<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
NORRIS COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
Norris Communications, Inc.
13114 Evening Creek Drive South
San Diego, CA 92128
November 14, 1997
Re: Message from the President
Dear Stockholder:
The purpose of this letter is to emphasize the importance to you as a Norris
Communications, Inc. Stockholder of the successful passage of the measures
detailed in the attached Proxy Statement for our Annual Meeting. It is
critically important to the future operations of the Company that we have
sufficient authorized shares of common stock to meet our current obligations and
for future use to further develop the Company.
As you know, I was appointed President in January 1997 during difficult
financial circumstances. Since that time we have restructured operations and
dramatically reduced operating costs. The enclosed Quarterly Report on Form
10-QSB for the second quarter ended September 30, 1997 shows a reduction in
operating costs from $2,857,336 in the prior year's first six months to $678,175
in the current first six months. We have also dramatically reduced our operating
losses by exiting direct manufacturing and focusing on OEM sales and licensing
of our exciting digital recording and processing technology.
The Company has made important business progress as outlined in the enclosed
Annual Report on Form 10-KSB. We have expanded our original private labeling
agreement with Sanyo for all of Europe. We have also passed important contract
milestones contained in our OEM product development agreement with Lanier
Worldwide, Inc. These agreements provide the foundation for exploiting our
proprietary technologies. We are also developing exciting new technology called
Flashback Audio(TM), designed for CD-quality music playback using SanDisk's
CompactFlash(R) memory.
During the last several months we aggressively worked to restructure our equity.
We negotiated a floor on the exercise price of outstanding prepaid warrants
(more fully described in the Proxy Statement) to remove the uncertainty about
our share structure. This occurrence made the recent preferred stock financing
possible (also described in the Proxy Statement). This financing was critically
needed and provides working capital for our agreements with Sanyo and Lanier and
funds to develop Flashback Audio. However, the agreements we have reached to
restructure our equity requires a VOTE FOR Proposal #3 to increase the
authorized shares of common stock from 60,000,000 to 120,000,000 shares. Failure
of this Proposal would nullify many of the advantages contained in recent
agreements.
The Company does not have sufficient authorized and unissued shares of common
stock to meet its current obligations. Nor does the Company have any authorized
and unissued shares of common stock to raise additional money in the future, if
required, respond to business opportunities, seek corporate or strategic
partners or to attract and retain talented employees. We will need additional
technical personnel to carry out our business plan and in the highly competitive
San Diego market, stock-based incentives are an important component of
compensation.
Failure of Proposal #3 to pass could have serious negative consequences to the
Company. Prepaid warrant holders may nullify terms of existing agreements, the
mandatory redemption provisions of preferred stock will accelerate, and the
Company could become exposed to significant cash payments to secured note
holders. The Company additionally would be required to continue to hold
<PAGE> 3
additional stockholder meetings or consent solicitations in an attempt to obtain
approval for the proposed increase. These efforts are costly and divert
important management time from the operations of the business.
The Board of Directors believes that the Company's ability to continue as a
going concern could be jeopardized by the failure of Proposal #3 and this could
have a significant detrimental effect on the holders of the Company's common
stock. The Board of Directors urge you to VOTE FOR the proposals described in
the Proxy Statement. With respect to Proposal #3, a NON-VOTE IS EQUIVALENT TO A
NO VOTE thereby reducing the chance of passage.
Unless you plan to attend the Annual Meeting in person, please review the
enclosed Proxy Statement carefully, complete and sign the enclosed Proxy to
indicate whether you approve or disapprove of the proposals therein. YOUR
RESPONSE SHOULD BE RECEIVED NO LATER THAN THE JANUARY 5, 1998 MEETING DEADLINE
IN ORDER THAT YOUR VOTE BE CONSIDERED. MOREOVER, WE REQUEST THAT YOU RESPOND
PROMPTLY TO ASSIST US IN TABULATING THE PROXIES.
With the matters described herein successfully behind us, management can focus
on building stockholder value and operating the business. If you have any
questions, please contact our Corporate Secretary, Robert Putnam, or me at
619-679-1504.
Sincerely,
/s/ Alfred H. Falk
- --------------------------
Alfred H. Falk
President
<PAGE> 4
NORRIS COMMUNICATIONS, INC.
13114 EVENING CREEK DRIVE SOUTH, SAN DIEGO, CALIFORNIA 92128
TELEPHONE - (619) 679-1504
FACSIMILE - (619) 486-3922
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 5, 1998
TO THE STOCKHOLDERS OF
NORRIS COMMUNICATIONS, INC.
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Norris Communications, Inc., a Delaware corporation (the
"Company"), will be held at the Rancho Bernardo Inn, located at 17550 Bernardo
Oaks Drive, San Diego, California 92128, on Monday, January 5, 1998, beginning
at 2:00 p.m. local time. The Annual Meeting will be held for the following
purpose:
1. To elect directors of the Company to serve as directors until the annual
meeting of stockholders to be held in 1998, until such directors'
successor has been duly elected and qualified or until such directors
have otherwise ceased to serve as directors.
2. To approve an amendment to the Company's 1994 Stock Option Plan to
increase the number of shares reserved for issuance thereunder by
6,000,000 to an aggregate of 10,000,000 shares.
3. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of shares of common stock, $.001 par value, that the
Company is authorized to issue from 60,000,000 to 120,000,000.
4. To ratify the appointment of Ernst & Young as independent accountants
for the Company for the fiscal year ending March 31, 1998.
5. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
The Board of Directors has fixed November 14, 1997 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any postponements or adjournments thereof, and only
stockholders of record at the close of business on that date are entitled to
such notice and to vote at the Annual Meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available at the offices of the Company
for ten (10) days prior to the Annual Meeting.
We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the Annual
Meeting either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN
ONE PROXY CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
By Order of the
Board of Directors
/s/ ALFRED H. FALK
------------------------------
ALFRED H. FALK
President
San Diego, California
November 20, 1997
<PAGE> 5
NORRIS COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 5, 1998
The undersigned stockholder of Norris Communications, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated November 20, 1997, and hereby
appoints Elwood G. Norris, Alfred H. Falk and Robert Putnam, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1997 Annual Meeting of Stockholders of Norris Communications, Inc., to be held
on January 5, 1998, at 2:00 p.m., local time, at the Rancho Bernardo Inn,
located at 17550 Bernardo Oaks Drive, San Diego, California 92128, and at any
adjournment thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
1. ELECTION OF DIRECTORS: ____ FOR all nominees listed below ____ WITHHOLD
AUTHORITY to vote
(except as indicated) for all nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the following list:
Elwood G. Norris, Alfred H. Falk and Robert Putnam.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 6,000,000
TO AN AGGREGATE OF 10,000,000 SHARES.
___ FOR ___ AGAINST ___ ABSTAIN
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK, $.001 PAR
VALUE, THAT THE COMPANY IS AUTHORIZED TO ISSUE FROM 60,000,000 TO
120,000,000.
___ FOR ___ AGAINST ___ ABSTAIN
4.PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG, AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 1998:
___ FOR ___ AGAINST ___ ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting or any adjournment thereof.
(Continued on reverse side)
<PAGE> 6
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION AND NO
ABSTENTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 6,000,000 SHARES TO AN
AGGREGATE OF 10,000,000 SHARES, FOR THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK, $.001 PAR VALUE, THAT THE COMPANY IS AUTHORIZED TO ISSUE FROM
60,000,000 TO 120,000,000, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG, AS INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE TELEPHONE NUMBER OF THE
COMPANY IS (619) 679-1504 AND ITS FACSIMILE NUMBER IS (619) 486-3922.
DATED: , 19
----------------------- ----
--------------------------------------
Signature
--------------------------------------
Signature
(This Proxy should be marked, dated and
signed by the stockholder(s) exactly
as his or her name appears hereon, and
returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held by
joint tenants or as community property,
both should sign).
NORRIS COMMUNICATIONS, INC.
13114 EVENING CREEK DRIVE SOUTH, SAN DIEGO, CALIFORNIA 92128
TELEPHONE - (619) 679-1504
FACSIMILE - (619) 486-3922
<PAGE> 7
PRELIMINARY COPY
NORRIS COMMUNICATIONS, INC.
13114 EVENING CREEK DRIVE SOUTH
SAN DIEGO, CALIFORNIA 92128
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 5, 1998
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Norris Communications, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 2:00 p.m., local time, on January 5, 1998, and
any postponements or adjournments thereof for the purposes set forth in the
accompanying Notice of Annual Meeting. The telephone number of the Company is
(619) 679-1504 and its facsimile number is (619) 486-3922. This Proxy Statement
and the accompanying form of proxy were first mailed to stockholders on or about
November 20, 1997.
RECORD DATE AND VOTING
November 14, 1997 has been fixed as the record date (the "Record Date")
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting, and any postponements or adjournments thereof. As of November
14, 1997, there were 56,413,405 shares of the Company's common stock, $.001 par
value per share (the "Common Stock"), issued and outstanding. A total of 99,500
shares of the Company's preferred stock, $.001 par value per share, were
outstanding as of that date with such shares entitled to cast 114.28571 votes
per preferred share or 11,371,428 votes in the aggregate. A majority of the
shares entitled to vote, present in person or represented by proxy, will
constitute a quorum at the meeting.
Each share of Common Stock issued and outstanding on the Record Date is
entitled to one vote on any matter presented for consideration and action by the
stockholders at the Annual Meeting. Each share of Preferred Stock is entitled to
cast a number of votes equal to the number of shares of Common Stock into which
the Preferred Stock is then convertible. With respect to all matters other then
the election of directors and the proposed amendment to the Company's
Certificate of Incorporation, the affirmative vote of a majority of the voting
shares present in person or represented by proxy at the meeting and entitled to
vote on the subject matter will be the act of the stockholders. Directors will
be elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote on the election of directors. The
matter of the proposed amendment to the Company's Certificate of Incorporation,
requires the affirmative vote of a majority of the outstanding shares of Common
Stock on the record date, the Preferred Stock shall not vote on this matter.
Abstentions will be treated as the equivalent of a negative vote for the purpose
of determining whether a proposal has been adopted and will have no effect for
the purpose of determining whether a director has been elected. Unless otherwise
instructed, proxies solicited by the Company will be voted "FOR" the nominees
named herein for election as directors, "FOR" the approval of an amendment to
the Company's 1994 stock option plan (the "Plan") to increase the number of
shares reserved for issuance thereunder by 6,000,000 shares to an aggregate of
10,000,000 shares, "FOR" the approval of an amendment to the Company's
Certificate of Incorporation to increase the number of shares of Common Stock,
$.001 par value, that the Company is authorized to issue from 60,000,000 to
120,000,000, and "FOR" the ratification of the selection of Ernst & Young to
provide audit services to the Company for the fiscal year ending March 31, 1998.
New York Stock Exchange Rules ("NYSE Rules") generally require that when
shares are registered in street or nominee name, its member brokers must receive
specific instructions from the beneficial owners in order to vote on certain
proposals. However, the NYSE Rules do not require specific instructions in order
for a broker to vote on the election of directors. If a member broker indicates
on the proxy that such broker does not have discretionary authority as to
certain shares to vote on any proposal that does require specific instructions,
those shares will not be considered as present and entitled to vote with respect
to that matter. Pursuant to Delaware law, a broker non-vote will not be treated
as present or voting in person or by proxy on the proposal. A broker non-vote
will have no effect for the purpose of determining whether a director has been
elected.
1
<PAGE> 8
A stockholder giving a proxy has the power to revoke it at any time
before it is exercised by giving written notice of revocation to the Secretary
of the Company, by executing a subsequent proxy, or by attending the Annual
Meeting and voting in person. Subject to any such revocation, all shares
represented by properly executed proxies will be voted in accordance with the
specifications on the enclosed proxy card.
ELECTION OF DIRECTORS
The Company's bylaws state that the Board of Directors shall consist of
not less than four nor more than seven members. The specific number of Board
members within this range is established by the Board of Directors and is
currently set at four. A vacancy was created on or about June 1997 with the
resignation of Michael Joe from the Board of Directors. Since the Company has
yet to recruit a suitable replacement for Mr. Joe, a Board of three directors
with one vacancy, will be elected at the Annual Meeting. Unless otherwise
instructed, proxy holders will vote the proxies received by them for the
Company's three nominees named below. In the event that any nominee of the
Company is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. In no event will proxies be
voted for a greater number of persons than the number of nominees named. It is
not expected that any nominee will be unable or will decline to serve as a
director. The term of office of each person elected as a director will continue
until the next annual meeting of stockholders and such time as his or her
successor is fully elected and qualified or until his or her earlier
resignation, removal or death. The nominees have supplied the following
background information to the Company:
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Elwood G. Norris 59 Chairman of the Board and Chief Executive 1988
Officer of the Company since 1988
Alfred H. Falk 42 President of the Company since 1997 1997
Robert Putnam 39 Vice President and Secretary of the 1995
Company since 1988
</TABLE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE ABOVE NOMINEES.
MANAGEMENT
Set forth below is certain information with respect to each of the
nominees for the office of director, each director whose term of office will
continue after the Annual Meeting and each executive officer of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Elwood G. Norris 59 Chairman of the Board and Chief Executive Officer
Alfred H. Falk 42 President and Director
Robert Putnam 39 Vice President, Secretary and Director
Renee Warden 33 Controller
</TABLE>
Elwood G. Norris - Mr. Norris has been Chairman of the Board of
Directors of the Company since 1988. From 1988 to October 1995, he was President
and Chief Executive Officer. In October 1995 he was appointed Chief Technology
Officer and in January was reappointed as Chief Executive Officer. Since 1980,
Mr. Norris has also been a Director of American Technology Corporation ("ATC")
and served as its President and Chief Executive Officer until February 1994. He
is currently Chief Technology Officer of ATC. ATC is a publicly held consumer
electronic products Company, from which the Company acquired JABRA Corporation
("JABRA"). Since August 1989, he has served as director of Patriot Scientific
Corporation ("Patriot") and served as Chairman and Chief Executive Officer until
June 1994. From June 1995 until June 1996 when he was reappointed Chairman,
Mr. Norris served as temporary President and Chief Executive Officer of Patriot.
Patriot is a public company engaged in the development of microprocessor
technology, digital modem products and radar and antenna engineering. He
invented the patented EarPHONE technology
2
<PAGE> 9
owned by JABRA and is the primary inventor of the Company's digital recording
technology. Mr. Norris devotes only part-time services to the Company,
approximately twenty hours per week.
Alfred H. Falk - Mr. Falk was appointed President and a Director of the
Company in January 1997. From March, 1995, prior to his appointment as
President, he served as Vice President, Business Development and Vice President
of OEM and International Sales of the Company. Before joining the Company,
Mr. Falk was with Resources Internationale where he served as Director of U.S.
Sales from 1993 to 1995. From 1988 to 1993, Mr. Falk was the Manager of OEM
Sales and Technology Licensing for Personal Computer Products, Inc. in San
Diego. From 1978 to 1988 Mr. Falk held several management positions at DH
Technology and was instrumental in its successful start up. Mr. Falk attended
Palomar College in San Marcos and Foothill College in Los Altos, California.
Robert Putnam - Mr. Putnam was appointed Secretary of the Company in
March 1988, and Vice President in April 1993. He was appointed a director of the
Company in 1995. He served as a director of ATC from 1984 to September 1997 and
served as Secretary/Treasurer until February 1994, President and Chief Executive
Officer from February 1994 to September 1997 and currently serves as Vice
President, Treasurer and Assistant Secretary of ATC. He has also served as
Secretary/Treasurer and a director of Patriot since 1989. Mr. Putnam obtained a
B.A. degree in mass communications/advertising from Brigham Young University in
1983. Mr. Putnam devotes only part-time services to the Company, approximately
ten hours per week.
Renee Warden - Ms. Warden was appointed Controller of the Company in
June 1997. From November 1991 to June 1997 she was Accounting Manager for the
Company. Since 1993 she has attended Palomar College and most recently the
accounting program at the University of Phoenix, San Diego.
For information concerning beneficial ownership of Common Stock by
directors and executive officers, see "Security Ownership of Certain Beneficial
Owners and Management" below. The Board of Directors met three times during
fiscal 1997, which meetings each director then in office attended. The Board of
Directors also took action on nine occasions by means of written consent in lieu
of a meeting after informal discussions, as permitted by law, each member of the
Board participated in those discussions, and the actions by written consent were
unanimous.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
As of the date of this Proxy Statement, the Board of Directors has no
formal standing Audit, Compensation or Nominating Committee. These functions
during fiscal 1997 were performed by the entire Board of Directors.
DIRECTOR COMPENSATION
Standard Compensation - The Company has no other arrangements to pay any
direct or indirect remuneration to any directors of the Company in their
capacity as directors other than in the form of reimbursement of expenses for
attending directors' or committee meetings.
Stock Options - Directors have received in the past and may receive in
the future stock options pursuant to the Company's stock option plans. No
options were issued to non-employee directors during the fiscal year ended
March 31, 1997.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the years ended March 31, 1997, 1996 and
1995, the cash compensation of the Chief Executive Officer and the four other
most highly compensated executive officers of the Company who received
compensation in excess of $100,000 in that year (the "Named Executive
Officers").
3
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------- --------------
Name and Fiscal Other Options All Other
Principal Position Year Salary Bonus Annual (# of Shares) Compensation
- ------------------ ---- ------ ----- ------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Elwood G. Norris, Chairman 1997 $105,788 -0- -0- -0- $ 5,940(2)
and Chief Executive 1996 $163,500 -0- -0- 400,000 -0-
Officer(1) 1995 $120,384 -0- -0- -0- -0-
R. Gordon Root, President & 1997 $150,900 $30,000 -0- -0- $ 5,940(2)
Chief Executive Officer(3) 1996 $ 85,615 $20,000(4) -0- 150,000
- -0-
1995 $-0- -0- -0- -0- -0-
Peter Gorrie, Chief 1997 $ 86,742 $31,990 $13,726(6) -0- $40,000(7)
Operating Officer(5) 1996 $ 29,262 -0- -0- -0- -0-
1995 $-0- -0- -0- -0- -0-
</TABLE>
(1) In September 1995, the Company entered into an employment agreement with
Elwood G. Norris, the Company's Chief Executive Officer. The employment
agreement provides for payment of a base salary of $115,000 per year until
October 31, 1997, when the base salary shall automatically increase 10% per
year. The employment agreement, which terminates on September 30, 1999,
further provides that Mr. Norris (or his estate) shall continue to receive
his base salary for a period of not longer than twelve months in the event
Mr. Norris is unable to fulfill his duties due to mental or physical
disabilities or death. Under terms of the employment agreement, Mr. Norris
also is entitled to participate in the Company's bonus pool and health
insurance plan. From time to time, Mr. Norris has waived certain
compensation due him under this employment agreement. There are no deferred
amounts payable to Mr. Norris.
(2) Represents bonus paid by issuance of 10,000 shares of Common Stock valued at
$5,940.
(3) Chief Executive Officer from October 1995 to December 1996.
(4) Amount stated reflects fair market value of 13,333 shares of Common Stock
as of the date of grant.
(5) Chief Operating Officer from February 1996 to January 1997.
(6) Amount stated reflects automobile expenses of $13,726.
(7) Amount stated reflects a severance payment of $40,000.
There were no options to purchase shares of the Company's Common Stock
granted in the fiscal year ended March 31, 1997 to the Chief Executive Officers
or any of the Named Executive Officers.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
There were no options exercised by the Named Executive Officers during the
fiscal year ended March 31, 1997. The following table provides information on
unexercised options at March 31, 1997:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options At In-the-Money Options At
March 31, 1997 March 31, 1997
----------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Elwood G. Norris 700,000(1) -0- $-0- $-0-
</TABLE>
(1) Subsequent to March 31, 1997 a total of 192,500 of these options expired
and the balance was voluntarily canceled to allow share issuances to
Prepaid Warrant holders.
The Company has not awarded stock appreciation rights to any employee of
the Company and has no long-term incentive plans, as that term is defined in
Securities and Exchange Commission regulations. The Company has no defined
benefit or actuarial plans covering any person.
4
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following security ownership information is set forth, as of
November 14, 1997, with respect to certain persons or groups known to the
Company to be beneficial owners of more than 5% of the Company's outstanding
Common Stock and with respect to each director of the Company, each of the
executive officers named in the Summary Compensation Table currently employed by
the Company, and all current directors, nominees and executive officers as a
group (four persons). Other than as set forth below, the Company is not aware of
any other person who may be deemed to be a beneficial owner of more than 5% of
the Company's Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner(1) Beneficial Ownership(2) Percent of Class
- --------------------------------------- ----------------------- ----------------
<S> <C> <C>
Elwood G. Norris 709,838 1.3%
Robert Putnam 40,000 *
Alfred H. Falk -0-(5) *
Renee Warden 2,000 *
Gross Foundation, Inc. 3,182,640 5.6%
Morgen Christiano & Co. LLC 2,911,657 5.2%
All officers, directors and nominees
as a group (4 persons) 751,838 1.3%
</TABLE>
* Less than 1%
(1) The address of each beneficial owner other than the Gross Foundation,
Inc. is 13114 Evening Creek Drive South, San Diego, California 92128.
The address of the Gross Foundation, Inc. is 1660 49th Street,
Brooklyn, New York 11204. The address of Morgen Christiano & Co., LLC
is 1246 Lago Vista Drive, Beverly Hills, California 90210.
(2) Unless otherwise noted, sole voting and dispositive power are
possessed with respect to all shares of Common Stock owned.
(3) Includes 225,000 shares owned by ATC as a result of Mr. Norris' 29%
ownership. Excludes unvested options granted to Mr. Norris in June
1997 to purchase 450,000 shares (original June 1997 option issuance
was for 700,000 shares with options on 250,000 shares subsequently
voluntarily canceled by Mr. Norris to allow share issuances to
Prepaid Warrant holders).
(4) Excludes unvested options to purchase 150,000 shares. (5) Excludes
unvested options to purchase 369,684 shares (original June
1997 option issuance was for 500,000 shares with options on 130,316
shares subsequently voluntarily canceled by Mr. Falk to allow share
issuances to Prepaid Warrant holders).
(6) Consists entirely of presently exercisable options to purchase shares.
(7) Based solely on information provided to the Company by such beneficial
owner. Does not include any shares of Common Stock which may be
acquired from time to time upon exercise of Prepaid Warrants upon the
approval of the amendment to the Company's Certificate of Incorporation
to increase the authorized number of shares of Common Stock.
(8) Based solely on a review of a stockholder transcript prepared by
the transfer agent for the Company.
(9) Includes presently exercisable options to purchase 2,000 shares and
the 225,000 shares owned by ATC and attributable to Mr. Norris.
The above table does not include ownership of over 5% of the Company's
outstanding Common Stock that may beneficially exist by holders of prepaid
warrants exercisable into Common Stock at a discount to market. Other than as
disclosed herein, the Company has received no current information regarding the
beneficial holdings of prepaid warrant holders, nor has it been advised, other
than as disclosed herein, by any holders that they beneficially own more than 5%
of the Company's Common Stock.
On July 17, 1997 an electronic Form 13D was filed by UFH Endowment Ltd.
with an address of Liechtenstein not specifying a number of shares owned. The
Company has no additional information regarding the number of shares held
currently or the investment intent of this investor.
5
<PAGE> 12
The following security ownership information is set forth as of November
14, 1997, with respect to certain persons or groups known to the Company to be
beneficial owners of more than 5% of the Company's outstanding Series A
Redeemable Convertible Preferred Stock, the only class of preferred stock
outstanding. Other than as set forth below, the Company is not aware of any
other person who may be deemed to be a beneficial owner of more than 5% of the
Company's preferred stock.
<TABLE>
<CAPTION>
Amount and Votes
Nature of Entitled
Beneficial Percent of to Cast At
Name and address of Beneficial Owner Ownership (1) Class Meeting (2)
- ------------------------------------ ------------- ----- -----------
<S> <C> <C> <C>
CCL PACIFIC LTD. 20,000 20.1% 2,285,714
1005A Lippo Tower
89 Queensway, Central
Hong Kong
TAISHIN COMPANY (HONG KONG) LTD. 15,000 15.1% 1,714,286
Room 605 Central Building
No. 1 Pedder Street, Central
Hong Kong
CANUSA TRADING LTD. 7,500 7.5% 857,143
37 Reid Street, 2nd Flr., Armoury Bldg.
Hamilton, Bermuda
NEO OPTICS LTD. 7,500 7.5% 857,143
1600-555 Burrard Street
Vancouver, B.C. V7X1S6 Canada
PARIL HOLDING 7,500 7.5% 857,143
137 Martastrasse
Zurich 8040 Switzerland
R. KIRK AVERY 5,000 5.0% 571,429
6121 Vista de la Mesa
La Jolla, California 92037
JERRY E. POLIS FAMILY TRUST 5,000 5.0% 571,429
3188 Bel Air Drive
Las Vegas, Nevada 89109
BARBARA C. ROEMER 5,000 5.0% 571,429
7175 Eads Avenue
La Jolla, California 92037
TIA LTD. 5,000 5.0% 571,429
1600-555 Burrard Street
Vancouver, B.C. V7X1S6 Canada
ARCADIA MUTUAL FUND INC. 5,000 5.0% 571,429
55 Frederick Street
Box CB 13029
Nassau, Bahamas
</TABLE>
(1) Represents number of shares of preferred stock, $.001 par value, held as of
November 14, 1997. At such date an aggregate of 99,500 shares of preferred
stock were issued and outstanding entitled to cast 11,371,428 votes in the
aggregate.
6
<PAGE> 13
(2) Represents the number of votes the holder is entitled to cast at the
meeting with the common stockholders and preferred stockholders voting as a
single class. However with respect to the matter of the proposed amendment
to the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock only the common stockholders shall be
entitled to vote and the preferred stockholders shall not vote on this
matter.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers and persons who own
more than 10% of the Common Stock to file initial reports of ownership (Forms 3)
and reports of changes in ownership of Common Stock (Forms 4 and Forms 5) with
the Securities and Exchange Commission.
Based solely on a review of copies of such reports furnished to the
Company and written representation that no other reports were required during
the fiscal year ended March 31, 1997, the Company believes that all persons
subject to the reporting requirements pursuant to Section 16(a) filed the
required reports on a timely basis with the Securities and Exchange Commission,
except as follows: (1) to the Company's knowledge, former executive officer
Kathleen Terry's Form 3 for May 1996 and former director Michael W. Joe's Form 3
for December 1996 were not filed and Fred Falk's Form 3 for January 1997 was
filed late in June 1997; and (2) Robert Putnam's Form 4 and Elwood G. Norris'
Form 4 for December 1996 each reporting one transaction were filed one day late.
CERTAIN TRANSACTIONS
Elwood Norris, Chairman and Chief Technology Officer of the Company, is
also a director of ATC. He is the owner of 2,844,438 shares of ATC (representing
approximately 29% of its issued and outstanding capital) and Robert Putnam, the
Vice President/Secretary and a director of the Company is also a director,
President and Chief Executive Officer of ATC. He is the owner of 420,000 shares
of ATC (representing approximately 4% of its issued and outstanding shares).
Commencing July 11, 1997 the Company jointly leased with ATC an
aggregate of 12,925 square feet of engineering office space at 13114 Evening
Creek Drive South, San Diego, California of which the Company occupies
approximately 5,500 square feet at a cost of $5,800 per month. From April 1996
to July 1997, the Company provided approximately 2,407 square feet of space at
the Company's 12725 Stowe Drive, Poway, California facility and certain support
services to ATC at the rate of $3,095 per month. The Company believes that the
terms of the above arrangements are no less favorable than could be obtained
from an independent and unaffiliated party. The Company's former facility was
sublet by the landlord and the Company effective on September 30, 1997 entered
into a three year term note for $182,129 representing a settlement of unpaid
rentals and termination of the lease agreement.
Conflicts of Interest. Certain conflicts of interest now exist and will
continue to exist between the Company and its officers and directors due to the
fact that they have other employment or business interests to which they devote
some attention and they are expected to continue to do so. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interest between the Company and its management or
management-affiliated entities. There can be no assurance that members of
management will resolve all conflicts of interest in the Company's favor. The
officers and directors are accountable to the Company as fiduciaries, which
means that they are legally obligated to exercise good faith and integrity in
handling the Company's affairs. Failure by them to conduct the Company's
business in its best interests may result in liability to them.
Officer and director Robert Putnam also acts as Treasurer and Secretary
of Patriot where he ultimately reports to the Board of Directors of which
Mr. Norris is Chairman. Mr. Putnam is Vice President, Treasurer and Asst.
Secretary of ATC of which Mr. Norris is a director. The possibility exists that
these other relationships could affect Mr. Putnam's independence as a director
of the Company. The Company has not provided a method of resolving this conflict
and probably will not do so, partly due to inevitable extra expenses and delay
any measures would occasion. Mr. Norris and Mr. Putnam are obligated to perform
their duties in good faith and to act in the best interest of the Company and
its stockholders, and any failure on their part to do so may constitute a breach
of their fiduciary duties and expose them to damages and other liability under
applicable law. While the directors and officers are excluded from liability for
certain actions, there is no assurance that Mr. Norris or Mr. Putnam would be
excluded from liability or indemnified if they breached their loyalty to the
Company.
7
<PAGE> 14
1994 STOCK OPTION PLAN
The Company adopted the Plan in September 1994. The Plan is designed to
promote the interest of the Company and its stockholders by providing an
incentive to certain key employees, directors and consultants of the Company and
its affiliates to continue their employment and to afford such employees,
directors and consultants the opportunity to acquire and enlarge their stock
ownership in the Company in order that they may have a direct interest in the
Company's success. The Plan provides for the granting of options which either
qualify for treatment as incentive stock options under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code") and are designated
"incentive stock options" or which do not qualify for such treatment and are
designated "nonstatutory stock options." Unless the context clearly indicates to
the contrary, the term "option" used herein shall mean either an incentive stock
option or non-statutory stock option and the term "optionee" shall mean any
person holding an option granted under the Plan.
ADMINISTRATION
The Plan is administered by a committee which the Board appoints to
administer the Plan (the "Committee"). The Committee makes such rules and
regulations and establishes such procedures for the administration of the Plan
as it deems appropriate. In accordance with the provisions of the Plan, the
Committee has authority to determine from time to time the persons who will be
granted options, the number of shares subject to each option, the time or times
when options may be granted and to prescribe such terms and provisions of each
option granted which are not inconsistent with the Plan. The Committee also
construes and interprets the Plan and options granted it and determines all
questions of policy which may arise in the administration of the Plan.
ELIGIBILITY
Key employees, directors and consultants of the Company and its
affiliates are eligible for selection as participants in the Plan. Incentive
stock options may be granted only to full-time key employees of the Company,
including, without limitation, officers and members of the Board who are also
full-time key employees at the time of grant. Non-qualified stock options may be
granted to employees (including officers) and directors of and consultants to
the Company. In no event, however, may a member of the Committee be granted an
option under the Plan.
CEILING OF INCENTIVE STOCK OPTION GRANTS
The aggregate fair market value (determined at the time the option is
granted) of the shares of Common Stock for which incentive stock options may be
exercisable for the first time by any employee during any calendar year (under
all incentive stock option plans of the Company) may not exceed $100,000. Should
it be determined that any incentive stock option granted pursuant to the Plan
exceeds such maximum, such incentive stock option shall be considered a
non-qualified stock option and not qualify for treatment as an incentive stock
option under Section 422 of the Code to the extent, but only to the extent, of
such excess.
MAXIMUM NUMBER OF SHARES SUBJECT TO THE PLAN
Subject to adjustment by reason of stock splits or similar capital
adjustments, options may be granted under the Plan covering a maximum aggregate
of 4,000,000 shares of Common Stock. At the Annual Meeting the stock holders are
being requested to consider and approve the proposed amendment to the Plan to
increase the number of shares issuable under the Plan to 10,000,000. The Board
of Directors approved such amendment, subject to stockholder approval, in
September 1997.
OPTION PRICE
The option exercise price per share for non-qualified stock options
granted under the Plan must be 85% of the fair market value of the Common Stock
determined on the date the option is granted. The option exercise price per
share for incentive stock options granted under the Plan must be 100% of the
fair market value of the Common Stock determined on the date that the option is
granted, except that in the case of an employee owning more than 10% of the
combined voting power of all classes of stock of the Company (applying
attribution rates), the option exercise price of any incentive stock option
shall be at least 110% of the fair market value of such shares on the date of
grant. The option exercise price is payable by check or by bank draft made
payable to the order of the Company or in shares of Common Stock of the Company
owned by the optionee having a fair market value on the exercise date
(determined by the
8
<PAGE> 15
Committee) equal to the option price for the shares being purchased. The average
for the bid and asked price for common stock on November 14, 1997 as reported by
the NASD's OTC Electronic Bulletin was [ ].
OPTION TERM
No option shall be exercisable after the expiration of ten years from
the date it was granted. Incentive stock options granted to any employee owning
more than 10% of the combined voting power of all classes of stock of the
Company will expire five years from the date such option is granted.
TERMINATION OF OPTION
Options granted under the Plan are contingent upon continued employment
by the Company or an affiliate of the Company or continued relationship as a
director or consultant; however, if the employment or other relationship is
terminated after 12 months from the date of the grant of the option, the
optionee has the right to exercise his or her option at any time within a three
month period after such termination, but only to the extent that the optionee
was entitled to exercise the option immediately prior to such termination. If
the optionee dies, the option may be exercised at any time within 18 months
following his or her death by his or her estate or by the person or persons to
whom his or her rights under the option passed by law or by laws of descent or
distribution, but only to the extent that such option was exercisable by the
optionee on the date of optionee's termination or within not more than three
months after such termination. If an optionee becomes permanently and totally
disabled, the option may be exercised at any time within 12 months following
such disability, but only to the extent that such option was exercisable by the
optionee on the date of the optionee's termination or within not more than three
months after such termination.
AMENDMENT OF PLAN
The Board of Directors may terminate or amend the Plan at any time as it
deems advisable, provided, however, that no amendment to the Plan which would
materially (i) impair any options previously granted, (ii) increase the maximum
number of shares of Common Stock for which options may be granted under the
Plan, (iii) increase the benefits accruing to options under the Plan or (iv)
modify the requirements as to eligibility to participate in the Plan or alter
the method of determining the option exercise price, may be made without
shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES
Federal income tax laws have frequently been revised and may be changed
again in the future. The Company has been advised of the following federal
income tax consequences of the grant and exercise of options under the Plan and
the disposition of shares issued thereunder in existence as of the date that
this Proxy Statement is being printed.
Incentive Stock Options. There are no tax consequences to the optionee upon
the grant of an incentive stock option pursuant to the procedures set forth in
the Plan. There are no tax consequences to the optionee upon exercise of an
incentive stock option, except that the amount by which the fair market value of
the share at the time of exercise exceeds the option exercise price is included
in the optionee's alternative minimum taxable income (unless the shares are sold
in the same taxable year), possibly giving rise to alternative minimum tax.
If the shares of Common Stock acquired are not disposed of within two years
from the date the incentive stock option was granted or within one year after
the shares are transferred to the optionee, any gain realized upon the
subsequent disposition of the shares will be characterized as long-term capital
gain and any loss will be characterized as long-term capital loss.
If all requirements other than the above described holding period
requirements are met, a "disqualifying disposition" occurs and gain in an amount
equal to the lesser of (i) the fair market value of the share on the date of
exercise minus the option exercise price or (ii) the amount realized on
disposition minus the option exercise price (except for certain "wash" sales,
gifts, or sales to related persons), is taxed as ordinary income and the Company
will be entitled to a corresponding deduction in an amount equal to the
optionee's ordinary income at that time. The gain in excess of this amount, if
any, will be characterized as long-term capital gain if the optionee held the
shares for more than 18 months. Persons that may be subject to the application
of the provisions of Section 16(b) of the Securities Exchange Act of 1934 are
subject to certain additional rules.
9
<PAGE> 16
Nonstatutory Options. Other than incentive stock options granted under the
Plan, all options granted under the Plan will be taxed as nonstatutory options.
Upon the grant of a nonstatutory option, no income will be recognized by the
optionee and the Company will not be entitled to a deduction. This is because
such options are not actively traded on an established market and the fair
market value of the option privilege is not easily ascertainable. Upon the
exercise of nonstatutory options, the optionee will recognize taxable income in
the amount by which the then fair market value of the shares of Common Stock
acquired exceeds the option exercise price, with the Company being entitled to a
deduction in an equal amount. The amount of such taxable income will be
characterized as compensation income to the optionee. Persons that may be
subject to the application of the provisions of Section 16(b) of the Securities
Exchange Act of 1934 are subject to certain additional rules.
Upon the subsequent disposition of the Common Stock, the optionee will
recognize gain or loss, which will be characterized as capital gain or loss in
an amount equal to the difference between the proceeds received upon disposition
and his or her basis for the shares (the basis being equal to the sum of the
price paid for the stock and the amount of income realized upon exercise of the
option) provided the shares are held as a capital asset. Any capital gain or
loss to the optionee will be characterized as long term or short-term, depending
upon whether his or her holding period for tax purposes exceeds 18 months.
The taxable income recognized upon the exercise of nonstatutory options
is subject to withholding for federal income tax purposes. Accordingly, the
Company generally must, as a condition to the exercise of a nonstatutory option,
deduct from payments otherwise due to the optionee the amount of taxes required
to be withheld by virtue of such exercise or require that the optionee pay such
withholding to the Company or make other arrangements satisfactory to the
Company regarding the payment of such taxes.
The preceding paragraphs as they relate to the optionee are intended to
be merely a summary of the most important Federal income tax consequences of the
grant and exercise of options to a U.S. citizen or resident under the Plan and
the disposition of shares issued thereunder in existence as of the date that
this Proxy Statement is being printed. EACH OPTIONEE SHOULD CONSULT HIS OR HER
OWN TAX COUNSEL AS TO THE CONSEQUENCES UNDER FEDERAL, STATE AND LOCAL TAX LAWS
FOR THE PARTICULAR OPTIONEE'S CIRCUMSTANCES.
APPROVAL OF AMENDMENT TO 1994
STOCK OPTION PLAN
The Company's Board of Directors and stockholders have previously
adopted and approved the Plan. A total of 500,000 shares were originally
reserved for issuance under the Plan. In 1996, the Board of Directors and the
stockholders amended the Plan to increase the number of shares authorized for
issuance by 3,500,000 to 4,000,000 shares. In September 1997 the Board of
Directors authorized an amendment to the Plan, subject to stockholder approval,
to increase the number of shares reserved for issuance thereunder by 6,000,000
shares, bringing the total number of shares issuable under the Plan to
10,000,000 shares.
At the Annual Meeting, the stockholders are being requested to consider
and approve the proposed amendment to the Plan to increase the number of shares
of Common Stock reserved for issuance thereunder by 6,000,000 shares, bringing
the total number of shares issuable under the Plan to 10,000,000 shares. The
amendment to increase the number of shares issuable under the Plan will enable
the Company to continue its policy of granting options as a means to attract and
retain highly qualified personnel, to motivate high levels of performance and to
recognize key employee accomplishments.
For a description of the principal features of the Plan, see "1994 Stock
Option Plan."
VOTE REQUIRED; BOARD RECOMMENDATION
The approval of the amendment to the Plan requires the affirmative vote
of a majority of the shares represented, in person or by proxy, and voting at
the Annual Meeting (which shares voting affirmatively also constitute at least a
majority of the required quorum).
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE PLAN
AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
10
<PAGE> 17
APPROVAL OF AMENDMENT OF THE CERTIFICATE OF
INCORPORATION OF THE COMPANY TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK
In September 1997, the Board of Directors authorized an amendment,
subject to stockholder approval, to the Company's Certificate of Incorporation
(the "Certificate"), to increase the number of shares of Common Stock that the
Company is authorized to issue from 60,000,000 to 120,000,000.
The Board of Directors considers it both desirable and essential to have
additional shares of Common Stock available for issuance from time-to-time. The
Board also advises stockholders that failure to approve the amendment could have
a material adverse effect on the Company, its business and results of
operations.
OUTSTANDING SHARES; SHARES RESERVED FOR FUTURE ISSUANCE; AND SHARES TO BE
RESERVED OR ISSUABLE UPON THE INCREASE IN AUTHORIZED SHARES
As of November 14, 1997, the Company had 56,413,405 shares of Common
Stock outstanding. An additional 3,586,595 shares were reserved for future
issuance under the Company's stock option plans and pursuant to other options
and warrants thereby reserving the balance of the 60,000,000 authorized shares
of Common Stock. The Company cannot issue any additional shares of Common Stock
at this time other than through the exercise of shares reserved for options and
other warrants.
The Company also has existing obligations and agreements that require
the Company to take actions to increase its authorized shares and issue shares,
when available, at the election of existing security holders. The terms of these
securities and the related obligations are summarized as follows:
Prepaid Warrants - In June-August 1996, the Company sold warrants ("Prepaid
Warrants") with a face value of $3,805,900. The Prepaid Warrants were
exercisable, without further cash payment, into shares of the Common Stock
of the Company at the lessor of $0.70 per share (with respect to $805,900 of
Prepaid Warrants) and $0.69125 per share (with respect to $3,000,000 of
Prepaid Warrants) or a 30% discount to the five day average closing bid
price of the Common Stock on the day prior to exercise. The exercise price
of the Prepaid Warrants was further discounted by 7% per year and for other
events until the Prepaid Warrants were exercised. As a result of the decline
in the market price of the Common Stock following the issuance of the
Prepaid Warrants, the number of shares of Common Stock issued upon exercise
of the Prepaid Warrants was significantly dilutive to existing stockholders
and has caused the Company to be contractually committed to further issuance
of Common Stock beyond the amount of shares that are currently authorized.
To date, Prepaid Warrant holders have exercised Prepaid Warrants with a face
value of $2,792,944 into 30,980,553 shares of Common Stock (inclusive of
penalties and discounts). The balance of the remaining three Prepaid
Warrants presently outstanding is $1,012,956 (face value). In determining
the number of shares of Common Stock to be issued upon exercise, the Company
adjusts the face value of the Prepaid Warrants upward to reflect penalties
and the 7% annual discount. The adjusted value of the Prepaid Warrants is
approximately $1.25 million.
In August 1997, the Company suspended the Prepaid Warrant holder's ability
to exercise Prepaid Warrants pursuant to their terms due to the lack of
authorized shares in excess of those reserved for other warrants and
options. The suspension extends the term of the Prepaid Warrants for the
suspension period and provides such holders the benefit of the lower of the
price at suspension or after the suspension is cured. The Company is
obligated to take such corporate action as may be necessary or appropriate
to increase its authorized but unissued shares of Common Stock.
In September 1997, the remaining three Prepaid Warrant holders executed
Amendment No. 1 to the Common Stock Warrant. Among other terms, the
Amendment fixes the exercise price at $0.0875 per share subject to certain
adjustments. The fixed price of $0.0875 per share may be adjusted down (i)
to 80% of the market price following certain changes in the Company's Common
Stock including a reverse stock split, and (ii) to the price at which new
securities are issued if at a price below $0.0875 per share. At the fixed
price of $0.0875 per share the remaining Prepaid Warrants ($1.25 million, as
adjusted) are convertible into approximately 14.4 million shares as of
October 31, 1997. The number of shares issuable further increases by 7% per
annum. The
11
<PAGE> 18
original expiration of the Prepaid Warrants was in July and August 1999,
however, such date is currently being extended during the suspension
period as described above.
Under terms of Amendment No. 1, as modified, the Company issued 1,000,000
shares of Common Stock to Prepaid Warrant holders in September 1997 and an
additional 1,000,000 shares of Common Stock in October 1997 from shares
previously reserved for other warrants and options. The Company has also
agreed to hold a stockholders meeting or otherwise conduct a consent
solicitation to increase the authorized number of shares on or before
January 5, 1998 and have sufficient shares authorized by February 15, 1998.
Failure by the Company to meet these conditions allows the Prepaid Warrant
holders, at their option, to nullify the Amendment.
Upon approval of this Amendment to the Certificate the Company intends to
reserve approximately 16.1 million shares of Common Stock for future
issuance pursuant to the Prepaid Warrants. This amount includes the shares
currently issuable plus an amount representing the 7% discount through the
estimated term of the Warrants. The actual shares issuable could be greater
should the proposed amendment not be approved and the Prepaid Warrant
holders elect to nullify Amendment No. 1 to the Common Stock Warrant or
should the Company elect to effect a reverse stock split or make other
adjustments prior to exercise. The Board of Directors has no current plans
to effect a reverse split and any such action would require the approval of
the stockholders.
Secured Promissory Notes With Limited Conversion Features and Warrants on
Conversion In June 1997, the Company issued $500,000 of 12% secured
promissory notes ("Notes") for cash with the proceeds used to assist the
Company to complete its financial restructuring. Interest is payable
quarterly in cash and the Notes are due on September 30, 1999. The Notes are
collateralized by the Company's issued and pending patents and the Flashback
technology. The Notes may become convertible only when and if allowable
under the terms of the Prepaid Warrants and when sufficient authorized stock
is available. The conversion price is pegged to the lowest Prepaid Warrant
exercise price, as may be adjusted, and is currently fixed at $0.0875 per
share, when and if convertible. Upon a distribution in shares, subdivision,
split-up, combination, reclassification or other change in the Common Stock
the conversion price of the Notes is the lesser of $0.0875 (or lower amount
effective at the time) or 70% of the average closing bid price of the Common
Stock for the 20 trading days after each such event.
The Notes would become convertible into 5,714,286 shares of Common Stock
upon the approval of this Amendment. The Company may force conversion of the
Notes if the closing bid price of the Company's Common Stock is greater than
$0.75 per share for ten consecutive days and certain other conditions are
met. Upon conversion, the Company is obligated to issue to each holder a
warrant exercisable into the number of shares so converted at the conversion
price, such warrants exercisable for a period of three years from issuance.
Upon approval of the proposed amendment, the Company intends to reserve
5,714,286 shares of Common Stock for conversion of the Notes. The actual
shares issuable upon conversion of the Notes could be greater should the
proposed amendment not be approved and the Prepaid Warrant holders described
above elect to nullify Amendment No. 1 to the Common Stock Warrant or should
the Company elect to effect a reverse stock split or otherwise adjust the
shares of Common Stock whereupon the number of shares issuable under both
the Notes and the Prepaid Warrants would be subject to adjustments. The
Board of Directors has no current plans to effect a reverse stock split and
any such action would require the approval of the stockholders.
Series A Redeemable Convertible Preferred Stock - In September 1997, the
Company filed a Certificate of Designation of Preferences, Rights and
Limitations of Series A Redeemable Convertible Preferred Stock with the
Delaware Secretary of State, designating 100,000 shares of its preferred
stock ("Series A Stock"). As of November 14, 1997, a total of 99,500 shares
of Series A Stock had been sold for cash at $10.00 per share for gross
proceeds of $995,000.
The Series A Stock has voting rights equal to the number of shares of Common
Stock into which the Series A Stock is convertible, currently 114.28571
votes per preferred share. Dividends of 8% per annum are cumulative and may
be payable in cash or shares of Common Stock, at the Company's election. The
Series A Stock has a liquidation preference of $10.00 per share, plus
accrued and unpaid dividends, with no participation after the preference is
paid.
12
<PAGE> 19
The Series A Stock is convertible into shares of Common Stock computed by
dividing $10.00 plus accrued and unpaid dividends by the lesser of (i)
$0.0875 or (ii) 80% of the average closing bid price for the Common Stock
for the ten trading days immediately following any and each distribution in
shares, subdivision, split up, combination, reclassification, or other
change in Common Stock.
The Company is required to redeem the Series A Stock on September 1, 2000
("Mandatory Redemption Date") and upon the occurrence of certain other
events. The Company may redeem the Series A Stock earlier only if there are
sufficient shares available for conversion of the Series A Stock. The
redemption price is $10.00 per share plus accrued and unpaid dividends if
there are sufficient shares available for conversion of the Series A Stock,
otherwise the redemption price is equal to the greater of (i) $10.00 per
share plus accrued and unpaid dividends or (ii) an amount equal to a five
day market price multiplied by the shares into which the Series A Stock
would be convertible if shares were authorized, plus a 10% premium. If
sufficient shares of Common Stock for conversion of the Series A Stock are
not authorized by March 31, 1998, the dividend rate shall be increased to
12% until sufficient shares are authorized and the Mandatory Redemption Date
shall be accelerated to December 31, 1998.
Based on the 99,500 shares of Series A Stock currently outstanding, upon
approval of the proposed amendment, the Company intends to reserve
approximately 14,200,000 shares of Common Stock for conversion of the Series
A Stock based on the current conversion price and assuming estimated
dividends to the Mandatory Redemption Date of September 1, 2000 are
converted to shares of Common Stock. The shares to be reserved could
increase should the Board of Directors issue additional shares of Series A
Stock. The actual shares issuable upon conversion of the Series A Stock
could be greater should the Company elect to effect a reverse stock split or
otherwise adjust the Common Stock whereupon the number of shares of Common
Stock issuable under the Series A Stock described above would be subject to
adjustment. The Board of Directors has no current plans to effect a reverse
stock split and any such action would require the approval of the
stockholders.
The Company does not have any authorized and unissued shares of Common
Stock that have not been reserved for issuance to meet its immediate needs under
the above existing agreements. Nor can the Company raise additional money, make
acquisitions or take any other action requiring the issuance of its Common Stock
unless the authorized number of shares of Common Stock is increased.
Based on the above three agreements, the Company requires 39,600,881
shares of Common Stock solely to be reserved to meet the Company's obligations
to such security holders, as follows:
<TABLE>
<CAPTION>
<S> <C>
Existing Options and other Warrants, as adjusted 3,586,595
Prepaid Warrants 16,100,000
12% Convertible Notes 5,714,286
Series A Stock 14,200,000
----------
39,600,881
==========
</TABLE>
The actual shares issuable for outstanding securities could be more or
less depending upon a variety of factors. (See paragraphs below for additional
discussion of the consequences of failure to authorize such shares).
Accordingly, upon approval of the proposed amendment, and assuming no other
changes, the Company would have 56,413,405 shares of Common Stock outstanding
with a total of 39,600,881 shares reserved for future issuance.
If the proposal is approved to increase by 6,000,000 the number of shares
issuable pursuant to the Plan is approved, another 8,460,316 shares would be
reserved for issuance thereunder consisting of the shares currently unissued
from the Plan and the proposed increase in shares.
REASONS FOR THE INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
In addition to meeting the requirements of having sufficient shares of
Common Stock as outlined by agreements in the preceding paragraphs, the Board of
Directors believes there are also a number of important business reasons for
increasing the number of shares of Common Stock available.
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<PAGE> 20
The authorized number of shares of Common Stock currently available is
not sufficient to meet existing obligations or enable the Company to respond to
potential business opportunities and to pursue important objectives that may be
anticipated. Accordingly, the Board of Directors believes that it is in the
Company's best interests to increase the number of authorized shares of Common
Stock. The Board of Directors also believes that the availability of such shares
will provide the Company with the flexibility to issue Common Stock for proper
corporate purposes that may be identified by the Board of Directors from time to
time, such as stock dividends (including stock splits in the form of stock
dividends), financings, acquisitions, or strategic business relationships.
Further, the Board of Directors believes the availability of additional shares
of Common Stock will help enable the Company to attract and retain talented
employees through the grant of stock options and other stock-based incentives.
An important component of the Company's business strategy is to develop and
market new products and technologies. These efforts will require recruitment of
additional technical personnel which are in high demand and short supply in the
San Diego area. The availability of stock-based incentives is a critical element
in attracting, motivating and retaining technical and executive talent.
The Company does not, as of the date of this Proxy Statement, have any
agreements with respect to future acquisitions that would require the issuance
of shares of the Company's Common Stock.
The Board of Directors believes the availability of authorized but
unissued Common Stock can be of considerable value. Because of the Company's
existing contractual requirements and its current financial condition, the
unavailability of authorized but unissued Common Stock will have a material
adverse impact on the Company and its business.
CONSEQUENCES OF FAILURE TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The Company is obligated by the terms of the Prepaid Warrants and the
Series A Stock to seek stockholder approval for the authorization of additional
shares of Common Stock. The terms of the Prepaid Warrants require the Company to
take immediate corporate action as may be necessary or appropriate to increase
its authorized but unissued shares of Common Stock to a sufficient number,
including without limitation, engaging in best efforts to obtain requisite
stockholder approval. By further agreement with the Prepaid Warrant holders,
should the Company not have sufficient shares authorized by February 15, 1998,
the holders, at their option, may nullify the terms of Amendment No. 1 to the
Common Stock Warrants fixing the conversion price subjecting the Company to
indeterminate and possibly significant dilution from future exercises of Prepaid
Warrants in the future.
The Series A Stock designation requires that the Company take all
appropriate corporate action to authorize additional shares of its Common Stock,
to be reserved and kept available for issuance upon the conversion of the Series
A Stock.
Failure to obtain the approval for this Amendment could subject the
Company to liability under the above or other agreements and potential
litigation. Any litigation, should it occur, could have a material adverse
impact on the Company and its business.
The Board of Directors believes that it has been at a disadvantage in
negotiating the terms of recent required fundings including the issuance of the
Notes and the Series A Stock due to the lack of sufficient shares of Common
Stock. The uncertainty regarding the availability of shares of Common Stock, the
Company's losses and lack of collateral makes the prospects of future financings
unlikely without additional authorized Common Stock.
The Notes provide that should they not be convertible at maturity
(September 30, 1999, subject to acceleration in certain events) then the Company
shall pay in cash an amount equal to the amount that would be realizable
assuming conversion of the Notes and exercise of the underlying warrants had
occurred at the most favorable price and sales at the most advantageous prices.
Accordingly, the lack of additional shares of Common Stock prior to Note
maturity could expose the Company to material payments on the Notes above and
beyond the $500,000 principal and interest. It is unlikely that the Company can
generate from operations sufficient funds to meet any such obligation or
refinance the Notes without additional authorized shares of Common Stock.
The Series A Stock provides for an accelerated Mandatory Redemption Date
of December 31, 1998 should sufficient authorized shares not be available by
March 31, 1998. The redemption price payable in cash for each share of Series A
Stock is the greater of (i) $10.00 per share plus accrued and unpaid dividends
or (ii) an amount equal to a five day market price multiplied by the shares into
which the Series A Stock would be convertible if shares were authorized, plus a
10%
14
<PAGE> 21
premium. It is unlikely that the Company can generate from operations sufficient
funds to meet any such obligation nor finance the redemption without additional
authorized shares of Common Stock.
As can be seen from the above paragraphs, failure to approve the
Amendment to the Company's Certificate of Incorporation may result in the
Company being required to immediately hold another stockholder meeting or
consent solicitation at its expense to attempt to increase the authorized shares
to meet its obligations and to prevent the mandatory redemption of the Series A
Stock on December 31, 1998 and additional payments due on the maturity of the
Notes at September 30, 1999 or sooner. Failure to obtain approval of this
Amendment and the triggering of any of these events could have a material
adverse effect on the Company, its business and results of operations. Also the
Company will be unable to raise additional money, attract personnel with
stock-based incentives, make acquisitions or take any other action requiring the
issuance of its Common Stock unless the authorized number of shares of Common
Stock is increased.
The Board of Directors believes that under such circumstances as
described above it may be unable to continue as a going concern. In such event,
the Company 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 with material adverse impact on the stockholders.
EFFECT OF AMENDMENT ON EXISTING STOCKHOLDERS
The increase of authorized shares of Common Stock will not alter the par
value of the Common Stock or the rights of stockholders.
Authorized but unissued shares may be issued at such time or times, to
such person or persons and for such consideration as the Board of Directors
determines to be in the best interests of the Company, without further
authorization from the Company except as may be required by the rules of any
stock exchange or national securities association trading system on which the
Common Stock may be listed or traded. Upon issuance, such shares will have the
same rights as the outstanding shares of Common Stock. The authorization of
additional shares of Common Stock will not, by itself, have any effect on the
rights of holders of existing shares. Depending on the circumstances, issuance
of additional shares of Common Stock could result in substantial dilution of the
existing stockholders' ownership interests in the Company. The Board of
Directors does not intend to issue any shares of Common Stock except to meet its
obligations and on terms which the Board deems to be in the best interests of
the Company and its then existing stockholders. The stockholders do not have
pre-emptive rights to purchase additional shares of Common Stock nor will they
have any such rights as a result of this proposal.
VOTE REQUIRED; BOARD RECOMMENDATION
The approval of the Amendment to the Certificate of Incorporation
requires the affirmative vote of a majority of the outstanding shares of Common
Stock on the record date. THEREFORE, FAILURE TO VOTE HAS THE SAME EFFECT AS A
NEGATIVE VOTE.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
For the 1997 fiscal year, Ernst & Young provided audit services which
included examination of the Company's annual financial statements, timely review
of unaudited quarterly financial information and assistance and consultation in
connection with the Company's registration statements on Form SB-2 and Form S-8
filed with the Commission. Audit services were provided with the approval of the
Board of Directors which, among other things, considered the independence of the
public accountants. Arrangements for non-audit services, if any, are made by
management with the knowledge of the Board of Directors. Upon the
recommendations of the Audit Committee, the Board has selected Ernst & Young to
provide audit services to the Company for the fiscal year ending March 31, 1998.
The stockholders are being requested to ratify such selection at the Annual
Meeting.
15
<PAGE> 22
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report on Form 10-KSB for the year ended March 31,
1997, including the annual statements, as filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, constitutes the annual
report to shareholders and is being mailed with this Proxy Statement. Also
accompanying this Proxy Statement is the Company's quarterly report on Form
10-QSB for the second fiscal quarter ended September 30, 1997.
UPON REQUEST AND PAYMENT OF A REASONABLE FEE TO COVER THE COMPANY'S
EXPENSES, THE COMPANY WILL FURNISH ANY PERSON WHO WAS A STOCKHOLDER OF THE
COMPANY AS OF THE RECORD DATE, A COPY OF ANY EXHIBIT TO THE FORM 10-KSB FOR THE
FISCAL YEAR ENDED MARCH 31, 1997. ANY SUCH WRITTEN REQUEST MAY BE ADDRESSED TO
ROBERT PUTNAM, SECRETARY, NORRIS COMMUNICATIONS, INC., 13114 EVENING CREEK DRIVE
SOUTH, SAN DIEGO, CALIFORNIA 92128. THE WRITTEN REQUEST MUST CONTAIN A GOOD
FAITH REPRESENTATION THAT, AS OF THE RECORD DATE, THE PERSON MAKING THE REQUEST
WAS THE BENEFICIAL OWNER OF COMMON STOCK OF THE COMPANY.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR
1998 ANNUAL MEETING
Any proposal relating to a proper subject which an eligible stockholder
may intend to present for action at the Company's 1997 Annual Meeting of
Stockholders and which such stockholder may wish to have included in the proxy
material for such meeting in accordance with the provisions of Rule 14a-8
promulgated under the Exchange Act must be received as far in advance of the
meeting as possible in proper form by the Secretary of the Company at 13114
Evening Creek Drive South, San Diego, California 92128 and in any event not
later than July 17, 1998. It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
OTHER BUSINESS OF THE ANNUAL MEETING
Management is not aware of any matters to come before the Annual Meeting
or any postponement or adjournment thereof other than the election of directors
and the ratification of accountants. However, inasmuch as matters of which
Management is not now aware may come before the meeting or any postponement or
adjournment thereof, the proxies confer discretionary authority with respect to
acting thereon, and the persons named in such proxies intend to vote, act and
consent in accordance with their best judgment with respect thereto, provided
that, to the extent the Company becomes aware a reasonable time before the
Annual Meeting of any matter to come before such meeting, the Company will
provide an opportunity to vote by proxy directly on such matter and, further
provided that, only proxies voting for approval of the amendments to the Plan
and Certificate of Incorporation may be voted to adjourn the meeting. Upon
receipt of such proxies in time for voting, the shares represented thereby will
be voted as indicated thereon and as described in this Proxy Statement.
MISCELLANEOUS
The solicitation of proxies is made on behalf of the Company and all the
expenses of soliciting proxies from stockholders will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, officers and
regular employees may communicate with stockholders personally or by mail,
telephone, telegram, or otherwise for the purpose of soliciting such proxies,
but in such event no additional compensation will be paid to any such persons
for such solicitation. The Company may also elect to engage a proxy solicitation
firm to assist in the solicitation of proxies and such firm may be compensated
for their efforts on behalf of the Company. The Company anticipates that a proxy
solicitation firm can be retained on a fixed fee basis for an amount not to
exceed $10,000. The Company will reimburse banks, brokers and other nominees for
their reasonable out-of-pocket expenses in forwarding soliciting material to
beneficial owners of shares held of record by such persons.
By Order of the Board of Directors
/s/ ALFRED H. FALK
----------------------------------
Alfred H. Falk
San Diego, California President
November 20, 1997
16
<PAGE> 23
NORRIS COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 11, 1997
The undersigned stockholder of Norris Communications, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated October 20, 1997, and hereby
appoints Elwood G. Norris, Alfred H. Falk and Robert Putnam, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1997 Annual Meeting of Stockholders of Norris Communications, Inc., to be held
on December 11, 1997, at 2:00 p.m., local time, at the Rancho Bernardo Inn,
located at 17550 Bernardo Oaks Drive, San Diego, California 92128, and at any
adjournment thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
1. ELECTION OF DIRECTORS: _____FOR all nominees listed below
(except as indicated)
_____WITHHOLD AUTHORITY to vote
for all nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the following list:
Elwood G. Norris, Alfred H. Falk and Robert Putnam.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
6,000,000 TO AN AGGREGATE OF 10,000,000 SHARES.
___ FOR ___ AGAINST ___ ABSTAIN
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK, $.001 PAR
VALUE, THAT THE COMPANY IS AUTHORIZED TO ISSUE FROM 60,000,000 TO
120,000,000.
___ FOR ___ AGAINST ___ ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG, AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 1998:
___ FOR ___ AGAINST ___ ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting or any adjournment thereof.
(Continued on reverse side)
1
<PAGE> 24
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION AND NO
ABSTENTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 6,000,000 SHARES TO AN
AGGREGATE OF 10,000,000 SHARES, FOR THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK, $.001 PAR VALUE, THAT THE COMPANY IS AUTHORIZED TO ISSUE FROM
60,000,000 TO 120,000,000, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG, AS INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE TELEPHONE NUMBER OF THE
COMPANY IS (619) 679-1504 AND ITS FACSIMILE NUMBER IS (619) 486-3922.
DATED: , 1997
-----------------------------------
Signature
-----------------------------------
Signature
(This Proxy should be marked, dated
and signed by the stockholder(s)
exactly as his or her name appears
hereon, and returned promptly in
the enclosed envelope. Persons
signing in a fiduciary capacity
should so indicate. If shares are
held by joint tenants or as
community property, both should
sign).
NORRIS COMMUNICATIONS, INC.
13114 EVENING CREEK DRIVE SOUTH, SAN DIEGO, CALIFORNIA 92128
TELEPHONE - (619) 679-1504
FACSIMILE - (619) 486-3922
2
