As filed with the Securities and Exchange Commission on _________, 1997
Registration No. ___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4
ON FORM SB-2
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>
PROSPECTUS
5,490,956 Shares
BOATRACS, INC.
Common Stock
__________________________
This Prospectus relates to 5,490,956 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 April ___, 1997.
<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. In
addition, the Commission maintains a Web Site at
http://www.sec.gov that contains reports, proxy and information
statements and other information regarding the Company.
The Company has filed with the Commission a Post-Effective
Amendment No. 4 to the Registration Statement on Form SB-2 (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. Certain statements contained in this
Prospectus regarding matters that are not historical facts are
forward-looking statements relating to future events or future
financial performance of the Company. Because such forward-
looking statements include risks and uncertainties, actual
results may differ materially from those expressed in or implied
by such forward-looking statements. Factors that could cause
actual results to differ materially include, but are not limited
to, those discussed under "Risk Factors," "Management's
Discussion and Analysis," and "Business," as well as those
discussed elsewhere in this Prospectus. The Company undertakes
no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
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 a vessel or vessels at sea and a base station on land
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 reporting 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. 5,490,956 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,
1992 1993 1994 1995 1996
Statement of
Operations Data:
Communication $199 $559 $756 $1,299 $1,428
Systems Revenues
Messaging 275 398 706 1,367 2,073
Revenues
Loss from (351) (227) (284) (678) (963)
operations
Net loss (408) (250) (311) (653) (905)
Net loss per $(0.04) $(0.03) $(0.03) $(0.06) $(0.07)
share
Weighted average
common and common
equivalent shares 9,339 9,462 9,500 11,277 12,597
outstanding
December 31, 1996
Balance Sheet Data:
Working capital . . . . . . . .. . . . $ 271
Total assets. . . . . . . . . . . .. . 1,581
Long-term liabilities, less current maturities. ---
Shareholders' equity . . . . . . . . . . . . . . 600
<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 a vessel or
vessels at sea and a base station on land 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.
<PAGE>
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 $905,438 for the year ended
December 31, 1996 and net losses of $653,136, $311,190 and
$249,736 for the years ended December 31, 1995, 1994 and 1993,
respectively, and at December 31, 1996 had an accumulated
deficit of $3,189,302. 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
exclusive 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).
<PAGE>
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.
QUALCOMM's Form 10K for the year ending September 29, 1996
indicates that the data satellite transponder lease runs through
2001 and the position reporting satellite transponder runs
through May, 1997 with the rights to extend through May, 1999.
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 200,000 QUALCOMM OmniTRACS
terminals in trucks in service worldwide. The Company has
contracts for or has installed approximately 1,000 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 positioning
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.
<PAGE>
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 56%
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 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 1996.
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
<PAGE)
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 is currently available with
respect to the Common Stock. Accordingly, any broker engaging
in a transaction in the Common Stock is 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 are generally
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 expanding 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."
<PAGE>
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 February 1997, the FCC granted to QUALCOMM, Inc. a
license adding marine capability for use with the OmniTRACS
system for up to 100,000 MCTs. This replaces the previous
experimental license that was being used for marine operation of
the OmniTRACS service. The term of the license is from January
3, 1997 to January 3, 2007. 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 has expanded into
international markets, where its operations are 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."
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.
<PAGE>
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 5,490,956 shares of Common Stock offered hereby, as of March
31, 1997, 2,026,237 shares were eligible for sale in the public
market and an additional 5,085,117 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, 1994, 1995 and 1996 and the balance
sheet data at December 31, 1995 and 1996 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, 1992 and 1993,
and the balance sheet data at December 31, 1992, 1993 and 1994
are derived from audited financial statements not included in
this Prospectus. 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,
1992 1993 1994 1995 1996
(in thousands, except per share data)
Statement of
Operations Data:
Revenues:
Communications $ 199 $559 $756 $1,299 $1,428
systems
Messaging 275 398 706 1,367 2,073
Total . . . . . . . . 474 957 1,462 2,667 3,501
Operating expenses:
Communications 127 387 555 901 913
systems
Messaging 305 344 467 833 1,090
Selling, general and 393 453 724 1,611 2,461
admin. expenses
Loss from operations (351) (227) (284) (678) (963)
Other income (expense) (57) (23) (27) 25 58
Net loss $(408) $(250) $(311) $(653) $(905)
Net loss per share $(.04) $(.03) $(.03) $(.06) $(.07)
Weighted avg. common 9,339 9,462 9,500 11,277 12,597
shares outstanding
December 31,
1992 1993 1994 1995 1996
(in thousands)
Balance Sheet Data:
Working capital (deficit) $(10) $(86) $398 $1,380 $271
Total assets 134 298 844 2,360 1,581
Long-term liabilities 480 600 738 369 ---
(less current maturities)
(1)
Shareholders' (429) (644) (251) 1,297 600
equity/(deficit) (2)
_______________
(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 a vessel or
vessels at sea and base stations on land 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,
1996 1995 1994
Revenues
Communications
systems . . . . . . . . . 40.8% 48.7% 51.7%
Messaging. . . . . . . . 59.2 51.3 48.3
Total . . . . . . . . 100.0 100.0 100.0
Operating expenses:
Communications
systems. . . . . . . . . . 26.1 33.8 38.0
Messaging. . . .. . 31.1 31.2 31.9
Selling, general and
administrative expenses. . . 70.3 60.4 49.5
Loss from operations. . . . (27.5) (25.4) (19.4)
Other income (expense). . . 1.6 .9 (1.9)
Net loss. .. . . . . (25.9)% (24.5)% (21.3)%
Years ended December 31, 1996 and 1995
Total revenues for the year ended December 31, 1996 were
$3,501,182, an increase of $834,498 or 31.3% as compared to total
revenues of $2,666,684 for the year ended December 31, 1995.
Communications systems revenues, which consists principally of
revenues from the sale of BOATRACS equipment and related
software, were $1,427,822 or 41% of total revenues, an increase
of $128,492 or 10% over the prior year. This growth in
communications systems revenues is attributable primarily to an
increase in sales of equipment to new and existing customers.
Messaging revenues, which consist of fees for messaging services
provided to BOATRACS units installed on vessels, were $2,073,360
or 59% of total revenues, an increase of $706,006 or 52% compared
to $1,367,354 or 51% of total revenues 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 and increased usage by some customers.
Communications systems expenses were $913,064 or 64% of
communications systems revenues for 1996, an increase of $12,084
or 1.34%, compared to $900,980 which represented 69% of
communications systems revenues in 1995. The dollar increase in
expenses primarily reflects increased equipment sales and related
software. The decrease in communications systems expenses as a
percentage of communications systems revenues is primarily due to
a reduction in the cost charged by the supplier to the Company
per unit commencing in the second quarter of 1996. Messaging
expenses were $1,089,719 or 53% of messaging revenues in 1996, an
increase of $256,571 or 31%, compared to $833,148 which
represented 61% 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
<PAGE>
of providing this service, an increase in sales to fleet
customers with greater utilization of the system, and a change in
the price structure charged by the Company's supplier.
Selling, general and administrative expenses were $2,461,018 or
70% of total revenues for 1996, an increase of $850,157 or 53%,
compared to $1,610,861 or 60% of total revenues in the prior
year. The increased dollar amount is primarily attributable to
significant increased expenses incurred in development of the
European market including travel and the hiring of consultants,
and the operation of a messaging center in the Netherlands. In
the United States, the increased dollar amount is primarily
attributable to payroll and related expenses due to the hiring of
additional sales and technical personnel, increased costs in
shareholder relations, advertising, insurance and general office
expenses offset by a decrease in legal and accounting expenses.
In addition, the Company has incurred significant increased costs
on the development of software to facilitate customer operations.
The Company anticipates that the dollar amount of selling,
general and administrative expenses will increase in the future
to accommodate the Company's growth. A breakdown of operating
results for 1996 on a geographic basis reflects pretax income of
approximately $360,000 for U.S. operations before software
research and development expenses. European operations lost
approximately $905,000 before research and development expenses,
due to start-up and marketing costs incurred in the development
of the market.
Interest expense in 1996 was $2,936 or .08% of total revenues, a
decrease of $13,213 or 82%, compared to $16,149 which was .6% of
total revenues in the prior year. The dollar decrease reflects
the effects of lower debt outstanding during 1996. Interest
income was $60,117 or 2% of total revenues, an increase of
$18,799 or 45% compared to $41,318 or 2% 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 $905,438
for 1996 compared to $653,136 for 1995, an increased loss of
$252,302 or 39%.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." This statement specifies the computation,
presentation, and disclosure requirements for earnings per share
for entities with publicly held common stock. The Company has
not adopted SFAS No. 128 for the current year but will adopt SFAS
No. 128 during the year ended December 31, 1998. The Company
does not expect the adoption of SFAS No. 128 to have a material
effect on its financial statements.
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.
<PAGE>
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.
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%.
Liquidity and Capital Resources
The Company's cash balance at December 31, 1996 was $103,144, a
decrease of $48,584, or 32% over the December 31, 1995 cash
balance of $151,728. At December 31, 1996, working capital was
$271,007, a decrease of $1,108,531 from the working capital of
$1,379,538 at December 31, 1995. Cash of $1,042,069 was used in
operating activities, cash of $670,660 was provided by investing
activities and cash of $322,825 was provided by financing
activities during 1996.
Investment securities were $425,852 at December 31, 1996, a
decrease of $1,038,997, compared to the prior year balance of
$1,464,849, due to funds being used to finance operations during
the year. Accounts receivable net of an allowance for
uncollectible amounts increased $149,754 to $557,246 due
primarily to higher messaging billings during the year. Prepaid
expenses and other assets were $73,710 at December 31, 1996, an
increase of $57,085 or 343% due primarily to increased prepaid
insurance and a deposit of $39,000 on investment consulting fees.
<PAGE>
Inventory at December 31, 1996 was $92,118, compared to $32,309
in the prior year, an increase of $59,809 due primarily to units
held for future sales in Europe. Property, net of accumulated
depreciation, was $120,731 at December 31, 1996, compared to
$72,399 in the prior year, an increase of $48,332 or 67%, due
primarily to the purchase of additional computer equipment and
office furniture. Notes receivable increased to $208,463 at
December 31, 1996, from $94,320 at December 31, 1995, an increase
of $114,143 or 121%, due to the increase of a loan to a Canadian
distributor, which is expected to continue to increase during
1997.
Accounts payable and accrued expenses were $796,666 at December
31, 1996, an increase of $103,201 or 15% compared to a balance of
$693,465 in the prior year due to higher vendor payables owing to
the Company's supplier resulting primarily to increased messaging
costs. Short-term margin loan was $139,268 at December 31, 1996,
reflecting borrowings against investment securities.
Deferred compensation, net of borrowings, was $45,129 at December
31, 1996, compared to $248,775 in the prior year due to additional
borrowing against the Deferred Compensation during the year. The
borrowings have been offset against deferred compensation in
accordance with the amended terms of the note.
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. Since year end, the
Company signed a contract with a German company, Deutsche
Binnenreederei to supply 105 MCTs to the German company's fleet.
Any funding requirements will be satisfied through potential
public and private financing. The known resources of liquidity of
the Company, coupled with the projections for revenue, are
expected to cover the Company's cash needs until at least the end
of 1997.
The Company anticipates making capital expenditures in excess of
$80,000 during 1997. 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 exclusive
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, and the integration of this
information directly into shared-based office computer systems is
vital to BOATRACS' customers. The Company has built software
tools for both the vessel and the office enabling the integration
of this information. 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.
<PAGE>
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. The
Company has contracts for or has installed approximately 1,000
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 Facility ("NMF") 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.
<PAGE>
The QUALCOMM Automatic Satellite Position Reporting ("QASPR")
system is featured in all BOATRACS mobile units. The NMF 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 NMF 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 NMF
and dish are maintained by QUALCOMM in Las Vegas, Nevada.
Connections to the QUALCOMM NMF 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 NMF by modem to monitor customer accounts on the
system. BOATRACS operators can personally relay satellite
messages between vessels and their families or business
associates on shore and from shore-based personnel to vessels
when requested. 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. This software allows for
the same features as the standard keyboard with the added
benefits of using a full screen and being able to send/receive
computer files of any type.
BOATRACS Messaging Center
BOATRACS operates a 24-hour Messaging Service from its San Diego,
California-based offices and a messaging center in Leiden, The
Netherlands 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.
<PAGE>
BOATRACS' Messaging Center is linked via a dedicated telephone
line for data transfers via modem directly to QUALCOMM's NMF in
San Diego, where message transmissions to and from the vessels
are formatted and processed.
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 NMF 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 NMF
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 had 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
<PAGE>
had 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. During 1996, the "Non-Exclusive Territory" became
exclusive Territory when the Company reached a goal of selling
700 MCTs.
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 year ended September 30,
1996 revenues in excess of $813 million and current
capitalization in excess of $3 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. Effective
January 3, 1997, this license was granted to QUALCOMM, which
added marine capability to use with the OmniTRACS system for up
to 100,000 MCTs for a term of 10 years.
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 also 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
<PAGE>
License Agreement term commenced in March 1995 and will
terminate upon the termination of the Distribution Agreement
between the Company and QUALCOMM.
During March 1995, the Company issued 1,112,265 shares of common
stock to QUALCOMM 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. The transaction was recorded
as a note receivable for common stock issued which is reduced as
discounts are earned. Through December 31, 1996, a total of
$315,578 in discounts were earned.
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. Under the terms of the contract,
the Company is no longer the exclusive distributor. 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 requires 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. In addition, BOATRACS is a 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.
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
International Operations
BOATRACS intends to expand into international markets. 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, which was used in 1996 by potential
customers evaluating BOATRACS' systems for possible purchase.
<PAGE>
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.
In June 1996, the Company entered 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. ORBCOMM estimates the
system will be operational during 1997.
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. The 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 not
enforced) 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.
Currently the Company is participating in a voluntary
experimental program with the NMFS to evaluate the effectiveness
of the System. 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,
<PAGE>
alternative management schemes, or acts of Congress which could
close certain fisheries in total or in part. BOATRACS has
installed more than 140 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 September 1996, the Company entered into an agreement
with Oceantrac Systems Limited of Canada ("SYSTEMS") reflecting
the terms of a Memorandum of Understanding between the Company
and SYSTEMS, providing for the establishment of Oceantrac,
Incorporated, a wholly-owned Canadian subsidiary of Systems
("OCEANTRAC"). Under the terms of the agreement, OCEANTRAC will
act as the sole representative of SYSTEMS for marketing,
distribution and sale of the BOATRACS System and any related
business in the territory granted under the license from the
Company including the provinces of Ontario, Quebec, New
Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and
Labrador.
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. BOATRACS
continues to offer Messaging Services to evaluation units to
demonstrate the value-added message relaying and monitoring
services that BOATRACS could provide to the maritime industry in
certain areas of Europe. 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.
<PAGE>
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.
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 products and services
that compete with BOATRACS products and services:
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 a voice-based system. 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 during the late 1990's, they will offer two-way
communication. Certain INMARSAT compliant equipment is approved
to provide Global Marine Distress Safety System ("GMDSS") notices
and communications. GMDSS requires shipping vessels of a certain
nature and size that operate certain routes 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 and BOATRACS continue to consider
submitting 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.
<PAGE>
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.
Watercomm phones utilize radio towers placed along the major U.S.
rivers to send and receive voice and data transmissions.
Watercomm users incur a connection charge as well as a per-minute
usage charge, based on where the vessel is operating. 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.
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, 1997, the Company had 12 full-time and seven part-
time employees.
Facilities
The Company conducts its operations from a leased 8,300 square
foot facility in San Diego, California, which expires in
September, 1998 and from a leased facility in Leiden, The
Netherlands, which expires in December 2001.
<PAGE>
MANAGEMENT
The executive officers and directors of the Company and their ages
as of April 15, 1997 are as follows:
Name Age Position
Michael Silverman 52 Chairman, Chief Executive Officer,
President, Director
Annette Friskopp 32 Secretary, Director
Dale Fisher 51 Chief Financial Officer
Giles Bateman 52 Director
Luis Maizel 46 Director
Norman Kane 46 Director
Ilana Silverman 49 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 of BOATRACS, Inc. ("Old
BOATRACS") with the Company (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. She
became a Director of the Company at 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.
<PAGE>
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.
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 Orthopaedic and Knee Surgery Medical Group and a
Director of TRI CITY Orthopaedic 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. 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.
There is no family relationship between any of the Company's
Directors and officers, except that Michael Silverman and Ilana
Silverman are married. There are no arrangements or understandings
between any Director or executive officer and any other person
pursuant to which any person has been elected or nominated as a
Director or executive officer. All Directors and executive
officers serve for a term of one year until the next Annual Meeting
of stockholders.
During the year ended December 31, 1996, the Board of
Directors held three meetings where all Directors were present
except Ms. Friskopp who attended two of the meetings. The Company
intends to hold quarterly meetings of its Board of Directors in the
future. The Company presently has a Compensation Committee of the
Board of Directors consisting of Giles Bateman and Michael
Silverman. The Compensation Committee's basic function is to set
the salary for employees and promotions. The Audit Committee,
consisting of Giles Bateman and Norman Kane, advises the Board of
Directors as to the selection of the Company's independent
accountants. During 1996, the Compensation and Audit Committees
each held one meeting.
Executive Compensation
The following table sets forth for the years indicated certain
compensation of the Company's chief executive officer and the
executive officers of the Company who earned more than $100,000 in
such years.
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation
Principal Position Year Salary Bonus
Michael Silverman 1996 $100,000 $0
Chairman, President 1995 $100,000 $0
and Chief Executive 1994 $100,000(1) $0
Officer
Annette Friskopp 1996 $124,961 $31,950
Chief Operating Officer 1995 $107,654 $31,800
1994 $ 92,654 $0
________________
(1) In 1994, $69,230 of Mr. Silverman's compensation earned was
deferred pursuant to a deferred compensation arrangement entered
into between the Company and Mr. Silverman, increasing the
balance of deferred compensation to $369,230.
In November 1995, a promissory note between the Company and
Michael Silverman, President and Chief Executive Officer, was
entered into, allowing Mr. Silverman to borrow up to $369,230 from
the Company. During 1996, it was amended allowing the Company to
offset the loan outstanding balance against the deferred income
balance. The promissory note is collateralized by deferred income
owing to Mr. Silverman in the same amount and will bear interest at
5.5%. At December 31, 1996, Mr. Silverman had borrowed $310,000,
and interest in the amount of $14,101 had been accrued. The total
outstanding has been offset against the deferred income as of
December 31, 1996.
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 his or her 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.
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 was $108,000 and after December 1995 increased to
$120,000 per annum. In addition, beginning January 1995, she
became entitled to 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 capital 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. In December 1996, Ms. Friskopp was awarded an
option to purchase 150,000 shares of the Company's common stock at
an exercise price of $1.125 per share. The options will vest 20%
annually over five years.
The following table sets forth the information concerning
individual grants of stock options and appreciation rights during
the last fiscal year to the Company's chief executive officer and
the executive officers of the Company who earned more than $100,000
last year.
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Percent Of
Number of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Options/SARs In Fiscal Base Price
Name Granted (#) Year (S/Sh) Expiration
Michael Silverman ----- ----- ----- -----
Annette Friskopp 100,000 15% $1.00 2003
Annette Friskopp 150,000 22% $1.125 2003
The following table sets forth the information concerning each
exercise of stock options during the last fiscal year by each of
Company's chief executive officer and the executive officers of the
Company who earned more than $100,000 last year and the fiscal year
value of unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number Of
Securities Value Of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options/SARs Options/SARs
On Value At FY-End (#) At FY-End(S)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
Michael Silverman ----- ----- ----- -----
Annette Friskopp -0- N/A 0/250,000 0/0
Compensation Committee Interlock and Insider Participation
During fiscal year 1996, Michael Silverman, an officer of the
Company, participated in deliberations of the Company's Board of
Directors concerning executive officer compensation.
Director Compensation
Non-employee directors of the Company receive $500 for each
meeting of the Board of Directors that they attend. Directors are
reimbursed for certain expenses in connection with attendance at
Board and committee meetings. Non-employee Directors participate in
the 1996 Stock Option Plan, and each non-employee director has been
awarded options to purchase 20,000 shares of the Company's common
stock at an exercise price of $1.00-$1.25 per share.
<PAGE>
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 executive officers and Directors, and persons who
beneficially own more than 10% of the Company's stock, to file
initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission. Executive officers,
Directors and greater than 10% beneficial owners are required by
applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms
furnished to the Company and information involving securities
transactions of which the Company is aware, the Company believes
that during the fiscal year ending December 31, 1996, all Section
16(a) filing requirements applicable to its executive officers,
Directors and greater than 10% beneficial stockholders were
complied with, except for a single Form 4, which was filed 10 days
late on behalf of Luis Maizel for a Pension Plan transaction for
which Mr. Maizel is a trustee.
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.
In March 1995, the Distribution Agreement between the Company
and QUALCOMM was amended. As a result of such amendment, the
Company obtained exclusive distribution rights in the United States
for marine application of the OmniTRACS System when the Company
purchased a total of 700 MCTs from QUALCOMM during 1996, subject to
certain minimum purchase requirements.
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.
In 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 expires during
October 1998.
In January 1996, the Company issued 50,000 options to purchase
Company stock at $1.50 per share.
<PAGE>
PRINCIPAL SHAREHOLDERS
Set forth below is certain information concerning the ownership
of the Company's Common Stock as of March 31, 1997 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 5,405,716(1) 43
Annette Friskopp 377,931 3
Dale Fisher 22,001(2) *
Giles Bateman 663,825 5
Luis Maizel 98,921(3) *
Norman Kane 469,667(4) 4
Ilana Silverman (5) 0 *
All Directors and Executive
Officers as a group
(7 persons) 7,038,061 56%
______________________
(1) Includes 327,599 shares held by Mr. Silverman's son.
(2) Includes 20,000 shares held in a Family Trust for which Ms.
Fisher is a trustee and 2,000 shares held in an IRA account.
(3) Includes 83,600 shares are held by the Maiz Family Trust of
which Mr. Maizel is a trustee and 15,321 shares held in a
Retirement Plan for which Mr. Maizel is a trustee.
(4) Includes 92,150 shares held by the Norman Kane Defined
Benefit Plan of which Dr. Kane has beneficial ownership.
(5) 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) 663,825
Gregory Silverman (3) 323,155
Doron Silverman (3) 327,599
Norman Kane Defined Benefit Plan (4) 92,150
Maiz Family Trust (5) 83,600
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
International Project Management 24,600
Fisher Family Trust 15,000
The Gilbert Family Trust 100,000
Jennifer Gilbert 10,000
Karly Gilbert 10,000
Pamela & Jack Saxton 3,000
R. A. Payn 6,667
John Griffiths 2,333
Lang Morris 2,000
Burt R. Bondy Pension Plan & Trust, dated 10/9/84 60,000
E. M. Trust, dated 12/18/84 10,000
Michael H. Jackman 92,600
Esrock Living Trust 8,000
Jonathan Schewitz 15,339
Penelope Smith 6,666
Torrey Pines Securities (6) 25,000
Mitchell Lynn (7) 50,000
Total 5,490,956
_________________________
(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 and Ilana Silverman, a Director of the
Company, is the wife of Michael Silverman.
(4) The Norman Kane Defined Benefit Plan is for the benefit of
Dr. Norman Kane.
<PAGE>
(5) Luis Maizel is a Director of the Company and a trustee of the
Maiz Family Trust.
(6) Torrey Pines Securities received a warrant dated October 31,
1995 to purchase 25,000 shares at $1.50 each. The
warrant expires on October 31, 1998.
(7) Represents 50,000 options to purchase stock at $1.50
per share.
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, 1997, 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.
<PAGE>
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
Chase Mellon Shareholder Services is the transfer agent and
registrar for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of March 31, 1997, the Company had 12,602,310 shares of Common
Stock outstanding. Of these, approximately 7,517,193, 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
5,085,117 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 one-year
holding period provisions, including Affiliates of the Company,
may sell restricted securities in brokers' transactions or
<PAGE>
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 two-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 two-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
Quarter Ended
March 31, 1997 $1.8125 $1.00
December 31, 1996 1.50 .625
September 30, 1996 1.50 .75
June 30, 1996 2.00 .75
March 31, 1996 .937 .75
December 31, 1995 1.375 .686
September 30, 1995 1.625 1.375
June 30, 1995 1.375 (1) 1.375 (1)
(1) April 30 through June 30,1995
On April 15, l997, the closing high and low bid price of the
common stock, as reported on the OTC Bulletin Board, was $1.687
and $1.50, respectively. As of January 31, 1997, the Company had
approximately 300 holders of record of its common stock. In
addition, approximately 2.4 million shares are held in street
name accounts. The Company has not paid any dividends since the
Merger and does not currently intend to declare any dividends.
<PAGE>
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.
<PAGE>
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, 1995
and 1996, and for each of the three years in the period ended
December 31, 1996 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 Auditors' Report F-2
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Operations for the years ended December 31, 1996,
1995 and 1994 F-4
Statements of Stockholders' Equity/(Deficit) for the years ended
December 31, 1996, 1995 and 1994 F-5
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994 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, 1996 and 1995, and the related
statements of operations, stockholders' equity (deficit), and cash
flows for each of the three years in the period ended December 31,
1996. 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, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting
principles.
February 7, 1997
F-2
<PAGE>
BOATRACS, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
CURRENT ASSETS:
Cash $103,144 $151,728
Investment securities 425,852 1,464,849
Accounts receivable - net 557,246 407,492
Inventories 92,118 32,309
Prepaid expenses and other
assets 73,710 16,625
Total current assets 1,252,070 2,073,003
PROPERTY, at cost 120,731 72,399
NOTES RECEIVABLE 208,463 94,320
TOTAL $1,581,264 $2,239,722
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $796,666 $693,465
Short-term margin loan on
securities 139,268
Deferred compensation- net 45,129
Total current
liabilities 981,063 693,465
LONG-TERM LIABILITIES -
Deferred Compensation - net 248,775
Total liabilities 981,063 942,240
COMMITMENTS (Notes 4 and 8)
STOCKHOLDERS' EQUITY:
Preferred stock, no par
value; 1,000,000 shares
authorized, no shares issued
Common stock, no par value;
100,000,000 shares authorized,
12,602,310 and 12,577,710
shares issued and outstanding
in 1996 and 1995,
respectively 4,210,925 4,186,325
Accumulated deficit (3,189,302) (2,283,864)
Note receivable for
common stock issued (421,422) (604,979)
Total
stockholders'
equity 600,201 1,297,482
TOTAL $1,581,264 $2,239,722
See notes to financial statements.
F-3
<PAGE>
BOATRACS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
REVENUES:
Communication system sales $1,427,822 $1,299,330 $ 755,574
Messaging 2,073,360 1,367,354 706,274
Total revenues 3,501,182 2,666,684 1,461,848
COSTS AND EXPENSES:
Communication system sales 913,064 900,980 554,808
Messaging 1,089,719 833,148 466,672
Selling, general and
administrative 2,461,018 1,610,861 724,086
Total costs
and expenses 4,463,801 3,344,989 1,745,566
LOSS FROM OPERATIONS (962,619) (678,305) (283,718)
INTEREST INCOME 60,117 41,318 4,702
INTEREST EXPENSE (2,936) (16,149) (32,174)
NET LOSS $ (905,438) $ (653,136) $ (311,190)
NET LOSS PER SHARE $ (0.07) $ (0.06) $ (0.03)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 12,597,471 11,277,245 9,500,000
See notes to financial statements.
F-4
<PAGE>
BOATRACS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Note
Receivable Total
Common Stock for Common Stockholders'
Accumulated Stock Equity
Shares Amount Deficit Issued (Deficit)
BALANCE,
JANUARY 1,
1994
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
conver-
sion 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
conver-
sion 179,684 215,621 215,621
Note
receiv-
able 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
Common
stock
issued
in
connection
with
services
rendered 24,600 24,600 24,600
Payments
received
on note
receivable 183,557 183,557
Net loss (905,438) (905,438)
BALANCE,
DECEMBER 31,
1996 12,602,310 $4,210,925 $(3,189,302) $(421,422) $600,201
See notes to financial statements.
F-5
<PAGE>
BOATRACS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
OPERATING ACTIVITIES:
Net loss $(905,438) $(653,136) $(311,190)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 44,420 32,890 26,952
Net accretion of discount
on investment securities (42,204) (27,505)
Provision for bad debts 18,297
Changes in assets and
liabilities:
Accounts receivable (149,754) (233,397) (13,389)
Inventories (59,809) (20,778) 10,696
Prepaid expenses and
other assets (57,085) (6,333) (6,709)
Accounts payable and
accrued expenses 127,801 337,897 14,913
Accrued interest payable 5,421 29,314
Deferred compensation 69,230
Net cash used
in operating
activities (1,042,069) (546,644) (180,183)
INVESTING ACTIVITIES:
Purchase of investment
securities (2,825,799) (2,096,344)
Proceeds from maturities
of investment securities 3,907,000 659,000
Issuance of notes receivable (317,789) (205,775) (9,000)
Capital expenditures (92,752) (66,549) (23,300)
Escrow deposit (50,000)
Net cash provided
by (used in)
investing activities 670,660 (1,709,668) (82,300)
FINANCING ACTIVITIES:
Payments received on note
receivable issued for
common stock 183,557 132,021
Proceeds from short-term
margin loan 139,268
Payments on long-term debt
and capital lease obligation (160,026) (41,813)
Net proceeds from issuance
of common stock 1,904,292 545,687
Proceeds from issuance of
long-term debt 240,000
Net cash provided
by financing
activities 322,825 1,876,287 743,874
NET (DECREASE) INCREASE IN CASH (48,584) (380,025) 481,391
CASH AT BEGINNING OF YEAR 151,728 531,753 50,362
CASH AT END OF YEAR $ 103,144 $ 151,728 $ 531,753
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Cash paid for interest $ 2,936 $ 10,416 $ 2,318
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued for
services rendered $24,600
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, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - 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,
Incorporated ("QUALCOMM", see Note 8). 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.
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 restated 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.
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 stated at cost. Depreciation is
provided under a straight-line method for assets acquired in
1996, and an accelerated method for assets purchased prior to
1996 over the estimated useful lives of the assets (generally
3-5 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 26%, 15% and 8% of 1996 sales, 23%, 18% and 12%
of 1995 sales, and 21% and 11% of 1994 sales. Accounts
receivable from these customers aggregated $300,413 at
December 31, 1996. The Company has not historically
experienced any significant losses on its accounts
receivable.
Stock-Based Compensation - Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation,"
encourages, but does require companies to record compensation
cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "
Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
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 expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications - Certain amounts in the 1995 and 1994
financial statements have been reclassified to conform to the
1996 presentation.
2. BALANCE SHEET DETAILS
1996 1995
Accounts Receivable $570,780 $425,789
Less allowance for doubtful accounts 13,534 18,297
$557,246 $407,492
Property- at cost:
Computers and equipment $226,650 $133,898
Less accumulated depreciation (105,919) (61,499)
$120,731 $72,399
Deferred Compensation - Officer (Note 7) $369,230 $369,230
Less Note Receivable - Officer ( Note 3) 324,101 120,455
$ 45,129 $248,775
Depreciation expense was $44,420, $24,334 and $12,289 for the
years ended December 31, 1996, 1995 and 1994, respectively.
F-8
<PAGE>
3. NOTES RECEIVABLE
Canadian Company - The Company has a note receivable
agreement with a Canadian company. Outstanding advances on
the note bear interest at 9.0% and are due on demand.
Advances on the note totaled $208,463 and $78,000 at
December 31, 1996 and 1995, respectively. The note has been
classified as long-term based upon the Company's intent not
to request payment prior to January 1, 1998.
In September 1996, the Company entered into an agreement with
the Canadian company whereby the Canadian company, through
its subsidiary, will act as the sole representative for
marketing, distribution and sale of the BOATRACS system, and
any related business in certain specified Canadian territory.
Stockholder- During 1995, the Company entered into 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
an agreed upon offset to related deferred compensation (see
Note 7). The advances bear interest at 5.5% and are due on
demand. Advances under the agreement totaled $310,000 at
December 31, 1996, plus accrued interest. Terms of the note
receivable agreement allow satisfaction of the balance as an
offset to related deferred compensation.
4. LEASES
Facility Leases - The Company leases its facilities under
five non-cancelable operating leases which expire through
September 2001. Rent expense was approximately $51,900,
$31,900, and $14,360 for the years ended December 31, 1996,
1995 and 1994, 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, 1996 and
December 31, 1995 is property acquired under a capital lease
of $6,289. All obligations in connection with this lease
were paid during 1996.
Future minimum lease payments under non-cancelable operating
leases at December 31, 1996 are summarized as follows:
Year Ending December 31,
1997 $88,835
1998 74,383
1999 26,436
2000 26,436
2001 26,436
242,526
<PAGE>
5. 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 years ended December 31, 1996 and
1995 and the period from October 1, 1994 to December 31,
1994, the Company's effective income tax rate is 0%.
The tax effects of significant items comprising the Company's
deferred income tax assets were approximately as follows:
1996 1995
Deferred income tax assets:
Net operating loss carryforwards $634,000 $271,000
Deferred employee compensation 160,000 148,000
Accrued employee compensation 13,000
Tax credits 12,000
Allowance for uncollectible accounts 6,000 7,000
Deferred income 1,000 1,000
State income taxes 500 500
Other reserves 6,000 6,000
Total deferred income tax assets 819,500 446,500
Less valuation allowance (819,500) (446,500)
Net deferred income tax assets $ - $ -
At December 31, 1996, the Company had unused net operating
loss carryforwards of approximately $1,650,000 for Federal
income tax purposes which expire at various dates from 2005
to 2011.
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.
6. STOCKHOLDERS' EQUITY (DEFICIT)
Note Receivable Issued for Common Stock - During March 1995,
the Company issued 1,112,265 shares of common stock to
QUALCOMM (see Note 8) 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 8). The transaction was recorded as a
note receivable for common stock issued which is reduced as
discounts are earned. Through December 31, 1996, a total of
$315,578 in discounts were earned.
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.
F-10
<PAGE>
Stock Options - During January 1996, the Company entered into
a Non-Circumvention Agreement with a financial consultant.
The agreement included a grant of 50,000 stock options at
$1.50 each.
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.
During May 1996, the Company filed Post-Effective Amendment
No. 3 to its Form S-1, which provides for registration of
6,033,385 shares on behalf of certain selling stockholders.
The Company did not receive any proceeds from this
transaction.
Stock Option Plan - Under the 1996 Stock Option Plan ("the
Plan"), the Company may grant incentive and non-qualified
options to purchase up to 1,000,000 shares of common stock to
employees, directors and consultants at prices that are not
less than 100% (85% for non-qualified) of fair market value
on the date the options are granted. Options issued under
the Plan expire seven years after the options are granted and
generally become exercisable ratably over a five-year period
following the date of grant. Stock option transactions are
summarized below:
Number Price
of Shares per Share
Outstanding, January 1, 1996 0
Granted 730,500 $1.00- $1.81
Canceled (21,000) $1.00 -$1.81
Outstanding, December 31, 1996 709,500 $1.00 - $1.81
The Company applies Accounting Principles Board of Opinion
No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for its Plan.
Accordingly, no compensation expense has been recognized for
its stock-based compensation plan. Had compensation cost
been determined based upon the fair value at the grant date
for awards under the Plan consistent with the methodology
prescribed under Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," the
Company's net loss and pro forma net loss for the period
ended December 31, 1996 would have been increased by
approximately $166,000, or $0.01 per share.
Under FASB 123, the fair value of the options granted during
1996 is estimated as approximately $830,000 on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions: no dividend yield, expected volatility
of 344%, risk-free interest rate of 6.5%, and expected life
of seven years.
The following table summarizes information as of December 31,
1996 concerning currently outstanding and exercisable
options:
Options Outstanding Options Exercisable
Weighted Weighted Avg Weighted Avg
Range of Number Avg Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
$1.00 - $1.81 709,500 6.6 $1.10 30,000 $1.18
F-11
<PAGE>
7. RELATED PARTY TRANSACTIONS
The Company has entered into a deferred compensation
arrangement with its majority stockholder. At December 31,
1996, deferred compensation totaled $369,230. Such amount
can be offset by a note receivable from the Stockholder (see
Note 3).
8. LICENSE AND DISTRIBUTION AGREEMENT
On June 13, 1990, the Company entered into a license and
distribution agreement, as amended through August 26, 1996,
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. During 1996, the Company reached
certain sales goals and became the exclusive distributor in
previous non-exclusive territories. 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. QUALCOMM was granted an
exclusive perpetual, worldwide, royalty free license to any
improvements made by the Company to the System or related
software.
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. The minimum purchase
requirements for each calendar year is 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.
If QUALCOMM is unable to provide service or elects not to
remain in business, they may terminate the agreement with six
months' notice and have no further liability. QUALCOMM shall
take such steps which are reasonable and necessary to enable
the Company to continue to provide the message services to
its existing end users.
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 re-negotiation at the end of the option period.
Memorandum of Understanding - During 1996, the Company
entered into a memorandum of understanding with ALCATEL
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.
9. SALARY REDUCTION SIMPLIFIED EMPLOYER PLAN (SAR-SEP)
During September 1996, the Company approved the adoption of a
Salary Reduction Simplified Employer Plan (SAR-SEP) allowing
eligible employees to contribute savings on a pretax basis
effective January 1996. Employees may contribute up to 15%
of their salary, not to exceed $9,500 annually. A
discretionary contribution is determined each year by the
Company. In 1996, the Company did not elect to contribute to
the Plan.
F-12
<PAGE>
10. SUBSEQUENT EVENTS
Federal Communications Commission (FCC) - In February 1997,
the FCC granted to QUALCOMM Inc. a license adding marine
capability for use with the OmniTRACS system for up to
100,000 MCTs. This replaces the previous experimental
license that was being used for marine operation of the
OmniTRACS service. The term of the license is from January
3, 1997 to January 3, 2007.
F-13
*****************
<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 5,490,956 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 28
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 38
Legal Matters 39
Experts 39
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. . . . . . 6,000
Transfer Agent and Registrar Fees . . . 500
Total. . . .. . . . . . . . . .$ 11,500
. . . . . .
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.
<PAGE>
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. The principal and
interest were paid in full September 1995.
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.
<PAGE>
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 January 1996, the Company issued 50,000 options to a
consultant 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
<PAGE>
(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 F-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;
<PAGE>
(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.
4 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 18th day of April, 1997.
BOATRACS, INC.
By: /S/ MICHAEL SILVERMAN
Michael Silverman, President
Pursuant to the requirements of the Securities Act of
1933, this Post-Effective Amendment No. 4 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 18, 1997
Michael Silverman the Board,
President,
Chief
Executive
Officer and
Director
<PAGE>
/S/ ANNETTE FRISKOPP Chief April 18, 1997
Annette Friskopp Operating
Officer and
Director
/S/ DALE FISHER Chief April 18, 1997
Dale Fisher Financial
Officer and
Chief
Accounting
Officer
/S/ GILES BATEMAN Director April 18, 1997
Giles Bateman
/S/ LUIS MAIZEL Director April 18, 1997
Luis Maizel
/S/ NORMAN KANE Director April 18, 1997
Norman Kane
/S/ ILANA SILVERMAN Director April 18, 1997
Ilana Silverman
<PAGE>
EXHIBIT INDEX
Exhibits Description Page
2 Plan of Reorganization by Merger(1)
3.1 Amended and Restated Articles of Incorporation(1)
3.2 Amended and Restated Bylaws(1)
3.3 Amendment of the Bylaws, Article III,
Section 2(9)
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(11)
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)
<PAGE>
10.7 Addendum to Stock Issuance/Employment Agreement
between the Company and Annette Friskopp
dated July 1, 1995(6)
10.8 Agreement entered into between BOATRACS,
Inc. and Oceantrac Systems Limited and
Oceantrac Incorporated, effective September,
1996(8)
10.9 BOATRACS,Inc. 1996 Stock Option Plan(10)
11 Statement regarding computation of net
loss per share(11)
23.1 Consent of Independent Auditors, Deloitte
& Touche,LLP(11)
___________________________
(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. 33-98810 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) Incorporated by reference to the exhibit of the same
number to the Company's
Form 10-QSB filed with the SEC November 1996.
(9) Incorporated by reference to the Company's Form 10-QSB
filed with the SEC in
May 1996.
(10) Incorporated by reference to the Company's Form S-8 filed
with the SEC on
March 29, 1996.
(11) 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
1996 1995 1994
Net Earnings (Loss) <$905> <$653> <$311>
Weighted average common shares outstanding:
Weighted average common shares 12,597 11,277 7,976
Common shares issued during the
year ended December 31, 1994 (1) --- --- 1,524
TOTAL 12,597 11,277 9,500
Net Earnings (Loss) per share <$.07> <$.06> <$.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 use in this Post-Effective Amendment No. 4 to
Registration Statement No. 33-98810 of BOATRACS, Inc. on Form SB-
2 of our report dated February 7, 1997, 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
San Diego, California
April 18, 1997
EXHIBIT 5.0
SOLOMON WARD SEIDENWURM & SMITH, LLP LETTERHEAD
April 18, 1997
BOATRACS, Inc.
6440 Lusk Boulevard, Suite D-201
San Diego, CA 92121
Re: Post-Effective Amendment No. 4 on Form SB-2 to Form S-1
Gentlemen:
We are delivering this opinion and consent to you in connection
with the registration under the Securities Act of 1933, as
amended, of 74,600 shares of common stock, no par value (the
"Shares"), of BOATRACS, Inc. (the "Company") held be certain
shareholders of the Company, pursuant to a Post-Effective
Amendment No. 4 on Form SB-2 to Form S-1 (the "Post-Effective
Amendment").
We have examined such documents and have reviewed such questions
of law as we have considered necessary and appropriate for the
purposes of this opinion and, based thereon, we advise you that,
in our opinion, the Shares are duly authorized, validly issued
and fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the above-referenced Post-Effective Amendment and to the
reference to this firm as set forth under the caption "Legal
Matters" in the Prospectus constituting part of the Post-
Effective Amendment.
Very truly yours,
SOLOMON WARD SEIDENWURM & SMITH, LLP
By: /s/Joseph M. Lesko
Joseph M. Lesko
JML/kap
P:0070681.01:07222.030
