SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended April 30, 1999
Commission File Number 1-13851
SONUS CORP.
(Exact name of small business issuer as specified in its charter)
Yukon Territory, Canada Not Applicable
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
111 S.W. Fifth Avenue, Suite 1620, Portland, Oregon 97204
(Address of principal executive offices)
Issuer's telephone number, including area code: 503-225-9152
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ---.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,113,707 Common Shares, without par
or nominal value, outstanding as of June 1, 1999.
Transitional Small Business Disclosure Format. Yes ---. No -X-.
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------
Statements in this report, to the extent they are not based on
historical events, constitute forward-looking statements. Forward-looking
statements include, without limitation, statements containing the words
"believes," "anticipates," "intends," "expects," and words of similar import.
Investors are cautioned that forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance, or achievements of Sonus Corp. (the "Company") to be
materially different from those described herein. Factors that may result in
such variance, in addition to those accompanying the forward-looking statements,
include economic trends in the Company's market areas, the ability of the
Company to manage its growth and integrate new acquisitions into its network of
hearing care centers, development of new or improved medical or surgical
treatments for hearing loss or of technological advances in hearing instruments,
changes in the application or interpretation of applicable government laws and
regulations, the ability of the Company to complete additional acquisitions of
hearing care centers on terms favorable to the Company, the degree of
consolidation in the hearing care industry, the Company's success in attracting
and retaining qualified audiologists and staff to operate its hearing care
centers, the ability of the Company to attract audiology centers as franchise
licensees under the Sonus Network, product and professional liability claims
brought against the Company that exceed its insurance coverage, and the
availability of and costs associated with potential sources of financing. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
2
<PAGE>
SONUS CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
April 30, July 31,
1999 1998
---------------- ----------------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,732 $ 2,720
Short-term investments, available for sale 500 6,408
Accounts receivable, net of allowance for doubtful
accounts of $856 and $684, respectively 4,069 3,339
Other receivables 831 515
Inventory 683 967
Prepaid expenses 553 270
---------------- ----------------
Total current assets 8,368 14,219
Property and equipment, net of accumulated
depreciation of $2,178 and $1,364, respectively 5,662 3,607
Other assets 300 151
Goodwill and covenants not to compete, net 18,632 16,152
---------------- ----------------
$ 32,962 $ 34,129
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans and short-term notes payable $ --- $ 46
Accounts payable 3,594 2,879
Accrued payroll 1,048 1,110
Other accrued liabilities 1,804 2,595
Convertible notes payable 921 ---
Capital lease obligation, current portion 126 120
Long-term debt, current portion 1,539 1,160
---------------- ----------------
Total current liabilities 9,032 7,910
Capital lease obligation, non-current portion 129 223
Long-term debt, non-current portion 2,494 1,733
Convertible notes payable --- 1,170
---------------- ----------------
Total liabilities 11,655 11,036
---------------- ----------------
Shareholders' equity:
Series A convertible preferred stock, no par
value per share, 13,333,333 shares authorized,
issued, and outstanding 15,701 15,701
Common stock, no par value per share, unlimited
number of shares authorized, 6,113,707 and 6,079,908
shares, respectively, issued and outstanding 14,921 14,673
Notes receivable from shareholders (251) (283)
Accumulated deficit (8,819) (6,711)
Accumulated other comprehensive loss (136) (229)
Treasury stock, 12,960 and 6,960 shares, respectively, at cost (109) (58)
---------------- ----------------
Total shareholders' equity 21,307 23,093
---------------- ----------------
$ 32,962 $ 34,129
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SONUS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three months ended Nine months ended
April 30, April 30,
-------------------------------- ------------------------------
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 9,093 $ 5,719 $ 25,280 $ 15,135
Costs and expenses:
Cost of products sold 2,869 1,763 8,355 4,882
Clinical expenses 4,073 2,953 12,488 7,476
General and administrative expenses 1,514 1,432 5,035 3,820
Depreciation and amortization 562 349 1,551 949
-------------- -------------- ------------ ------------
Total costs and expenses 9,018 6,497 27,429 17,127
-------------- -------------- ------------ ------------
Income (loss) from operations 75 (778) (2,149) (1,992)
Other income (expense):
Interest income 51 236 221 324
Interest expense (59) (39) (171) (94)
Other, net (2) --- (9) ---
-------------- -------------- ------------ ------------
Net income (loss) $ 65 $ (581) $ (2,108) $ (1,762)
============== ============== ============ ============
Per share of common stock:
Basic $ 0.01 $ (0.10) $ (0.35) $ (0.36)
Diluted $ 0.01 $ (0.10) $ (0.35) $ (0.36)
Average shares outstanding:
Basic 6,093 5,722 6,090 4,932
Diluted 8,953 5,722 6,090 4,932
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SONUS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
Three months ended Nine months ended
April 30, April 30,
------------------------------- ------------------------------
1999 1998 1999 1998
------------------------------- ------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income (loss) $ 65 $ (581) $ (2,108) $ (1,762)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Provision for bad debt expense 77 50 226 111
Depreciation and amortization 562 349 1,551 950
Changes in non-cash working capital:
Accounts receivable 99 80 (847) 53
Other receivables (115) 92 (315) 10
Inventory 90 (276) 336 (500)
Prepaid expenses 34 (464) (273) (846)
Accounts payable and accrued liabilities (1,031) (851) (283) (231)
-------------- --------------- ------------- ---------------
Net cash used in operating activities (219) (1,601) (1,713) (2,215)
-------------- --------------- ------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of short-term investments 2,093 (2,131) 5,908 (10,945)
Purchase of property and equipment (554) (260) (2,589) (846)
Reduction of (additional) costs related to acquisitions 86 (622) 60 (326)
Deferred acquisition costs and other, net (30) (58) (132) (124)
Net cash paid on business acquisitions (148) (1,826) (1,371) (2,292)
-------------- --------------- ------------- ---------------
Net cash provided by (used in) investing activities 1,447 (4,897) 1,876 (14,533)
-------------- --------------- ------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long term debt
and capital lease obligations (629) (304) (1,136) (676)
Deferred financing costs, net --- (21) (15) (21)
Advances on (repayments of) bank loans and
short-term notes payable 1 73 (295) (28)
Notes receivable from shareholders 29 (68) 29 (68)
Issuance of common stock for cash, net of costs 1 1,963 249 2,100
Issuance of preferred stock for cash, net of costs --- (51) --- 15,701
Acquisition of treasury stock (39) 0 (50) (25)
-------------- --------------- ------------- ---------------
Net cash provided by (used in) financing activities (637) 1,592 (1,218) 16,983
-------------- --------------- ------------- ---------------
Net increase (decrease) in cash and cash equivalents 591 (4,906) (1,055) 235
Effect on cash and cash equivalents of changes
in foreign translation rate 14 31 67 (59)
Cash and cash equivalents, beginning of period 1,127 6,150 2,720 1,099
-------------- --------------- ------------- ---------------
Cash and cash equivalents, end of period $ 1,732 $ 1,275 $ 1,732 $ 1,275
============== =============== ============= ===============
Supplemental disclosure of non-cash investing and financing activities:
Interest paid during the period $ 59 $ 39 $ 171 $ 94
Non-cash financing activities:
Issuance and assumption of long-term debt in acquisitions $ 197 $ 1,866 $ 1,706 $ 349
Issuance of long-term debt in connection with expanded covenants
not to compete and purchase price adjustments for acquisitions
completed in fiscal year 1998 $ --- $ --- $ 650 $ ---
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SONUS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three months ended Nine months ended
April 30, April 30,
------------------------------ -----------------------------
1999 1998 1999 1998
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) $ 65 $ (581) $ (2,108) $ (1,762)
Other comprehensive income, net of tax:
Foreign currency translation adjustments 40 32 93 (59)
------------ -------------- ------------ ------------
Comprehensive income (loss) $ 105 $ (549) $ (2,015) $ (1,821)
============ ============== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
SONUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Financial Statements
The interim financial statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the fiscal year ended July 31, 1998.
All adjustments, consisting only of normal recurring adjustments which are, in
the opinion of management, necessary for a fair statement of the results for the
interim periods presented have been made. The results of operations for an
interim period are not necessarily indicative of the results of operations for a
full year. Certain amounts in the financial statements for the three and nine
month periods ended April 30, 1998, have been reclassified in order to conform
to the presentation for the three and nine month periods ended April 30, 1999.
The Company has adopted Statement of Financial Accounting Standards No.130,
"Reporting Comprehensive Income," for its fiscal year ending July 31, 1999, and
therefore the interim financial statements contain consolidated statements of
comprehensive income for the three and nine month periods ended April 30, 1999
and 1998.
2. Acquisitions
During the three months ended April 30, 1999, the Company acquired two
hearing care centers in two separate transactions. The aggregate purchase price
for the acquisitions consisted of cash payments of $148,000 and $201,000 in
assumed liabilities. As a result of the acquisitions, the Company recorded
$72,000 in property and equipment, $18,000 in inventory, $2,000 in other assets,
and $257,000 in goodwill, which included costs related to the acquisitions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
At April 30, 1999, the Company operated 90 hearing care centers in
ten states and two Canadian provinces, compared to 80 centers at July 31, 1998,
and 88 centers at January 31, 1999. The Company had net income of $65,000 for
the three months ended April 30, 1999, compared to net losses of $2,494,000 for
the fourth quarter of fiscal 1998, $1,474,000 for the first quarter of fiscal
1999, and $699,000 for the second quarter of fiscal 1999.
RESULTS OF OPERATIONS
Three Months Ended April 30, 1999 Compared to Three Months Ended April 30, 1998
Revenues. Total revenues for the three months ended April 30, 1999,
were $9,093,000, representing a 59% increase over revenues of $5,719,000 for the
comparable period in fiscal 1998. The increase was primarily due to the addition
of 31 hearing care centers that were acquired by the Company during the twelve
months ended April 30, 1999. Revenue was also favorably impacted by an increase
of 13% in comparable center revenue in the fiscal third
7
<PAGE>
quarter. Product revenues were $7,823,000 for the three months ended April 30,
1999, up 69% from $4,627,000 for the same period in fiscal 1998. Audiological
service revenues decreased 18% to $799,000 for the three months ended April 30,
1999, from $980,000 for the comparable period in fiscal 1998. Audiological
service revenues represented 9% and 17% of total revenues for the three month
periods ended April 30, 1999 and 1998, respectively. The Company is focusing on
more profitable hearing instrument sales resulting in a decrease in audiological
service revenues. Other revenues increased 321% to $471,000 for the three months
ended April 30, 1999, from $112,000 for the three months ended April 30, 1998,
as a result of the increased size of the Company, revenues from the Company's
franchise license program known as Network Services, and revenues from the
Company's Hear PO Corp. subsidiary. No revenues from the Network Services
program or from Hear PO Corp. were recognized in the comparable quarter of the
prior fiscal year because the Network Services program had not been introduced
and Hear PO Corp. was not acquired until July 1998.
Product Gross Profit. Product gross profit for the three months ended
April 30, 1999, was $4,954,000 or 63% of product revenues, compared to
$2,864,000 or 62% of product revenues for the comparable period in fiscal 1998.
The increase in product gross profit percentage was due to increased buying
power with hearing instrument manufacturers, less dependence on sales discounts,
better price management, and a new tiered pricing strategy based on levels of
technology.
Clinical Expenses. As a percentage of revenues, clinical expenses
decreased to 45% for the three months ended April 30, 1999, compared to 52% for
the three months ended April 30, 1998. The decrease was due to Company's ability
to cut costs, streamline its operations, and eliminate inefficient and
duplicative processes. Clinical expenses for the three months ended April 30,
1999, were $4,073,000, representing an increase of 38% over clinical expenses of
$2,953,000 for the comparable period in fiscal 1998. Clinical expenses for the
three months ended April 30, 1999, were favorably affected by the reversal of an
expense accrual that was made during the fiscal quarter ended January 31, 1999,
in the amount of $149,000. The increase in clinical expenses was due to clinical
expenses associated with the 31 additional centers that were acquired by the
Company during the twelve months ended April 30, 1999. Clinical expenses include
all personnel, marketing, occupancy, and other operating expenses at the clinic
level.
General and Administrative Expenses. As a percentage of revenues,
general and administrative expenses decreased to 17% for the three-month period
ended April 30, 1999, versus 25% for the same period in the prior fiscal year.
The decrease in general and administrative expenses as a percentage of revenues
was due to growth in the Company's revenue base as a result of its strategic
acquisition program and enhanced marketing efforts, as well as a recently
implemented administrative restructuring and cost-cutting program. General and
administrative expenses increased 6% from $1,432,000 for the three months ended
April 30, 1998, to $1,514,000 for the three months ended April 30, 1999, due to
planned increases in corporate staff and other corporate expenses related to the
operation of a larger organization.
Depreciation and Amortization Expense. As a percentage of revenues,
depreciation and amortization expense remained at 6% for the three-month periods
ended April 30, 1999, and April 30, 1998. Depreciation and amortization expense
for the three months ended April 30, 1999, was $562,000, an increase of 61% over
the depreciation and amortization expense of $349,000 for the same period in the
prior fiscal year. The increase resulted from the
8
<PAGE>
depreciation of fixed assets and amortization of goodwill and covenants not to
compete associated with the 31 additional centers acquired by the Company during
the twelve-month period ended April 30, 1999.
Interest Income and Expense. Interest income for the three months ended
April 30, 1999, decreased to $51,000 from $236,000 for the same period in the
prior fiscal year. The decrease was due to lower balances of cash and short-term
investments held by the Company as funds have been used for acquisitions.
Interest expense for the three months ended April 30, 1999, was $59,000 compared
to $39,000 for the three months ended April 30, 1998, reflecting higher balances
of long-term debt incurred in connection with acquisitions.
Net Income. The Company's net income for the three months ended April
30, 1999, was $65,000 compared to a net loss of $581,000 for the three months
ended April 30, 1998. The Company's income from operations before interest,
depreciation, and amortization for the three months ended April 30, 1999, was
$637,000 compared to a loss of $429,000 for the three months ended April 30,
1998.
Nine Months Ended April 30, 1999 Compared to Nine Months Ended April 30, 1998
Revenues. Total revenues for the nine months ended April 30, 1999, were
$25,280,000, representing a 67% increase over revenues of $15,135,000 for the
comparable period in fiscal 1998. The increase was primarily due to the addition
of 31 hearing care centers that were acquired by the Company during the twelve
months ended April 30, 1999. Revenue was also favorably impacted by an increase
of 11% in comparable center revenue in the nine months ended April 30, 1999.
Product revenues were $21,766,000 for the nine months ended April 30, 1999, up
74% from $12,491,000 for the same period in fiscal 1998. Audiological service
revenues increased 11% to $2,693,000 for the nine months ended April 30, 1999,
from $2,434,000, for the comparable period in fiscal 1998. Audiological service
revenues represented 11% and 16% of total revenues for the nine-month periods
ended April 30, 1999 and 1998, respectively. As noted above, the Company has
made an effort to focus on more profitable hearing instrument sales, resulting
in a decrease in audiological service revenues as a percentage of total
revenues. Other revenues increased 290% to $821,000 for the nine months ended
April 30, 1999, compared to $210,000 for the same period in the prior fiscal
year as a result of the increased size of the Company, revenues from the
Company's franchise license program known as Network Services, and revenues from
the Company's Hear PO Corp. subsidiary. No revenues from the Network Services
program or from Hear PO Corp. were recognized in the comparable period of the
prior fiscal year because the Network Services program had not been introduced
and Hear PO Corp. was not acquired until July 1998.
Product Gross Profit. Product gross profit for the nine months ended
April 30, 1999, was $13,411,000 or 62% of product revenues, compared to
$7,609,000 or 61% of product revenues for the comparable period in fiscal 1998.
The increase in product gross profit percentage was due to increased buying
power with hearing instrument manufacturers, less dependence on sales discounts,
better price management, and a new tiered pricing strategy based on levels of
technology.
Clinical Expenses. As a percentage of revenues, clinical expenses
remained stable at 49% for the nine months ended April 30, 1999, and the nine
months ended April 30, 1998. Clinical expenses for the nine months ended April
30, 1999, were $12,488,000, representing an
9
<PAGE>
increase of 67% over clinical expenses of $7,476,000 for the comparable period
in fiscal 1998. This increase was primarily due to clinical expenses associated
with the 31 additional centers that were acquired by the Company during the
twelve months ended April 30, 1999.
General and Administrative Expenses. As a percentage of total revenues,
general and administrative expenses decreased to 20% for the nine-month period
ended April 30, 1999, versus 25% for the same period in the prior fiscal year.
The decrease in general and administrative expenses as a percentage of revenues
was due to growth in the Company's revenue base as a result of its strategic
acquisition program and enhanced marketing efforts, as well as a recently
implemented administrative restructuring and cost-cutting program. General and
administrative expenses increased 32% from $3,820,000 for the nine months ended
April 30, 1998, to $5,035,000 for the nine months ended April 30, 1999, due to
planned increases in corporate staff and other corporate expenses related to the
operation of a larger organization.
Depreciation and Amortization Expense. Depreciation and amortization
expense for the nine months ended April 30, 1999, was $1,551,000, an increase of
63% over the depreciation and amortization expense of $949,000 for the same
period in the prior fiscal year. The increase resulted from the depreciation of
fixed assets and amortization of goodwill and covenants not to compete
associated with the 31 additional centers that were acquired by the Company
during the twelve months ended April 30, 1999. As a percentage of revenues,
depreciation and amortization expense remained steady at 6% for the three and
nine-month periods ended April 30, 1999.
Interest Income and Expense. Interest income for the nine months ended
April 30, 1999, decreased to $221,000 from $324,000 for the same period in the
prior fiscal year. The decrease was due to lower balances of cash and short-term
investments held by the Company as funds have been used for acquisitions.
Interest expense for the nine months ended April 30, 1999, was $171,000 compared
to $94,000 for the nine months ended April 30, 1998, reflecting higher balances
of long-term debt incurred in connection with acquisitions.
Net Loss. For the nine months ended April 30, 1999, the Company had a
net loss of $2,108,000 compared to a net loss of $1,762,000 for the nine months
ended April 30, 1998. The Company's loss from operations before interest,
depreciation, and amortization for the nine months ended April 30, 1999, was
$598,000 compared to a loss of $1,043,000 for the nine months ended April 30,
1998.
LIQUIDITY AND CASH RESERVES
For the nine months ended April 30, 1999, net cash used in operating
activities was $1,713,000 compared to $2,215,000 for the nine months ended April
30, 1998. Net cash provided by investing activities was $1,876,000 in the first
nine months of fiscal 1999 compared to net cash used in investing activities of
$14,533,000 in the first nine months of fiscal 1998 as a result of purchases of
short-term investments following the sale of preferred stock in the second
quarter of fiscal 1998 and the sale of short-term investments during the nine
months ended April 30, 1999. Net cash provided by financing activities was
$16,983,000 in the first nine months of fiscal 1998 compared to net cash used in
financing activities of $1,218,000 in the first nine months of fiscal 1999. The
change was primarily the result of funds from the sale of preferred stock being
included in the first nine months of fiscal 1998. The Company repaid long-term
debt
10
<PAGE>
of $1,136,000 during the nine months ended April 30, 1999, compared to $676,000
during the comparable period in the prior fiscal year. The Company also repaid
bank loans and short-term notes payable totaling $295,000 during the nine months
ended April 30, 1999, compared to $28,000 for the nine months ended April 30,
1998.
At April 30, 1999, the Company had cash and short-term investments
available for sale totaling $2,232,000 and a working capital deficit of
$664,000. The Company believes that its cash and short-term investments, along
with cash generated from operations, will provide it with sufficient capital to
fund its operations on an ongoing basis. Additional funding will be needed for
capital expenditures during fiscal 2000 and to fund the Company's strategy to
acquire additional hearing care centers. The Company is engaged in negotiations
to secure additional funding that may result in the Company incurring long-term
or short-term indebtedness and in the issuance of additional equity securities.
Any such issuance of equity may be dilutive to current shareholders and debt
financing may impose significant restrictive covenants on the Company. There can
be no assurance that such negotiations will be successful and result in the
Company obtaining additional funding.
YEAR 2000
The "Year 2000 problem" refers to the possibility that computer and
other systems could fail or not work properly as a result of these systems using
only the last two digits of a year to refer to that year and therefore being
unable to properly recognize a year that begins with "20" instead of "19". The
Company has undertaken a review of the potential effects of the Year 2000
problem on its business on a system by system basis.
With respect to its information technology ("IT") systems, the Company
believes that the computer hardware and system software of its IBM AS/400
computer, on which its patient management system and accounting system operate,
are Year 2000 compliant. Unrelated to Year 2000 issues, the Company is
continuing its development of a new patient management system. Initially, the
Company's hearing care centers and its subsidiary Hear PO Corp. will use the
software. However, in the future the Company may license the software to its
Sonus Network franchise licensees and others. The development contractor for the
software has represented that it will meet Year 2000 standards. Implementation
of the new software is expected to begin in June 1999. The Company installed a
new release of its accounting and financial reporting software in March 1999,
which the vendor represents is Year 2000 compliant. The Company is currently
surveying all of its servers, personal computers, and network hardware to
determine compliance with Year 2000 standards and expects that this survey will
be completed by August 1999. All equipment found to be deficient will be
replaced. The Company estimates that the cost of replacement equipment will be
less than $50,000.
The Company has reviewed its non-IT systems (primarily voice
communications) for Year 2000 compliance and will replace those systems that
were found to be non-compliant. The Company estimates that its cost to replace
the non-IT systems that are non-compliant with Year 2000 standards will not
exceed $50,000.
The Company also faces the risk that vendors from which the Company
purchases goods and services, such as hearing instrument manufacturers, utility
providers, the banks that maintain the Company's depository accounts and process
its credit card transactions, and the Company's payroll processor, may have
systems that are not Year 2000 compliant. Significant disruptions
11
<PAGE>
in the operations of its vendors may have a material adverse effect on the
Company. The Company plans to monitor the progress of its major vendors in
achieving Year 2000 compliance. However, the Company presently does not
anticipate the occurrence of major interruptions in its business due to Year
2000 issues.
The Company has not established a contingency plan to address potential
Year 2000 noncompliance with respect to the Company's systems or those of its
major vendors and is currently considering the extent to which such a plan is
necessary. Due to the Company's dependence on systems outside its control, such
as telecommunications, transportation, and power supplies, there can be no
assurance that the Company will not face unexpected problems associated with the
Year 2000 issue that may affect its operations, business, and financial
condition.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits filed as part of this report or incorporated by
reference herein are listed in the accompanying exhibit index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the fiscal quarter ended April 30, 1999.
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 thereunto duly authorized.
SONUS CORP.
By: /s/ Edwin J. Kawasaki
Edwin J. Kawasaki
Vice President-Finance
(Principal Financial Officer)
DATED: June 14, 1999
12
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for Sonus Corp. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 1,732
<SECURITIES> 500
<RECEIVABLES> 4,934
<ALLOWANCES> (856)
<INVENTORY> 683
<CURRENT-ASSETS> 8,368
<PP&E> 7,840
<DEPRECIATION> 2,178
<TOTAL-ASSETS> 32,962
<CURRENT-LIABILITIES> 9,032
<BONDS> 2,623
0
15,701
<COMMON> 14,921
<OTHER-SE> (9,315)
<TOTAL-LIABILITY-AND-EQUITY> 32,962
<SALES> 25,280
<TOTAL-REVENUES> 25,280
<CGS> 8,355
<TOTAL-COSTS> 27,429
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 226
<INTEREST-EXPENSE> 171
<INCOME-PRETAX> (2,108)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,108)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,108)
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
