U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-11038
BOATRACS, INC.
(Exact name of small business issuer as specified in its charter)
California 33-0644381
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6440 Lusk Blvd., Suite D201, San Diego, CA 92121
(Address of Principal Executive Offices)
(619) 587-1981
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the
Exchange Act after the distribution of securities under a
plan confirmed by a court. Yes X No
APPLICABLE ONLY TO CORPORATE FILERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date: 12,602,310 shares of common stock as of
April 30, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOATRACS, INC.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31
1996 1995
REVENUES:
Communications systems sales $460,973 $193,181
Messaging 443,632 260,354
TOTAL REVENUES 904,605 453,535
COSTS AND EXPENSES:
Communications systems sales 304,085 103,701
Messaging 253,698 166,210
Selling, general and administrative 532,303 349,894
TOTAL COSTS AND EXPENSES 1,090,086 619,805
LOSS FROM OPERATIONS (185,481) (166,270)
Interest expense (1,195) (7,306)
Interest income 17,360 4,861
NET LOSS ($169,316)($168,715)
NET LOSS PER SHARE ($.01) ($0.02)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 12,582,846 9,950,343
See Notes to Financial Statements
BOATRACS, INC.
BALANCE SHEETS (Unaudited)
March 31 December 31
1996 1995
ASSETS
CURRENT ASSETS:
Cash $147,893 $151,728
Investment Securities 1,195,331 1,464,849
Accounts receivable (net of allowance for
uncollectible accounts of $15,958 and $18,297
in 1996 and 1995, respectively) 536,739 407,492
Inventories 23,505 32,309
Prepaid expenses and other assets 15,962 16,625
TOTAL CURRENT ASSETS 1,919,430 2,073,003
NOTES RECEIVABLE 322,543 214,775
PROPERTY at cost (net of accumulated
depreciation of $69,198 and $61,499 in
1996 and 1995, respectively) 94,751 72,399
TOTAL $2,336,724 $2,360,177
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $765,583 $692,757
Current portion of capital lease obligation 387 708
TOTAL CURRENT LIABILITIES 765,970 693,465
LONG-TERM LIABILITIES:
Deferred Compensation 369,230 369,230
TOTAL LIABILITIES 1,135,200 1,062,695
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, authorized
1,000,000 shares, no shares issued and outstanding
Common stock, no par value, authorized
100,000,000 shares; issued and outstanding
12,602,310 and 12,577,710 in 1996 and 1995,
respectively 4,210,925 4,186,325
Accumulated deficit (2,453,180) (2,283,864)
Note receivable for Common Stock issued (556,221) (604,979)
TOTAL SHAREHOLDERS' EQUITY 1,201,524 1,297,482
TOTAL $2,336,724 $2,360,177
See Notes to Financial Statements
BOATRACS, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31
1996 1995
Operating activities:
Net loss ($169,316) ($168,715)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 7,699 6,811
Accrued interest on long-term debt 0 7,214
Accrued interest on notes receivable (2,147) 0
Changes in assets and liabilities:
Accounts receivable (129,246) (136,159)
Inventories 8,804 (26,345)
Prepaid expenses and other assets 662 (19,569)
Accounts payable and accrued expenses 97,426 135,805
Net cash used in operating activities (186,118) (200,958)
Investing activities:
Purchases of capital equipment (30,051) (8,319)
Net maturities of investment securities 269,518 0
Net cash provided by (used in) investing activities 239,467 (8,319)
Financing activities:
Payments received on note receivable issued for
common stock 48,758 1,500
Increase in notes receivable (105,621) (11,000)
Payments on capital lease obligation (321) (419)
Net cash used in financing activities (57,184) (9,919)
Net decrease in cash (3,835) (219,196)
Cash at beginning of period 151,728 531,753
Cash at end of period $147,893 $312,557
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Common stock issued for note receivable $0 $737,000
Conversion of deposit to equity 0 50,000
Common stock issued for services rendered 24,600 0
See Notes to Financial Statements
BOATRACS, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of only normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results
that may be expected for any other interim period or for the
year ending December 31, 1996.
NOTE 2 - 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 each period including common stock
equivalents. Net loss per share is unchanged on a fully
diluted basis for all periods presented.
NOTE 3 - NOTES RECEIVABLE
During October 1994, the Company entered into an agreement
with a Canadian company whereby it agreed to advance up to
$20,000. The agreement was amended during 1995 and the
first quarter of 1996, increasing the advance to $108,000 at
March 31, 1996. Advances bear interest at 9% per annum and
are due on demand. Advances under the agreement totaled
$78,000 at December 31, 1995. The note has been classified
as long-term based upon the Company's intent not to request
payment prior to April 1, 1997.
In May, 1995 the Company signed a Memorandum of
Understanding with the Canadian company to form a new
company in Canada in which the Company will have a minority
interest. The new Company will be incorporated in Canada
and will be granted exclusive rights for the marketing,
distribution and sale of the BOATRACS System in the Canadian
provinces of Ontario, Quebec, New Brunswick, Prince Edward
Island, Nova Scotia, Newfoundland and Labrador. The
Canadian company, which had served as the exclusive
distributor for BOATRACS in Eastern Canada, will provide
message monitoring for BOATRACS in Eastern Canada.
During 1995, the Company entered a note receivable agreement
with an individual who is an officer, Director and majority
stockholder of the Company under which it agreed to advance
up to $369,230. Advances are secured by deferred
compensation, bear interest at 5.5% and are due on demand.
Advances under the agreement totaled $120,000 at December
31, 1995 and $190,000 at March 31, 1996, plus accrued
interest. The note has been classified as long-term based
upon the Company's intent not to request payment prior to
April 1, 1997.
NOTE 4 - AGREEMENTS WITH QUALCOMM INCORPORATED
On March 31, 1995, the Company entered into a Subscription
Agreement and an Amendment (#6) to the License and
Distribution Agreement with QUALCOMM Incorporated, the
Company's supplier of OmniTRACS Satellite-based
communications and tracking equipment. Through these two
agreements QUALCOMM acquired 1,112,265 shares, or
approximately 9%, of BOATRACS, Inc. common stock increasing
the shares outstanding at that date to 11,122,651. The
shares were issued for a total consideration of $737,000
which will be paid by providing discounts on future
purchases of OmniTRACS equipment and messaging units from
QUALCOMM. The transaction was recorded as a note receivable
for shares issued which is reduced as discounts are earned.
During the first quarter of 1996, a total of $48,758 in
discounts had been earned reducing the receivable balance to
$556,221, compared to the first quarter of the prior year
when $1,500 of discounts were earned reducing the receivable
balance to $735,500.
NOTE 5 - REGISTRATION STATEMENTS WITH THE SECURITIES AND
EXCHANGE COMMISSION
On May 3, 1995, the Company filed a registration statement
on Form S-1 with the Securities Exchange Commission which
became effective on July 6, 1995, registering shares held by
certain shareholders of old BOATRACS, Inc., the Company's
sole supplier and shares which were converted into common
stock from a Promissory Note by a director of the Company on
June 15, 1995. A total of 4,840,222 shares were registered.
The Company did not receive any proceeds from the
transaction.
On October 31,1995, the Company filed a second registration
statement with the Securities Exchange Commission
registering an additional 1,275,375 newly issued shares
which were issued to new and existing shareholders in
September 1995. The Company did not receive any proceeds
from the transaction.
Proceeds net of commissions in the amount of $1,904,292 were
raised from the Private Placement Offering in September
1995.
NOTE 6 - SUBSEQUENT EVENTS
On May 3, 1996, the Company filed a Post-Effective Amendment
No. 3 to the Registration Statement on Form S-1 with the
Securities and Exchange Commission to register a total of
6,033,385 shares held by certain shareholders. The Company
did not receive any proceeds from the transaction.
On April 3, 1996, the Company issued stock options to
purchase 252,500 shares of BOATRACS, Inc. common stock at a
grant price of $1.00 per share to company employees and
Directors. The grants were subject to approval at the
Annual Meeting on May 9, 1996, which was granted by
shareholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has distribution rights in the United States for
marine application of the OmniTRACS system of satellite-
based communications and tracking systems manufactured by
QUALCOMM Incorporated ("QUALCOMM"). The OmniTRACS system
provides confidential two-way communications between vessels
at sea and base stations on land or with other vessels and
is effective while a vessel is within the satellite's
"footprint," which extends roughly 200 to 400 miles offshore
of the continental United States. The system also allows
for hourly position tracking and 24 hour messaging service
and, using supplementary products, can provide engine
performance and fuel consumption monitoring.
The Company was incorporated in California in 1982 under the
name First National Corporation as a bank holding company.
From 1982 to 1993, the Company provided, through its wholly-
owned subsidiaries, business and individual banking services
and certain corporate trust services.
On November 9, 1993, First National Corporation filed a
voluntary petition under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of California. On January 12, 1995,
the Company (formerly First National Corporation) merged
with BOATRACS, Inc., ("Old BOATRACS"), a California
corporation formed in 1990 to be a distributor in the United
States marine market of the OmniTRACS satellite-based
communications and tracking system manufactured by QUALCOMM.
The merger of Old BOATRACS with and into the Company (the
"Merger") was implemented pursuant to a Plan and Agreement
of Reorganization that was approved by the Bankruptcy Court.
First National Corporation had no significant assets or
operations at the effective date of the Merger. The Company
intends to operate and continue the business of Old
BOATRACS.
For the Three Months Ended March 31, 1996 and 1995
Total revenues for the quarter ended March 31, 1996 were
$904,605, an increase of $451,070 or 99.5% as compared to
total revenues of $453,535 for the quarter ended March 31,
1995.
Communications systems revenues, which consists of revenues
from the sale of the BOATRACS system and related software,
were $460,973 or 51.0% of total revenues, an increase of
$267,792 or 138.6% compared to $193,181 or 42.6% of total
revenues in the first quarter of 1995. The increase in
communication systems revenues primarily reflects increased
sales of communication units to vessels in the first quarter
of 1996 compared to the same period in 1995. Messaging
revenues were $443,632 or 49.0% of total revenues, an
increase of $183,278 or 70.4% compared to $260,354 or 57.4%
of total revenues in the first quarter of 1995. The
increase in revenues reflects an overall increase in
messaging services provided by the Company as a result of
growth in the number of BOATRACS systems installed on
vessels and increased usage by some customers.
Communications systems expenses were $304,085 or 66% of
communications systems revenues for the quarter ended March
31, 1996, an increase of $200,384 or 193%, compared to
$103,701 which represented 53.7% of communications systems
revenues in the corresponding quarter of the prior year.
The dollar increase in expenses primarily reflects the
increase in sales of BOATRACS systems. The increase in
communications systems expenses as a percentage of
communications systems revenues is primarily due to fewer
software sales which have a higher margin in the first
quarter of 1996, compared to the first quarter of 1995 and
more units sold at volume discounts in 1996, compared to
1995. Messaging expenses were $253,698 or 57.2% of
messaging revenues for the quarter ended March 31, 1996, an
increase of $87,488 or 52.6%, compared to $166,210 which
represented 63.8% of messaging revenues in the corresponding
quarter of the prior year. The dollar increase in costs
reflects increased messaging services rendered due to
increased BOATRACS systems installed on vessels and
increased usage by some customers. The decrease in
messaging costs as a percentage of messaging revenues is due
to the continuing increase in revenues over the relatively
fixed costs of providing this service.
Selling, general and administrative expenses were $532,303
or 58.8% of total revenues for the quarter ended March 31,
1996, an increase of $182,409 or 52.1%, compared to $349,894
or 77.2% of total revenues in the prior corresponding
quarter. The increased dollar amount is primarily
attributable to additional expenses incurred, including the
hiring of additional sales and messaging personnel and
general increases in operating expenses associated with the
Company's growth. In addition, the Company has incurred
significant costs pursuing the commencement of operations
in Europe, including travel, legal, opening and maintaining
a messaging center in The Netherlands, payment to various
consultants and participation in European trade shows. The
Company also has incurred costs in the development of
software to facilitate customer operations. The costs are
written off as incurred. A breakdown of operating results
for the first quarter 1996 on a geographical basis reflects
a pretax profit of approximately $74,000 for U.S. operations
before research and development of software expenses.
Interest expense for the quarter ended March 31, 1996 was
$1,195 or .13% of total revenues, a decrease of $6,111
compared to $7,306 which was 1.6% of total revenues in the
prior corresponding quarter. The dollar decrease reflects
the effects of a decrease in average outstanding debt
balances over the corresponding quarter in the prior year.
The interest expense in the first quarter of 1996 was
incurred as a result of short-term borrowings against
investments.
Other income of $17,360 in the quarter ended March 31, 1996
represents interest earned on cash investments. This
represents an increase of $12,499 or 257%, compared to
interest income of $4,861 in the first quarter of 1995.
Liquidity and Capital Resources
The Company's cash balance at March 31, 1996 was $147,893,
a decrease of $3,835 over the December 31, 1995 cash balance
of $151,728. At March 31, 1996, working capital was
$1,153,460, a decrease of $226,078 from the working capital
of $1,379,538 at December 31, 1995. Cash of $186,118 was
used in operating activities, cash of $239,467 was provided
by investing activities and cash of $57,184 was used in
financing activities in the first three months of 1996.
Accounts receivable increased $129,246 at March 31, 1996
compared to December 31, 1995, due to the increased sales
and messaging charges in the first quarter not yet paid for.
Inventory decreased $8,804 at March 31, 1996 compared to
year end, primarily due to decreased units, antennas and
components on hand. Notes receivable increased $105,621 at
March 31, 1996 compared to year end due to monies loaned in
connection with Promissory Notes (see Note 3 to the
financial statements).
Accounts payable and other accrued expenses increased
$72,826 at March 31, 1996 compared to year end, primarily
due to payables due to the supplier of BOATRACS
communications and messaging systems. Reduction of note
receivable for common stock issued in the amount of $48,758
relates to discounts received on purchases of equipment and
messaging from the supplier as provided in accordance with
the terms of the note. (See Note 4 to the financial
statements.)
The Company anticipates making capital expenditures in
excess of $70,000 during 1996. To date the Company has
financed its working capital needs through private loans,
the issuance of stock and cash generated from operations.
Expansion of the Company's business may require a commitment
of additional funds. To the extent that the net proceeds of
recent private financing activities and internally generated
funds are insufficient to fund the Company's operating
requirements, it may be necessary for the Company to seek
additional funding, either through collaborative
arrangements or through public or private financing. There
can be no assurance that additional financing will be
available on acceptable terms or at all. If additional
funds are raised by issuing equity securities, dilution to
the existing shareholders may result. If adequate funds are
not available, the Company's business would be adversely
affected.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable
ITEM 2. CHANGES IN SECURITIES
Inapplicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On Thursday, May 9, 1996, the Company held the Annual
Meeting of Shareholders at the Wyndham Hotel, San Diego,
California.
The following Directors were elected:
FOR AGAINST
Michael Silverman 10,728,445 0
Annette Friskopp 10,728,445 0
Giles Bateman 10,728,445 0
Norman Kane 10,728,445 0
Luis Maizel 10,728,445 0
Ilana Silverman 10,728,445 0
The following matters were adopted at the meeting:
1. Approval of the BOATRACS, Inc. 1996 Stock Option Plan.
FOR AGAINST ABSTAIN NON-VOTE
9,558,428 217,142 5,341 2,821,399
2. Amendment of the Company's By-laws to increase the
number of authorized Directors from five to nine.
FOR AGAINST ABSTAIN NON-VOTE
10,720,747 3,474 5,757 1,872,332
ITEM 5. OTHER INFORMATION
Inapplicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Item
(a)(1) Exhibit 3 - Amendment of the By-laws-
Article III Section 2 (filed herewith).
(a) (2) Exhibit 11 - Computation re Net Income
(Loss) per share (filed herewith).
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant caused this report to
be signed on its behalf by the
undersigned, thereunto duly authorized.
BOATRACS, Inc.
Registrant
May 14, 1996 /s/MICHAEL SILVERMAN
Date Michael Silverman
Chief Executive Officer
May 14, 1996 /s/ANNETTE FRISKOPP
Date Annette Friskopp
Chief Operating Officer
May 14, 1996 /s/DALE FISHER
Date Dale Fisher
Chief Financial Officer