<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
-
For quarterly period ended September 30, 1995
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 13,390,391
(Class) (Outstanding at November 13, 1995)
===============================================================================
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NORRIS COMMUNICATIONS CORP.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995 and
and March 31, 1995 (unaudited) 3
Consolidated Statements of Operations for the three and six
months ended September 30, 1995 and 1994 (unaudited) 4
Consolidated Statements of Cash Flows for the six months
ended September 30, 1995 and 1994 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
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 12
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K *
SIGNATURES 13
* No information provided due to inapplicability of the item.
2
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NORRIS COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 MARCH 31, 1995
$ $
--------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash -- 3,291,203
Accounts receivable, less allowance for doubtful
accounts of $200,000 and $210,000, respectively 139,866 152,673
Inventory (note 3) 4,013,156 2,663,403
Prepaid expenses and other 307,694 396,644
--------------------------------------
TOTAL CURRENT ASSETS 4,460,716 6,503,923
Property and equipment, net 1,504,529 1,742,796
Purchased goodwill, net of accumulated amortization of
$354,015 and $309,646, respectively 310,586 354,955
Other intangible assets, net of accumulated amortization of
$21,631 and $17,451 respectively 56,743 56,958
--------------------------------------
TOTAL ASSETS 6,332,574 8,658,632
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Note payable 3,132,646 3,000,000
Accounts payable, trade 2,710,742 1,234,574
Other accounts payable and accrued liabilities 19,853 410,539
Current portion of capital lease obligations 165,896 193,229
--------------------------------------
TOTAL CURRENT LIABILITIES 6,029,137 4,838,342
--------------------------------------
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 30,000,000
shares; 11,918,862 and 11,616,814 shares outstanding,
respectively (note 4) 18,180,054 17,849,751
Contributed surplus 1,592,316 1,592,316
Deficit (19,468,933) (15,621,777)
--------------------------------------
TOTAL STOCKHOLDERS' EQUITY 303,437 3,820,290
--------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 6,332,574 8,658,632
======================================
</TABLE>
See notes to interim consolidated financial statements
3
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NORRIS COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
$ $ $ $
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
REVENUES 327,871 1,217,471 806,603 2,434,004
Cost of sales 725,440 1,480,583 2,192,405 2,967,882
------------------------------ ------------------------------
Gross loss (397,569) (263,112) (1,385,802) (533,878)
------------------------------ ------------------------------
OPERATING EXPENSE (INCOME)
Selling and administrative 912,264 1,268,121 1,695,733 2,447,109
Research and related expenditures 126,365 169,611 604,090 333,088
Interest expense 57,406 62,511 181,940 71,472
Interest income (4,224) (625) (20,409) (751)
------------------------------ ------------------------------
1,091,811 1,499,618 2,461,354 2,850,918
------------------------------ ------------------------------
Operating loss (1,489,380) (1,762,730) (3,847,156) (3,384,796)
Provision for income taxes -- -- -- --
------------------------------ ------------------------------
NET LOSS (1,489,380) (1,762,730) (3,847,156) (3,384,796)
============================== ==============================
Net loss per share (0.13) (0.23) (0.33) (0.46)
============================== ==============================
Weighted average shares 11,710,529 7,702,231 11,697,517 7,315,147
============================== ==============================
</TABLE>
See notes to interim consolidated financial statements
4
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NORRIS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
For the six months ended September 30
<TABLE>
<CAPTION>
1995 1994
OPERATING ACTIVITIES $ $
--------------- --------------
<S> <C> <C>
Net loss (3,847,156) (3,384,796)
Adjustments to reconcile net loss to net cash
used by operating activites:
Depreciation and amortization 255,229 253,887
Loss from sales of assets 38,550
Changes in assets and liabilities:
Accounts receivable 12,807 258,074
Inventory (1,349,753) (705,475)
Prepaid expenses and other 88,950 (385,270)
Accounts payable, trade 1,476,168 624,225
Other accounts payable and accrued liabilities (390,686) (12,912)
-------------- ------------
Cash used in operating activities (3,715,891) (3,352,267)
-------------- ------------
INVESTING ACTIVITIES
Purchase of property and equipment (35,263) (161,104)
Proceeds on sale of assets 28,300
Investment in patents and intangibles (3,965) (27,933)
-------------- ------------
Cash used in investing activities (10,928) (189,037)
-------------- ------------
FINANCING ACTIVITIES
Advances under operating line of credit 132,646 2,220,000
Principal payments on capital lease obligations (27,333) (32,867)
Repayment of note payable -- (31,250)
Proceeds from issuance of shares 330,303 20,621
-------------- ------------
Cash provided by financing activities 435,616 2,176,504
============== ============
Net decrease in cash (3,291,203) (1,364,800)
-------------- ------------
Cash, beginning of period 3,291,203 1,459,526
-------------- ------------
Cash, end of period -- 94,726
============== ============
SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION:
Cash paid during the period for:
Interest 181,940 71,472
</TABLE>
See notes to interim consolidated financial statements
5
<PAGE> 6
NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 1995
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 jurisdiction of incorporation from British Columbia to the Yukon Territory,
Canada. The Company is engaged through its subsidiary in the development,
manufacture and marketing of electronic products.
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 flows from operations
in six of its past seven fiscal years and for the six month period ended
September 30, 1995. The Company's ability to continue as a going concern is in
substantial doubt and is dependent upon obtaining additional financing and
achieving a profitable level of operations.
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. They do not include all information and footnotes
required by generally accepted accounting principles. 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, 1995.
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 six
month period ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1996. 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>
September 30, 1995 March 31, 1995
------------------ --------------
<S> <C> <C>
Raw materials $1,712,539 $1,396,112
Work in process 109,958 444,192
Finished goods 2,190,659 823,099
- -------------------------------------------------------------------------------
$4,013,156 $2,663,403
===============================================================================
</TABLE>
6
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NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 1995
4. COMMON STOCK
The following table summarizes shares issued and outstanding:
<TABLE>
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
Balance March 31, 1995 11,616,814 $17,849,751
Stock options exercised 15,000 30,303
Stock issued 287,048 300,000
- -------------------------------------------------------------------------------
Balance September 30, 1995 11,918,862 $18,180,054
===============================================================================
</TABLE>
5. OPTIONS AND WARRANTS
At September 30, 1995 warrants and stock options were outstanding/exercisable
into the following listed shares:
<TABLE>
<CAPTION>
Number of Exercise Price
Description Shares U.S.$ Cdn. $ Expiration Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warrants 115,000 $3.76 * February 1996
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 106,986 $2.25 * February 2000
Warrants 88,014 $2.25 * March 2000
- -------------------------------------------------------------------------------
Total 1,075,850
===============================================================================
Stock options 56,000 $3.65 * August 1996
Stock options 15,000 $2.00 * September 1996
Stock options 2,000 $4.47 $6.01 January 1997
Stock options 60,000 $3.38 * April 1997
Stock options 287,818 $2.11 $2.84 August 1997
Stock options 100,000 $2.00 * September 1997
Stock options 150,000 $1.50 * October 1998
Stock options 181,000 $2.11 $2.84 November 1998
Stock options 129,840 $3.65 * August 1999
Stock options 512,000 $3.38 * April 2000
- -------------------------------------------------------------------------------
Total 1,493,658
===============================================================================
</TABLE>
* These warrants and options are denominated in U.S. dollars. All other
options are denominated in Canadian dollars with the U.S. dollar
equivalent computed at the exchange rate in effect on September 30,
1995.
6. 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 $8,028,000 and $4,285,000 for federal and state tax purposes,
respectively, subject to certain limitations.
7
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NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 1995
7. INVESTMENT IN JABRA CORPORATION
The Company owns 1,800,000 common shares of JABRA or 23.2% (1994-1,800,000
common shares or 33.5%) of JABRA's common shares. Effective July 15, 1993, JABRA
has been accounted for under the cost method and at September 30, 1995 the
carrying value was nil.
8. 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.
9. SUBSEQUENT EVENTS
On or about October 26, 1995, the Company completed a private placement of
1,280,667 common shares with gross cash proceeds to the Company of $1.7 million.
Auerbach, Pollak & Richardson, Inc. ("Auerbach") acted as placement agent. The
Company paid a 7.0% commission, costs and issued 128,067 warrants to Auerbach in
connection with the private placement.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Prior to the introduction of the FLASHBACK recorder in December 1994, the
revenues of the Company were generated by contract manufacturing. Contract
manufacturing accounted for over 90% of total revenues in fiscal 1995. However,
as a result of the termination of certain contract manufacturing services, the
reconfiguration of manufacturing to accommodate FLASHBACK production and other
changes described in this report, the Company anticipates that proprietary
products, i.e. FLASHBACK, will account for the majority of revenues in fiscal
1996. As a result of these changes and the introduction of FLASHBACK prior
operating results are not indicative of future results.
The Company has incurred operating losses in six of its past seven years and
these losses have been material. The Company incurred an operating loss of $7.1
million in fiscal 1995. This resulted from the development and launch of the
FLASHBACK and losses incurred in contract manufacturing operations. Since future
results are primarily dependent on FLASHBACK results, the Company's losses are
expected to continue until such time as the Company is able to manufacture and
sell quantities at sufficient margins to cover fixed costs of operations. The
Company's inability to accomplish the foregoing would have a material adverse
effect on the Company's ability to operate profitably and without sufficient
financial resources in the future, 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
FLASHBACK 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 operating costs approximate $300,000 per month. At low
sales volumes it is unlikely that positive gross margins from FLASHBACK 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 fiscal 1996 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.
Demand for the Company's FLASHBACK recorder is uncertain as the Company is in
the early stages of entering various marketing channels. Sales are expected to
be subject to significant month to month variability resulting from the limited
market penetration achieved to date 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 FLASHBACK 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.
On November 10, 1995, the Company announced an Original Equipment Manufacturer
(OEM) sales division had been created to meet the demand for the FLASHBACK
technology. The three goals are to (1) license the microprocessor and software,
(2) design and manufacture custom products, and (3) offer private label branding
of current Company products. Also, the Company announced the availability of the
Norris FlashFile System as a development tool for individuals and companies
preparing to use Flash memory in their systems and/or products. Norris' system
stores and manipulates data using a file manager API, and supports compressed
voice, image, or video as well as conventional file data.
Results of Operations
Revenues of $0.3 million for the second quarter of fiscal 1996 decreased by
73.1% from revenues of $1.2 million for the second quarter of fiscal 1995. For
the first six months of fiscal 1996, the Company reported revenues of $0.8
million, significantly lower than revenues of $2.4 million for the first six
months of fiscal
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1995. A portion of the decrease in revenues was due to the unanticipated minimal
and deferral of FLASHBACK orders. Fiscal 1996 revenues were primarily from the
operations and sales of the FLASHBACK. Fiscal 1995 revenues were primarily from
the operations of the contract manufacturing business. A substantial portion of
the Company's revenues have been derived primarily 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 material adverse effect on the Company.
Gross loss was $0.4 million or 121% of revenues in the second quarter of fiscal
1996, compared to a gross loss of $0.3 million or 22% in the second quarter of
fiscal 1995. For the first six months of fiscal 1996, the Company reported gross
loss of $1.4 million or 172% of revenues, as compared to a gross loss of $0.5
million or 22% for the first six months of fiscal 1995. During the first six
months of fiscal 1996, the decrease in gross profit was due to the Company's
cessation of contract manufacturing and minimal sales of the FLASHBACK product
while fixed overhead expenses related to cost of sales plus the cost of product
were greater than the revenues generated by the sales of Flashback. In the first
fiscal quarter of 1996 cost of sales included $980,000 representing the cost of
7,000 discontinued FLASHBACK units sold to Active Media Services, Inc., an
independent media trading firm. These units were 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 since their use requires certain matching
cash payments and the Company's ability to continue as a going concern is in
substantial doubt. Management believes the credits have very limited future
value in planned operations and intends to recognize future revenue from the
trade credits only when ascertainable economic value is realized from their use.
During the first six months of fiscal 1995, sales were from contract
manufacturing, in which high costs resulted from accepting lower margin turnkey
and consignment orders and an increased mix of through-hole printed circuit
boards which required more hand placement of components (which increased labor
costs with no corresponding increase in revenues).
Total operating expenses (including research and related expenditures, selling
and administrative and interest expense less interest income) were $1.1 million
for the second quarter of fiscal 1996 as compared to $1.5 million for the second
quarter of fiscal 1995. For the first six months of fiscal 1996, operating
expenses were $2.5 million, as compared to $2.9 million in fiscal 1995. The
reduction of these operating expenses was primarily due to an effort to reduce
expenses, while manufacturing and selling the FLASHBACK. The material changes
and reasons for the changes from the first six months of fiscal 1996 compared to
the first six months of fiscal 1995 were: a decrease in legal and settlements of
$299,000 (the decrease was due to a reduction of settlements and legal fees
being paid in the current fiscal year), a decrease in salaries of $127,000 (the
Company is in continuing efforts to reduce salaries), a decrease in finders fee
of $124,000 (a large line of credit was established in the prior year where a
finders fee was paid), and a decrease in public relations of $71,000 (the
Company has primarily focused on advertising and reduced public relations
efforts). These decreases were offset by increases in research and development
during the first fiscal quarter of 1996.
Research and development costs (associated with new product development) were
$126,000 for the second quarter of fiscal 1996, as compared to $170,000 for the
second quarter of fiscal 1995. For the first six months of fiscal 1996, research
and development costs were $604,000, as compared to $333,000 for the first six
months of fiscal 1995. The increased levels in research and development
associated with FLASHBACK, although subject to quarterly variations, are
expected to continue at higher levels than the prior year.
The Company reported an operating loss of $1.5 million for the second quarter of
fiscal 1996, as compared to an operating loss of $1.8 million for the second
quarter of fiscal 1995. For the first six months of fiscal 1996, the Company
reported an operating loss of $3.8 million, as compared to an operating loss of
$3.4 million for the first six months of fiscal 1995.
Liquidity and Capital Resources
At September 30, 1995, the Company had a working capital deficit of $1.6
million, compared to working capital of $1.7 million at March 31, 1995. The
Company had approximately $4.0 million of working capital invested in
inventories at September 30, 1995, compared to approximately $2.7 million at
March 31, 1995 with the increase due to FLASHBACK components. The decrease in
working capital is a result of the Company's continuing losses, which have been
funded by working capital. The Company has exhausted its
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available credit under its credit line which was converted to a fixed note, as
discussed below. Approximately $1.1 million in working capital was expended by
the Company in the quarter ended September 30, 1995 and management estimates
that approximately $1.0 million in working capital will be expended in the
quarter ended December 31, 1995. The Company's current cash position is
insufficient to enable the Company to meet either its obligations to creditors
or its on-going expenses.
On October 17, 1995, the Company executed a Loan Modification Agreement with CVD
Financial Corporation ("CVD"), regarding the line of credit. The Loan
Modification Agreement, which had an effective date of August 1, 1995, provided
for (i) the extension of the maturity date of the loan (the "Loan") to January
31, 1996, (ii) a reduction in the interest rate charged by CVD from prime rate
plus seven percent (7%) to prime rate plus two percent (2%), (iii) the waiver by
CVD of certain events of default which had occurred, including the Company's
failure to make interest payments due June 1, July 1, and August 1, 1995 in the
aggregate of $122,146 and to pay the entire balance of the Loan at its original
maturity on July 31, 1995, (iv) the issuance of 75,000 shares of the Company's
common stock, to CVD, (v) the issuance of a new warrant to CVD to purchase
200,000 shares of Common Stock at $2.00 per share, (vi) the repricing of
existing warrants to purchase 450,000 shares of Common Stock to $1.75 per share,
(vii) the issuance of an option to acquire up to 300,000 shares of JABRA
Corporation ("JABRA") common stock at a price of $1.50 per share, (viii) the
grant of certain conversion rights to CVD to enable CVD to convert at anytime
prior to repayment all or any portion of the outstanding principal balance of
the Loan (including accrued but unpaid interest) into shares of Common Stock at
the lesser of (a) $1.50 per share or (b) following the occurrence of an event of
default, the higher of $1.00 per share and the average closing price for the 20
days preceding the date of notice of an event of default, and (ix) in the event
CVD becomes the holder of not less than 1,000,000 shares of Common Stock, to
nominate and appoint one director to the Company's board of directors.
Substantially all of the assets of the Company and its subsidiary (including
JABRA shares) are pledged to CVD as collateral for the amounts loaned and the
Company is prohibited from incurring additional indebtedness without CVD's prior
consent. In addition, as a result of the loan modification agreement, the loan
is low non-revolving (i.e. no additional funds may be borrowed prior to maturity
and 33% of the net proceeds from any equity financing must be used to pre-pay
the loan.
On October 17, 1995, the Company paid CVD $429,000, reducing the outstanding
balance of the Loan to $2,703,646.
Accordingly, the Company will require additional capital (and a replacement or
refinancing of the CVD loan) during fiscal 1996 to meet its debts as they become
due and to continue as a going concern. The Company will also require additional
working capital to finance production and sales of FLASHBACK. Successful
commercialization of FLASHBACK could require additional working capital for
promotion and advertising. The Company estimates that planned expenditures and
projected working capital requirements will require a minimum of an additional
$3 million (in addition to the $2.7 million required to refinance the CVD loan)
to continue operating for the next twelve months. Should FLASHBACK sales take
more time to develop, then additional funds may be required as substantial
resources are currently invested in inventory in anticipation of FLASHBACK
sales. The existing business may be able to generate some of the additional $3
million required depending on FLASHBACK results, however there can be no
assurance thereof. The Company is currently pursuing various alternatives to
meet its needs for additional capital and refinancing of existing debt. There
can be no assurance the Company will be successful and any such financing may be
dilutive to current shareholders. The failure to refinance existing debt or
raise additional funds could have a material adverse effect on the Company and
could force the Company to reduce or curtail operations.
The Company may, from time to time, seek additional funds through additional
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
For the six months ended September 30, 1995, net cash decreased $3.3 million.
Cash used in operating activities was $3.7 million. Major components using cash
were a net loss of $3.8 million, increase in inventory of $1.3 million, and a
decrease in other accounts payable of $0.4 million. The increase in inventory
11
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resulted from a build-up of finished goods inventory. Major components providing
cash were an increase in accounts payable of $1.5 million and depreciation and
amortization of $0.3 million. The major component of cash provided by financing
activities was proceeds from issuance of shares of $0.3 million.
Possible Inability to Continue as a Going Concern.
The Company has suffered recurring losses from operations and has a working
capital deficit at September 30, 1995. This factor, in combination with (i) the
Company's exhaustion of it's presently existing line of credit, (ii) the
Company's substantial reliance upon such lines of credit to fund the continuing,
increasing losses from operations and cash flow deficits, (iii) 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, (iv)
materially increased net losses and cash flow deficits from operations during
fiscal 1995 and first and second quarters of 1996 and (v) 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.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders on September 28, 1995, the
following members were elected to the Board of Directors:
Elwood G. Norris
Robert Putnam
R. Gordon Root
The following proposals were approved at the Company's Annual Meeting:
<TABLE>
<CAPTION>
Affirmative Negative Votes
Votes Votes Withheld
--------------------------------
<C> <C> <C> <C>
1. To confirm, By-Laws No. 1 2,450,037 36,700 36,640
2. To increase authorized common shares 2,418,192 75,885 29,300
to 30,000,000
3. Appointment of Ernst & Young, Chartered 2,506,077 8,700 8,600
Accountants, as auditors of the Company
</TABLE>
12
<PAGE> 13
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: June 11, 1996 By: /s/ Kathleen E. Terry
----------------------------------
Kathleen E. Terry
(Principal Financial and Accounting
Officer and duly authorized to sign on
behalf of the Registrant)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains sumary financial information extracted from (A) unaudited
Restated Interim Statements for the six months ended September 30, 1995 and is
qualified in its entirety by reference to such (B) Quarterly report on Form
10-QSB/A for the quarterly period ended September 30, 1995.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 339866
<ALLOWANCES> 200000
<INVENTORY> 4013156
<CURRENT-ASSETS> 4460716
<PP&E> 1504529
<DEPRECIATION> 0
<TOTAL-ASSETS> 6332574
<CURRENT-LIABILITIES> 6029137
<BONDS> 0
0
0
<COMMON> 18180054
<OTHER-SE> 1592316
<TOTAL-LIABILITY-AND-EQUITY> 6332574
<SALES> 806603
<TOTAL-REVENUES> 806603
<CGS> 2192405
<TOTAL-COSTS> 2299823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181940
<INCOME-PRETAX> (3847156)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3847156)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3847156)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
