<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1996
Commission File Number 0-20734
NORRIS COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
Yukon Territory, Canada None
(State or other jurisdiction of (I.R.S. Empl. Ident. No.)
incorporation or organization)
12725 Stowe Drive, Poway, California 92064
(Address of principal executive offices) (Zip Code)
(619) 679-1504
(Registrant's telephone number, including area code)
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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, without par value 22,308,611
(Class) (Outstanding at August 5, 1996)
<PAGE> 2
NORRIS COMMUNICATIONS CORP.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1996 and
and March 31, 1996 (unaudited) 3
Consolidated Statements of Operations for the three
months ended June 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended June 30, 1996 and 1995 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 12
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
* No information provided due to inapplicability of the item.
2
<PAGE> 3
NORRIS COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996
$ $
------------- --------------
<S> <C> <C>
ASSETS
Current
Cash 565,668 2,843,540
Accounts receivable, less allowance for doubtful
accounts of $11,647 and $11,647, respectively 120,671 94,619
Inventory (note 3) 3,355,577 3,243,245
Prepaid expenses and other 305,049 226,436
----------- -----------
Total current assets 4,346,965 6,407,840
Property and equipment, net 1,401,921 1,359,791
Other intangible assets, net of accumulated amortization of
$26,757 and $24,896 respectively 47,652 49,513
----------- -----------
Total assets 5,796,538 7,817,144
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Demand loan payable (note 4) 307,416 2,185,546
Accounts payable, trade 1,434,913 2,554,209
Other accounts payable and accrued liabilities 170,019 443,225
Current portion of capital lease obligations 168,341 168,831
----------- -----------
Total current liabilities 2,080,689 5,351,811
----------- -----------
Convertible notes payables -- 3,000,000
----------- -----------
Total liabilities 2,080,689 8,351,811
----------- -----------
Stockholders' equity (deficiency)
Common stock, no par value, authorized 60,000,000 and 30,000,000
respectively; 22,308,611 and 15,103,703 shares
outstanding, respectively (note 5, 7, and 10) 26,730,427 21,762,337
Warrants (note 6) 738,128 --
Contributed surplus 1,592,316 1,592,316
Accumulated deficit (25,345,022) (23,889,320)
----------- -----------
Total stockholders' equity (deficiency) 3,715,849 (534,667)
----------- -----------
Total liabilities and stockholders' equity (deficiency) 5,796,538 7,817,144
=========== ===========
</TABLE>
See notes to interim consolidated financial statements
3
<PAGE> 4
NORRIS COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
June 30
1996 1995
$ $
----------- -----------
<S> <C> <C>
Revenues 153,726 478,732
Cost of sales 259,257 1,466,965
----------- -----------
Gross profit (loss) (105,531) (988,233)
----------- -----------
Operating expense (income)
Selling and Administration 1,073,299 783,469
Research and related expenditures 211,584 477,727
Interest expense 76,480 124,534
Interest income (11,192) (16,185)
----------- -----------
1,350,171 1,369,545
----------- -----------
Operating loss (1,455,702) (2,357,778)
Provision for income taxes (note 8) -- --
----------- -----------
Net loss (1,455,702) (2,357,778)
=========== ===========
Net loss per share (note 9) (0.09) (0.20)
=========== ===========
Weighted average shares 16,964,510 11,624,314
=========== ===========
</TABLE>
See notes to interim consolidated financial statements
4
<PAGE> 5
NORRIS COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
For the three months ended
June 30
1996 1995
$ $
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss (1,455,702) (2,357,778)
Adjustments to reconcile net loss to net cash
used by operating activites:
Depreciation and amortization 103,360 129,853
Gain from sale of asset -- 38,550
Interest paid by issuance of common stock 33,773 --
Professional services paid by issuance of common stock 72,000 --
Legal settlement paid by issuance of common stock 127,500 --
Changes in assets and liabilities:
Accounts receivable (26,052) (228,536)
Inventory (112,332) (1,521,922)
Prepaid expenses and other (78,613) 46,677
Accounts payable, trade (1,119,296) 780,713
Other accounts payable and accrued liabilities (273,206) 119,878
---------- ----------
Cash used in operating activities (2,728,568) (2,992,565)
---------- ----------
INVESTING ACTIVITIES
Purchase of property and equipment (143,629) (27,937)
Proceeds on sale of assets -- 26,150
Investment in patents and intangibles -- (3,965)
---------- ----------
Cash used in investing activities (143,629) (5,752)
---------- ----------
FINANCING ACTIVITIES
Repayments under demand loan payable (1,878,130) --
Principal payments on capital lease obligations (490) (13,528)
Convertible note payable -- --
Proceeds from issuance of shares and warrants 2,472,945 30,303
---------- ----------
Cash provided by financing activities 594,325 16,775
---------- ----------
Net decrease in cash (2,277,872) (2,981,542)
Cash, beginning of period 2,843,540 3,291,203
---------- ----------
Cash, end of period 565,668 309,661
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest 43,555 124,534
Supplemental schedule of noncash investing
and financing activities:
The company converted a long-term convertible 3,000,000 --
note plus accrued interest into common stock
</TABLE>
See notes to interim consolidated financial statements
5
<PAGE> 6
NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
1. OPERATIONS
Norris Communications Corp. (the "Company") was incorporated in the Province of
British Columbia, Canada on February 11, 1988 and on November 22, 1994, changed
its domicile from British Columbia to the Yukon Territory, Canada. The Company
is engaged through its wholly-owned U.S. subsidiariesin the development,
manufacture and marketing of electronic products and exploiting proprietary
technology.
2. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, Norris Communications, Inc.
("NCI"), based in San Diego County, California.
The interim consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the discharge of
liabilities in the normal course of business for the foreseeable future. The
Company has incurred significant losses and negative cash flow from operations
in each of the last three fiscal years and for the three month period ended June
30, 1996 and has an accumulated deficit of $25,345,022 at June 30, 1996. The
Company's operational plan for fiscal 1997 contemplates developing markets for
its proprietary products and continued investment in research and related
expenditures. The Company's ability to continue as a going concern is in
substantial doubt and is dependent upon achieving a profitable level of
operations and, if necessary, obtaining additional financing.
These interim consolidated financial statements do not give effect to any
adjustments which would be necessary should the Company be unable to continue as
a going concern and therefore be required to realize its assets and discharge
its liabilities in other than the normal course of business and at amounts
different from those reflected in the accompanying interim consolidated
financial statements.
These interim consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and the instructions to Form 10-QSB. They do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. The interim consolidated financial
statements and notes thereto should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto for the year ended
March 31, 1996.
In the opinion of management, the interim consolidated financial statements
reflect all adjustments of a normal recurring nature necessary for a fair
statement of the results for interim periods. Operating results for the three
month period ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1997. The interim
consolidated financial statements and notes thereto are stated in U.S. dollars.
3. INVENTORY
Inventory is valued at the lower of cost or market, but not in excess of net
realizable value. Cost is determined on a first-in, first-out basis. Inventories
consist of the following:
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996
------------- --------------
<S> <C> <C>
Raw materials $1,320,537 $1,569,812
Work in process 429,669 194,437
Finished goods 1,605,371 1,478,996
---------- ----------
$3,355,577 $3,243,245
========== ==========
</TABLE>
6
<PAGE> 7
NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
4. DEMAND LOAN PAYABLE
The demand loan payable to CVD Financial Corporation in the amount of $3,000,000
plus accrued interest was retired on July 31, 1996.
5. COMMON STOCK
The following table summarizes shares issued during the period ended June 30,
1996:
<TABLE>
<CAPTION>
Shares Amount
---------- -----------
<S> <C> <C>
Balance, March 31, 1996 15,103,703 $21,762,337
Convertible notes and accrued interest
at prices ranging from $0.981 to $1.269 per share 4,366,051 3,033,773
Stock issued for accounts payable at $1.50 per share 85,000 127,500
Stock issued for services at $1.50 per share 48,000 72,000
Stock issued for cash at $0.70 per share net of
offering costs of $159,283 2,705,857 1,734,817
---------- -----------
Balance, June 30, 1996 22,308,611 $26,730,427
========== ===========
</TABLE>
6. WARRANTS
Represents proceeds from warrants pre-paid for cash net of offering costs of
$67,772. The face amount of the warrants of $805,900 is exercisable, without
further cash payment, into common shares of the Company at the lessor of: $0.69
per common share or a 30% discount to the 5 day moving average price of the
common shares on the day prior to exercise. The exercise price of the warrants
will be further discounted by 7% per year and for other events until the
warrants are exercised. At June 30, 1996, these warrants were exercisable into
approximately 1,151,000 common shares.
7. OPTIONS AND WARRANTS
At June 30, 1996, warrants were outstanding/exercisable into the following
listed shares:
<TABLE>
<CAPTION>
Number of Exercise Price
Description Shares U.S.$ Expiration Date
<S> <C> <C> <C>
Warrants 200,000 2.00 September 1998
Warrants 450,000 1.75 June 1999
Warrants 33,750 4.00 June 1999
Warrants 82,100 4.00 August 1999
Warrants (a) 106,986 2.01 February 2000
Warrants (a) 88,014 2.01 March 2000
Warrants 129,230 1.625 March 2001
Warrants (a) 128,067 1.25 October 2005
--------- ----- --------------
Total 1,218,147
=========
</TABLE>
(a) These warrants, amongst other provisions, contain a provision for
adjustment for dilutive events. The exercise prices and where applicable,
the number of warrants, have been adjusted to reflect any such events
through March 31, 1996.
7
<PAGE> 8
NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
7. OPTIONS AND WARRANTS (Continued)
The following table summarizes stock option activity for the period:
<TABLE>
<S> <C>
Outstanding at March 31, 1996 1,493,658
Granted 0
Exercised 0
Expired 0
Canceled (5,000)
Outstanding at June 30, 1996 1,488,658
</TABLE>
Options outstanding are exercisable at prices ranging from US $1.50 to US $6.01
and expire over a period from August 2, 1996 to April 3, 2000.
8. INCOME TAXES
The Company has not provided a tax provision for the current period, due to
current losses. The Company has U.S. net operating loss carryforwards of
approximately $9,462,000 and $4,991,000 for federal and state tax purposes,
respectively, subject to certain limitations.
9. NET LOSS PER SHARE
The net loss per share is calculated using a weighted average number of common
shares and common stock equivalents outstanding for the period. Common
equivalent shares consisting of outstanding stock options and warrants have been
excluded because their effect would be antidilutive.
10. SUBSEQUENT EVENTS
On July 31, 1996, the Company completed a private placement of warrants for
gross proceeds of $2,410,000 and on August 7, 1996 an additional $590,000. These
warrants have terms comparable to the warrants described in Note 6 above.
On July 25, 1996, the Company had a special shareholder meeting at which the
shareholders approved the increase in the authorized shares from 30 million to
60 million and authorized 5,000,000 shares of $.001 par value preferred stock.
The Company's Yukon articles were amended on July 30, 1996 for the increase in
authorized common shares. Since the Company is contemplating changing its
domicile from the Yukon territory, Canada to Delaware, no amendment has been
filed to the Yukon articles to reflect the preferred shares. The shareholders
also approved an increase in the shares available for granting of stock options
under the 1994 Stock Option Plan from a maximum of 500,000 shares to a maximum
of 4,000,000 shares.
------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Prior to the introduction of the FLASHBACK proprietary product in December 1994,
the revenues of the Company were generated by contract manufacturing. In fiscal
1996 contract manufacturing accounted for 18%
8
<PAGE> 9
of total revenues and 62% for the quarter ended June 30, 1996. The sale of
FLASHBACK products accounted for approximately 38% of revenues for the three
months ended June 30, 1996.
The Company has incurred operating losses in each of the past three fiscal years
and these losses have been material. The Company incurred an operating loss of
$8.3 million in fiscal 1996. This resulted primarily from FLASHBACK operations.
Since future results are dependent on proprietary product (FLASHBACK recorders
and new products) results, the Company's losses are expected to continue until
such time as the Company is able to manufacture and sell quantities of
proprietary products at sufficient margins to cover fixed costs of operations.
Should the Company be unable to accomplish the foregoing and operate profitably,
the Company may be forced to reduce or curtail operations. The Company continues
to be subject to the risks normally associated with any new business activity,
including unforeseeable expenses, delays and complications. Accordingly, there
is no assurance the Company can or will report operating profits in the future.
Since the Company utilizes its own facility and equipment for the manufacture of
proprietary products, gross margins are especially dependent upon sales volumes
as a result of a substantial fixed manufacturing overhead. The Company estimates
that its monthly fixed cash operating costs approximate $400,000 per month. At
low sales volumes it is unlikely that positive gross margins from proprietary
products can be achieved. However at higher volumes the allocation of fixed
costs over more sales can result in increasing gross margins. Accordingly, the
Company anticipates variances in gross margins from quarter to quarter in future
quarters as production is still in the early stages and product sales volumes
can vary as the various distribution channels are launched and as a result of
seasonal and other factors associated with the sale of consumer electronic
products.
Sales of and demand for the Company's FLASHBACK recorder have not met
management's expectations due to a variety of factors including competitive
pressure in the portable recording industry and insufficient financial resources
to differentiate the product from competitors. The Company has responded by
changing distribution channel emphasis to the high end business markets, by less
reliance on outside sales representatives and by education efforts aimed at
retailers and customers on the differences between FLASHBACK and less expensive
memo recorders. The scheduled introduction of the Company's VOICELINK computer
peripheral in the second fiscal 1997 quarter is expected to open new channels of
distribution and further differentiate the Company's product offerings. Sales
are expected to be subject to significant month to month variability resulting
from the limited market penetration achieved to date, the impact of new product
introductions and the seasonal nature of demand for consumer electronic
products. The markets for consumer electronic products are subject to rapidly
changing customer tastes and a high level of competition. Demand for the
Company's products is expected to be influenced by marketing and advertising
expenditures, product positioning in retail outlets, technological developments
and general economic conditions. Because these factors can change rapidly,
customer demand can also shift quickly. The Company may not be able to respond
to changes in customer demand because of the time required to change or
introduce products, production limitations and limited financial resources.
The Company is also engaged in OEM (Original Equipment Manufacturer) and
licensing activities in connection with its FLASHBACK technology. The Company
anticipates, but there can be no assurance, that OEM and licensing revenues will
become a significant component of future revenues of the Company.
Results of Operations
For the first three months of fiscal 1997, the Company reported revenues of
$153,726, 68% less than revenues of $478,732 for the first three months of
fiscal 1996. The decrease in revenues is due primarily to reduced FLASHBACK
sales comparable to the prior year. Sales for the prior period included some
initial stocking orders by retailers. A substantial portion of the Company's
FLASHBACK revenues have been derived from a limited number of customers. The
loss of certain large customers or a decline in the economic prospects of such
customers would have a further adverse effect on the Company.
For the first three months of fiscal 1997, the Company reported a gross loss of
$105,531 as compared to a gross loss of $988,233 for the first three months of
fiscal 1996. Gross losses are due to the minimal sales of the FLASHBACK product
while fixed manufacturing overhead related to cost of sales plus the cost of
product continue to exceed the revenues generated by sales. The first quarter of
fiscal 1996 cost of sales included $980,000 representing the cost of 7,000
discontinued FLASHBACK units sold in exchange for $1,172,500 of media trade
credits. The Company recognized no prepaid asset nor any revenue in connection
with the trade credits.
9
<PAGE> 10
Due to the Company's high manufacturing overhead, the Company expects to report
gross losses until product sales and/or margins improve sufficiently to cover
manufacturing overhead. The Company's strategies to produce positive margins
includes increasing volume of existing products and adding new products,
improving pricing, reducing manufacturing costs, obtaining additional contract
manufacturing business, and obtaining new revenues from the OEM and licensing
division. There can be no assurance the Company can achieve positive gross
margins in the future.
Total operating expenses (including research and related expenditures, selling
and administrative and interest expense less interest income) were $1.4 million
for the first quarter of fiscal 1997, the same as the first quarter of fiscal
1996. Selling and administrative expenses increased in the first quarter of
fiscal 1997 to $1,073,299 compared to $783,469 for the comparable period of the
prior year. The increase of $306,403 in the current quarter included an increase
in personnel and consulting of $232,000 due to primarily to additional sales and
marketing personnel, $35,000 related to a recently established office in the
U.K., and general increases in other administrative expenses as compared to the
prior period. Research and development costs were $212,000 for the first quarter
of fiscal 1997, as compared to $478,000 for the first quarter of fiscal 1996
which included $370,000 of FLASHBACK pre-production development costs. The
research and development costs associated with new products, although subject to
quarterly variations, are expected to continue at recent quarter levels.
The Company reported an operating loss of $1.5 million for the first quarter of
fiscal 1997, as compared to an operating loss of $2.4 million for the first
quarter of fiscal 1996.
Liquidity and Capital Resources
At June 30, 1996, the Company had working capital of $2.3 million, compared to
working capital of $1.1 million at March 31, 1996. The Company had approximately
$3.4 million of working capital invested in inventories at June 30, 1996,
compared to approximately $3.2 million at March 31, 1996 with the increase due
to FLASHBACK components for new products. The increase in working capital is a
result of the Company's financing activities offset by continuing losses which
consumed working capital during the period. Approximately $2.7 million in cash
was used in operating activities by the Company in the quarter ended June 30,
1996 which included a $1.4 million reduction in short-term debt.
During the quarter ended June 30, 1996, the Company made principal payments
aggregating $1,878,130 and on July 31, 1996, the Company retired the remaining
$307,416 obligation related to the demand loan payable to CVD Financial
Corporation. During the first fiscal quarter, $3 million of long-term
convertible notes, plus accrued interest, were converted into common stock. The
Company has no long-term debt nor any bank lines of credit or related financing
facilities. In July and August , 1996, the Company obtained equity from the sale
of pre-paid warrants for cash of $3 million.
The Company estimates that its cash position, adjusted for the items described
in the previous paragraph and assuming no increase in revenues, can provide the
Company with sufficient working capital for the next six months. If there is no
increase in revenues, expenditures and level of operations remain at prior
levels and there is no contribution from operations, the Company estimates it
would require a minimum of $2.4 million in the fourth quarter of fiscal 1997 to
continue operating for the next twelve months. The Company currently estimates
that additional funding could be obtained through increased sales of existing
and new products through new retail and OEM channels, success in obtaining
additional contract manufacturing business and the ability of the licensing
division to generate revenue, however there can be no assurances thereof.
The Company may, from time to time, seek additional funds through lines of
credit, public or private debt or equity financing. The Company might require
additional capital to finance future developments, new products, production,
marketing, acquisitions or extraordinary expansion of facilities in accordance
with its business strategy. There can be no assurances that additional capital
will be available when needed.
Changes in Cash
10
<PAGE> 11
For the three months ended June 30, 1996, net cash decreased by $2.3 million.
Cash used in operating activities was $2.7 million. Major components using cash
were a net loss of $1.4 million after depreciation, an increase in inventory of
$0.1 million, an increase in prepaid expenses of $0.1 million and a decrease in
other accounts payable and accruals of $1.4 million. The Company expended
$144,000 on new equipment during the quarter. The major component of cash
provided by financing activities was proceeds from issuance of shares of $2.5
million less $1.9 million used to reduce the obligation on the demand loan
payable.
Future Commitments and Financial Resources
The Company's future commitments are related to its capital and operating leases
(see audited financial statements for the fiscal year ended March 31, 1996).
These commitments are included in the cash requirements discussed above.
The Company is committed to purchase orders providing for the future delivery of
components in accordance with production schedules. Generally, these orders may
be canceled or extended should production schedules change, however, purchase
orders for customized components often involve vendors less willing to cancel
purchase orders although generally open to extensions or modifications which are
common to the industry. Since the Company's production schedules have been
extended, should production be further curtailed or cease, then the Company
could become liable for outstanding purchase orders and the liability could be
material.
If in the future, operations of the Company increase significantly, the Company
may require additional funds. The Company might also require additional capital
to finance future developments, acquisitions or extraordinary expansion of
facilities. The Company currently has no plans, arrangements or understanding
regarding any acquisitions.
Possible Inability to Continue as a Going Concern and Management's Plans for
Improving Operations
The Company has suffered recurring losses from operations. This factor, in
combination with (i) the Company's prior reliance upon debt to fund the
continuing, increasing losses from operations and cash flow deficits, (ii)
substantial inventory buildup during fiscal 1995 and fiscal 1996 consisting of
raw materials, components and finished product to be utilized in the manufacture
and sale of its FLASHBACK product and material decline in inventory turnover,
(iii) materially increased net losses and cash flow deficits from operations
during fiscal 1996 and (iv) the likelihood that the Company may be unable to
meet its debts as they come due, raise substantial doubt about the Company's
ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon its
ability to obtain adequate financing and achieve a level of revenues adequate to
support the Company's capital requirements, as to which no assurance can be
given. In the event the Company is unable to continue as a going concern, it may
elect or be required to seek protection from its creditors by filing a voluntary
petition in bankruptcy or may be subject to an involuntary petition in
bankruptcy. To date, management has not considered this alternative, nor does
management view it as a likely occurrence. Management has undertaken steps as
part of a plan to improve operations with the goal of sustaining Company
operations for the next twelve months and beyond. These steps include (i)
re-focusing the Company as a family of products, technology components and
software and not reliant on a single recoder product; (ii) expanding the retail
product offering by introducing a computer interface VoiceLink which allows the
FLASHBACK recorder to interact with a personal computer, and communicate with
other computers via the Internet; (iii) repositioning the core retail product,
the FLASHBACK recorder, at the computer peripheral and telephony markets; (iv)
building a sales and marketing infrastructure to focus on the computer retail
and OEM markets; and (v) upgrading and expanding the management team.
The Company's next generation retail product, the Mobile Office, is progressing
to market. The Mobile Office includes the Company's FLASHBACK recorder, 18 or 36
minute SOUNDCLIPS, the VoiceLink (which links the FLASHBACK to a personal
computer) and the related software. The Company is actively developing
distribution agreements for the Mobile Office. The Company is also progressing
with licensing and OEM opportunities, which management believes, could have a
positive impact on future operations.
11
<PAGE> 12
Another strategic change to improve operations and cash flows was the formation
of Primus Contract Manufacturing Services Inc., a wholly owned subsidiary formed
in June 1996 to utilize excess manufacturing capacity. The Company is actively
marketing contract services as a separate revenue source.
There can be no assurance the above steps or others will allow the Company to
improve operating results or achieve a profitable level of operations.
Effect of Recently Issued Accounting Standards
Recently issued accounting standards having relevant applicability to the
Company consist primarily of Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), which establishes standards for accounting for stock-based
compensation. SFAS No. 123 is effective for financial statements for fiscal
years beginning after December 15, 1995. It is not expected that the Company
will adopt the "fair value based method" of accounting for stock options, which
is encouraged by SFAS No. 123, but rather will continue to account for such,
utilizing the "intrinsic value based method" as is allowed by that statement.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1.1 Amendment to Articles and Certificate of Continuance of Norris
Communications Corp. (Yukon) dated July 29, 1996.
The above exhibits are filed herewith this Quarterly Report on Form 10-QSB.
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORRIS COMMUNICATIONS CORP.
Date: August 13, 1996 By: /s/Kathleen E. Terry
--------------------------------------
Kathleen E. Terry
Chief Financial Officer
(Principal Financial and Accounting
Officer and duly authorized to sign on
behalf of the Registrant)
12
<PAGE> 1
YUKON Exhibit 3.1.1
JUSTICE
BUSINESS CORPORATIONS ACT
(Section 30 or 179)
Form 5-01
ARTICLES OF AMENDMENT
1. Name of Corporation:
NORRIS COMMUNICATIONS CORP. Corporate Access #: 24223
2. The Articles of the above named corporation are amended pursuant to a
court order:
Yes No X .
--- ---
3. The articles of the above named corporation are amended as follows:
The authorized share capital is increased to 60,000,000 common
shares.
4. DATE SIGNATURE TITLE
29 July 1996 Lorne N Austring Solicitor
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
INTERIM STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 565,668
<SECURITIES> 0
<RECEIVABLES> 132,318
<ALLOWANCES> 11,647
<INVENTORY> 3,355,577
<CURRENT-ASSETS> 4,346,965
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,796,538
<CURRENT-LIABILITIES> 2,080,689
<BONDS> 0
0
0
<COMMON> 26,730,427
<OTHER-SE> 2,330,444
<TOTAL-LIABILITY-AND-EQUITY> 5,796,538
<SALES> 153,726
<TOTAL-REVENUES> 153,726
<CGS> 259,257
<TOTAL-COSTS> 259,257
<OTHER-EXPENSES> 1,284,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,480
<INCOME-PRETAX> (1,455,702)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,455,702)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,455,702)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
