors"
beginning on page 6 .
____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
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 ____________________.
<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, files
reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission").
These reports, proxy statements and other information
can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and should also be
available for inspection and copying at the Commission's
regional offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can also be obtained from the
Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission a Registration
Statement on Form S-1 (the "Registration Statement")
under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common
Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration
Statement or the exhibits thereto. Statements contained
in this Prospectus as to the contents of any contract or
other document filed or incorporated by reference as an
exhibit to the Registration Statement are not
necessarily complete, and each such statement is
qualified in its entirety by reference to the copy of
such contract or other document filed as an exhibit to
the Registration Statement. For further information,
reference is hereby made to the Registration Statement
and exhibits thereto, copies of which may be inspected
at the offices of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 or obtained from the
Commission at the same address at prescribed rates.
____________________________________
OmniTRACS is a registered trademark of QUALCOMM
Incorporated. BOATRACS is a trademark of BOATRACS, Inc.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by,
and should be read in conjunction with, the more
detailed information and the Company's Financial
Statements and Notes thereto appearing elsewhere in
this Prospectus. For accounting purposes, the Merger
has been treated as a recapitalization of Old BOATRACS
with Old BOATRACS as the acquirer. Accordingly, the
financial information presented herein represents that
of Old BOATRACS. All historical share data relating to
Old BOATRACS in this Prospectus is restated to reflect
the conversion of the issued and outstanding common
stock of Old BOATRACS into 9,500,000 shares of the
Company's Common Stock pursuant to the Merger.
The Company
BOATRACS, Inc. 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. In addition,
the Company develops application software for marine
application of the OmniTRACS system. The OmniTRACS
system, as adapted and enhanced by the Company for
marine application, 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 (the
"Bankruptcy Court"). 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 Incorporated. The merger of Old BOATRACS
with and into the Company was implemented pursuant to
the Plan and Agreement of Reorganization by Merger of
BOATRACS, Inc. With and Into First National Corporation
Under the Name of "BOATRACS, Inc." (the "Agreement"),
which was approved by the Bankruptcy Court. First
National Corporation had no significant assets at the
effective date of the Merger. The Company intends to
operate and continue the business of Old BOATRACS.
The Offering
Common Stock offered by the Selling Shareholders.....6,111,385 shares
Common Stock outstanding.............................12,602,310 shares
OTC Bulletin Board symbol............................BTRK
<PAGE>
Risk Factors
Prospective investors should consider carefully the factors set
forth under the heading "Risk Factors," beginning on page 6.
Summary Financial Information
(in thousands, except per share data)
Year Ended December 31,
1991 1992 1993 1994 1995
Statement of Operations Data:
Communication Systems Revenues $330 $199 $559 $756 $1,299
Messaging Revenues 108 275 398 706 1,367
Loss from operations (426) (351) (227) (284) (678)
Net loss (458) (408) (250) (311) (653)
Net loss per share $(0.05) $(0.04) $(0.03) $(0.03) $(0.06)
Weighted average common and
common equivalent shares
outstanding 9,141 9,339 9,462 9,500 11,277
December 31, 1995
Balance Sheet Data:
Working capital . . . . . . . . . . . . . $1,380
Total assets. . . . . . . . . . . . . . . 2,360
Long-term liabilities, less current maturities. 369
Shareholders' equity . . . . . . . . . . . 1,297
<PAGE>
THE COMPANY
BOATRACS, Inc. ("BOATRACS" or 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"). In
addition, the Company develops application software for marine
application of the OmniTRACS system. The OmniTRACS system, as
adapted and enhanced by the Company for marine application,
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 constant position
tracking and monitoring and, using supplementary products, can
provide engine performance and fuel consumption monitoring.
Background
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 (the "Bankruptcy Court"). First National Corporation
sold its principal asset consisting of 2,125,000 common stock in
First National Bank pursuant to an order of the Bankruptcy Court
authorizing and approving such sale. On December 23, 1994, the
Bankruptcy Court entered its order confirming First National
Corporation's Second Amended Plan of Reorganization (the "Plan of
Reorganization"), which became effective January 3, 1995.
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 the Plan and Agreement of
Reorganization by Merger of BOATRACS, Inc. With and Into First
National Corporation Under the Name of "BOATRACS, Inc." (the
"Agreement"). The Agreement was approved by the Bankruptcy Court
as part of the Plan of Reorganization. First National Corporation
had no significant assets at the effective date of the Merger.
Pursuant to the Merger, the Company, which was the surviving
corporation, changed its corporate name to "BOATRACS, Inc."; the
outstanding shares of Old BOATRACS were converted into the right
to receive slightly less than 95% of the shares of common stock to
be issued by the surviving corporation; and each of the
outstanding shares of First National Corporation was converted
into the right to receive 1/7 share of the common stock of the
surviving corporation, with an aggregate of slightly more than 5%
of the shares of common stock issued by the surviving corporation
to be issued to the shareholders of First National Corporation
prior to the Merger. As a result of the Merger, the 63,018 issued
and outstanding shares of Old BOATRACS were converted into the
right to receive 9,500,000 shares of the Company's Common Stock,
and the 3,570,899 issued and outstanding shares of the common
stock of First National Corporation were converted into the right
to receive approximately 510,000 shares of the Company's Common
Stock. The Company has continued to operate the business of Old
BOATRACS.
RISK FACTORS
In addition to the other information in this Prospectus, the
following risk factors should be considered carefully in
evaluating the Company and its business before purchasing the
Common Stock offered by this Prospectus. An investment in the
Common Stock offered hereby is speculative in nature and involves
a high degree of risk.
Limited Operating History; History of Operating Losses. The
current business of the Company began in April 1990 and is subject
to the risks inherent in the establishment and growth of a new
business enterprise. The likelihood of the continued success of
the Company must be considered in light of the problems, expenses,
difficulties and delays frequently encountered in connection with
a young business, including, but not limited to, uncertainty as to
development of markets and acceptance of the Company's products,
and competition. The Company incurred a net loss of $653,136 for
the year ended December 31, 1995 and net losses of $311,190,
$249,736 and $408,295 for the years ended December 31, 1994, 1993
and 1992, respectively, and at December 31, 1995 had an
accumulated deficit of $2,283,864. There can be no assurance that
the Company will achieve or sustain profitability in the future.
See "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Potential Fluctuation in Quarterly Results. The Company's
quarterly operating results have varied significantly as a result
of a number of factors, including varying levels of sales and the
timing of increased expenses to support the Company's growth. The
Company expects that its operating results will fluctuate in the
future as a result of these and other factors including possible
acquisitions and strategic relationships and the level of
competition. There can be no assurance that the Company will be
able to achieve and sustain a level of profitability on a quarter-
to-quarter basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--
Market Expansion."
Dependence upon Key Management. The Company's success will
continue to depend to a significant extent upon its President,
Michael Silverman, and its Chief Operating Officer, Annette
Friskopp. The Company has entered into employment agreements with
each of these officers. Mr. Silverman's agreement automatically
renews annually unless terminated by the Board of Directors. Ms.
Friskopp's agreement is terminable upon 60 days' notice. The loss
of the services of either of these individuals could have a
material adverse effect upon the Company's business. There can be
no assurance that the Company will be able to retain its existing
personnel or attract additional qualified employees in the future.
See "Management."
Relationship with QUALCOMM. The foundation of the Company's
business is the License and Distribution Agreement between
QUALCOMM and the Company pursuant to which 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. QUALCOMM is the sole
supplier of the equipment sold by the Company and provides certain
services that are essential to the Company's business (except for
certain equipment and software created or adapted specifically for
maritime application). Should QUALCOMM decide to discontinue its
satellite communications business or the manufacture of such
equipment, the Company would be unable to continue its operations.
In addition, any manufacturing delay or difficulty in procuring
components experienced by QUALCOMM resulting in a shortage of
available OmniTRACS units could have a material adverse impact on
the Company's business and financial results. Under the License
and Distribution Agreement QUALCOMM retains all ownership rights
to the OmniTRACS software and all updates, upgrades, improvements
or modifications thereto, whether made by QUALCOMM or the Company.
See "Business--Agreements with QUALCOMM."
Satellite and Other Facilities for OmniTRACS Service. The
Company is dependent upon QUALCOMM's OmniTRACS system which
currently operates on leased Ku-band satellite transponders. The
Company has been informed that QUALCOMM's satellite transponder
leases run through the year 2003 and that QUALCOMM has contracts
for backup transponder capacity in case of failure. However,
there can be no assurance that the satellite transponders leased
by QUALCOMM will continue to function. Based upon information
received from QUALCOMM, the Company believes that there are
approximately 137,000 QUALCOMM OmniTRACS terminals in trucks in
service worldwide. The Company has installed approximately 650
OmniTRACS terminals on marine vessels. QUALCOMM has informed the
Company that it believes that its current domestic transponder
capacity is adequate to support OmniTRACS service for the
reasonably foreseeable future, assuming current per unit message
and position reporting volumes, and that it believes that
additional transponder capacity will be available on acceptable
terms when needed. According to reports filed with the Federal
Communications Commission ("FCC"), QUALCOMM has successfully
negotiated for additional transponder capacity in the past, and
the Company believes that QUALCOMM will negotiate for additional
transponder capacity as necessary. However, no assurance can be
given that future transponder capacity will be available on
acceptable terms when needed. Any failure by QUALCOMM to maintain
adequate satellite capacity would have a material adverse effect
on the Company's business and financial results. The system of
satellite-based communications and tracking systems distributed by
the Company for marine application and the related message service
provided by the Company is effective only while a vessel is within
the satellite's "footprint," which extends roughly 200 to 400
miles offshore of the continental United States. This area could
be reduced or impaired should QUALCOMM use a different transponder
or satellite for its OmniTRACS service. Reduction or impairment
of the service area could have a material adverse effect on the
Company's business and financial results. See "Business--The
OmniTRACS and BOATRACS Systems."
Dependence upon QUALCOMM Facilities. All message transmissions
to and from vessels equipped with the Company's products are
formatted and processed in QUALCOMM's Network Management Facility
located at its facilities in San Diego, California. Although
QUALCOMM maintains a back-up Network Management Facility in Las
Vegas, Nevada, the Company's operations are subject to the risk
that a failure or natural disaster could interrupt this service
and have a material adverse effect on the Company's business and
financial results. See "Business--The OmniTRACS and BOATRACS
Systems."
Dependence upon Telephone Systems. The messaging service
provided by the Company involves data transfers via standard
telephone lines. The Company's operations rely upon the
availability of stable telephone connections between the Company
and QUALCOMM's Network Management Facility and between the
Company, its customers and QUALCOMM's Network Management Facility.
See "Business--The OmniTRACS and BOATRACS Systems." Any system
failure or natural disaster that resulted in and interruption of
stable telephone service would have a material adverse effect on
the Company's business and financial results.
Dependence on Proprietary Technology. According to reports
filed with the Commission, QUALCOMM has been granted United States
patents and has patent applications pending in the United States
with respect to its OmniTRACS system, which is distributed by the
Company for marine applications. QUALCOMM has also reported that
it actively pursues patent protection in other countries of
interest, which protection may or may not cover OmniTRACS
products. There can be no assurance that the pending patent
applications will be granted, that QUALCOMM's patents or
copyrights will provide adequate protection, or that competitors
will not independently develop or patent technologies that are
substantially equivalent or superior to the OmniTRACS system.
From time to time, certain companies may assert exclusive patent,
copyright and other intellectual property rights to technologies
which are important to the industry or to the products distributed
by the Company. If QUALCOMM is unable to license protected
technology used in its products, or if the OmniTRACS product were
found to infringe on protected technology, QUALCOMM could be
prohibited from marketing such products. In such circumstances,
the Company would be unable to continue its operations.
Control by Management Shareholders. Officers and directors of
the Company beneficially own in the aggregate approximately 60% of
the issued and outstanding Common Stock of the Company. As a
result, such management shareholders have the power to exercise
majority control of the Company, with the ability to approve
fundamental corporate transactions and to control the election of
the Board of Directors. See "Management" and "Principal
Shareholders."
Competition. The mobile communications industry is highly
competitive. The Company competes with a number of companies,
many of which have greater financial, technical and marketing
resources than the Company. In this competitive environment, the
Company may not be able to provide the marketplace affordable and
timely software solutions, which would have an adverse effect on
the Company's financial results. In addition, as this industry
develops, other large competitors may emerge. There can be no
assurance that the Company will be able to compete successfully
with such companies. See "Business--Competition."
Dependence upon Significant Customers. The Company's primary
source of customers is the commercial marine industry. The
following customers, Kirby Corporation, Hollywood Marine and
Tidewater Marine, the loss of whom would have a material adverse
effect on the Company operations, each represented more than 10%
of the Company's total sales in 1995.
The major customers may change yearly as they are calculated on
total revenues including sales of communications systems.
Purchases of communication systems by a customer may not occur
yearly and there can be no assurance that such customers will make
significant purchases of the Company's products in the future.
The only relationship between the Company and any of the above
customers is that the Company sells to each customer communication
systems and messaging services.
No Assurance of Public Market; Potential Volatility of Stock
Price. Subsequent to the Company's initial public offering in
March 1995, there has been a limited public trading market for the
Common Stock, and there can be no assurance that an active trading
market will develop or be sustained. The market price of the
Common Stock could be subject to significant fluctuations in
response to operating results and other factors. In addition, in
recent years the stock market in general, and the market for
shares of small capitalization stocks in particular, have
experienced extreme price and volume fluctuations that often have
been unrelated or disproportionate to the operating performance of
affected companies. These fluctuations, as well as general
economic and market conditions, may adversely affect the market
price of the Common Stock.
In addition, no exclusion from the definition of a "penny stock"
under the Exchange Act may be available with respect to the
Common Stock. Accordingly, any broker engaging in a transaction
in the Common Stock would be required to provide any potential
purchaser of the Common Stock with a risk disclosure document,
disclosure of market quotations, if any, disclosure of the
compensation of the broker-dealer and salesperson in connection
with such a transaction and monthly account statements showing the
market value of the Common Stock held in such customer's accounts.
The bid and offer quotation and compensation information must be
provided prior to effecting the transaction and must be contained
on the customer's confirmation, and further, the broker must make
a special written suitability determination for other than
established customers and receive the purchaser's agreement to a
transaction prior to consummating the transaction. Brokers may
become less willing to engage in transactions in the Common Stock
because of the "penny stock" rules, thereby making it more
difficult for holders of the Common Stock to dispose of their
shares.
Possible Issuance of Preferred Stock. The Company's Amended
and Restated Articles of Incorporation authorize the issuance of
preferred stock in the future without further shareholder approval
and upon such terms and conditions, and having such rights,
privileges and preferences, as the Board of Directors may
determine. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future.
The Company has no present plans to issue any shares of preferred
stock. However, the issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or could discourage a
third party from acquiring, a majority of the outstanding voting
stock of the Company. See "Description of Capital Stock."
International Business. The Company is currently taking steps
to expand its operations abroad. Because certain joint ventures
currently under negotiation between the Company and foreign firms
will provide for a minority ownership position by the Company in
the joint venture, the Company may be limited in taking actions it
might otherwise wish to pursue. The Company has no prior
experience in managing foreign operations. International
expansion efforts are likely to strain the Company's management,
financial and other resources. Any failure of the Company to
expand in an efficient manner or to manage its dispersed
organization could have a material adverse impact on the Company's
business and financial results. Other risks that will be faced by
the Company in its international business include costly
regulatory requirements; unexpected changes in regulatory
requirements; fluctuations in currency exchange rates (which could
materially and adversely affect the Company's results of operation
and, in addition, may have an adverse effect on demand for the
Company's products abroad); tariffs or other barriers;
difficulties in staffing and managing foreign operations;
political and economic instability; difficulties in accounts
receivable collection; extended payment terms; and potentially
negative tax consequences. These factors could have an adverse
impact on the Company's business and financial results in the
future or require the Company to modify its current business
practices. See "Business--Market Expansion."
Regulation. Domestic Operations. QUALCOMM filed an
application with the FCC for a standard experimental license with
a two-year term, which was granted effective August 18, 1995. In
addition, QUALCOMM is pursuing a Petition for Rulemaking which it
filed with the FCC in 1992 that would amend the Table of Frequency
Allocations to permit non-experimental use of the frequencies
utilized by the OmniTRACS System in the United States coastal
waters. There can be no assurance that the Table of Frequency
Allocations will be amended and that QUALCOMM's current license
will continue to be renewed. In the event of non-renewal or
revocation of QUALCOMM's license by the FCC, the License and
Distribution Agreement between QUALCOMM and the Company may be
terminated and the Company may be unable to continue its United
States operations.
International Operations. BOATRACS intends to expand into
international markets, where its operations will be subject to the
local regulatory requirements. See "--International Business" and
"Business--Market Expansion." In countries in which the Company
contracts with QUALCOMM's local OmniTRACS service provider, the
Company believes that such service provider or BOATRACS will be
responsible for securing the necessary regulatory approvals for
maritime operations from the local governments. The Company and
such local service providers may be less prominent in such
international markets than local competitors and may have less
opportunity to influence regulatory and standards policies. In
countries in which the Company contracts with distributors of
other communications systems, the Company may apply to the local
governments for applicable approvals. No assurance can be given
that the Company will be able to obtain the required approvals.
Changes in the regulation of QUALCOMM's OmniTRACS system, or the
inability to obtain foreign regulatory approvals, could have a
material adverse effect on the Company's operating results and its
ability to expand its business in the future.
QUALCOMM's Right to Purchase the Company's Business. Pursuant
to the License and Distribution Agreement between QUALCOMM and the
Company, if the Company desires to sell its business, QUALCOMM has
a right of first refusal to purchase the Company's business on the
terms of the sale to the proposed transferee. See "Business--
Agreements with QUALCOMM."
Potential Acquisitions. The Company intends to seek to acquire
additional businesses related to its existing business.
Preliminary discussions that may lead to acquisitions of such
businesses are in progress but the Company presently has no
understandings, agreements or commitments with respect to any such
potential acquisition. Any such acquisition may be achieved
through the payment of cash, the issuance of the Company's stock
or notes, or a combination of cash, stock and notes. There is no
assurance that the Company will be able to identify suitable
candidates for acquisition or consummate advantageous
acquisitions. If the Company does make one or more acquisitions,
such acquisitions may not be profitable or otherwise beneficial to
the Company. See "Business--Market Expansion."
Substantial Future Capital Needs; Availability of Capital.
Expansion of the Company's business may require a commitment of
substantial 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.
Decrease in Licensed Fishing Vessels. Fishing vessels
constitute a significant portion of the Company's existing and
potential customers. Fishing resources are in decline in many
areas of the world, resulting in a decline in the number of
licensed fishing vessels. Significant declines in the number of
such vessels could have a material adverse impact on the Company's
operating results and its ability to expand in the future.
Shares Eligible for Future Sale. Sales of substantial amounts
of Common Stock in the public market could have a material adverse
effect on the price of the Common Stock. In addition to the
6,111,385 shares of Common Stock offered hereby, as of March 31,
1996, 71,366 shares were eligible for sale in the public market
and an additional 6,419,559 shares were eligible for sale in the
public market in reliance upon Rule 144 under the Securities Act
of 1933, as amended. Rule 144 imposes volume limitations and
certain other restrictions on the sale of restricted securities
and securities held by "affiliates" of the Company. See "Shares
Eligible for Future Resale."
DIVIDEND POLICY
Old BOATRACS never declared or paid cash dividends on its Common
Stock, and the Company, which now operates the business formerly
conducted by Old BOATRACS, does not anticipate paying any
dividends in the foreseeable future. The Company intends to
retain earnings, if any, for the development of its business.
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in
conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere in this
Prospectus. The statement of operations data for the years ended
December 31, 1993, 1994 and 1995 and the balance sheet data at
December 31, 1994 and 1995 are derived from, and are qualified by
reference to, the audited financial statements included elsewhere
in this Prospectus. The statement of operations data for the
years ended December 31, 1991 and 1992, and the balance sheet
data at December 31, 1992 and 1993 are derived from audited
financial statements not included in this Prospectus. The balance
sheet data at December 31, 1991 is derived from unaudited
financial statements of the Company. In the opinion of
management, the unaudited financial statements have been prepared
on the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments,
which the Company considers necessary for a fair presentation of
the financial position and results of operations for the
unaudited period.
Year Ended December 31,
1991 1992 1993 1994 1995
(in thousands, except per share data)
Statement of Operations Data:
Revenues:
Communications systems $330 $199 $559 $756 $1,299
Messaging 108 275 398 706 1,367
Total 438 474 957 1,462 2,667
Operating expenses:
Communications systems 256 127 387 555 901
Messaging 164 305 344 467 833
Selling, general and admin 444 393 453 724 1,611
expenses
Loss from operations (426) (351) (227) (284) (678)
Other income (expense) (32) (57) (23) (27) 25
Net loss $(458) $(408) $(250) $(311) $(653)
Net loss per share $(.05) $(.04) $(.03) $(.03) $(.06)
Weighted avg. common 9,141 9,339 9,462 9,500 11,277
shares outstanding
December 31,
1991 1992 1993 1994 1995
(in thousands)
Balance Sheet Data:
Working capital (deficit). $43 $(10) $(86) $398 $1,380
Total assets. 253 134 298 844 2,360
Long-term liabilities 718 480 600 738 369
(less current maturities) (1)
Shareholders' equity/(deficit) (2) (610) (429) (644) (251) 1,297
_________________
(1) Includes capitalized lease obligations and excludes current
portion of long-term debt and capital lease obligations.
(2) No cash dividends were declared or paid during the periods
presented.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with "Selected
Financial Data" and the Company's financial statements and
notes thereto appearing elsewhere in this Prospectus. For
accounting purposes, the Merger has been treated as a
recapitalization of Old BOATRACS with Old BOATRACS as the
acquirer. Accordingly, the financial information presented
herein represents that of Old BOATRACS.
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.
In addition, the Company develops application software for
marine applications of the OmniTRACS system. The OmniTRACS
system, as adapted and enhanced by the Company for marine
application, 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 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 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.
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the
relative percentages that certain income and expense items bear
to total revenues:
Year Ended December 31,
1992 1993 1994 1995
Revenues
Communications systems 41.9% 58.4% 51.7% 48.7%
Messaging 58.1 41.6 48.3 51.3
Total 100.0 100.0 100.0 100.0
Operating expenses:
Communications systems 26.8 40.4 38.0 33.8
Messaging 64.4 35.9 31.9 31.2
Selling, general and 82.9 47.4 49.5 60.4
administrative expenses
Loss from operations (74.1) (23.7) (19.4) (25.4)
Other income (expense) (12.0) ( 2.4) ( 1.9) 0.9
Net loss (86.1)% (26.1)% (21.3)% (24.5)%
Years ended December 31, 1995 and 1994
Total revenues for the year ended December 31, 1995 were
$2,666,684, an increase of $1,204,836 or 82% as compared to
total revenues of $1,461,848 for the year ended December 31,
1994.
Communications systems revenues, which consists principally of
revenues from the sale of BOATRACS equipment and related
software, were $1,299,330 or 49% of total revenues, an increase
of $543,756 or 72% over the prior year. This growth in
communications systems revenues is attributable primarily to an
increase in sales of equipment.
Messaging revenues, which consist of fees for messaging
services provided to BOATRACS units installed on vessels, were
$1,367,354 or 51% of total revenues, an increase of $661,080 or
94% compared to $706,274 in the prior year. The increase in
messaging revenues primarily reflects an overall increase in
messaging services provided by the Company as a result of
growth in the number of units installed on vessels in prior
periods.
Communications systems expenses were $900,980 or 69% of
communications systems revenues for 1995, an increase of
$346,172 or 62%, compared to $554,808 which represented 73% of
communications systems revenues in 1994. The dollar increase
in expenses primarily reflects increased equipment sales. The
decrease in communications systems expenses as a percentage of
communications systems revenues is primarily due to sales mix,
fewer discounts given to particular customers determined on a
case by case basis, including factors such as volume sales or
anticipated volume sales of communication systems and messaging
operations. Messaging expenses were $833,148 or 61% of
messaging revenues in 1995, an increase of $366,476 or 79%,
compared to $466,672 which represented 66% of messaging
revenues in the prior year. The dollar increase in costs
reflects increased messaging services rendered due to increased
equipment sales and related usage. The decrease in messaging
costs as a percentage of messaging revenues is due to increased
margin on messaging services due to the continuing increase in
revenues over the relatively fixed costs of providing this
service and an increase in sales to fleet customers with
greater utilization of the system.
<PAGE>
Selling, general and administrative expenses were $1,610,86l or
60% of total revenues for 1995, an increase of $886,775 or
122%, compared to $724,086 or 50% of total revenues in the
prior year. The increased dollar amount is primarily
attributable to expenses incurred on travel in connection with
potential expansion into foreign markets, additional legal
expenses including legal expenses connected with the Merger,
preparation of Securities & Exchange Commission filings and
documents, the hiring of additional sales and administrative
personnel, expenses incurred in software development and
general increases in operating expenses associated with the
Company's growth. The Company anticipates that the dollar
amount of selling, general and administrative expenses will
increase in the future to accommodate the Company's growth.
Interest expense in 1995 was $16,149 or .6% of total revenues,
a decrease of $16,025 or 50%, compared to $32,174 which was 2%
of total revenues in the prior year. The dollar decrease
reflects the effects of the payoff of long-term debt during
1995. Interest income was $41,318 or 2% of total revenues, an
increase of $36,616 or 779% compared to $4,702 or .3% in the
prior year due to interest earned on funds invested as a result
of the amount raised in a private placement in September 1995
in the net amount of $1,904,292.
As a result of the factors described above, net loss was
$653,136 for 1995 as opposed to $311,190 for 1994, an increase
of $341,946 or 110%.
Years ended December 31, 1994 and 1993
Total revenues for the year ended December 31, 1994 were
$1,461,848, an increase of $505,155 or 52.8% as compared to
total revenues of $956,693 for the year ended December 31,
1993.
Communications systems revenues, which consist of revenues from
the sale of BOATRACS equipment and related software, were
$755,574 or 51.7% of total revenues, an increase of $197,031 or
35.3% over the prior year. This growth in communications
systems revenues is attributable to an increase in sales of
equipment and related software.
Messaging revenues, which consist of fees for messaging
services provided to BOATRACS units installed on vessels, were
$706,274 or 48.3% of total revenues, an increase of $308,124 or
77.4% compared to $398,150 in the prior year. The increase in
messaging revenues primarily reflects an overall increase in
messaging services provided by the Company as a result of
growth in the number of units installed on vessels in prior
periods.
Communications systems expenses were $554,808 or 73.4% of
communications systems revenues for 1994, an increase of
$167,499 or 43.2%, compared to $387,309 which represented 69.3%
of communications systems revenues in 1993. The dollar
increase in expenses primarily reflects increased equipment
sales. The increase in communications systems expenses as a
percentage of communications systems revenues is primarily due
to discounts given to particular customers determined on a case
by case basis, including factors such as volume sales or
anticipated volume sales of communication systems and messaging
operations. Messaging expenses were $466,672 or 66.1% of
messaging revenues in 1994, an increase of $123,334 or 35.9%,
compared to $343,338 which represented 86.2% of messaging
revenues in the prior year. The dollar increase in costs
reflects increased messaging services rendered due to increased
equipment sales. The decrease in messaging costs as a
percentage of messaging revenues is due to increased margin on
messaging services due to the continuing increase in revenues
over the relatively fixed costs of providing this service.
<PAGE>
Selling, general and administrative expenses were $724,086 or
49.5% of total revenues for 1994, an increase of $270,796 or
59.7%, compared to $453,290 or 47.4% of total revenues in the
prior year. The increased dollar amount is primarily
attributable to expenses incurred on travel in connection with
potential expansion into foreign markets, additional legal
expenses including legal expenses connected with the Merger,
the hiring of additional personnel and general increases in
operating expenses associated with the Company's growth.
Interest expense in 1994 was $32,174 or 2.2% of total revenues,
an increase of $10,054 or 45.4%, compared to $22,492 which was
2.3% of total revenues in the prior year. The dollar increase
reflects the effects of an increase in average outstanding debt
balances over 1993.
As a result of the factors described above, net loss was
$311,190 for 1994 as opposed to $249,736 for 1993, an increase
of $61,454.
Liquidity and Capital Resources
The Company's cash balance at December 31, 1995 was $151,728, a
decrease of $380,025, or 71% over the December 31, 1994 cash
balance of $531,753. At December 31, 1995, working capital was
$1,379,538, an increase of $990,213 from the working capital of
$389,325 at December 31, 1994. Cash of $546,644 was used in
operating activities, cash of $1,577,647 was used in investing
activities and cash of $1,744,266 was provided by financing
activities during 1995.
Investment securities increased $1,464,849 at December 31,
1995, compared to the prior year due to funds raised through a
private placement concluded in September 1995 in the net amount
of $1,904,292. Accounts receivable net of an allowance for
uncollectible amounts increased $215,100 to $407,492 due to
more units sold and higher messaging billings during the year.
Prepaid expenses and other assets were $16,625 at December 31,
1995, an increase of $6,333 or 62% due primarily to increased
prepaid insurance. Inventory at December 31, 1995 was $32,309,
compared to $11,531 in the prior year, an increase of $20,778
due primarily to units and antennas held for future sales.
Property, net of accumulated depreciation, was $72,399 at
December 31, 1995, compared to $30,184 in the prior year, an
increase of $42,215 or 140%, due primarily to the purchase of
computer equipment and office furniture. Notes receivable
increased to $214,775 at December 31, 1995, from $9,000 at
December 31, 1994, an increase of $205,775 or 229%, due
primarily to the increase of a loan of $69,000 to a Canadian
distributor, bringing the balance to $78,000 at December 31,
1995, and a note in the amount of $120,000 plus accrued
interest was issued to the Chief Executive Officer and
President of the Company, which is collateralized by deferred
compensation owed to the officer in the amount of $369,230.
Accounts payable was $692,757 at December 31, 1995, an increase
of $337,897 or 95% compared to a balance of $354,860 in the
prior year due to higher vendor payables owing to the Company's
supplier resulting from increased sales of units and messaging
costs.
Long-term debt and related accrued interest was reduced by
$368,421 during 1995 to a zero balance at December 31, 1995,
due to loans being paid in cash and by $215,621 being converted
into common stock in accordance with the terms of a promissory
note.
Note receivable for common stock issued relates to a note
receivable issued by a supplier in return for stock issued. On
April 1, 1995, the balance was $737,000 which was subsequently
reduced to $604,979 at December 31, 1995 in accordance with the
agreement by amortizing the balance through discounts received
on purchases of equipment and messaging from the supplier.
Initial responses to the BOATRACS System in Europe have been
favorable. BOATRACS has participated in a number of tests of
the OmniTRACS and BOATRACS System in Europe. The results of
the Systems under evaluation have been positive and a messaging
center was opened in late 1995. The magnitude of the required
funding will depend upon the results of such evaluation, the
regulatory issues the Company faces, the number of countries
the Company seeks to do business in, the strength of the
competition, the complexity of business operations in each
country, and the perceived demand at the time. Any funding
requirements will be satisfied through the $1,904,292 net
raised by the Company through a private placement of its common
stock in September 1995, collaborative arrangements, or through
public or private financing as discussed below. Excluding
potential public and private financing, the known resources of
liquidity of the Company are expected to cover the Company's
cash needs until at least the end of 1996.
The Company anticipates making capital expenditures in excess
of $70,000 during 1996. 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 substantial
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.
<PAGE>
BUSINESS
Introduction
BOATRACS, Inc.'s ("The Company") objectives include providing
the most effective data communications system for all vessels
including boats, ships and barges (marine application). To
achieve this objective, the Company currently offers the
OmniTRACS satellite-based communications and tracking system
(the "OmniTRACS System") developed, manufactured and licensed
by QUALCOMM, INCORPORATED ("QUALCOMM"). The Company has
distribution rights for the OmniTRACS System in the United
States for marine application under a License and Distribution
Agreement dated June 13, 1990, as amended from time to time,
with QUALCOMM. The Company's 24-hour messaging center provides
personal message relaying services to individual vessels and
backup services to fleets of vessels.
The Company derives revenue primarily from two sources:
a. Sales of QUALCOMM equipment and software and additional,
complimentary and/or modified equipment created or procured for
maritime application; and
b. Message and monitoring revenues.
BOATRACS' primary source of customers is the commercial marine
industry, which includes commercial fishermen, fuel
transporters and the workboat industry of the inland waterways.
The industry has demanding service requirements including
mobility, positioning, durability, confidentiality and
integrity of communications signals for the management of
information. Such information includes vessel logs, supplies,
wage information, and fuel and engine monitoring.
Confidentiality of data transmission is an added concern of
commercial maritime fleet operators. For example, scallop
fishermen need to be able to communicate to shore about their
catches and from boat to boat without informing competitors.
Towboat dispatchers need to keep communications about customers
confidential. Two-way radio and cellular phone service provide
mobility but lack complete privacy.
The need for improved position reporting and communications
abilities for commercial vehicles, such as trucking fleets, was
addressed by QUALCOMM in 1988 with the development of its
OmniTRACS System. The OmniTRACS System provides confidential
two-way data messaging, position reporting and confirmation
services. Through the adaptation and enhancement of QUALCOMM's
already successful OmniTRACS system for marine application,
BOATRACS believes that it has developed cost-effective,
reliable and user-friendly solutions for many of the
communications, vessel tracking and near "real time" data
transfer needs of commercial vessel operators.
Background
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 (the "Bankruptcy Court").
First National Corporation sold its principal asset consisting
of 2,125,000 shares of common stock in First National Bank
pursuant to an order of the Bankruptcy Court authorizing and
approving such sale. On December 23, 1994, the Bankruptcy
Court entered its order confirming First National Corporation's
Second Amended Plan of Reorganization (the "Plan of
Reorganization"), which became effective January 3, 1995.
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"). The merger of Old BOATRACS with and
into the Company was implemented pursuant to the Plan and
Agreement of Reorganization by Merger of BOATRACS, Inc. with
and into First National Corporation under the name of
"BOATRACS, Inc." (the "Agreement"). The Agreement was approved
by the Bankruptcy Court as part of the Plan of Reorganization.
First National Corporation had no significant assets at the
effective date of the Merger.
Pursuant to the Merger, the Company, which was the surviving
corporation, changed its corporate name to "BOATRACS, Inc.";
the outstanding shares of Old BOATRACS were converted into the
right to receive slightly less than 95% of the shares of common
stock to be issued by the surviving corporation; and each of
the outstanding shares of First National Corporation was
converted into the right to receive 1/7 share of the common
stock of the surviving corporation, with an aggregate of
slightly more than 5% of the shares of common stock issued by
the surviving corporation to be issued to the shareholders of
First National Corporation prior to the Merger. As a result of
the Merger, the 63,018 issued and outstanding shares of Old
BOATRACS were converted into the right to receive 9,500,000
shares of the Company's common stock, and the 3,570,899 issued
and outstanding shares of the common stock of First National
Corporation were converted into the right to receive
approximately 510,000 shares of the Company's common stock.
The Company intends to operate and continue the business of Old
BOATRACS.
The OmniTRACS and BOATRACS Systems
The OmniTRACS System, as adapted and enhanced by the Company
for marine application (the "BOATRACS System"), provides
confidential two-way data communications between a vessel or
vessels at sea and a base station on land through the use of a
mobile communications terminal ("MCT") and a satellite
communications system. The BOATRACS System also allows for
hourly position reporting and monitoring and, using
supplementary products, can provide engine performance and fuel
consumption monitoring. At December 31, 1995, the Company had
installed approximately 650 systems on marine vessels. The
BOATRACS System is effective while a vessel is within the
satellite's "footprint," which extends approximately 200 to
400 miles offshore most areas of the continental United States.
The BOATRACS System is an interactive communications network
linking a vessel to shore and from shore-based personnel to
vessels and from boat to boat. Messaging and positioning
information are beamed from the vessel, via Ku-band satellite,
to the QUALCOMM Network Management Center ("NMC") in San Diego,
California, to base stations at the customers' offices or to
the BOATRACS 24 Hour Messaging Center also in San Diego.
Messages that go to BOATRACS can be relayed by an operator via
phone or fax. The BOATRACS System is capable of sending or
receiving digital (text) messages or files to or from a vessel.
The QUALCOMM Automatic Satellite Position Reporting ("QASPR")
system is featured in all BOATRACS mobile units. The NMC uses
the QASPR system to calculate a vessel's position, accurate to
1000 feet. This position is made available to shore-based
users.
The QUALCOMM NMC is the communications hub of the BOATRACS
System. All communications are transmitted via satellite
through a 7.6 meter dish located on the QUALCOMM premises. A
backup NMC facility and dish are maintained by QUALCOMM in Las
Vegas, Nevada. Connections to the QUALCOMM NMC are supported
through existing lease-line and dial-up services.
Satellite service is provided by GTE aboard an existing
satellite under a "protected lease" which guarantees
transponders will be available to QUALCOMM through one of GTE's
available satellites.
The BOATRACS 24 Hour Messaging Center is located in San Diego
and provides message relaying and stand-by backup services for
fleets and individual vessels using the system. Computers
communicate to the QUALCOMM NMC by modem to monitor customer
accounts on the system. BOATRACS operators personally relay
satellite messages between vessels and their families or
business associates on shore and from shore-based personnel to
vessels. Other custom services are also available.
BOATRACS charges its customers for the transmission of each
message and, additionally, for the transmission of each
character within a message. There also is a monthly connection
fee for the MCT to be on-line and for hourly position reports.
The charges are subject to certain volume discounts.
On the Vessel
The MCT consists of three basic components: the Communications
Unit, the Keyboard/Display Unit and the Outdoor Unit. The
Communications Unit is about the size of a briefcase with a
rugged exterior casing. The Keyboard Display Unit has an
imbedded display and is usually kept in the pilot house or
wherever other communication and navigation devices are kept on
the vessel. Messages are both created and received on a four-
line liquid crystal display screen. The Outdoor Unit is the
antenna which is mounted externally, generally on top of the
wheelhouse. The design of the unit allows for both ease of
installation and efficient use of what is usually limited
space. Software menus and simple wording on the
Keyboard/Display Unit facilitate easy use of the system to send
and receive messages. Although many of BOATRACS' customers use
only the basic MCT, BOATRACS offers optional products that
interface with the basic unit. Customers also have the option
of using a personal computer and BOATRACS' BOATCOMM User
Interface Software instead of the standard Keyboard/Display
Unit.
BOATRACS Messaging Center
BOATRACS operates a 24-hour Messaging Service from its San
Diego, California-based offices where messages are forwarded to
vessels and land-based connections. After initial set-up costs
have been incurred, the messaging facility is virtually a fixed
cost operation with the potential to handle hundreds of
additional units at a small incremental cost.
BOATRACS' Messaging Center is linked via a dedicated telephone
line for data transfers via modem directly to QUALCOMM's
Network Management Facility in San Diego, where message
transmissions to and from the vessels are formatted and
processed.
<PAGE>
Network Management Facilities
One component of the Network Management Facility is an earth
station for communication with the MCTs via satellite. All
individual messages originating from either the Network
Management Facility or the vessels are automatically
acknowledged electronically upon receipt and checked for
accuracy of transmission by the system. If not received
correctly, the messages are automatically retransmitted. Since
all messages and position reports are transmitted in data
format, they can be stored for later retrieval and viewing.
In the Office
Generally, a customer with less than four units uses the
Company's 24-hour Messaging Service only. Typically, a
customer who has more than four BOATRACS units elects to
establish an in-house base station. The base station provides
the customer with an in-house communications link and vessel-
tracking capability. The base station is comprised of a
computer and BOATRACS or third party communications software
containing a mapping function whereby a customer can follow the
progress of its fleet on a detailed computer map.
Communications are conducted via modem directly between the
customer's base station and the Network Management Facility
maintained by QUALCOMM for satellite transmission to the
customer's vessels.
Customers in the commercial marine industry have informed the
Company that the BOATRACS System provides much needed services
and has been very effective in saving time and money. Based
upon conversations with customers, the Company believes that
its customers typically experience increased worker
productivity, asset utilization and dispatching efficiency
while saving communications costs. Many customers enter into a
three- to five-year contract, establishing a fixed rate to be
paid for messaging services used by the customer during the
contract term.
Agreements with QUALCOMM
The Company has distribution rights for the OmniTRACS System in
the United States for marine application under a License and
Distribution Agreement dated June 13, 1990, as amended from
time to time (the "Distribution Agreement") with QUALCOMM. The
Distribution Agreement has an initial term of five years with
three options to extend for five years each (provided that
BOATRACS is in full compliance with the terms of the
Distribution Agreement) for a total of twenty years through
2010. The first option to extend has been exercised by the
Company. The Distribution Agreement calls for the negotiation
in good faith of a new agreement upon the expiration of the
last option.
Under the Distribution Agreement, the Company has the exclusive
rights to distribute the OmniTRACS System for marine
application and to provide messaging services to end users of
such products for marine application, in the following
geographic areas (the "Territory"): within the coastal waters
of the United States (as defined in the Distribution Agreement)
of the Atlantic and Pacific Oceans, excluding (i) the Gulf of
Mexico, (ii) all gulf state waterways bordering the Gulf of
Mexico, (iii) all inland waterways and (iv) all international
territories. The Company has non-exclusive rights to
distribute such products and provide such message services in
the following areas (the "Non-Exclusive Territory"): (a) those
coastal waters (as defined) constituting the Gulf of Mexico and
(b) the inland waterways of the United States. After the
Company sells 700 MCTs, the Territory, in which the Company has
exclusive distribution rights, will be expanded by the addition
of the Non-Exclusive Territory. The Company anticipates
reaching 700 MCTs during 1996.
Under the Distribution Agreement, BOATRACS is required to sell
a certain minimum number of MCTs in order to maintain the
exclusivity of its distribution rights, commencing with
480 MCTs in the aggregate by December 31, 1996. This
requirement has been met by the Company. Thereafter, the
minimum purchase requirements for each calendar year are to be
agreed upon between the Company and QUALCOMM subject to a
minimum of 300 MCTs for the calendar year ending December 31,
1997 and increasing by 10% each year thereafter.
QUALCOMM, a public company with fiscal 1995 revenues in excess
of $386 million and current capitalization in excess of $2
billion, is a leader in digital wireless communications
technologies. QUALCOMM manufactures and services the MCTs.
QUALCOMM also directly sells MCTs, along with office-based
software and computers to monitor and communicate with the
MCTs, to the transportation industry. QUALCOMM provides the
OmniTRACS service for its own customers as well as BOATRACS'
customers, by leasing the Ku-band satellite transponders and
maintaining the Network Management Facility which processes all
communications between the satellites and customers' and the
Company's base stations. QUALCOMM also maintains a back-up
Network Management Facility in Las Vegas, Nevada in case of any
malfunction to the system in San Diego, California.
QUALCOMM is responsible for the manufacture and warranty repair
of all of the OmniTRACS units supplied by them. Warranties for
a specified period are passed on to the Company's customers.
Extended warranties may be purchased at an additional cost.
If BOATRACS desires to sell its business, QUALCOMM has a right
of first refusal under the Distribution Agreement to purchase
the business of BOATRACS on the terms of the sale to the
proposed transferee.
QUALCOMM's obligation to provide messaging services pursuant to
the Distribution Agreement is contingent upon, among other
things, the receipt of a permanent license from the FCC to
operate the OmniTRACS System for marine application. See "--
Regulation." If such license is not obtained, the Distribution
Agreement will automatically terminate and the Company would be
unable to continue its operations.
If QUALCOMM becomes unable to provide messaging services either
directly or through a third party, or elects not to remain in
the business of providing such services, QUALCOMM may terminate
the Distribution Agreement with no further liability by giving
BOATRACS six months prior notice. If QUALCOMM elects to
terminate the Distribution Agreement, QUALCOMM shall take
reasonable and necessary steps to enable BOATRACS to continue
to provide messaging services to its end users. BOATRACS may
terminate the Distribution Agreement under certain
circumstances if new technology for a system comparable to the
BOATRACS System is developed by certain entities other than
QUALCOMM.
The Company recently entered into a license agreement with
QUALCOMM (the "License Agreement") pursuant to which QUALCOMM
will pay the Company a per copy royalty for the right to use,
sublicense and distribute certain interface software developed
and owned by the Company as an enhancement to QUALCOMM's
OmniTRACS System. The License Agreement term commenced in
March 1995 and will terminate upon the termination of the
Distribution Agreement between the Company and QUALCOMM.
<PAGE>
Agreement with Intrex
In September 1995, the Company signed a three-year distribution
agreement with Intrex Data Communications Corporation whereby
the Company became the exclusive distributor of the Intrex Fuel
System products, which provide a fuel and engine monitoring
system to the marine market. This system allows the crew
onboard to monitor engine performance and fuel consumption of
the vessel while underway, which can be used to conserve fuel.
When this system is interfaced to the BOATRACS MCT, this
information can be transmitted to base stations on land. This
product will require the Company to undertake a marketing
program to sell the system and expenditures to train personnel
and develop software to support the system. If the price of
fuel to the marine market is reduced, the system will be less
desirable because of the reduced need for fuel consumption
management. The territory covers North America, Central
America, South America and Europe. There is a minimum number
of units to be sold yearly to maintain exclusivity. In
addition, BOATRACS will be the non-exclusive distributor for
Dolphin products, the associated Intrex software. The
agreement automatically renews for an additional five years
unless a party is notified to the contrary. The Company
believes there exists a market for this product.
Memo of Understanding with ALCATEL QUALCOMM
In February 1996, the Company signed a Memorandum of
Understanding (the "MOU") with ALCATEL QUALCOMM, a French
company, which is a joint venture company between the ALCATEL
Group and QUALCOMM. The MOU contemplates BOATRACS operating in
Europe under a similar basis that it operates in the United
States by providing maritime satellite-based communications and
tracking of vessels.
Regulation
Domestic Operations
QUALCOMM filed an application with the FCC for a standard
experimental license with a two-year term, which was granted
effective August 18, 1995. In addition, QUALCOMM is pursuing a
Petition for Rulemaking which it filed with the FCC in 1992
that would amend the Table of Frequency Allocations to permit
non-experimental use of the frequencies utilized by the
OmniTRACS System in the United States coastal waters. There
can be no assurance that the Table of Frequency Allocations
will be amended and that QUALCOMM's current license will
continue to be renewed. In the event of non-renewal or
revocation of QUALCOMM's license by the FCC, the License and
Distribution Agreement between QUALCOMM and the Company may be
terminated and the Company may be unable to continue its United
States operations.
International Operations
BOATRACS intends to expand into international markets. See "--
Market Expansion." In countries which QUALCOMM has an
affiliated OmniTRACS service provider, the Company believes
that such affiliate or BOATRACS will attempt to secure the
necessary regulatory approvals for maritime applications from
the local governmental authorities for the affiliate or the
Company. In countries in which no QUALCOMM affiliate is
operating, the Company will apply to the local governmental
authority for applicable approvals. No assurance can be given
that the Company will be able to obtain the required approvals.
During the fourth quarter 1995 a messaging office was opened in
The Netherlands, contemplating the expansion into this market.
Additional Products
BOATRACS continues to develop new software products to
complement the BOATRACS product line. This software is sold to
BOATRACS' customers under BOATRACS' proprietary names.
The Company is seeking strategic alliances with companies that
have a proven product or service in the marine market. In
addition, BOATRACS strives to stay abreast of new products
and services that can complement its existing product and
service offerings and seeks to build
additional strategic relationships with companies that are
developing new interfaces and marine related products that
require communications between a vessel and the shore.
BOATRACS continues to explore ways to economically take
advantage of these relationships by acquiring either sales and
distribution rights to, or direct ownership of, the products
developed. The Company believes that these efforts have the
potential to result in significant growth in installed units
and message volume in the future.
The Company has agreed to enter into a reseller arrangement
with Orbital Communications Corporation ("ORBCOMM"), which is
developing a Low-Earth Orbit system ("LEO"), pursuant to which
the Company will distribute ORBCOMM's LEO services to the
worldwide marine market if and when such services become
commercially available. The LEO system, if it proves
successful, will complement BOATRACS' present services. The
reseller agreement is currently being negotiated.
Market Expansion
The Company believes that there is a sizable market in the
United States and abroad for its products and has developed a
strategy to expand into selected markets by providing
innovative solutions to customer needs. Following are
descriptions of certain areas of potential market expansion
being explored by the Company. There can be no assurances that
any of the Company's market expansion efforts will be
successful.
Proposed United States Fishing Regulations
As a result of the critical level of various fishing resources,
the National Marine Fisheries Service ("NMFS"), a division of
the United States Department of Commerce, is managing the
population of specific marine species through recently imposed
(but suspended) regulations of the domestic scallop and ground
fishing fleets. These regulations impose restrictions on the
number of days and locations that certain vessels can fish.
Compliance with these regulations requires a certified tracking
device to monitor on a 24-hour basis the position of vessels
licensed to catch a regulated species. The BOATRACS System has
been preliminarily approved by NMFS in this capacity, but would
be subject to a certification process that has not been
announced. These regulations were due to become effective for
the scallop industry on September 1, 1994, and although the
implementation of the regulations has been delayed, BOATRACS
believes that eventually the regulations will become effective.
The Company believes that the sales potential in the domestic
scallop and ground fishing industries are difficult to
forecast. It is anticipated that as fish stocks dwindle, the
number of licensed fishing vessels also declines.
Additionally, the currently contemplated implementation of
satellite transponders onboard fishing vessels may be overruled
by emergency measures, alternative management schemes, or acts
of Congress which could close certain fisheries in total or in
part. BOATRACS has installed more than 100 units on fishing
vessels that could fall within the proposed regulations calling
for certified tracking devices. The Company believes that
implementation of such regulations would expand the market for
the Company's products and services.
International Distribution of the BOATRACS System
Numerous Ku-band satellites currently provide coverage in
regions outside the United States, including Japan, Europe,
Canada, Mexico and regions of the former Soviet Union.
Additionally, QUALCOMM uses a C-Band satellite to provide
coverage in Brazil. As a result, the Company believes that a
significant opportunity exists for utilization of the BOATRACS
System outside of the United States. Because the Company's
business is currently dependent upon services provided by
QUALCOMM through its OmniTRACS operations, the Company's
primary strategy is to expand its services to selected areas of
the world where the OmniTRACS service has been established.
The Company's operations in such areas would be conducted
pursuant to agreements to be negotiated between the Company and
QUALCOMM's local OmniTRACS service providers. In countries in
which no OmniTRACS service provider is operating, the Company
may seek to enter into agreements with providers of other
communications services, if available.
Canada. In May 1995, the Company signed a Memorandum of
Understanding with OceanTrac Systems Limited of Canada to form
a new company in Canada in which the Company will have a
minority interest. The new company 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. OceanTrac serves as the exclusive distributor and
provides messaging services for BOATRACS in Eastern Canada.
Europe. QUALCOMM's press releases indicate that over
10,000 MCTs are currently in operation throughout Europe. The
Company has currently established a base station in The
Netherlands to offer the BOATRACS System in the European and
Mediterranean markets. Except for anticipated modifications to
incorporate European maps, minimal product changes or
enhancements are necessary to enter the European market. The
Company's success in Europe is dependent upon identifying or
developing software solutions and providing them to the market
in a timely manner. EUTELSAT and QUALCOMM's United Kingdom
service provider, ALCATEL EUTELTRACS U.K., installed test
equipment on five British vessels on an evaluation basis.
EUTELSAT has requested, and BOATRACS has agreed to offer, the
BOATRACS 24-hour Messaging Services to these evaluation units
to demonstrate the value-added message relaying and monitoring
services that BOATRACS could provide to the fishing industry
throughout Europe. BOATRACS has been invited by EUTELSAT and
ALCATEL QUALCOMM (a joint venture between QUALCOMM and ALCATEL
N.V. that is responsible for the European OmniTRACS operations)
to contact other European marine customers that are currently
evaluating or who have purchased the OmniTRACS System to offer
them trial messaging services. In February 1996, the Company
signed a Memorandum of Understanding with ALCATEL QUALCOMM,
contemplating BOATRACS operating in Europe under a similar
basis that it operates in the United States.
BOATRACS intends to focus on three key market sectors in
Europe: fishing, coastal and inland towing. The Company plans
to establish sales activities in European countries where an
agreement can be reached with the local OmniTRACS service
provider or distributor of other communications services and
where a marine license can be obtained from the local
government. The Company also intends to provide messaging
services on demand and begin working with industry associations
to better utilize today's technology. Through local sales
agents and a highly focused sales strategy aimed directly at
the largest fleets, BOATRACS hopes to establish a profitable
market in the European marine industry.
Additional Overseas Expansion. The Company has been asked by
various entities to commence activities in Asia and South
America. Expansion in these areas will depend on available
capital resources, as these are large markets with specific
needs. No decision has yet been made regarding such possible
expansion.
Potential Acquisitions
Preliminary discussions that may lead to acquisitions of
additional businesses related to the Company's existing
business are in progress but the Company presently has no
understandings, agreements or commitments with respect to any
such potential acquisition. There is no assurance that the
Company will be able to identify suitable candidates for
acquisition or consummate advantageous acquisitions. Any such
acquisition may be achieved through the payment of cash, the
issuance of the Company's stock or notes, or a combination of
cash, stock and notes. If the Company does make one or more
acquisitions, such acquisitions may not be profitable or
otherwise beneficial to the Company.
Sales and Distribution
Since its inception, the Company has engaged manufacturer's
representatives to place the Company's products with marine
electronics dealers who sell to the end user. The
representatives provided BOATRACS with a much-needed
introduction to the marine market. However, with few
exceptions, BOATRACS has not had success from the dealer and
manufacturers' representative system of distribution. Except
in the New England fishing market, most of the selling and
distributing has been generated by the San Diego office.
Although some dealers provide excellent local service, the
Company has begun to assign salespeople to geographic areas
where there is a concentration of potential customers. In
addition, the Company is continually seeking relationships with
third-party distributors who can provide sales and service
support for its products. The Company believes that such
arrangements have the potential to result in sales in areas
where it is not cost-effective to have a full-time BOATRACS
salesperson.
Competition
The mobile communications industry is highly competitive. The
industry includes major domestic and international companies,
many of which have financial, technical, marketing, sales,
distribution and other resources substantially greater than
those of the Company. The Company competes in its market on
the basis of product quality, reliability, price, customer
support and product features. The Company believes that it is
competitive with respect to each of these factors.
The following is an overview of certain competing and
substitute products and services that BOATRACS faces:
Alternative Satellite Service Providers. Several competing
entities provide satellite-based mobile voice and data systems
in marine markets. INMARSAT, an international consortium,
provides maritime voice, facsimile and data services nearly
worldwide using capacity on a combination of owned and leased
satellites. American Mobile Satellite Corporation currently
offers data communications and vessel tracking using its newly
launched L-band satellite, and has announced that it expects to
offer a voice-based system later in 1996. ARGOS provides one-
way (ship to shore) communications and position reporting in
many parts of the world. When ARGOS operates on the Japanese
ADEOS2 satellite from the late 1990's, they will offer two-way
communication. Mobile Datacom Corporation offers mobile
terminals for the provision of data communications and position
location services in the marine market using leased L-band
transponder space. INMARSAT is approved to provide Global
Marine Distress Safety System ("GMDSS") notices and
communications. GMDSS requires shipping vessels of a certain
size that operate certain distances from shore to have a GMDSS
approved communications system by 1997. The Company is at a
disadvantage without such approval. The BOATRACS System cannot
become GMDSS approved because the BOATRACS system's coverage is
not global. EUTELSAT, BOATRACS AND QUALCOMM is currently
working on a request to the International Maritime Organization
("IMO") to consider approving a regional category that would
allow vessels operating in a specific regional area to utilize
a regional-based system such as the BOATRACS System.
Alternatively, a request to be recognized as a distress
monitoring and safety system to individual countries in which
the Company operates could be made, but there are no assurances
that countries would respond to such a request. If such
approval is not obtained, the Company will be at a disadvantage
when attempting to sell to certain shipping, workboat, and
towing companies.
Radio. Although radios are required for most vessels, many
small businesses rely exclusively on radios for their
communication needs throughout the marine industry. Radio can
be used to communicate with a marine operator, who can in turn
place a long distance telephone call for the radio user.
Typically, the cost of the marine operator together with the
long distance telephone charges can be significant. Radio is
not dependable in inclement weather, lacks confidentiality, and
does not always provide a clear signal.
Cellular phone. Cellular phone provides clear, easy to use
communication to many boats including pleasure boats and
commercial shipping, workboat, and towing operators. Although
a cellular system provides a clear hook-up and a reliable
service, it is expensive. Compared to cellular costs, the
Company believes that an average, long-range operating customer
could save enough to pay for its BOATRACS System within the
first year to year and a half of use. The cellular range is
also limited because the networks of cell sites were placed in
locations most suitable for automobiles and not for vessels.
This means that coverage on the water is limited. Cellular
phones are usually out of range ten miles from the coast;
however, Waterway Communications Systems, Inc. ("Watercomm")
provides cellular radio phone service for vessels operating on
inland waterways. Both cellular and Watercomm phones are out
of range when outside of their home cells, in which case the
vessel's phone "roams," which often incurs an additional $2 to
$3 per day in roaming charges in addition to higher per minute
charges in the limited areas where roaming is available. In
Europe, GSM cellular phone service offers extensive coverage
and plans to provide coverage to nearly all of Europe's
population. GSM cellular phone service also provides a user
the convenience of using a single phone in many different
countries; however, there are significant roaming charges when
roaming in a non-home country.
<PAGE>
Proprietary Information
The Company relies on a combination of copyrights, trade
secrets, trademarks and proprietary information to maintain and
enhance its competitive position. According to reports filed
with the Commission, QUALCOMM has been granted United States
patents and has patent applications pending in the United
States with respect to the OmniTRACS System. QUALCOMM has also
reported that it actively pursues patent protection in other
countries of interest, which protection may or may not cover
OmniTRACS products.
Employees
At March 31, 1996, the Company had 12 full-time and six part-
time employees.
Facilities
The Company conducts its operations from a leased 8,300 square
foot facility in San Diego, California. The lease on this
space will expire in September 1998.
<PAGE>
MANAGEMENT
The executive officers and directors of the Company and their
ages as of April 15, 1996 are as follows:
Name Age Position
Michael Silverman 51 Chairman, Chief Executive
Officer, President, Director
Annette Friskopp 32 Chief Operating Officer, Secretary,
Director
Dale Fisher 50 Chief Financial Officer
Giles Bateman 51 Director
Luis Maizel 45 Director
Norman Kane 45 Director
Ilana Silverman 48 Director
Mr. Silverman formed Old BOATRACS in 1990 and served as
Chairman, Chief Executive Officer, President and a director of
that company from its inception until the Merger, at which time
he assumed his present positions with the Company. Mr.
Silverman is also a director of JAYARK Corporation, an importer
and distributor of furniture. Mr. Silverman is a Chartered
Accountant (South Africa) and received a Master of Business
Administration degree from Stanford University.
Ms. Friskopp joined Old BOATRACS in 1991 as Senior Vice
President of Production, Development and Operations and assumed
her present positions with the Company following the Merger.
Prior to Ms. Friskopp joining Old BOATRACS, she attended
Harvard Business School full-time where a Master of Business
Administration degree was conferred upon her. Ms. Friskopp
holds a Bachelor of Science degree in Accounting with emphasis
on international business from the University of Nebraska, and
she has credits from other universities for her studies in
Europe and Asia. She is a Certified Public Accountant and
previously worked in the audit division of Price Waterhouse.
Ms. Fisher joined Old BOATRACS as Controller in April 1994 and
was appointed Chief Financial Officer in August 1994. She
became Chief Financial Officer of the Company upon the Merger.
Prior to joining Old BOATRACS, Ms. Fisher served with The Price
Company, the operator of the Price Club warehouse clubs, for
more than 11 years in various management positions including
Director of Investor Relations, Manager of Financial Accounting
and Audit Manager. Ms. Fisher is a Certified Public Accountant
and holds a Bachelor of Science degree in Accounting from San
Diego State University.
Mr. Bateman was elected a Director of Old BOATRACS in 1994 and
became a Director of the Company upon the Merger. Since 1991,
Mr. Bateman has served as a Director of Comp USA, a superstore
computer retailer, and has served as that company's Chairman
since 1993. Mr. Bateman was a co-founder of The Price Company
and served as Chief Financial Officer and a Director of that
company from 1976 to 1991 and as Vice Chairman from 1986 to
1991.
<PAGE>
Mr. Maizel became a Director of the Company in October 1995.
For more than the past five years, Mr. Maizel has been
president of LM Advisors, LM Capital Management, money
management firms and board member of several financial and
commercial corporations both in the U.S. and Mexico. He was
born and raised in Mexico City, holds a BS in Mechanical
Electrical Engineering, an MS in Industrial Engineering from
the National University of Mexico and an MBA from Harvard
Business School where he also was a faculty member.
Dr. Kane became a Director of the Company in October 1995. Dr.
Kane is an orthopedic surgeon practicing in San Diego. For
more than the past five years, Dr. Kane has been the President
of La Jolla Sports and Knee Surgery Medical Group and a
Director of TRI CITY Orthopedic Medical Group. From 1986-1989,
Dr. Kane was the surgeon for the San Diego Chargers, and in
1988 was the surgeon for the San Diego Soccers.
Ms. Silverman was appointed a Director in March 1996, subject
to shareholder approval of the amendment of the By-laws to
increase the authorized number of Directors to nine from the
current number of five. For more than the past five years, Ms.
Silverman has been active in charitable and community
organizations. She holds a Bachelor of Arts degree from the
University of Natal, South Africa. Ms. Silverman is the spouse
of Michael Silverman.
Selwyn Klein was appointed a director of the Company in October
1995. He resigned in December 1995.
The Company has a Compensation Committee of which Mr. Bateman
is the Chairman and Mr. Maizel is a member. The Committee has
had no meetings to date. In October 1995, the Company
established an Audit Committee consisting of Giles Bateman and
Norman Kane. During 1995, the Audit Committee held no formal
meetings.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders
are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to
the Company, or written representations that no Forms 5 were
required, the Company believes that during its fiscal year
ended December 31, 1995, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-
percent beneficial owners were complied with.
Executive Compensation
The following table sets forth for the years indicated certain
compensation of the Company's current chief executive officer
and the executive officers of the Company who earned $100,000
or more in such years:
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation
Principal Position Year Salary Bonus
Michael Silverman 1995 $100,000 (1) $0
Chairman, President and 1994 100,000 $0
Chief Executive Officer 1993 100,000 $0
Annette Friskopp 1995 $107,654 $31,800
Chief Operating Officer 1994 92,654 $0
1993 72,000 $0
____________________
(1) All of Mr. Silverman's compensation earned during 1993 and
$69,230 of compensation earned during 1994 was deferred
pursuant to a deferred compensation arrangement entered into
between the Company and Mr. Silverman. At December 31, 1995,
deferred compensation totaled $369,230.
The Company also provides certain compensatory benefits and
other non-cash compensation to the persons named in the Summary
Compensation Table. The incremental cost to the Company of all
such benefits and other compensation paid in the years
indicated to such named individuals was less than 10% of their
reported compensation and also less than $50,000.
The Company entered into an employment agreement with Michael
Silverman, its Chairman, Chief Executive Officer, President and
majority shareholder, effective January 1, 1995. Under the
agreement, Mr. Silverman's annual base compensation is
$100,000, with such increases, bonus compensation and benefits
as the Board of Directors may determine from time to time. The
agreement has a one-year term and automatically renews annually
for successive one-year periods unless terminated by the Board
of Directors upon notice given by November 1 of the prior year.
The agreement is terminable by the Company only for good cause,
as defined in the agreement.
Pursuant to the terms of the subscription agreement between the
Company and certain shareholders of the Company, Mr. Silverman
shall not be entitled to (i) compensation from the Company in
excess of $100,000 per year or (ii) any stock options or profit
sharing from the Company, and the Company shall not make any
payments on any loans or debts owed to Mr. Silverman, until
certain conditions are satisfied. These conditions include,
among other items, profitable operations for the preceding
calendar year.
The Company has entered into an Addendum to Stock
Issuance/Employment Agreement effective January 21, 1991, and
amended July 1995, whereby Annette Friskopp's salary from April
to December 1995 shall be $108,000 and after December 1995
shall be $120,000 per annum. In addition, beginning January
1995 she will receive a bonus for each unit sold to an end
user. In addition, the Agreement granted Ms. Friskopp an
option to acquire 100,000 additional shares of common stock,
which has been treated as being a grant pursuant to the
Company's 1996 Stock Option Plan at a price equal to the fair
market value of such shares on the date of grant. The options
will vest 20% annually over five years.
<PAGE>
Stock Option Plan - Subsequent to December 31, 1995, the Company
approved a stock option plan for certain employees and directors
of the Company. The plan provides for the issuance of options
to acquire up to 1,000,000 shares of the Company's common stock.
The plan is subject to approval by the Company's stockholders.
Compensation Committee Interlocks and Insider Participation
During the last completed fiscal year, Michael Silverman and
Annette Friskopp, both of whom are officers of the Company,
participated in deliberations of the Company's Board of
Directors concerning executive officer compensation.
Director Compensation
In fiscal year 1995, non-employee directors of the Company
received $500 for each meeting of the Board of Directors that
they attended.
CERTAIN TRANSACTIONS
In March 1995, QUALCOMM, the sole supplier of the OmniTRACS
equipment sold by the Company, purchased 1,112,265 shares of
the Company's Common Stock in consideration of a reduction in
price of certain products and services provided by QUALCOMM to
the Company. As a result of such purchase, QUALCOMM owns
approximately 9% of the Company's issued and outstanding Common
Stock.
In March 1995, the Company entered into the License Agreement
with QUALCOMM authorizing QUALCOMM to use, sublicense and
distribute certain interface software developed and owned by
the Company as an enhancement to QUALCOMM's OmniTRACS System.
The License Agreement will terminate upon the termination of
the Distribution Agreement between the Company and QUALCOMM.
See "Business--Agreements with QUALCOMM."
In March 1995, the Distribution Agreement between the Company
and QUALCOMM was amended. As a result of such amendment, the
Company will have the exclusive distribution rights in the
United States for marine application of the OmniTRACS System
after the Company purchases 700 MCTs from QUALCOMM, subject to
certain minimum purchase requirements. See "Business--
Agreements with QUALCOMM."
During 1992 Old BOATRACS issued two notes payable aggregating
$260,000 to two investors. Principal and interest, accrued at
7.5% per annum, totaled $297,328 at December 31, 1993 and was
due in April 1995. 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 remaining balance of such
notes at December 31, 1994 totaled $160,539, including $2,318
of accrued interest. The notes bore interest at 7.5% per annum
and were held by the Company's President and Chief Operating
Officer. The principal and interest was paid in full during
September 1995.
<APGE>
In July 1994 Old BOATRACS issued a convertible promissory note
for $200,000 to a director of Old BOATRACS. Principal and
interest, accrued at 8% per annum, were due in July 1999. The
promissory note was convertible into shares of common stock at
the option of the holder from April 1, 1995 to June 30, 1999.
In addition, the Company had the right to convert such
indebtedness after April 1, 1996. The conversion price was
equal to 80% of the common stock fair market value at the
exercise date. In connection with the issuance of the
convertible promissory note, Old BOATRACS granted the holder an
option to purchase up to 5% of Old BOATRACS' outstanding common
stock for a maximum aggregate purchase price of $50,000. In
July 1994, 419,840 shares of common stock were issued by Old
BOATRACS pursuant to the exercise of such option resulting in
net proceeds to Old BOATRACS of $50,000. As of June 15, 1995,
the director converted the principal and accrued interest on
the promissory note into 179,684 shares of common stock.
PRINCIPAL SHAREHOLDERS
Set forth below is certain information concerning the ownership
of the Company's Common Stock as of March 31, 1996 by (i) all
persons known to the Company to be beneficial owners of more
than 5% of the outstanding Common Stock, (ii) each director of
the Company, (iii) each executive officer of the Company, and
(iv) all executive officers and directors of the Company as a
group. Except as otherwise indicated, and subject to
applicable community property and similar laws, the persons
named have sole voting and investment power with respect to the
securities owned by them.
Number of Shares Percent of
Beneficially Owned Outstanding Shares
QUALCOMM Incorporated 1,112,265 9%
6455 Lusk Boulevard
San Diego, CA 92121
Michael Silverman 6,005,027(1) 48
Annette Friskopp 377,931 3
Dale Fisher 12,001(3) *
Giles Bateman 596,225(2) 5
Luis Maizel 83,600(4) *
Norman Kane 469,667(5) 4
Ilana Silverman (6) 0 *
All Directors and Executive
Officers as a group
(7 persons) 7,544,451 60%
______________________
(1) Includes 285,894 shares held by Mr. Silverman's son.
(2) Includes 132,400 shares held by trusts for which Mr.
Bateman nor his wife serve as trustees.
(3) Includes 10,000 shares held in a Family Trust for which Ms.
Fisher is a trustee and 2,000 shares held in an IRA account.
(4) All of Mr. Maizel's shares are held by the Maiz Family
Trust of which Mr. Maizel is a trustee.
(5) Includes 92,150 shares held by the Norman Kane Defined
Benefit Plan of which Dr. Kane has beneficial ownership.
(6) Ms. Silverman is the wife of Mr. Silverman.
* Less than 1%
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of Shares of Common
Stock beneficially owned by each of the Selling Shareholders.
All Shares owned by the Selling Shareholders are being
registered. Each of the Selling Shareholders has sole voting
and investment power with respect to the Shares, subject to
applicable community property and similar laws.
Name of Selling Shareholder Shares
QUALCOMM Incorporated 1,112,265
Amended & Restated Louis L. Gonda Family Trust 588,000
Annette Friskopp (1) 377,931
Norman Kane (2) 377,517
Giles Bateman (2) 463,825
Frederick L. Copeland 238,350
Gregory Silverman(3) 285,894
Doron Silverman(3) 285,894
Darrell C. Ferguson 217,450
Forevergreen Partners 209,000
Shores Properties 209,000
Barry S. Kassar & Avra Kassar Family Trust 125,000
Norman Kane Defined Benefit Plan(4) 92,150
Barry S. Kassar, M.D., Inc. Pension and Profit
Sharing Plan 84,000
Maiz Family Trust(5) 83,600
Mark S. Weinbaum & Dorith D. Weinbaum, Trustees,
Weinbaum Family Trust 83,600
Mario Modiano 41,800
Stephanie Adler Trust, Whitney Skala Trustee(6) 29,850
Melody Adler Trust, Whitney Skala Trustee(6) 29,850
Lisa Bateman Trust, Whitney Skala Trustee(6) 29,850
Matthew R. Bateman Trust, Whitney Skala Trustee(6) 29,850
Shannon Hartley Trust, Whitney Skala Trustee(6) 13,000
Giant Trading 100,000
Thomas Bernard 2,709
Norman Sarkin 18,500
Zane Feldman and Alice Feldman Trust 40,000
Bank Insinger De Beuford N.V. 274,800
Clariden Bank 667,700
Total 6,111,385
_________________________
(1) Ms. Friskopp is Chief Operating Officer, Secretary and a
Director of the Company.
(2) Mr. Bateman and Dr. Kane are Directors of the Company.
(3) Gregory and Doron Silverman are the children of Michael
Silverman, Chairman of the Board and Chief Executive
Officer of the Company.
(4) The Norman Kane Defined Benefit Plan is for the benefit of
Dr. Norman Kane.
(5) Luis Maizel is a Director of the Company and a trustee of
the Maiz Family Trust.
(6) Each of these trusts are for the benefit of the family of
Giles Bateman
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, no par value ("Common
Stock"), and 1,000,000 shares of Preferred Stock, no par value
("Preferred Stock").
Common Stock
As of March 31, 1996, there were 12,602,310 shares of Common
Stock outstanding held by approximately 300 holders of record.
The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the
shareholders, except that holders of Common Stock are entitled
to cumulative voting rights with respect to the election of
directors. In cumulative voting, the holders of Common Stock
are entitled to cast for each share held the number of votes
equal to the number of directors to be elected. Subject to
preferences that may be applicable to any shares of Preferred
Stock issued in the future, holders of Common Stock are
entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders
of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of
Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are fully paid
and nonassessable.
Preferred Stock
The Board of Directors is authorized, subject to any
limitations prescribed by law, without further shareholder
approval, to issue from time to time up to 1,000,000 shares of
preferred stock in one or more series. Each such series of
preferred stock shall have such number of shares, designations,
rights, preferences, privileges and restrictions as shall be
determined by the Board of Directors, which may include, among
others, dividend rights, voting rights, redemption and sinking
fund provisions, liquidation preferences and conversion rights,
which in any case, could be superior to the rights associated
with the Common Stock.
The purpose of authorizing the Board of Directors to issue
preferred stock and determine its rights and preferences is to
eliminate delays associated with a shareholder vote on specific
issuances. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions
and other corporate purposes, could make it more difficult for
a third party to acquire, or could discourage a third party
from attempting to acquire, a majority of the outstanding
voting stock of the Company. The Company has no present plans
to issue any shares of preferred stock.
Limitation of Liability and Indemnification
Pursuant to provisions of the California Corporations Code,
Article V of the Company's Amended and Restated Articles of
Incorporation provides that the liability of the Company's
directors for monetary damages shall be eliminated to the
fullest extent permissible under California law.
Article VI of the Company's Amended and Restated Bylaws
authorizes the Company to indemnify its directors, officers,
employees and agents in certain circumstances against expenses,
judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with a proceeding arising out
of such person's service in such capacity, if that person acted
in good faith and in a manner that that person reasonably
believed to be in the best interests of the Company and, in the
case of a criminal proceeding, had no reason to believe was
unlawful. The Company is required to indemnify a director,
officer, employee or agent of the Company against expenses
actually and reasonably incurred in the event such person is
successful on the merits in the defense of any such claim.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Transfer Agent and Registrar
First Interstate Bank of California is the transfer agent and
registrar for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of March 31, 1996, the Company had 12,602,310 shares of
Common Stock outstanding. Of these, approximately 6,182,751,
including all of the shares offered by this Prospectus, will be
immediately eligible for resale in the public market without
restriction under the Securities Act of 1933, as amended (the
"Act"), except that any shares purchased by "affiliates" of the
Company, as that term is defined in Rule 144 adopted under the
Act ("Affiliates") may generally only be resold in compliance
with the applicable provisions of Rule 144. Substantially all
of the remaining 6,419,559 shares of Common Stock are held by
executive officers of the Company and will be subject to the
volume limitations discussed below and certain other
limitations.
Pursuant to the terms of subscription agreements between the
Company and certain of the Selling Shareholders in connection
with a private placement of the common stock of Old BOATRACS in
October 1994, each of such Selling Shareholders has agreed to
sell at least 1/11 of the Shares purchased by such Selling
Shareholder on the open market within one year after the
effective date of the Registration Statement of which this
Prospectus is a part. Such Selling Shareholders hold an
aggregate of 2,112,800 shares of Common Stock.
In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated under this Rule with those
of others) whose restricted securities (as that term is defined
in Rule 144) have been fully paid for and meet the Rule's two-
year holding period provisions, including Affiliates of the
Company, may sell restricted securities in brokers'
transactions or directly to market makers, provided the number
of shares sold by such person in any three-month period is not
in excess of the greater of 1% of the total number of shares of
Common Stock then outstanding or the average weekly trading
volume for the four calendar week period immediately prior to
each such sale. The Rule provides further that after
restricted securities have been fully paid for and meet the
Rule's three-year holding period provisions, such securities
may be sold by persons who are not Affiliates of the Company
without regard to volume limitations; however, in general,
securities held by Affiliates of the Company must continue,
even after the three-year holding period, to be sold in
broker's transactions or directly to market makers in such
securities, subject to the volume limitations described above.
The foregoing is a brief summary of certain provisions of Rule
144 and is not intended to be a complete description thereof.
To date there has been a limited public trading market for the
Common Stock of the Company, and no prediction can be made as
to the effect, if any, that market sales of shares of Common
Stock or the availability of shares for sale will have on the
market price of the Common Stock prevailing from time to time.
Nevertheless, sales of significant numbers of shares of the
Common Stock in the public market could adversely affect the
market price of the Common Stock and could impair the Company's
future ability to raise capital through an offering of its
equity securities.
MARKET INFORMATION
The Company's Common Stock began trading in the over-the-
counter market in March 1995 and is quoted on the OTC Bulletin
Board under the symbol "BTRK". The following table sets forth
high and low bid quotations for the Common Stock as provided by
the National Association of Securities Dealers, Inc.:
High Bid Low Bid
Period from April 30,1995 through
June 30, 1995 $1.375 $1.375
Quarter ended September 30,1995 1.625 1.625
Quarter ended December 31,1995 1.375 .686
Quarter ended March 31, 1996 .875 .75
On April 19, 1996, the closing bid price of the Common Stock,
as reported on the OTC Bulletin Board, was $1.25 per share.
The quotations set forth above represent inter-dealer prices
without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions. The existence of
quotations for the Common Stock should not be deemed to imply
that there is an established public trading market for the
Company's Common Stock.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold by the Selling
Shareholders or by pledgees, donees, transferees or other
successors in interest (collectively with the Selling
Shareholders, the "Sellers") acting as principals for their own
accounts. The Company will not receive any of the proceeds of
this offering.
The Sellers, directly or through brokers, dealers,
underwriters, agents or market makers, may sell some or all of
the Shares. Any broker, dealer, underwriter, agent or market
maker participating in a transaction involving the Shares may
receive a commission from the Sellers. Usual and customary
commissions may be paid by the Sellers. The broker, dealer,
underwriter or market maker may agree to sell a specified
number of the Shares at a stipulated price per Share and, to
the extent that such person is unable to do so acting as an
agent for the Sellers, to purchase as principal any of the
Shares remaining unsold at a price per Share required to
fulfill the person's commitment to the Sellers.
A broker, dealer, underwriter or market maker who acquires the
Shares from the Sellers as a principal for its own account may
thereafter resell such Shares from time to time in transactions
(which may involve block or cross transactions and which may
also involve sales to or through another broker, dealer,
underwriter, agent or market maker, including transactions of
the nature described above) in the over-the-counter market, in
negotiated transactions or otherwise, at market prices
prevailing at the time of the sale or at negotiated prices. In
connection with such resales, the broker, dealer, underwriter,
agent or market maker may pay commissions to or receive
commissions from the purchasers of the Shares. The Sellers
also may sell some or all of the Shares directly to purchasers
without the assistance of a broker, dealer, underwriter, agent
or market maker and without the payment of any commissions.
The Company is bearing all of the costs relating to the
registration of the Shares (other than any fees and expenses of
counsel for the Selling Shareholders). Any commissions,
discounts or other fees payable to a broker, dealer,
underwriter, agent or market maker in connection with the sale
of any of the Shares will be borne by the Sellers. Any
commissions paid or any discounts or concessions allowed to any
broker, dealer, underwriter, agent or market maker and, if any
such broker, dealer, underwriter, agent or market maker
purchases any of the Shares as principal, any profits received
on the resale of such Shares, may be deemed to be underwriting
commissions or discounts under the Securities Act.
Pursuant to the registration rights granted to QUALCOMM in
connection with QUALCOMM's acquisition of Shares, the Company
has agreed to indemnify QUALCOMM and any person who controls
QUALCOMM against certain liabilities and expenses arising out
of, based upon or relating to information set forth in this
Prospectus, and the Registration Statement of which this
Prospectus is a part, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has
been passed upon for the Company by Solomon Ward Seidenwurm &
Smith, San Diego, California.
EXPERTS
The financial statements of the Company as of December 31, 1994
and 1995, and for each of the three years in the period ended
December 31, 1995 included in this Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance
upon the report of such firm given upon their authority as
experts in accounting and auditing.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's report..............................F-2
Balance Sheets as of December 31, 1995 and 1994...........F-3
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993........................F-4
Statements of Shareholders' Equity/(Deficit) for
the years ended December 31, 1995, 1994 and 1993........F-5
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993........................F-6
Notes to Financial Statements.............................F-7
F-1
<PAGE>
DELOITTE & TOUCHE LLP LETTERHEAD
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Boatracs, Inc.:
We have audited the accompanying balance sheets of Boatracs, Inc.
(the "Company") as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' equity (deficit), and
cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP Corp.
San Diego, California
February 12, 1996
F-2
<PAGE>
BOATRACS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
CURRENT ASSETS:
Cash $ 151,728 $531,753
Investment securities,
at amortized cost (approximate
fair value of $1,464,746) 1,464,849
Accounts receivable (net of
allowance for uncollectible accounts
of $18,297 and $6,376 in 1995
and 1994, respectively) 407,492 192,392
Inventories 32,309 11,531
Prepaid expenses and other assets 16,625 10,292
Total current assets 2,073,003 745,968
PROPERTY, at cost (net of accumulated
depreciation of $61,499 and
$37,165 in 1995 and 1994, respectively) 72,399 30,184
NOTES RECEIVABLE 214,775 9,000
DEPOSIT IN ESCROW AND OTHER ASSETS 58,556
TOTAL $ 2,360,177 $ 843,708
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 692,757 $ 354,860
Current portion of capital
lease obligation 708 1,783
Total current liabilities 693,465 356,643
LONG-TERM LIABILITIES:
Deferred compensation 369,230 369,230
Long-term debt 368,421
Capital lease obligation 730
Total long-term liabilities 369,230 738,381
Total liabilities 1,062,695 1,095,024
COMMITMENTS (Notes 6, 10 and 11)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value;
1,000,000 shares authorized, no
shares issued or outstanding
Common stock, no par value;
100,000,000 shares authorized,
12,577,710 and 9,500,000 shares
issued and outstanding in 1995
and 1994, respectively 4,186,325 1,379,412
Accumulated deficit (2,283,864)(1,630,728)
Note receivable for common
stock issued (604,979)
Total stockholders'
equity (deficit) 1,297,482 (251,316)
TOTAL $ 2,360,177 $ 843,708
See notes to financial statements.
F-3
<PAGE>
BOATRACS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
REVENUES:
Communication system sales $ 1,299,330 $ 755,574 $ 558,543
Messaging 1,367,354 706,274 398,150
Total revenues 2,666,684 1,461,848 956,693
COSTS AND EXPENSES:
Communication system sales 900,980 554,808 387,309
Messaging 833,148 466,672 343,338
Selling, general and
administrative 1,610,861 724,086 453,290
Total costs and expenses 3,344,989 1,745,566 1,183,937
LOSS FROM OPERATIONS (678,305) (283,718) (227,244)
INTEREST INCOME 41,318 4,702
INTEREST EXPENSE (16,149) (32,174) (22,492)
NET LOSS $ (653,136) $ (311,190) $ (249,736)
NET LOSS PER SHARE $ (0.06) $ (0.03) $ (0.03)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 11,277,245 9,500,000 9,461,586
See notes to financial statements.
F-4
<PAGE>
BOATRACS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Note Total
Receivable Stockholders'
Common Stock for Common Equity
------------- Accumulated Stock (Deficit)
Shares Amount Deficit Issued
BALANCE,
JANUARY 1, 1993 7,855,011 $ 640,361 $ (1,069,802) $ - $(429,441)
Common stock
issued in
connection
with employment
agreement 121,203 643 643
Additional
paid-in capital 34,500 34,500
Net loss (249,736) (249,736)
BALANCE,
DECEMBER 31, 1993 7,976,214 675,504 (1,319,538) - (644,034)
Common stock
issued in
connection with:
Exercise of
stock options 419,840 50,000 50,000
Stock sale 836,062 495,687 495,687
Long-term debt
and accrued
interest
conversion 267,884 158,221 158,221
Net loss (311,190) (311,190)
BALANCE,
DECEMBER 31, 1994 9,500,000 1,379,412 (1,630,728) - (251,316)
Common stock
issued in
connection with:
Merger 510,386 (50,000) (50,000)
Long-term
debt and
accrued interest
conversion 179,684 215,621 215,621
Note receivable 1,112,265 737,000 (737,000)
Stock sale 1,275,375 1,904,292 1,904,292
Payments received
on note receivable 132,021 132,021
Net loss (653,136) (653,136)
BALANCE,
DECEMBER
31, 1995 12,577,710 $4,186,325 $(2,283,864) $(604,979) 1,297,482
See notes to financial statements.
F-5
<PAGE>
BOATRACS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
OPERATING ACTIVITIES:
Net loss $ (653,136) $ (311,190) $ (249,736)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation and amortization 32,890 26,952 24,320
Net accretion of discount
on investment securities (27,505)
Provision for bad debts 18,297
Non-cash expense for stock
option issued 643
Changes in assets and liabilities:
Accounts receivable (233,397) (13,389) (145,789)
Inventories (20,778) 10,696 (4,249)
Prepaid expenses and
other assets (6,333) (6,709) (1,702)
Accounts payable and
accrued expenses 337,897 14,913 258,245
Accrued interest payable 5,421 29,314 21,420
Deferred compensation 69,230 100,000
Net cash (used in)
provided by
operating activities (546,644) (180,183) 3,152
INVESTING ACTIVITIES:
Purchase of
investment securities (2,096,344)
Proceeds from maturities
of investment securities 659,000
Issuance of notes receivable (205,775) (9,000)
Payments received on
note receivable issued
for common stock 132,021
Capital expenditures (66,549) (23,300) (5,860)
Escrow deposit (50,000)
Net cash used
in investing activities (1,577,647) (82,300) (5,860)
FINANCING ACTIVITIES:
Net proceeds from
issuance of common stock 1,904,292 545,687
Payments on long-term
debt and capital
lease obligation (160,026) (41,813) (1,354)
Proceeds from issuance of long-term debt 240,000
Proceeds from additional paid-in capital 34,500
Net cash
provided by
financing activities 1,744,266 743,874 33,146
NET (DECREASE) INCREASE IN CASH (380,025) 481,391 30,438
CASH AT BEGINNING OF YEAR 531,753 50,362 19,924
CASH AT END OF YEAR $ 151,728 $ 531,753 $50,362
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 10,416 $ 2,318 $ -
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Common stock issued
for note receivable $ 737,000
Conversion of long-term
debt and accrued
interest to common stock $ 215,621 $ 158,221
Conversion of
escrow deposit to equity $ 50,000
See notes to financial statements.
F-6
<PAGE>
BOATRACS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Merger - During January 1995, Boatracs, Inc. ("Old
Boatracs") was merged into First National Corporation
("FNC"), a public company, which had previously 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.
Pursuant to the plan of reorganization and merger (the "Plan"),
(i) FNC, which was the surviving corporation, changed its name to
Boatracs, Inc. (the "Company"), (ii) the outstanding shares of
Old Boatracs were converted into the right to receive an
aggregate of 9,500,000 shares or approximately 95% of the post
merger outstanding common stock, and (iii) each outstanding share
of FNC was converted into the right to receive 1/7 share of the
common stock of the surviving corporation, for an aggregate of
510,386 shares or approximately 5% of the post merger outstanding
common stock. The Company paid $50,000 to FNC stockholders in
connection with the merger. Such consideration was used to pay
claims of creditors of FNC and to pay a dividend to the pre-
merger stockholders of FNC. The Plan also required an amendment
to the Company's capital structure to provide for the
authorization of 1,000,000 shares of preferred stock and
100,000,000 shares of common stock.
For accounting purposes the acquisition has been treated as a
recapitalization of Old Boatracs with Old Boatracs as the
acquirer. Accordingly, the historical financial statements prior
to January 12, 1995 are those of Old Boatracs. The financial
statements for all periods presented have been retroactively
frestated to reflect the equivalent number of shares received in
the merger and the change in the capital structure. Pro forma
information has not been provided as it is not required.
The Company - The foundation of the Company's business is the
distribution of the OmniTRACS satellite-based communications and
tracking system for marine application under a license and
distribution agreement with Qualcomm, Inc. ("Qualcomm", see Note
10). Under the agreement, the Company sells mobile
communications terminals and software for use onboard marine
vessels and by marine dispatchers. In addition, the Company also
provides 24 hour messaging and relaying services. Should
Qualcomm decide to discontinue its business or equipment
deliveries, the Company would be unable to continue its
operations.
Cash and Cash Equivalents - The Company considers all highly
liquid investments with an original maturity of 30 days or less
to be cash equivalents.
Investment Securities - Investment securities represent U.S.
Treasury securities that the Company has the positive intent and
ability to hold to maturity which are reported at amortized cost.
Interest earned on these investment securities is included in
interest income.
Inventories - Inventories, which are comprised entirely of
finished goods, are carried at the lower of cost (specific
identification) or market.
Property - Property is recorded at cost. Depreciation is
provided under an accelerated method over the estimated useful
lives of the assets (generally 5-7 years).
F-7
<PAGE>
Revenue Recognition - Revenue from the sale of communication
systems is recognized at the time the equipment is shipped to the
customer. Revenue from messaging is recognized at the time the
transmission is made by the customer.
Significant Customers - Major customers individually accounted
for 23%, 18% and 12% of 1995 sales, 21% and 11% of 1994 sales,
and 29% and 14% of 1993 sales. Accounts receivable from these
customers aggregated $184,844 at December 31, 1995. The Company
has not historically experienced any significant losses on its
accounts receivable.
Income Taxes - Effective October 1994, the Company elected C
corporation status (Note 7). Prior to October 1994 the Company
had elected S corporation status for federal income tax and
California franchise tax purposes. As such, taxable income or
loss through September 1994 was attributed to the stockholders of
the Company.
Deferred income taxes are recorded to reflect the net tax effects
of temporary differences between the carrying amount of assets
and liabilities for financial reporting and income tax purposes.
A valuation allowance is maintained to reduce deferred income tax
assets to an amount which, in the opinion of management, will
more likely than not be realized by the Company.
Net Loss Per Share - Net loss per share amounts are calculated by
dividing net loss by the weighted average number of common shares
outstanding during the year.
Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenes during the
reporting period. Actual results could differ from those
estimates.
Reclassifications - Certain amounts in the 1994 and 1993
financial statements have been reclassified to conform to the
1995 presentation.
2. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities at
December 31, 1995 were as follows:
Gross
Amortized Unrealized Fair Carrying
Cost Losses Value Value
$ 1,464,849 $ (103) $ 1,464,746 $ 1,464,849
Investment securities consist of U.S. Treasury securities which
are contractually due in one year or less. The fair value was
obtained from independent pricing services. There were no sales
of these securities during 1995.
3. NOTES RECEIVABLE
During October 1994, the Company entered a note receivable
agreement with Oceantracs Systems Ltd. ("Oceantracs") under which
it agreed to advance up to $20,000. The note was amended during
1995 to provide for additional advances. Outstanding advances on
the note bear interest at 9.0% and are due on demand. Advances
on the note totalled $78,000 and $9,000 at December 31, 1995 and
1994, respectively. The note has been classified as long-term
based upon the Company's intent not to request payment prior to
January 1, 1997.
F-8
<PAGE>
During May 1995, the Company signed a memorandum of
understanding with Oceantracs 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 Company's
communication system in the Canadian provinces of Ontario,
Quebec, New Brunswick, Prince Edward Island, Nova Scotia,
Newfoundland and Labrador. Oceantracs, which had served as the
exclusive distributor for the Company in Eastern Canada, will
provide message monitoring in Eastern Canada.
During 1995, the Company entered a note receivable agreement with
an individual who is an officer, director and majority
stockholder of the Company under which it agreed to advance up to
$369,230. Advances are secured by deferred compensation (see
Note 9), bear interest at 5.5% and are due on demand. Advances
under the agreement totalled $120,000 at December 31, 1995. The
note has been classified as long-term based upon the Company's
intent not to request payment prior to January 1, 1997.
4. PROPERTY
Property at December 31, 1995 and 1994 is summarized as follows:
1995 1994
Computers and equipment $133,898 $67,349
Less accumulated depreciation (61,499) (37,165)
$72,399 $30,184
Depreciation expense was $24,334, $12,289 and $9,655 for the
years ended December 31, 1995, 1994 and 1993, respectively.
5. LONG-TERM DEBT
Notes Payable - During 1992 the Company issued two notes payable
aggregating $260,000 at an interest rate of 7.5%. During October
1994, $158,221 of the outstanding principal and accrued interest
was extinguished through the conversion into 267,884 shares of
newly issued common stock of the Company. The remaining balance
of these notes was paid during 1995.
Convertible Promissory Note - During July 1994, the Company
issued a convertible promissory note for $200,000 at an interest
rate of 8% to a director of the Company. During June 1995, the
outstanding principal and accrued interest was converted into
179,684 shares of the Company's common stock at 80% of the fair
market value.
6. LEASES
Facility Leases - The Company leases its facility under four non
cancelable operating leases which expire through September 1998.
Rent expense was approximately $31,900, $14,360 and $22,773 for
the years ended December 31, 1995, 1994 and 1993, respectively.
The Company's leases have rent escalation terms based on the
Consumer Price Index, which will affect future minimum lease
payments.
Capital Lease - Included in property at December 31, 1995 and 1994
is property under a capital lease of $6,289 with related
accumulated amortization of $5,201 and $4,477, respectively.
F-9
<PAGE>
Future minimum lease payments under capital and non-cancelable
operating leases at December 31, 1995 are summarized as follows:
Capital Operating
Year Ending December 31, Lease Leases
1996 $ 1,028 $ 61,925
1997 62,400
1998 47,947
Total 1,028 $ 172,272
Less: Amount
representing interest (320)
Current portion $ (708)
7. INCOME TAXES
Prior to October 1994 the Company had elected S corporation
status for federal income tax and California franchise tax
purposes. As such, taxable income or loss through September
1994 was attributed to the stockholders of the Company.
Effective October 1994, the Company elected C corporation
status. Due to a valuation allowance provided for deferred
income tax assets for the year ended December 31, 1995 and the
period from October 1, 1994 to December 31, 1994, the Company's
effective income tax rate was 0%.
The tax effects of significant items comprising the Company's
deferred income tax asset were approximately as follows:
1995 1994
Deferred income tax assets:
Net operating loss carryforwards $ 271,000 $ 57,000
Deferred employee compensation 148,000 148,000
Accrued employee compensation 13,000
Allowance for uncollectible accounts 7,000 3,000
Deferred income 1,000 3,000
State income taxes 500 500
Other reserves 6,000 2,000
Total deferred income tax assets 446,500 213,500
Less valuation allowance (446,500) (213,500)
Net deferred income tax asset $ - $ -
At December 31, 1995, the Company had unused net operating loss
carryforwards of approximately $730,000 for federal income tax purposes
which expire at various dates from 2005 to 2010.
F-10
(PAGE>
8. STOCKHOLDERS' EQUITY (DEFICIT)
Stock Sales - During October 1994, the Company issued 836,062
shares of common stock for net proceeds of $495,687. Pursuant
to the terms of such financing, the Company's CEO and
majority stockholder is restricted from (i) receiving
compensation in excess of $100,000 per year, (ii) receiving
any stock options or profit sharing, and (iii) receiving
any deferred compensation payments from the Company until
certain conditions are satisfied. These conditions
include, among other items, profitable operations for the
preceding calendar year.
Note Receivable Issued for Common Stock - During March
1995, the Company issued 1,112,265 shares of common stock
to Qualcomm (see Note 10) for $737,000. The purchase price
of the shares will be paid by a reduction in the price of
certain products and services currently provided by
Qualcomm to the Company and, upon satisfaction of certain
conditions, the conversion of a certain non-exclusive
territory to an exclusive territory, under the license and
distribution agreement (see Note 10). The transaction was
recorded as a note receivable for common stock issued which
is reduced as discounts are earned. At
December 31, 1995, a total of $132,021 in discounts had been
earned.
Stock Option - In connection with the issuance of the
convertible promissory note (see Note 5) the Company
granted the holder an option to purchase up to 5% of the
Company's outstanding common stock for a maximum aggregate
purchase price of $50,000. During July 1994, 419,840
shares of common stock were issued by the Company pursuant
to the exercise of such option resulting in net proceeds to
the Company of $50,000.
Stock Warrants - During October 1995, the Company issued
25,000 common stock purchase warrants. The warrants
represent the right to purchase one share of the Company's
common stock at $1.50 and expire during October 1998.
Registration Statements with the Securities and Exchange
Commission - During 1995, the Company filed two
registration statements on Form S-1 with the Securities and
Exchange Commission, registering a total of 6,049,684
shares of the Company's common stock. The Company did not
receive any proceeds from these transactions.
9.RELATED PARTY TRANSACTIONS
The Company has entered into a deferred compensation
arrangement with its majority stockholder pursuant to which
the Company has recorded an annual salary expense of
$100,000 for the years ended December 31, 1995, 1994 and
1993. At December 31, 1995, deferred compensation totalled
$369,230 (see Note 3).
10.LICENSE AND DISTRIBUTION AGREEMENT
On June 13, 1990, the Company entered into a license and
distribution agreement, as amended through May 26, 1995,
with Qualcomm. Pursuant to the agreement, the Company was
appointed Qualcomm's exclusive and non-exclusive
distributor, in defined territories, of the OmniTRACS
satellite-based communications and tracking system (the
"System") for marine application, as defined. The Company
was also appointed provider of message services to the
users of the System. In connection therewith, the Company
was also granted an exclusive and non-exclusive license to
certain software used with the System for an annual
maintenance fee of $1,000, and Qualcomm was granted an
exclusive perpetual, worldwide, royalty free license to any
improvements made by the Company to the System or related
software.
F-11
<PAGE>
Under the agreement, the Company is required to sell a
certain minimum number of systems in order to maintain the
exclusivity of its distribution rights, commencing with 480
systems in the aggregate by December 31, 1996. As of
December 31, 1995, this requirement has been met by the
Company. Thereafter, the minimum purchase requirements for
each calendar year are to be agreed upon between the
Company and Qualcomm subject to a minimum of 300 systems
for calendar year ended December 31, 1997 and increasing by
10% each year thereafter.
In the event the Company desires to sell its business, the
Company shall first provide notice in writing to Qualcomm.
Qualcomm shall then have thirty days to exercise its option
to purchase the Company at the purchase price and on the
terms stated in the notice.
The agreement expires during June 2000 and may be renewed
for two additional five-year periods. The agreement is
subject to renegotiation at the end of the option period.
11.SUBSEQUENT EVENTS
Memorandum of Understanding - Subsequent to December 31,
1995, the Company entered into a memorandum of
understanding with ACATEL Qualcomm, a French company,
whereby the Company agreed to establish and distribute a
certain satellite communication system within a certain
number of countries comprising the joint venture territory,
as defined in the memorandum, for vessel applications. The
Company agreed to use the European TeleCommunications
Satellite Signatory Organization to distribute its system.
Stock Option Plan - Subsequent to December 31, 1995, the
Company approved a stock option plan for certain employees
and directors of the Company. The plan provides for the
issuance of options to acquire up to 1,000,000 shares of
the Company's common stock. The plan is subject to approval
by the Company's stockholders which is expected to be received
at the Company's Annual meeting on May 9, 1996.
F-12
<PAGE>
No person has been
authorized to give any
information or to make
any representation in
connection with this
offering other than
those contained in
this Prospectus and,
if given or made, such 6,111,385 SHARES
information or
representation must
not be relied upon as
having been authorized
by the Company, the
Selling Shareholders
or any other person. BOATRACS, INC.
This Prospectus does
not constitute an
offer to sell or a
solicitation of an
offer to buy any
security other than
the securities to Common Stock
which it relates, or
an offer to or a
solicitation of any
person in any
jurisdiction where
such an offer or
solicitation would be _____________
unlawful. Neither the
delivery of this Prospectus
Prospectus nor any _____________
sale made hereunder
shall, under any
circumstance, create
any implication that
there has been no
change in the affairs
of the Company since
the date hereof or
that the information
herein is correct as
of any time subsequent
to the date hereof.
__________________
Table of Contents
Page
Available Information 2
Prospectus Summary 3
The Company 5
Risk Factors 6
Dividend Policy 11
Selected Financial Data 12
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 13
Business 18
Management 29
Certain Transactions 32
Principal Shareholders 33
Selling Shareholders 34
Description of Capital
Stock 35
Shares Eligible for Future
Sale 36
Market Information 37
Plan of Distribution 37
Legal Matters 38
Experts 38
Index to Financial
Statements F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The estimated expenses of this offering are as follows:
To Be Paid By
Company
SEC Registration Fee.................... $ 0
Blue Sky Qualification Fees and Expenses.. 2,500
Printing and Engraving Expenses........... 0
Legal Fees and Expenses................... 2,500
Accounting Fees and Expenses.............. 2,500
Transfer Agent and Registrar Fees......... 500
Total. . . . . . . . . . . . .. . $ 8,000
Item 14. Indemnification of Directors and Officers.
Pursuant to provisions of the California Corporations Code,
Article V of the Company's Amended and Restated Articles of
Incorporation provides that the liability of the Company's
directors for monetary damages shall be eliminated to the fullest
extent permissible under California law.
Article VI of the Company's Amended and Restated Bylaws
authorizes the Company to indemnify its directors and officers in
certain circumstances against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in
connection with a proceeding arising out of such person's service
in such capacity, if that person acted in good faith and in a
manner that that person reasonably believed to be in the best
interests of the Company and, in the case of a criminal
proceeding, had no reason to believe was unlawful. The Company
is required to indemnify a director or officer of the Company
against expenses actually and reasonably incurred in the event
such person is successful on the merits in the defense of any
such claim. The indemnification provided by Article VI is not
exclusive of any other rights to which such director or officer
seeking indemnification may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or
otherwise, with respect to action in his or her official capacity
and with respect to action in another capacity while holding such
office, to the extent such additional rights to indemnification
are authorized in the Company's Amended and Restated Articles of
Incorporation.
In addition, employment agreements between the Company and
certain executive officers of the Company provide that such
executive officers shall each be indemnified against all
liabilities, damages, costs, expenses, attorneys' fees and claims
(each, a "Claim"), and all costs, expenses and attorneys' fees
incurred in the defense of any such Claim, arising from certain
circumstances relating to such executive officer's employment,
except to the extent caused by such executive officer's negligent
act, willful misconduct or breach under such agreement. The
Company is required to defend at its sole cost any action or
proceeding brought against such executive officer by reason of
any such Claims upon notice from the executive officer.
Item 15. Recent Sales of Unregistered Securities.
During the past three years, the following securities, which were
not registered under the Securities Act of 1933, as amended (the
"Act"), were issued by the entities indicated:
A. Issuances by Old BOATRACS
All historical share data below relating to Old BOATRACS is
restated to reflect the conversion of the issued and outstanding
common stock of Old BOATRACS into 9,500,000 shares of the
Company's Common Stock pursuant to the Merger.
During 1992, BOATRACS, Inc., a privately held company that merged
with and into the Company effective January 12, 1995 ("Old
BOATRACS"), issued two notes payable aggregating $260,000. 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
remaining balance of such notes at December 31, 1994 totaled
$160,539, including $2,318 of accrued interest. The notes bore
interest at 7.5% per annum and was held by the Company's
President and Chief Operating Officer.
During 1991, 1992 and 1993, Old BOATRACS issued an aggregate of
438,685 shares of common stock to its Chief Operating Officer
pursuant to a Stock Issuance/Employment Agreement entered into
between Old BOATRACS and such officer in January 1991.
In July 1994, Old BOATRACS issued a convertible promissory note
for $200,000 to a Director of Old BOATRACS. Principal and
interest accrued at 8% per annum, were due in July 1999. The
promissory note was convertible into shares of common stock at
the option of the holder from April 1, 1995 to June 30, 1999. In
addition, the Company had the right to convert such indebtedness
after April 1, 1996. The conversion price was equal to 80% of
the common stock fair market value at the exercise date. In
connection with the issuance of the convertible promissory note,
Old BOATRACS granted the holder an option to purchase up to 5% of
Old BOATRACS' outstanding common stock for a maximum aggregate
purchase price of $50,000. In July 1994, 419,840 shares of
common stock were issued by Old BOATRACS pursuant to the exercise
of such option resulting in net proceeds to Old BOATRACS of
$50,000. As of June 15, 1995, the Director converted the
principal and accrued interest on the promissory note into
179,684 shares of common stock.
In October 1994, Old BOATRACS issued an aggregate of 836,062
shares of common stock for aggregate net proceeds of $495,687 to
11 purchasers who acquired such securities for investment and not
with a view to the distribution thereof. It is believed that
such issuances are exempt from registration under the Act
pursuant to Rule 504 promulgated under the Act.
B. Issuances by the Company
In January 1995, the Company issued (i) 9,500,000 shares of its
common stock to the former shareholders of Old BOATRACS in
exchange for all of the outstanding common stock of Old BOATRACS,
and (ii) 510,386 shares of its common stock to the former
shareholders of First National Corporation, pursuant to a Plan
and Agreement of Reorganization by Merger of BOATRACS, Inc. with
and into First National Corporation under the name of "BOATRACS,
Inc.", which plan had been confirmed by the U. S. Bankruptcy
Court for the Southern District of California. It is believed
that the issuance of shares to the former shareholders of First
National Corporation is exempt from registration under the Act
pursuant to 11 U.S.C. 1145.
In March 1995, the Company issued 1,112,265 shares of common
stock to its sole supplier, in consideration of discounts on
future purchases of equipment and services.
In June 1995, the Company issued 179,684 shares of common stock
to a Director upon conversion of that Director's promissory note
which had been issued by Old BOATRACS in July of 1994.
In October 1995, the Company issued 1,275,375 shares of common
stock in consideration of $2,021,357. The Company paid
commissions of $118,000.
In October 1995, the Company issued 25,000 Warrants to Torrey Pines
Securities at an exercise price of $1.50 per share.
In March 1996, the Company issued 24,600 shares of common stock
to a consultant of the Company in consideration of services
rendered.
With regard to the transactions described above, unless otherwise
noted, it is believed that such transactions are exempt from
registration under the Act pursuant to Section 4(2) thereof or
Regulation D promulgated thereunder. Unless otherwise noted, no
underwriters were involved, nor was any commission or fee paid by
the Company or Old BOATRACS in connection with any of the
transactions described above.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
See Exhibit Index
(b) Financial Statement Schedules:
Financial statement schedules are omitted because they are not
required, are not applicable, or the information is included in
the Financial Statements or Note thereto.
Item 17. Undertakings
(1) The undersigned Registrant hereby undertakes:
(a) 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;
(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; and
(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 (a)(1)(i) and
(a)(1)(ii) shall not apply if the registration statement
is on Form S-3, Form S-8 or Form S-3, and the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
(b) that, for the purposes 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;
(c) 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;
(d) that, for purposes of determining any liability
under the Securities Act of 1933, the information omitted from
the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared
effective;
(e) that, for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment
that contains a form of prospectus 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.
(2) 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, 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Post-Effective Amendment No.
1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego,
State of California on the 30th day of April, 1996.
BOATRACS, INC.
By: /S/ MICHAEL SILVERMAN
Michael Silverman, President
<PAGE>
Pursuant to the requirements of the Securities Act of
1933, this Post-Effective Amendment No. 1 to Registration
Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/S/ MICHAEL SILVERMAN Chairman of April 30, 1996
Michael Silverman the Board,
President,
Chief Executive
Officer and Director
/S/ ANNETTE FRISKOPP Chief April 30, 1996
Annette Friskopp Operating
Officer and
Director
/S/ DALE FISHER Chief April 30, 1996
Dale Fisher Financial
Officer and
Chief Accounting
Officer
/S/ GILES BATEMAN Director April 30, 1996
Giles Bateman
/S/ SELWYN KLEIN Director April 30, 1996
Selwyn Klein
/S/ LUIS MAIZEL Director April 30, 1996
Luis Maizel
/S/ NORMAN KANE Director April 30, 1996
Norman Kane
/S/ ILANA SILVERMAN Director April 30, 1996
Ilana Silverman
<PAGE>
EXHIBIT INDEX
Exhibits Description
2 Plan of Reorganization by Merger(1)
3.1 Amended and Restated Articles of Incorporation(1)
3.2 Amended and Restated Bylaws(1)
4.1 Form of the Company's Common Stock Certificate(4)
4.2 Form of Subscription Agreement--October 1994 investors(4)
4.3 Subscription Agreement--QUALCOMM(4)
4.4 Second Amended Plan of Reorganization of First National
Corporation(2)
4.5 Bankruptcy court order confirming Second Amended Plan of
Reorganization(3)
4.6 Warrant to Purchase Common Stock of BOATRACS, Inc.(7)
5.0 Opinion and Consent of Solomon Ward Seidenwurm & Smith (6)
10.1* License and Distribution Agreement dated June 13,1990,
by and between QUALCOMM and the Company, as amended(5)
10.2* License Agreement dated March 31, 1995, between the
Company and QUALCOMM(4)
10.3 Employment Agreement--Michael Silverman(4)
10.4 Employment Agreement--Annette Friskopp, as amended(4)
10.5 Stock Issuance/Employment Agreement between the Company and
Annette Friskopp, as amended(4)
10.6 Convertible Promissory Note dated July 1, 1994(4)
10.7 Addendum to Stock Issuance/Employment Agreement
between the Company and Annette Friskopp dated July 1,1995(6)
11 Statement regarding computation of net loss per share
23.1 Consent of Independent Auditors, Deloitte & Touche, LLP(8)
___________________________
(1) Incorporated by reference to the exhibit of the same
number to the Company's Current Report on Form 8-K dated
January 12, 1995.
(2) Incorporated by reference to Exhibit A to First National
Corporation's Current Report on Form 8-K dated January 9,1995 ("FNC 8-K").
(3) Incorporated by reference to Exhibit B to the FNC 8-K.
(4) Incorporated by reference to the exhibit of the same
number to the Company's Form S-1, SEC File No. 33-91284, filed
with the SEC on May 4, 1995.
(5) Incorporated by reference to the exhibit of the same
number to the Company's Amendment No. 3 to Form S-1, SEC File
No. 33-91284, filed with the SEC on July 6, 1995.
(6) Incorporated by reference to the exhibit of the same
number to the Company's Form S-1, SEC file No. 333-1817 filed
with the SEC on October 31, 1995.
(7) Incorporated by reference to the exhibit of the same
number to the Company's Form 10-KSB filed with the SEC on March
28, 1996.
(8) Attached herewith.
*Confidential treatment requested
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS (LOSS) PER SHARE
(in thousands, except earnings (loss) per share data)
Primary and Fully Diluted
Earnings (Loss) per Share:
For the Year Ended December 31
1995 1994 1993
Net Earnings (Loss) <$653> <$311> <$250>
Weighted average common shares outstanding:
Weighted average common shares 11,277 7,976 7,938
Common shares issued during the
year ended December 31, 1994 (1) --- 1,524 1,524
TOTAL 11,277 9,500 9,462
Net Earnings (Loss) per share <$.06> <$.03> <$.03>
(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.
EXHIBIT 23.1
DELOITTE & TOUCHE, LLP LETTERHEAD
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Boatracs, Inc. on Form S-1 of our report dated
February 12, 1996, appearing in the Prospectus, which is part of
this Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.
Deloitte & Touche LLP Corp.
San Diego, California
May 2, 1996
