<PAGE>
PROSPECTUS
GEOTEK COMMUNICATIONS, INC.
Issuance and Sale of 6,831,000 Shares
of Common Stock issuable upon exercise of Warrants
and Resale by a Certain Selling Shareholder of 621,000
Shares of Common Stock issuable upon exercise of the Warrants
This Prospectus relates to the issuance and sale to holders of the
Warrants (as hereinafter defined) of the common stock, par value $.01 per share
(the "Common Stock"), of Geotek Communications, Inc., a Delaware corporation
("Geotek" or the "Company"), upon exercise of such Warrants. The Warrants
entitle the holders thereof to purchase from the Company an aggregate of
6,831,000 shares of Common Stock from time to time, at any time on or after 9:00
a.m., New York, New York time on January 6, 1996 until 5:00 p.m. New York, New
York time on July 15, 2005 at a price of $9.90 per share, subject to adjustment
under certain circumstances (the "Warrants"). All shares of Common Stock
issuable upon exercise of the Warrants are hereinafter referred to as the
"Warrant Shares."
This Prospectus also relates to the offer and sale by S-C Rig
Investments-III, L.P. (the "Selling Shareholder"), from time-to-time, of 621,000
of the Warrant Shares (the "Resale Shares"). The Resale Shares and the Warrant
Shares are collectively referred to as the "Shares."
The Company's Common Stock is listed on the NASDAQ National Market
("NNM") under the symbol "GOTK" and on the Pacific Stock Exchange ("PSE") under
the symbol "GEO." On November 6, 1995, the closing sale price for the Company's
Common Stock, as quoted on the NNM, was $8.125 per share.
------------------------------------
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3 HEREOF.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================================================
Proceeds to the
Price Underwriting Discounts Proceeds to Selling
to Public and Commissions the Company Shareholder
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........... $ 9.90(1)(2) $0(1)(2) $ 9.90 $(1)(3)
- -------------------------------------------------------------------------------------------------------------------------------
Total............... $67,626,900.00(1)(2) $0(1)(2) $67,626,900.00 $(1)(3)
===============================================================================================================================
</TABLE>
(1) The Warrant Shares registered for issuance and sale hereunder will be
issued and sold to holders of the Warrants upon exercise of the
Warrants at an exercise price of $9.90 per share, subject to adjustment
under certain circumstances. It is anticipated that the Resale Shares
registered for resale hereunder will be sold, from time to time, by the
Selling Shareholder in market or private transactions at prevailing
prices.
(2) No underwriting discounts or commissions are payable in connection with
the issuance of the Shares.
(3) The Company will pay all expenses of the offering of the Warrant Shares
to which this Prospectus relates. Notwithstanding the foregoing, the
Company will not pay any underwriting or broker-dealer discounts or
commissions agreed to be paid by the Selling Shareholder in connection
with the resale of the Resale Shares by the Selling Shareholder.
------------------------------------
The Date of this Prospectus is November 22, 1995
<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"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, New York, NY 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission, Washington, D.C. 20549. The
Company's Common Stock is listed on both the NNM and the PSE and such reports,
proxy statements and other information filed with the Commission should also be
available for inspection at the offices of the National Association of
Securities Dealers, Inc., Report Section, 1735 K Street, N.W., Washington, D.C.
20006, and at the PSE facilities located at 115 Sansome Street, San Francisco,
California.
The Company has filed with the Commission a registration statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered hereby (such registration statement,
together with all exhibits thereto, is hereinafter referred to as the
"Registration Statement"). This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is hereby made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any document filed with, or incorporated
by reference in, the Registration Statement are not necessarily complete, and in
each instance are qualified in all respects by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company incorporates by reference into this Prospectus the
documents listed below:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (as amended on Form 10-K/A #1 filed on or about April 28,
1995, Form 10-K/A #2 filed on or about May 26, 1995 and Form 10-K/A #3 filed on
or about September 26, 1995);
(2) The Company's Quarterly Reports on Form 10-Q for the three month
periods ended March 31, 1995, June 30, 1995 (as amended on Form 10-Q/A filed
on or about September 26, 1995) and September 30, 1995;
(3) The Company's Current Reports on Form 8-K, dated June 18, 1993 (as
amended on Form 8-K/A filed on or about July 12, 1993), June 8, 1994 (as amended
on Form 8-K/A filed on or about June 27, 1995), July 5, 1994 (as amended on Form
8-K/A filed on or about September 14, 1994), August 2, 1994 (as amended on Form
8-K/A filed on or about October 13, 1994 and Form 8-K/A filed on or about May
25, 1995), February 27, 1995, May 26, 1995, July 6, 1995 and July 31, 1995; and
(4) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, dated December 15, 1992.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the filing of a post-effective amendment to the
Registration Statement which indicate that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained herein or
in any other subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide, without charge, to each
person (including any beneficial owner) to whom a copy of this Prospectus has
been delivered, upon the written or oral request of such person, a copy of all
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<PAGE>
documents incorporated by reference in this Prospectus, other than exhibits to
such documents unless such exhibits are specifically incorporated by
reference herein. Requests for such copies should be directed to Corporate
Secretary, Geotek Communications, Inc., 20 Craig Road, Montvale, New Jersey
07645; telephone number (201) 930-9305.
ADDRESS AND TELEPHONE NUMBER
The mailing address and telephone number of the Company's principal
offices are as follows:
Geotek Communications, Inc.
20 Craig Road
Montvale, New Jersey 07645
(201) 930-9305
RISK FACTORS
The securities described herein involve a substantial degree of risk.
In addition to the other information and financial data set forth elsewhere or
incorporated by reference into this Prospectus, prospective investors should
carefully consider, among other things, the following factors in evaluating the
Company, its business and the Shares:
Commercial Implementation of GEONET
The Company's current business plan contemplates the commercial
implementation of GEONET(TM) in 36 target markets in the United States by the
end of 1997. In each of these markets, the Company expects to gradually add
subscribers and increase its service offerings. The Company expects to continue
to generate negative cash flow in each of its target markets until it achieves
an adequate subscriber base in such market.
The successful and timely implementation of GEONET will depend upon a
number of factors, many of which are beyond the control of the Company,
including, but not limited to, the timely and cost-effective manufacture,
construction and integration of the system infrastructure and software, the
acquisition and control of additional radio spectrum, the procurement and
preparation of base station and remote sites, the receipt of all necessary
regulatory approvals, the establishment of effective sales and marketing
organizations and distribution channels and the need for substantial additional
financing. See "- Dependence on Third Party Providers," "- Need for Spectrum;
Need for Transmission Sites," "- Government Regulation" and "- Need for
Additional Financing." The failure or delay with respect to any of these items
could adversely affect the timing of the implementation of GEONET in one or more
of the Company's U.S. target markets, which could have a material adverse effect
on the Company.
The Company will make continuing hardware and software modifications to
GEONET prior to, during and after the system's commercial roll-out. For example,
the Company must integrate the initial GEONET data applications, which are
expected to be completed in the middle of 1996, with the initial GEONET voice
applications. Subsequent applications also will need to be integrated with
existing GEONET applications. There can be no assurance that the Company will be
able to satisfactorily complete such modifications and/or integration efforts,
or that they will be able to be completed in a manner that enables the Company
to offer its GEONET services on a profitable basis. A failure by the Company to
satisfactorily complete any such modifications or integration efforts or to
complete them on a cost-effective basis could have a material adverse effect on
the Company.
To date, no other wireless service provider has been successful at
providing the level of integrated voice and data services contemplated by the
Company. Accordingly, in implementing GEONET, the Company may encounter
unforeseen technical issues. In addition, each of the Company's U.S. target
markets is expected to present unique technical issues to the Company due to
differences in geography and the level of local development. Technical
difficulties in the operation and/or performance of GEONET also may be
experienced as additional subscribers are added to the system in a given market
or as the coverage area in any market is increased. There can be no assurance
that the Company will be able to adequately address any such issues in any given
market or that such issues will be able to be addressed in a cost-effective
manner. Any failure by the Company to adequately address such issues or to
address them in a cost-effective manner could have a material adverse effect on
the Company.
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Limited Operating History; Management of Growth
The Company entered the wireless communications industry in 1992 and,
therefore, has limited experience in developing, establishing and operating
wireless communications systems. To date, most of the Company's wireless
communications services experience has been in foreign markets and has involved
different technology than that to be employed by the Company in its U.S. target
markets. In addition, the Company's only experience to date in the United States
with respect to its digital wireless communications services has been testing
GEONET in Philadelphia and, beginning in August 1995, providing wireless
communication services to customers in Philadelphia. Prospective investors,
therefore, have limited historical financial information about the Company on
which to make a determination as to the prospects for the Company's U.S.
wireless communications operations or financial condition and as to an
investment in the Shares offered hereby.
Although the Company has added experienced senior management and has
filled a substantial number of sales and field service positions during the last
year, the Company will need to rapidly and significantly increase the number of
technical, sales, management and administrative personnel that it employs as the
roll-out of GEONET progresses. The Company's success will depend upon its
ability to continue to attract, motivate, train and manage additional employees.
Management's ability to manage the Company's growth effectively also will
require it to significantly expand its operational, financial and management
systems. The failure of the Company to manage its growth effectively would have
a material adverse effect on the Company's future operations.
Need for Spectrum; Need for Transmission Sites
The Company will require additional spectrum to add capacity and to
service anticipated demand in certain of its target markets, including in
certain of its 1995 and 1996 markets. The Company also requires additional
spectrum to initiate services in certain of its 1997 target markets. Moreover, a
significant portion of the Company's existing radio spectrum in Philadelphia,
New York City, Washington, Chicago, Dallas, Miami and Houston is subject to
management agreements pursuant to which Motorola, Inc. ("Motorola") controls the
radio spectrum. The Company began service in Philadelphia in August 1995 and
intends to enter into several other of these markets in the Fall of 1995. The
Company cannot utilize this radio spectrum for GEONET services until such
management agreements are terminated. In November 1994, Motorola and NEXTEL
Communications, Inc. ("NEXTEL") entered into a consent decree with the federal
government pursuant to which NEXTEL and Motorola agreed, upon effectiveness of
the consent decree, to take steps to reduce their ownership and management of
radio spectrum in certain U.S. markets including each of the above-referenced
markets, so that they collectively own and/or manage no more than thirty 900 MHz
channels in such markets. The consent decree further provides that any Motorola
management agreements will be terminable at the sole option of the party owning
the license upon 120 days' notice to Motorola. The consent decree allows
Motorola to refuse to terminate such management agreements when Motorola and
NEXTEL together control (including by management agreement) thirty or fewer 900
MHz channels in the licensee's market (including the managed channels as to
which the termination of the agreement is being sought). The consent decree
became effective on July 25, 1995. The Company has notified Motorola of its
intent to terminate management agreements relating to certain channels owned by
the Company or to which the Company has rights.
Certain agreements pursuant to which the Company has the right to
acquire spectrum are subject to regulatory approval. Generally, these agreements
relate to spectrum in smaller markets. Although the Company believes that such
approval will be forthcoming prior to its expected roll-out in each such market,
there can be no assurance that such approvals will be received on a timely basis
or at all. The failure by the Company to obtain any such approvals could have a
material adverse effect on the Company.
The Company intends to acquire sufficient spectrum in each of its
target markets in which it does not have sufficient spectrum to initiate service
and to add additional capacity in certain of its other U.S. target markets. The
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<PAGE>
Federal Communications Commission (the "FCC") will auction spectrum commencing
in November, 1995 in each market in which the Company desires to acquire
additional spectrum. Although the Company intends to bid on such spectrum to the
extent such spectrum is needed, there can be no assurance that the Company will
be the successful bidder for any radio spectrum auctioned by the FCC. In
addition, the Company cannot predict the cost of obtaining licenses for
additional spectrum since such costs are determined by factors beyond the
Company's control, including, but not limited to, the availability of licenses
and the number of competitors seeking to acquire licenses in any particular
market. Although the Company believes that it will be able to acquire sufficient
spectrum in each of its U.S. markets, there can be no assurance that the Company
will be able to make such acquisitions on a timely basis if at all or that such
acquisitions will be able to be made on commercially acceptable terms. A failure
by the Company to obtain sufficient radio spectrum on commercially acceptable
terms and/or on a timely basis could have a material adverse effect on the
Company. See "- Commercial Implementation of GEONET."
There are only a limited number of existing communications towers
capable of providing the Company with optimal coverage area for its radio
transmissions and that are capable of supporting the Company's transmission
equipment. In the event the Company cannot obtain leases for existing towers, it
may be required to purchase sites, obtain necessary permits and build such
towers, a process which the Company estimates could take up to one year to
complete for each tower. If the Company is required to build new towers, the
roll-out of GEONET in one or more target markets could be delayed, which could
have a material adverse effect on the Company.
Deficiency of Earnings; Net Losses; Substantial Indebtedness
On a consolidated basis, the Company experienced net losses from
continuing operations of $2.4 million, $50.4 million and $42.4 million for the
years ended December 31, 1992, December 31, 1993 and December 31, 1994,
respectively and $47.4 million for the nine month period ended September 30,
1995. In addition, the Company had a deficiency of earnings before interest,
taxes, depreciation and amortization ("EBITDA") of $0.9 million, $15.2 million
and $34.2 million for the years ended December 31, 1992, December 31, 1993 and
December 31, 1994, respectively and $30.6 million for the nine month period
ended September 30, 1995. The Company anticipates that its net operating losses
from operations and its EBITDA deficiency will increase significantly during the
roll-out of GEONET. There can be no assurance that the Company will ever operate
at profitable levels or have positive EBITDA. Until sufficient cash flow is
generated from operations, the Company will have to utilize its capital
resources or external sources of funding to satisfy its working capital needs.
Additionally, the macrocellular architecture of GEONET will allow the Company to
adjust its aggregate cash expenditures by focusing its activities in certain
markets while reducing its planned investments in other markets.
The Company has significant indebtedness, a substantial portion of
which is represented by its 15% Senior Secured Discount Notes due 2005 which
have an aggregate principal amount at maturity of $227.7 million (the "Senior
Discount Notes"). Although no payments of interest or principal are due on the
Senior Discount Notes in the immediate future, the Company will have significant
debt service obligations beginning in July 2000. The Company also anticipates
seeking additional financing, which financing may impose additional and earlier
debt service obligations on the Company. See "-- Need for Additional Financing."
The degree to which the Company is leveraged may impair the ability of the
Company to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or other general corporate purposes. In
addition, the Indenture governing the Senior Discount Notes (the "Indenture")
and certain documents executed in connection therewith impose significant
operating and financial restrictions on the Company, affecting, among other
things, the ability of the Company to incur indebtedness, make prepayments of
certain indebtedness, pay dividends, make investments, engage in transactions
with stockholders and affiliates, issue capital stock of its subsidiaries,
create liens, sell assets and engage in mergers and consolidations. Although the
Indenture and the related documents contain various exemptions that are
generally designed to allow the Company to operate its business without undue
restraint, these restrictions, in combination with the leveraged nature of the
Company, could limit the ability of the Company to effect future financings,
respond to changing market conditions and otherwise may restrict corporate
activities.
Need for Additional Financing
The Company's existing cash on hand and expected cash flow from
operations will not be sufficient to fund the Company's full roll-out of GEONET.
Based on the Company's projected roll-out schedule in its 36 United States
target markets and its projected loading of subscribers in these markets, the
Company estimates that it will need at least an additional $250.0 million of
financing to fund GEONET's infrastructure costs as well as operating losses and
working capital needs. Additionally, the macrocellular architecture of GEONET
will allow the Company to adjust its aggregate cash expenditures by focusing its
activities in certain markets while reducing its planned investments in other
markets.
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Pursuant to the terms of a Defeasance Security Agreement, dated July 6,
1995, the Company pledged to the holders of its Senior Secured Notes due 1998
(the "Notes"), $40.5 million, at maturity, of United States Treasury obligations
to secure the Company's obligations under such Notes. The Notes are convertible
into Common Stock beginning September 30, 1995 at a 12.5% discount to the market
price of the Common Stock on the date of conversion. To the extent the Notes are
not converted into Common Stock, the Company's financing needs will increase by
an amount equal to the face value of the United States Treasury obligations
securing such Notes which would otherwise have been released to the Company upon
conversion.
The Company's need for additional financing will increase if the
Company experiences delays in the commercial implementation of GEONET, cost
overruns or unanticipated cash needs. Moreover, additional financing may be
necessary to satisfy the terms of certain financing transactions, including, but
not limited to, possible redemption obligations of the Company in connection
with the Company's Preferred Stock. Additional financing also may be required to
fund acquisitions of additional spectrum and businesses. The amount of
additional funding required will depend upon the timing of such expenditures,
the availability of cash flow from operations and, to the extent applicable, the
availability of lease and vendor financing. It is presently anticipated that
additional financing, if obtained, would be obtained from one or more sources,
including, but not limited to, equity or debt financing (whether through public
or private offerings), strategic partners, joint ventures, vendor financing,
leasing arrangements or a combination thereof. There can be no assurance that
additional financing will be available to the Company on desirable terms or at
all.
Competition
Although the Company believes that the quality, array and flexibility
of services to be offered by the Company through GEONET will meaningfully
differentiate such services from those offered by other wireless communications
providers in the Company's target markets, the Company will face significant
competition from such other providers. The Company expects to experience
competition for each type of service it intends to offer from existing dispatch,
cellular telephony, paging and public data service providers. In addition, the
Company expects to experience competition from manufacturers of Private Mobile
Radio ("PMR") equipment, which target existing private network operators and
Specialized Mobile Radio ("SMR") customers and urge them to build or upgrade
their own private networks rather than utilize SMR service providers. Many of
these providers and manufacturers are larger, more established, have more
experience in the telecommunications industry, have greater name recognition,
have larger sales staffs and/or have greater financial resources than the
Company.
NEXTEL has announced plans to construct a nationwide digital Enhanced
Specialized Mobile Radio ("ESMR") network and is offering services in several
cities. NEXTEL has also secured a significant number of 800 MHz SMR channels in
several of the largest U.S. markets. In addition, OneComm Corp. ("OneComm") has
constructed an ESMR network in several cities. Furthermore, several large SMR
providers are positioning themselves to compete for wireless voice and data
traffic and have announced plans to construct digital ESMR networks utilizing
equipment manufactured primarily by Motorola. These providers include Dial Page,
Inc. ("Dial Page") and Pittencrieff Communications, Inc. ("Pittencrieff").
Motorola has announced agreements to transfer its 800 MHz SMR licenses to
NEXTEL, OneComm and Dial Page in consideration for equity positions in these
companies. Motorola will remain the largest SMR service provider in the 900 MHz
band utilizing analog equipment. In addition, to the extent that Motorola is the
largest provider of PMR equipment, Motorola may be deemed to be an indirect
competitor of the Company. In 1994, NEXTEL announced plans to acquire OneComm
and Dial Page.
The Company also may face competition from technologies and services
introduced in the future. In March 1995, the FCC completed auctions for Personal
Communications Services ("PCS") licenses in most telecommunication markets
within the United States. PCS could compete with services to be offered by the
Company. The FCC also may license additional spectrum for other wireless
services. It is also possible that satellite technology ultimately could be
developed to permit urban use equal to or superior to that available through SMR
systems, which would result in increased competition for the Company's services.
The commercialization or further development of any such technologies could have
a material adverse effect on the Company. See "- Rapid Technological Changes".
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Many of the target customers for GEONET currently use other wireless
communications services. In order to be successful, the Company will need to
migrate a portion of its target customers from their existing services to those
provided by the Company over GEONET. The Company's ability to migrate its target
customers over to its services will be highly dependent on the perceived utility
of the Company's services to its target customers as compared to the services
currently utilized by such customers. Because there currently is no integrated
wireless communications network commercially available that is comparable to
that expected to be offered by the Company over GEONET, the extent of the demand
for the Company's wireless communication services cannot be predicted with any
degree of certainty. The demand for the Company's digital wireless
communications services also could be affected by other matters beyond its
control, such as the future cost of subscriber equipment, marketing and pricing
strategies of competitors and general economic conditions.
The Company also expects to experience competition for radio spectrum
from existing and future providers of wireless communications services. The
Company also expects to experience competition for communications tower space.
See "- Need for Spectrum; Need for Transmission Sites."
The Company also experiences competition for each of its products and
services other than GEONET in the markets in which it sells such products and
services. Such competition is expected to remain strong for the foreseeable
future.
Government Regulation
The licensing, construction, operation and acquisition of SMR systems
in the United States is regulated by the FCC under the Communications Act of
1934, as amended (the "Communications Act"). During 1994, the FCC initiated
several regulatory proceedings with wide-ranging implications for the wireless
telecommunications industry. A primary intent of these recent amendments was to
encourage competition among mobile communications service providers by removing
regulatory distinctions between common carriers such as cellular telephone
companies and private carriers such as SMR service providers. Although the
Company will not be required to comply with most of these regulatory changes
prior to 1996, the regulations may materially impact the Company's operations in
the future. For example, the Company will be required to provide services on a
"nondiscriminatory basis" and on terms that are not "unjust and unreasonable,"
as such terms are defined by the Communications Act. In addition, the FCC may,
in the future, require that the Company provide equal access to its wireless
services to other wireless and wireline communications providers and
interconnection to wireline and wireless entities. The FCC may, in the future,
specify by rule other common carrier regulations that would apply to commercial
mobile services providers such as the Company. Moreover, the FCC did not delay
the effective date of the applicability of its rules concerning foreign
investment in and management and/or participation in any entity holding an FCC
license. However, the FCC did provide a mechanism for newly re-classified
providers to petition for a waiver of these limitations. The Company filed a
petition to retain its foreign directors and officers, including certain
executive officers of the Company the loss of the services of which could
adversely affect the conduct of the Company's business. The Company's petition
was granted by the FCC, which permits the Company to retain its foreign
directors and officers until August 10, 1996. Thereafter, the Company's ability
to retain foreign directors and officers will be limited by current FCC
regulations. See "- Dependence on Key Personnel." These limitations may also
affect the Company's ability to secure foreign financing through the sale of
shares of Common Stock or Common Stock equivalents and to issue Common Stock in
the acquisition of foreign subsidiaries. The Company cannot predict the effect
of any of these regulations or any future regulation adopted by the FCC on the
Company's operations. Moreover, there has been little experience in the
interpretation and implementation of these regulations. Future interpretations
or practices with respect to such regulations could have a material adverse
effect on the Company.
The Company has been granted a waiver to construct and activate certain
systems it has acquired. In the event the Company fails to construct or activate
such systems in accordance with the dates set forth in the waiver, the Company
could lose the waiver and lose all of the frequencies covered by such waiver
which have not been constructed or activated. The Company's waiver is currently
subject to a pending challenge that was filed by a third party with whom the
Company failed to negotiate a satisfactory management agreement. The Company
believes that this challenge is without merit and is vigorously opposing it. A
loss of the frequencies covered by such waiver that have not been constructed or
activated would have a material adverse effect on the Company.
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The Company intends to acquire additional SMR licenses. There can be no
assurance that the Company will be successful in its efforts to negotiate the
acquisition of all licenses it seeks to acquire or in its efforts to obtain
regulatory approval therefor. In addition, there can be no assurance that any
licenses currently owned or acquired in the future by the Company will be
renewed. The failure of the Company to renew existing or future SMR licenses
could have a material adverse effect on the Company.
All of the equipment utilizing the Company's technology, to the extent
it is used to send or receive signals, must meet FCC criteria. Although GEONET
base stations have received such approval and the mobile subscriber units have
been designed to meet FCC standards, there can be no assurance that the
subscriber units will meet such criteria. A failure by the Company's subscriber
units or any of its other equipment to meet FCC standards could have a material
adverse effect on the Company.
Future changes in regulation or legislation affecting digital wireless
telecommunications service or the allocation by the FCC or Congress of
additional spectrum for services that compete with such service could adversely
affect the Company's business. See "- Competition."
Dependence on Third Party Providers
The Company's digital wireless telecommunications system is being
developed and commercialized by its subsidiary, PowerSpectrum, Ltd. ("PST").
However, the development by PST of the technology and systems is dependent in
large part upon the efforts of Rafael Armament Development Authority ("Rafael"),
a PST contractor, to adapt frequency hopping from a military to a commercial
application, to integrate the frequency hopping technology with other digital
technologies required for optimal commercial deployment of GEONET and, as
discussed below, for the cost-effective manufacture of the base station
hardware. In this regard, approximately 90 employees of Rafael are presently
engaged on a full-time subcontract basis in the development of FHMA. If Rafael
reduces its commitment to PST or continuing development efforts are not
successful, the Company's prospects could be materially adversely affected.
Neither the Company nor PST manufacture the system architecture,
hardware and mobile subscriber units necessary for the commercial implementation
of GEONET. Rafael has been contracted by PST to manufacture the system hardware
for GEONET. Third parties, including Mitsubishi Consumer Electronics America
("Mitsubishi"), Hughes Network Systems ("Hughes"), a unit of GM Hughes
Electronics, and Kenwood Corporation of Japan ("Kenwood"), will manufacture
subscriber units and certain other components of the system hardware for GEONET.
There can be no assurance that such third parties will deliver such equipment on
a timely basis or that the Company will be able to successfully integrate such
components and hardware in a cost effective system on a timely basis, if at all.
The Company has only a single manufacturing source for certain of the components
of the GEONET system hardware, including the base stations and subscriber units.
Although the Company believes that it can obtain all components necessary to
build GEONET from other sources, delays may be encountered in the event of a
component shortage because of the time it may take to identify substitute
sources and manufacture substitute components. A failure by the Company to
obtain hardware components on a timely basis or at satisfactory prices could
adversely affect the ability of the Company to roll-out and market GEONET, which
could have a material adverse effect on the Company. See "- Commercial
Implementation of GEONET."
The Company has entered into an agreement with IBM Corporation ("IBM")
to manage the construction of the GEONET stations and the installation of FHMA
equipment in the Company's U.S. target markets. A failure by IBM to manage the
preparation and construction of the Company's base stations and remote sites
could have a material adverse effect on the Company. See "- Commercial
Implementation of GEONET".
Rapid Technological Changes
The telecommunications industry is subject to rapid and significant
changes in technology, which could lead to new products and services that
compete with those offered by the Company or could lower the cost of current
competing products and services to the point where the Company's products and
services could become non-competitive and the Company could be required to
reduce the prices of its services. While the Company is not aware of any
proposed changes that will materially affect the attractiveness of its product
and service offerings, the effect of technological changes on the businesses of
the Company cannot be predicted. In the future, the Company expects to
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experience competition from new technologies such as ESMR networks, PCS and
possibly satellite technology, as well as from advances with respect to
existing technologies such as cellular, paging and mobile data transmission. See
"- Competition."
Dependence on Key Personnel
The success of the Company will depend greatly upon the active
participation and the experience of its management. The loss of the services of
Yaron Eitan, the Company's President and Chief Executive Officer, could
adversely affect the conduct of the Company's business. In addition, the
successful implementation of the Company's business plan will depend, to a large
extent, upon the ability of the Company's and its subsidiaries' engineers and
scientific personnel to perfect and improve upon existing and proposed products.
The loss of some or all of such personnel, or the inability of the Company to
attract additional personnel, or the inability of such persons to design such
systems or to continue product enhancement will directly inhibit the ability of
the Company to sell its products and services and to operate profitably.
Risks of International Business
The Company operates in and sells products and services to clients in
various countries and certain of its products and components are manufactured
abroad. The Company's research and development activities are reliant upon
foreign providers. Accordingly, the Company is subject to the risks inherent in
conducting business across national boundaries, including, but not limited to,
currency exchange rate fluctuations, international incidents, military
outbreaks, economic downturns, government instability, nationalization of
foreign assets, government protectionism and changes in governmental policy, any
of which risks could have a material adverse impact on the Company.
Influence by Significant Stockholders; Preemptive Rights
As of the date hereof, approximately 25% of the total voting power of
the Company's Common Stock (on a fully diluted basis, but without giving effect
to the exercise of the options held by Vanguard Cellular Systems, Inc.
("Vanguard") was beneficially owned by the directors and executive officers of
the Company and their affiliates. Vanguard holds options to purchase
approximately 5.3 million shares of Common Stock. Consequently, the Company's
directors and executive officers will be able to exert significant influence
with respect to all matters upon which stockholder approval is required.
Of the amounts discussed above, 5,916,514 shares, or 9.9% of the
Company's Common Stock (calculated as of 10/27/95 in accordance with Rule 13d-3
under the Exchange Act) are beneficially owned by the Selling Shareholder, whose
affiliate, Purnendu Chatterjee, is a director of the Company. See "- Selling
Shareholder." In addition, as of 10/27/95, Vanguard beneficially owned
approximately 3.3 million shares or 6.1% of the Company's outstanding Common
Stock. However, assuming full exercise of the options held by Vanguard as of
such date, 8.6 million shares, or 14.5% of the Company's Common Stock on a fully
diluted basis, would be beneficially owned by Vanguard. With respect to certain
issuances of voting securities by the Company, Vanguard and the Selling
Shareholder have the preemptive right to purchase voting securities of the
Company, at the same price and the same terms as the Company may offer to third
parties, in an amount sufficient to maintain Vanguard's or the Selling
Shareholder's percentage interests, as applicable, in the voting securities of
the Company.
Winston Churchill, the Chairman of the Board of the Company, Yaron
Eitan, the President and Chief Executive Officer of the Company, Evergreen
Canada-Israel Investment & Co., Ltd. ("Evergreen"), the Selling Shareholder and
Vanguard have agreed to vote their shares to elect a representative of each of
Evergreen, the Selling Shareholder and Vanguard, respectively, to the Board of
Directors of the Company (although no representative of Evergreen currently is a
member of the Board of Directors). This obligation shall continue with respect
to each of the parties for so long as Vanguard, the Selling Shareholder and
Evergreen beneficially own at least 2,500,000, 2,500,000 and 1,000,000 shares of
Common Stock, respectively. In the event that the beneficial ownership of any
such party drops below its designated ownership level, then the agreement
terminates with respect to such party only and the agreement continues in full
force and effect with respect to the remaining parties thereto. Mr. Purnendu
Chatterjee is the designated representative of the Selling Shareholder; and Mr.
Haynes G. Griffin is the designated representative of Vanguard. In addition, the
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Company has agreed, pursuant to an agreement entered into in connection with the
Company's acquisition of Metro Net Systems, Inc. to use its best efforts to
cause the election of Mr. Richard Krants as a director of the Company through
the 1996 fiscal year. The Company has also agreed to use its best efforts to
have Mr. Eitan elected as a member of the Board of Directors during the term of
his employment.
Transactions with Affiliates
During the period since its inception, the Company has undertaken a
wide variety of financing and merger/acquisition activity which has resulted in
its present corporate and financial structure. Included in such activity have
been transactions which have involved persons who now serve, or who did serve at
the time, as directors and officers of the Company or persons or entities
related to such persons. In every instance where such transactions have involved
any such persons or entities, the specific transaction has been approved
unanimously by directors of the Company, including all disinterested and outside
directors, with the affected parties abstaining. It is the Company's view that
each such transaction has been on terms no less favorable to the Company than
other similar transactions available to the Company with unaffiliated parties,
if available at all. In most of such instances, such transactions have been the
Company's only recourse to meet financing needs and/or business goals. Despite
the foregoing, prospective purchasers may wish to consider the circumstances in
which such transactions were made, the terms of such transactions and the
Company's possible alternative courses of action.
Patent Issues
The Company protects its proprietary information by way of
confidentiality and non-disclosure agreements with employees and third parties
who may have access to such information. The Company continually reviews its
technology developments in order to file patent applications and has filed
patent applications with respect to certain aspects of its FHMA(TM) frequency
hopping technology and GEONET in Israel and expects to file additional patent
applications in Israel and the United States. Generally, the Company intends to
file all patent applications in the United States and Israel and in such other
countries as it deems appropriate. There can be no assurance that such
applications will be granted. There can be no assurance that any patents issued
will afford meaningful protection against competitors with similar technology or
that any patents issued will not be challenged by third parties. There also can
be no assurance that others will not independently develop similar technologies,
duplicate the Company's technologies or design around the patented aspects of
any technologies developed by the Company. Many patents and patent applications
have been filed by third parties with respect to wireless communications
technology. The Company does not believe that its technology infringes on the
patent rights of third parties. However, there can be no assurance that certain
aspects of the Company's technology will not be challenged by the holders of
such patents or that the Company will not be required to license or otherwise
acquire from third parties the right to use certain technology. The failure to
overcome such challenges or obtain such licenses or rights could have a material
adverse effect on the Company's operations.
Dividends On Common Stock Not Likely
The Company has not declared or paid any cash dividends on its Common
Stock since commencing operations and does not anticipate paying any dividends
on its Common Stock in the foreseeable future. At present, the Company is
obligated to pay, for a five-year period following the issuance of its Series H
Cumulative Convertible Preferred Stock ("Series H Preferred Stock"), cumulative
dividends of $2,000,000 per year on the Series H Preferred Stock, in cash, and,
for a five-year period following the issuance of its Series I Cumulative
Convertible Preferred Stock ("Series I Preferred Stock") and Series K Cumulative
Convertible Preferred Stock ("Series K Preferred Stock"), respectively,
cumulative dividends equaling $700,000 per year on the Series I Preferred Stock
and $700,000 per year on the Series K Preferred Stock, in cash or shares of
Common Stock of the Company, before any cash dividends may be paid on its Common
Stock. In addition, the Company is presently obligated to pay cumulative annual
dividends of $750,000 per year on its Series L Cumulative Convertible Preferred
Stock ("Series L Preferred Stock"), in cash or additional shares of Series L
Preferred Stock, and cumulative annual dividends of $988,125 per year on the
Series M Cumulative Convertible Preferred Stock ("Series M Preferred Stock"), in
cash or shares of Common Stock, before any cash dividends may be paid on its
Common Stock. At present, the Company is current in payment of all required
dividends on its outstanding preferred stock. In addition, the terms of certain
indebtedness of the Company prohibit, during the term of such indebtedness, the
declaration or payment of any dividend on the Company's Common Stock (other than
in shares of such Common Stock).
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Shares of Common Stock Eligible for Sale; Dilution
The Company has in the past registered for offer and sale under the
Securities Act certain of the issued and outstanding shares of Common Stock and
certain of the shares of Common Stock issuable upon the exercise or conversion,
as applicable, of outstanding options, warrants and convertible securities held
by the Company's stockholders, including certain officers, directors, employees
and "affiliates" of the Company (as such term is defined pursuant to the
Exchange Act). The sale of such shares would have been subject to substantial
limitations in the absence of such registration. A substantial number of such
shares may still be held by the registered holders thereof and available for
resale under currently effective registration statements. In addition, certain
stockholders of the Company hold the right (subject to certain conditions) to
require that the Company register for offer and sale issued and outstanding
shares of Common Stock and/or shares of Common Stock issuable upon the exercise
or conversion, as applicable, of options, warrants and convertible securities.
Sales of substantial amounts of such shares could adversely affect the market
value of the Common Stock and, in the case of convertible securities, may effect
a dilution of the book value per share of Common Stock, depending upon the
timing of any such sales.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Resale Shares by the Selling Shareholder. The Company intends to use the
proceeds from the issuance and sale of the Warrant Shares (i) to fund
expenditures for the building, development and roll-out of GEONET, including
site construction, marketing costs, the purchase of subscriber units and system
hardware and (ii) for general corporate purposes, including the funding of
operating losses, working capital requirements, the possible acquisition of
additional radio spectrum in the Company's U.S. target markets and to fund the
Company's international operations.
The Company will require substantial additional financing in order to
complete the roll-out of GEONET in all 36 of its U.S. target markets. See "Risk
Factors - Need for Additional Financing." Pending their use as set forth above,
the proceeds from the issuance and sale of the Warrant Shares will generally be
invested in high-grade, short-term, marketable, interest-bearing securities.
SELLING SHAREHOLDER
The Selling Shareholder (which term includes its transferees, pledgees,
donees or its successors) may from time-to-time offer and sell pursuant to this
Prospectus any or all of the Resale Shares.
The following table sets forth information, as of October 27, 1995 with
respect to the Selling Shareholder, including the total number of shares and
percentage of the Common Stock beneficially owned by the Selling Shareholder,
the number of such shares subject to sale hereunder and the resulting number of
shares and percentage of Common Stock to be beneficially owned by the Selling
Shareholder if all Resale Shares are sold by the Selling Shareholder. Such
information has been obtained from the Selling Shareholder. The Selling
Shareholder does not have, nor within the past three years has it had, any
position, office or other material relationship with the Company or any of its
predecessors or affiliates, except as noted below.
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<TABLE>
<CAPTION>
===================================================================================================================================
Pre-Offering Post Offering(2)
===================================================================================================================================
Selling Total Number of Percentage Shares Total Number Percentage
Shareholder Shares of of Class(3) Offered of Shares of of Class(3)
Common Stock of Common
the Company Stock of the
Beneficially Company
Owned Beneficially
Owned
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
S-C Rig
Investments III, 5,916,514 9.9% 621,000 5,295,514 8.8%
L.P.(1)
===================================================================================================================================
</TABLE>
(1) In addition to the Resale Shares, the Selling Shareholder holds 445,445
shares of the Company's Series H Preferred Stock and 20 Shares of the Company's
Series I Preferred Stock, convertible in accordance with the Certificate of
Designation of such shares into 4,444,450 shares of Common Stock and 851,064
shares of Common Stock, respectively. In connection with its purchase of the
Series I Preferred Stock, the Selling Shareholder was granted certain preemptive
rights with respect to the issuance of voting securities by the Company.
Upon the occurrence of certain events of default with respect to the
Series H Preferred Stock or Series I Preferred Stock, the number of directors
constituting the Board of Directors of the Company shall be increased by two
(i.e. by a total of four if any events of default occur with respect to both the
Series H Preferred Stock and the Series I Preferred Stock), both of the
additional directors will be elected by the holders of the Series H Preferred
Stock or Series I Preferred Stock, as applicable. The Selling Shareholder
currently holds all of the outstanding Series H Preferred Stock and Series I
Preferred Stock.
In addition, Dr. Purnendu Chatterjee, an affiliate of the Selling
Shareholder is currently a Director of the Company. As an affiliate of the
Selling Shareholder, Dr. Chatterjee may be deemed to beneficially own those
securities held by the Selling Shareholder. Dr. Chatterjee disclaims beneficial
ownership of such securities. Dr. Chatterjee also is deemed to beneficially own
options to purchase 200,000 shares of Common Stock held by one of his
affiliates, XTEC International, Inc. Dr. Chaterjee also holds 20,000 options to
purchase Common Stock which are immediately exercisable. In total, as calculated
in accordance with Rule 13d-3 under the Exchange Act, Dr. Chatterjee
beneficially owns approximately 10.2% of the Common Stock of the Company.
(2) Assumes the sale of all Resale Shares offered by this Prospectus by the
Selling Shareholder to third parties unaffiliated with the Selling Shareholder.
(3) These percentages are calculated in accordance with Section 13(d) of the
Securities Act and the rules promulgated thereunder.
PLAN OF DISTRIBUTION
The Resale Shares are being registered to permit public secondary
trading of the Resale Shares by the Selling Shareholder from time to time after
the date of this Prospectus. The Company has agreed, among other things, to bear
all expenses (other than underwriting discounts, selling commissions and fees
and expenses of counsel and other advisors to holders of the Resale Shares) in
connection with the registration and sale of the Resale Shares covered by this
Prospectus. The Company will not receive any of the proceeds from the sale of
the Resale Shares by the Selling Shareholder.
Pursuant to this Registration Statement, the Resale Shares may be sold
by the Selling Shareholder from time to time while this Registration Statement
is effective in the over-the-counter market or otherwise at prices and terms
prevailing at the time of sale or in negotiated transactions. Although the
Selling Shareholder has not advised the Company that it currently intends to
sell the Resale Shares pursuant to this Registration Statement, the Selling
Shareholder may choose to sell all or a portion of the Resale Shares from time
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to time in the manner described above. The methods by which the Resale Shares
may be sold by the Selling Shareholder in one or more of the following
transactions may include: (a) block trades in which the broker or dealer so
engaged will attempt to sell the securities as agent, but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus and (c) ordinary brokerage
transactions in which the broker solicits purchasers. In effecting sales,
brokers and dealers engaged by the Selling Shareholder may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from the Selling Shareholder in amounts to be negotiated (and, if such
broker or dealer acts as agent for the purchaser of such shares, from such
purchaser). Brokers or dealers may agree with the Selling Shareholder to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker or dealer is unable to do so acting as agent for the Selling
Shareholder, to purchase as principal any unsold shares at the price required to
fulfill such broker or dealer commitment to the Selling Shareholder. Brokers or
dealers who acquire shares as principals may thereafter resell such shares from
time to time in transactions (which may involve crosses and book transactions
and which may involve sales to and through other brokers or dealers, 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
sale or at negotiated prices, and in connection with the methods as described
above.
LEGAL MATTERS
The validity of the Shares will be passed upon by Andrew Siegel,
Esquire, General Counsel and Secretary of the Company.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1994
and 1993 and the consolidated statements of operations, shareholders' equity,
and cash flows for the years ended December 31, 1994, 1993 and 1992,
incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. In such report, Coopers & Lybrand L.L.P. states, that
with respect to certain affiliated companies, their opinions are based upon the
reports of other independent accountants.
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==================================== =========================================
No person is authorized
to give any information
or to make any representation
not contained or incorporated
by reference in this Prospectus,
and if given or made, such
information or representation GEOTEK COMMUNICATIONS, INC.
must not be relied upon as
having been authorized by the
Company. Neither the delivery ISSUANCE AND SALE OF 6,831,000 SHARES
of this Prospectus nor any sale OF COMMON STOCK ISSUABLE UPON
made hereunder shall, under any EXERCISE OF WARRANTS
circumstances, create any AND RESALE BY A CERTAIN
implication that there has been SELLING SHAREHOLDER OF 621,000
no change in the facts set forth SHARES OF COMMON STOCK ISSUABLE
in this Prospectus or in the UPON EXERCISE OF THE WARRANTS
affairs of the Company since the
date hereof. This Prospectus
does not constitute an offer to
sell or a solicitation of an
offer to buy any securities other
than those to which it relates
or an offer to sell or a
solicitation of an offer to buy
any securities in any jurisdiction
in which such offer or
solicitation is not authorized, or
in which the person making such
offer or solicitation is not
qualified to do so, or to any
person to whom it is unlawful to
make such an offer or solicitation
in such jurisdiction.
TABLE OF CONTENTS
Page
----
Available Information.......... 2
Incorporation of Certain
Information by Reference...... 2 ------------------------
Address and Telephone Number... 3
Risk Factors................... 3
Use of Proceeds................ 11 PROSPECTUS
Selling Shareholder............ 11
Plan of Distribution........... 12
Legal Matters.................. 13 November 22, 1995
Experts........................ 13
-------------------------
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