SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
Amendment No. 1
to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 7, 1998
Date of Report (date of earliest event reported)
BOATRACS, INC.
(Exact Name of Registrant as Specified in its Charter)
California 0-11038 33-0644381
(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
10675 Sorrento Valley Road, Suite 200
San Diego, California 92121
(Address of Principal Executive Offices
Including Zip Code
(619) 657-0100
(Registrant's Telephone Number,
Including Area Code)
The undersigned Registrant hereby amends its Current
Report on Form 8-K by the addition of financial statements and
exhibits as follows:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
On July 7, 1998, Boatracs, Inc., a California corporation
(the "Company") acquired Enerdyne Technologies, Inc., a California
corporation ("ET, Inc"). The acquisition was effected by means of
a merger whereby ET, Inc. was merged with and into the Company's
wholly owned subsidiary, Boatracs Acquisition, Inc., a California
Corporation ("Boatracs Acquisition"). Boatracs Acquisition
has changed its name to Enerdyne Technologies Inc. ("Enerdyne")
and will continue ET, Inc's business of providing versatile, high
performance digital video compression products to the Government
and commercial markets.
Pursuant to the terms of an Agreement and Plan or Reorganization
dated as of July 7,1998 (the "Merger Agreement"), by and between the Company,
ET Inc., and the shareholders of ET Inc., the merger consideration paid to
the shareholders of ET Inc., which was agreed upon between the parties
in arm's length negotiations, consisted of an aggregate of (I) $1,953,800
in cash, (ii) $7,815,200 principal amount of senior promissory notes
payable on July 7, 1999 and bearing interest at 8.5% per annum
("Senior Notes"), (iii) $1,953,800 principal amount of
subordinated promissory notes ("Subordinated Notes") with specified
minimum annual payments and any remaining amounts payable June 30, 2002
and bearing interest of 8.5% per annum, (iv) 2,930,700 shares of Common Stock
of the Company and (v) warrants ("Warrants") expiring on June 30, 2002 to
purchase 488,450 shares of Common Stock of the Company at a purchase price
of $2.00 per share. Subject to terms and conditions stated therein, the
Senior Notes are secured by all of the assets of ET Inc. and two of the
Company's directors, officers and significant shareholders each severally
guaranteed one-third of the unpaid principal balance of the Senior Notes
as of July 7, 1999. The Company also agreed to satisfy the obligations
of ET Inc. regarding payments to its financial advisors through delivery of
$46,200 in cash, $184,800 of Senior Notes, $46,200 of Subordinated Notes,
69,300 shares of Common Stock and Warrants for the purchase of 11,550
shares of Common Stock.
The funds for the cash payment were generated by the sale of
a promissory note payable to the Company from the Company's president to an
outside party and from working capital.
Irene Shinsato, one of the shareholders of ET Inc., has been
engaged for a one year term as President of Enerdyne and Scott Boden, the
other shareholder of ET Inc., has been employed for a two year term as
Enerdyne's Chief Technical Officer. Pursuant to the terms of their
employment agreements, the Company granted each of them a nonstatutory
stock option, vesting on the expiration date of their
respective employment agreements, to purchase 500,000 shares
of the Company's Common stock at an exercise price of $2.00 per share.
ENERDYNE TECHNOLOGIES, INC.Financial Statements for the Nine-
Month Period Ended March 31, 1998 and for the Fiscal Year
Ended June 30, 1997
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Enerdyne Technologies, Inc.:
We have audited the accompanying balance sheets of Enerdyne
Technologies, Inc. (the "Company") as of March 31, 1998 and
June 30, 1997, and the related statements of income and
retained earnings and of cash flows for the nine-month
period ended March 31, 1998 and for the year ended June 30,
1997. 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 March 31, 1998 and at June 30, 1997, and the results of
its operations and its cash flows for the above-stated
periods in conformity with generally accepted accounting
principles.
/S/DELOITTE & TOUCHE LLP
San Diego, CA
July 31, 1998
ENERDYNE TECHNOLOGIES, INC.
BALANCE SHEET
MARCH 31, 1998 AND JUNE 30, 1997
March 31, June 30,
ASSETS 1998 1997
CURRENT ASSETS:
Cash and cash equivalents $1,131,516 $397,353
Accounts receivable 1,011,002 515,506
Inventory 584,834 720,437
Deferred income taxes 79,866 47,685
Other receivables 68,200
Total current assets 2,807,218 1,749,181
PROPERTY - NET 342,070 368,947
OTHER ASSETS 5,775 5,775
TOTAL $3,155,063 $2,123,903
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $156,880 $345,896
Accrued expenses 678,049 1,068,437
Income taxes payable 478,919
Total current
liabilities 1,313,848 1,414,333
DEFERRED INCOME TAX LIABILITY 33,960 2,865
COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value -
10,000 shares authorized,
issued and outstanding 500 500
Common stock, no par value -
1,000,000 shares authorized,
20,000 shares issued and outstanding
20,000 20,000
Retained earnings 1,786,755 686,205
Total stockholders'
equity 1,807,255 706,705
TOTAL $3,155,063 $2,123,903
See notes to financial statements.
ENERDYNE TECHNOLOGIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 1998 AND
THE YEAR ENDED JUNE 30, 1997
Nine-Months Year
Ended Ended
March 31, June 30,
1998 1997
NET SALES $5,098,545 $5,794,128
COST OF SALES (1,183,922) (1,938,816)
Gross profit 3,914,623 3,855,312
OPERATING EXPENSES:
General and administrative 1,506,411 3,022,332
Research and development 218,825 266,101
Selling and marketing 543,170 356,307
Total operating expenses 2,268,406 3,644,740
INCOME FROM OPERATIONS 1,646,217 210,572
OTHER INCOME:
Interest and other income 14,923 25,176
INCOME BEFORE PROVISION FOR INCOME TAXES 1,661,140 235,748
PROVISION FOR INCOME TAXES (560,590) (72,951)
NET INCOME 1,100,550 162,797
RETAINED EARNINGS, BEGINNING OF PERIOD 686,205 528,408
COMMON STOCK DIVIDENDS PAID
(5,000)
RETAINED EARNINGS, END OF PERIOD $1,786,755 $686,205
See notes to financial statements.
ENERDYNE TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 1998 AND
THE YEAR ENDED JUNE 30, 1997
Nine-Months Year
Ended Ended
March 31, June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,100,550 $162,797
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 60,173 62,113
Changes in operating assets and
liabilities:
Accounts receivable (427,296) 42,641
Inventory 135,603 (4,189)
Deferred income taxes (1,086) 71,180
Accounts payable (189,016) 149,915
Accrued expenses (390,388) 324,516
Income taxes payable 478,919 (290,773)
Net cash provided by
operating activities 767,459 518,200
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (33,296) (221,485)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (5,000)
NET INCREASE IN CASH 734,163 291,715
CASH, BEGINNING OF PERIOD 397,353 105,638
CASH, END OF PERIOD $1,131,516 $397,353
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $8,793 $735
Income taxes paid $79,744 $310,325
See notes to financial statements.
ENERDYNE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JULY 1, 1997 TO MARCH 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Enerdyne Technologies, Inc. (the
"Company") was incorporated in California in December 1984.
The Company develops and manufactures high performance
digital video compression products.
On July 7, 1998, the Company was acquired by Boatracs, Inc.
("Boatracs") for $22,580,000 to be paid in the form of cash,
notes payable and Boatracs' common stock and warrants for
common stock.
Cash and Cash Equivalents - Cash equivalents consist of
highly liquid investments purchased with a maturity of three
months or less.
Accounts Receivable - In the opinion of management,
substantially all accounts receivable are collectible.
Accordingly, no allowance for doubtful accounts was considered
necessary at March 31,1998 and June 30, 1997.
Inventories - Inventories are carried at the lower of
average cost or market.
Property - Property is stated at cost. Depreciation and
amortization are provided using the straight-line method
over the estimated useful lives of the assets, generally six
to ten years.
Revenue Recognition - Sales of standard video compression
units which do not entail significant customer modification
are recognized upon shipment of products to customers.
Revenues related to contracts involving significant customer
modifications or the development of new technologies are
accounted for using the percentage-of-completion method,
primarily based upon specific contract deliverables.
Products are subject to a right of return for one year. An
allowance for estimated future returns is recorded at the
time of shipment based on historical returns. Actual return
experience has not been significant.
Income Taxes - The liability method is used in accounting
for income taxes. Under this method, deferred tax assets
and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to
reverse.
Concentration of Credit Risk - The Company invests its
excess cash in certificates of deposit. The Company has not
experienced any losses on its certificates of deposit.
Accounting Estimates - The preparation of financial
statements in conformity with generally accepted accounting
principles requires that management make estimates and
assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual
results may differ from those estimates.
Significant Customers - Sales to two customers comprised
greater than 10% of the Company's total revenues for the
nine-month period ended March 31, 1998. Revenues earned
from these customers were $1,283,000 and $788,000,
respectively. Receivables from these customers totaled
$243,000 and $346,000, respectively, at March 31, 1998.
Sales to one customer comprised greater than 10% of the
Company's total revenues for the year ended June 30, 1997.
Revenue earned from this customer was $853,635. No amounts
were receivable from this customer at June 30, 1997.
2. INVENTORY
Inventory consists of the following:
March 31, June 30,
1998 1997
Raw materials $425,842 $361,805
Work in process 138,523 358,632
Finished goods 20,469
Total $584,834 $720,437
3. PROPERTY - NET
Property consists of the following:
March 31, June 30,
1998 1997
Machinery and equipment $401,644 $388,858
Computer equipment 131,411 112,966
Furniture and fixtures 31,307 31,307
Leasehold improvements 27,300 25,235
591,662 558,366
Less accumulated depreciation and
amortization (249,592) (189,419)
Total $342,070 $368,947
4. INCOME TAXES
The components of the provision for
income taxes are as follows:
Nine Months Year
Ended Ended
March 31, 1998 June 30, 1997
Current:
Federal $455,688 $(4,764)
State 105,988 7,092
Total 561,675 2,328
Deferred:
Federal (13,645) 54,487
State 12,560 16,136
Total (1,085) 70,623
Provision for income taxes $560,590 $72,951
The provision for income taxes is different from that which
would be obtained by applying the statutory Federal income
tax rate (35%) to income before provision for income taxes.
The items causing this difference are as follows:
Nine-Months Year
Ended Ended
March 31, 1998 June 30, 1997
Provision at statutory rate $512,527 $80,154
State income taxes, net of Federal benefit 77,056 15,330
Federal tax credits (21,883) (26,610)
Other (7,110) 4,077
Provision at effective rate $560,590 $72,951
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant
components of the Company's net deferred tax assets are as
follows:
March 31, 1998 June 30, 1997
State taxes $46,626 $(3,477)
Reserves and accruals not currently
deductible 20,310 10,154
Differences between book and tax basis of
fixed and intangible assets (33,960) (33,225)
Differences between book and tax basis
inventory 12,930 41,008
Deferred tax credits 30,360
Total $45,906 $44,820
5. PREFERRED AND COMMON STOCK
Preferred stock is held by one shareholder and has a
liquidation preference of $347.50 per share. The Preferred
shareholder is not entitled to vote or receive dividends.
Common shareholders are entitled to receive dividends when
and as declared by the Company's Board of Directors. All
outstanding shares of stock were acquired by Boatracs, Inc.
as of at July 7, 1998. (See Note 1).
6. PROFIT SHARING PLAN
The Company has a profit sharing plan for eligible
employees. To be eligible to join the Plan, an employee
must be 21 years of age and must have completed one year of
service, as defined in the Plan. The Company makes
discretionary contributions as determined by the Company's
Board of Directors. Contributions accrued and paid for the
nine-months ended March 31, 1998 and for the year ended
June 30, 1997 were $82,500 and $119,418, respectively.
7. COMMITMENTS
The Company leases its principal facility under an operating
lease. Rent expense for the nine-months ended March 31,
1998 and for the year ended June 30, 1997 was $45,864 and
$64,786, respectively. Future minimum lease payments for
the facility lease are as follows for the calendar year:
1998 $45,864
1999 35,672
Total minimum payments $81,536
Item 7
(b) Proforma Financial Information
The following unaudited pro forma condensed consolidated
statements of operations for the three months ended March 31,
1998 and for the twelve months ended December 31, 1997 give
effect as if the acquisition of Enerdyne Technologies, Inc.
(ET, Inc.) occurred as of January 1, 1998 and 1997,
respectively. The condensed consolidated balance
sheet as of March 31,1998 gives effect to the acquisition as
if such transaction occurred on March 31, 1998.
The pro forma condensed consolidated financial statements
have been prepared by the management of the Company based
on the historical financial statements of the
Company and of ET, Inc. and the acquisition of ET, Inc. using
the purchase method of accounting. Assumptions and adjustments are
discussed in the accompanying notes to the pro forma condensed consolidated
financial statements. In the opinion of the management of the Company,
all pro forma adjustments necessary to state fairly such pro forma financial
information have been made. The unaudited pro forma condensed consolidated
financial statements are not necessarily indicative of what actual results
of operations would have been for the period had the transaction occurred
on the dates indicated. In addition, such financial statements do
not purport to indicate the results of future operations of
financial position of the Company from the acquisition date forward.
The accompanying pro forma financial statements reflect the
allocation of purchase price based on a preliminary analysis of the values of
equity instruments issued and the assets acquired and liabilities assumed.
Final analysis may result in a change to the purchase price allocation.
BOATRACS, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(IN 000'S) ADJUST-
BOATRACS ET, INC. MENTS TOTALS
REVENUES $2,003 $1,700 $3,703
COST OF REVENUES 1,202 395 1,597
GROSS PROFIT 801 1,305 2,106
SELLING, GENERAL AND
ADMINISTRATIVE 703 756 **1,090 2,549
INCOME (LOSS) FROM
OPERATIONS 98 549 (1,090) (443)
OTHER INCOME (EXPENSE) 32 5 1)(213) (176)
INCOME (L0SS) BEFORE PROVISION
FOR INCOME TAXES 130 554 (1,303) (619)
TAX PROVISION (BENEFIT) 187 5)(188) (1)
NET INCOME (LOSS) 130 367 (1,115) $(618)
BASIC EARNINGS (LOSS) PER
COMMON SHARE $.01 N/A ($.03)
DILUTED EARNINGS (LOSS)
PER COMMON SHARE $.01 N/A N/A
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 15,831 18,831
Dilutive effect of:
Employee stock options 854 N/A
Warrants 78
Weighted average of common
shares outstanding,
assuming dilution 16,763 18,831
Notes to pro forma condensed consolidated financial
statement of operations for the three months
ended March 31, 1998:
The following entries are made to adjust the condensed
consolidated statement of operations to give effect to the acquisition
of ET, Inc. as if it has occurred at the beginning of the quarter,
January 1, 1998.
** The adjustment of $1,090 is the sum of entries
2), 3), 4) and 6), which have been combined for ease of
presentation.
1) To record three months of interest expense at 8.5% on
$10 million of notes payable.
Dr. Interest Expense $213
Cr. Interest Payable $213
2) To record three months of amortization expense on
1,000,000 compensatory
options granted at $2.00 per share.
Dr. Selling, general and
administrative Expense $516
Cr. Unearned compensation $516
3) To record three months amortization expense of goodwill
with a 10 year life.
Dr. Amortization expense $68
Cr. Accumulated amortization $68
4) To record three months amortization expense on a patent
valued at $30 million with
a 16 year life.
Dr. Amortization expense $469
Cr. Accumulated amortization $469
5) To record the effect of the amortization of the patent
as a tax benefit. The
remaining tax benefit is presumed subject to a valuation
allowance.
Dr. Deferred taxes $188
Cr. Income tax benefit $188
6) To record three months amortization expense of non-
compete agreements signed by
two selling shareholders of ET, Inc. The agreements
are valued at $250,000 each.
One has a 3 year duration and the other a 4 year
duration.
Dr. Amortization of non compete
agreement $37
Cr. Non compete agreement $37
7) The weighted average number of shares has been
recomputed to include the shares
issued in relation to the Enerdyne acquisition as if they
had been outstanding since
January 1, 1998. The resulting weighted average number
of shares is 18,831,368.
BOATRACS, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN 000'S)
ADJUST-
BOATRACS ET,INC. MENTS TOTAL
REVENUES $5,248 $6,296 $11,544
COST OF REVENUES 3,035 1,759 4,794
GROSS PROFIT 2,213 4,537 6,750
SELLING, GENERAL
AND
ADMINISTRATIVE 2,505 3,335 **4,356 10,196
INCOME FROM
OPERATIONS (292) 1,202 (4,356) (3,446)
OTHER INCOME
(EXPENSE) 37 23 1)(850) (790)
INCOME (LOSS)
BEFORE PROVISION
FOR TAXES (255) 1,225 (5,206) (4,236)
TAX PROVISION
(BENEFIT) 0 410 5)(750) (340)
NET INCOME (255) 815 (4,456) (3,896)
BASIS EARNINGS
(LOSS) PER COMMON
SHARE ($.02) n/a ($.26)
DILUTED EARNINGS n/a n/a
(LOSS) PER COMMON
SHARE
WEIGHTED AVERAGE
SHARES
OUTSTANDING 13,535 15,097
Notes to pro forma condensed consolidated financial
statement of operations for the year ended December 31, 1997:
The following entries have been made to adjust the condensed
consolidated statement of
operations for the year ended December 31, 1997 as if the
acquisition of Enerdyne had
taken effect as of January 1, 1997.
** The entry of $4,356 is the sum of entries 2), 3), 4) and
6) which have been
combined for ease of presentation.
1) To record interest expense on notes payable at 8.5% on
$10 million of notes payable.
Dr. Interest expense $850
Cr. Interest payable $850
2) To record amortization expense on 1,000,000
compensatory options granted at
$2.00 per share.
Dr. Selling, general and
administrative expense $2,063
Cr. Unearned compensation $2,063
3) To record amortization expense of goodwill with a 10
year life.
Dr. Amortization expense $273
Cr. Accumulated amortization $273
4) To record amortization expense on a patent valued at
$30 million with a 16 year life.
Dr. Amortization expense $1,875
Cr. Accumulated amortization $1,875
5) To record the effect of the amortization of the patent
as a tax benefit. The remaining
tax benefit is presumed subject to a valuation allowance.
Dr. Deferred taxes $750
Cr. Income tax benefit $750
6) To record amortization expense of non compete
agreements signed by the two
selling shareholders of ET, Inc. The agreements are
valued at $250 each.
One has a 3 year duration and the other a 4 year duration.
Dr. Amortization of non compete
agreement $145
Cr. Non compete agreement $145
7) The weighted average number of shares has been
recomputed to include the shares
issued in relation to the Enerdyne acquisition as if they
had been outstanding since
January 1, 1997. The resulting weighted average number
of shares is 15,097,077.
BOATRACS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(IN 000'S)
ADJUST-
BOATRACS ET, INC. MENTS TOTAL
ASSETS
Cash $257 1,131 1) (1,131) $193
2) (2,000)
3) 1,436
4) 500
Other current assets 2,362 1,676 1) (1,676) 4,387
4) (500)
2) 2,525
Total current assets 2,619 2,807 4,580
Property - net 252 342 1) (342) 252
Patent 2) 30,000 30,000
Non -compete agreement 2) 500 500
Goodwill 810 2) 2,730 3,540
Other assets 327 6 1) (6) 327
Total assets $4,008 $3,155 $39,199
LIABILITIES AND STOCK-
HOLDERS EQUITY
Accounts payable $1,386 $157 1) (157) $1,386
Other current
liabilities 515 1,157 1) (1,157) 1,690
2) 1,175
Total current
liabilities 1,901 1,314 3,076
Deferred income taxes 2) 12,000 12,000
Notes payable 2) 10,000 10,000
Deferred income tax 34 1) (34)
Common stock, no
par value 6,989 20 1) (20)
2) 13,330
Notes receivable for common 3) (44) 20,275
stock (1,568) 3) 1,480 (88)
Unearned compensation 2) (2,750) (2,750)
Accumulated earnings
(deficit) (3,314) 1,787 1) (1,787) (3,314)
Total
liabilities and
stock-holders
equity $4,008 $3,155 $39,199
Notes to pro forma condensed consolidated balance sheet:
1) To eliminate ET, Inc. balance sheet as of 3/31/98 due to
acquisition.
Dr. Accounts payable 157
Other current liabilities 1,157
Deferred income tax 34
Common Stock 20
Accumulated earnings 1,787
Cr. Cash 1,131
Other current assets 1,676
Property -net 342
Other assets 6
2) To record purchase of ET, Inc.
Dr. Non compete agreement 500
Patent 30,000
Goodwill 2,730
Assets of ET, Inc. at
fair value 2,525
Unearned compensation 2,750
Cr. Deferred tax balance 12,000
Liabilities of ET,
Inc. at fair value 1,175
Notes payable 10,000
Common stock 13,330
Cash 2,000
3) To record payment on a note receivable from an
officer and major shareholder of the Company which was
repaid at a discount prior to the acquisition. This
transaction was necessary to finalize the acquisition.
Dr. Cash 1,436
Common stock
(discount given) 44
Cr. Notes Receivable 1,480
4) To reclassify a deposit placed in escrow on the
acquisition.
Dr. Cash 500
Cr. Current assets 500
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated: August 13, 1998 BOATRACS, INC.
BY: /S/ MICHAEL SILVERMAN,
CHAIRMAN OF THE BOARD