HGPG Corporate Digest

HGPG CORPORATE DIGEST

Norris Communications Corporation
April 1994

12725 Stowe Drive, Poway, CA 92064 * Tel (619) 679-1504

MKT: NASDAQ

SYM: NORRF

PRICE: $3.50

FY: March 31

BUSINESS DESCRIPTION

Norris Communications Corp. ("Norris" or "the Company"), based in San Diego, California, develops, manufactures and markets sophisticated electronic and audio products for the computer, integrated telephone, defense, telecommunications and medical industries. Incorporated in British Columbia, Canada, in 1988, the Company conducts its operations through two wholly-owned U.S. subsidiaries, American Surface mounted Devices, Inc., and Comp General, Inc. Norris is also a 42.8% owner of JABRA Corporation, formerly known as NORCOM Communications Corp.

RECENT RESULTS

For the nine months ended December 31, 1993, Norris reported revenues of $5.3 million and a net loss of $190,000 or $(.03) per share. In the same period a year earlier, the Company reported revenues of $5.8 million and a net loss of $3.9 million or $(.67) per share. Of the $3.9 million net loss, $3.45 million was attributable to a onetime charge for compensation expense, a non-cash item related to the release of certain common shares from escrow when the company was accepted for trading on NASDAQ last year.

OPERATIONS

American Surface Mounted Device, Inc. (ASMD) manufactures a wide range of electronic products from printed circuit design and component selection through prototype delivery and evaluation into full turnkey production. ASMD utilizes the latest robotic production equipment and is capable of manufacturing Surface Mount, Through-Hole and Chip-on-Board products as well as mixed technology boards. ASMD's revenues have grown from $0.9 million in fiscal 1990 to $8.2 million in fiscal year 1993, ended March 31, 1993. ASMD is the largest independent surface mounting contractor in the San Diego area, and has recently invested $2.5 million to install additional robotic and other sophisticated manufacturing equipment. This additional equipment has increased the total annual capacity of ASMD to over $25 million. Customers include Kodak, Cubic Corporation and IVAC, among others.

Comp General, Inc. (CGI) will begin manufacturing and marketing the "Flashback™," the first full-function personal recording device that does not use magnetic media--there are no motors, tapes, heads or moving parts of any kind. The Company has filed several patents on the Flashback™, and is in the process of filing several more. The entire unit is about the size of half a deck of playing cards and weighs about three ounces. It is expected to retail at less than $250 and should be introduced to the industry in April 1994, with a full product roll-out scheduled for mid-1994. All features presently available on portable tape recorders can be duplicated on Flashback™. In addition to Record, Play, Fast Forward, Reverse and Pause, other unique options will include random access and the ability to insert or edit messages with erasing or recording over subsequent speech. Flashback™ also has the ability to scan recordings at either a high or slow rate of speed without altering the pitch of the voice. The recording medium is a new breakthrough technology developed by Norris called "SoundClip™." SoundClips™ are removable solid-state, nonvolatile memory cartridges that use "Flash" memory and are essentially PCMCIA compatible. The Flashback™ recorder has a receptacle that accepts a SoundClip™ memory cartridge that can either record to or play back from it. The Company expects to introduce 60-minute and 120-minute SoundClips™ within a year of product introduction. All key manufacturing and assembly operations will be handled by American Surface Mounted Devices.

JABRA Corporation is producing a comprehensive EarPHONE™ product line. Developed by Norris, the EarPHONE™ combines a speaker and microphone in a small earpiece that fits comfortably in the ear, thus eliminating the need for a mouthpiece or headset. In July 1993, Norris sold 500,000 shares of JABRA for gross proceeds of $1,625,000. In addition, JABRA sold an additional 1,000,000 newly-issued shares for gross proceeds of $3,250,000, and another 105,000 shares as investment banking fees. As a result of these transactions, Norris now owns 1,800,000 shares of JABRA, or 42.8%.

MARKETS

The market for contract manufacturers using surface mount, through-hole and chip-on-board technologies is estimated at $5.5 billion, with an increasing amount of that work being brought back into the U.S. from the Pacific Rim. ASMD is a small but highly competent competitor in that market, with current capacity of about $25 million annually. The Company expects to reach that capacity sometime during its 1995 fiscal year, and by that time to have its next step up in capacity, to $50 million, underway. If demand for the Flashback™ voice recorder is as strong as the company expects, a significant portion of ASMD's revenues will be generated by production of the Flashback™ units.

Over 800 million personal tape recorders have been sold worldwide, with approximately 35 million sold annually. The U.S. market is estimated to be $600 million, with unit prices ranging from under $50 to over $600. At a suggested retail of $249.00, Flashback™, which is clearly a superior product, is modestly priced.

MANAGEMENT OUTLOOK

"Having completed the recent move into our new building, coupled with the addition of several new pieces of state-of-the-art high-speed robotic equipment, our American Surface Mounted Devices subsidiary is now prepared to compete with other world-class companies, both foreign and domestic, for high-quality, board-level electronic manufacturing," according to Elwood Norris, CEO. "The addition of Ron Viano as president of ASMD has added substantial strength to our management team, and I am optimistic that ASMD will be a major contributor to our success.

"Over the years, I've been involved in several new product introductions, but I believe our new Flashback™ personal recorder will easily be our best ever. We've engineered it to be so simple and easy to use that even people who already have a portable recorder will want to own one. Anyone who owns a recorder no doubt had high expectations when they bought it, hoping it was going to improve their productivity. Most have been disappointed. In spite of the best of intentions, customers found them too heavy, bulky and awkward to use, and ended up relegating them to a desk drawer.

"Even so, as many as 35 million of them are sold every year. Even a modest portion of those kinds of numbers could mean substantial revenues to the company," he said.

"People ask about the potential of our 43% holding of JABRA, and I have to say that while the potential could be quite large, we really don't have any control over what happens there. If they go public at some point in the future, which is probable, our holdings could be worth a substantial amount. But, as an investor, I would look at that as a bonus, not a basis, for owning our stock."

MANAGEMENT

Elwood G. Norris, Founder, Chairman & CEO, is a professional electronics engineer and has been granted numerous patents in the U.S. and worldwide. His inventions include a solid-state high-voltage spark plug which was purchased by Champion Spark Plug, and the first transcutaneous Doppler which has since evolved into the Sonogram, the ultrasound technology used by physicians and hospitals.

Robert Putnam, Vice President, Secretary and Treasurer, has been responsible for various aspects of operations and finance for the company since its inception in 1988. He was appointed Vice President in April 1993. He holds a B.A. Degree in Mass Communications & Advertising from Brigham Young University.

Gary N. Correia, Chief Financial Officer, joined Norris in July 1992 and assumed his present position in April 1993. He was previously Controller-Western U.S. for United States Testing Company, Inc. and Executive Director of Finance and Technology for Higgs, Fletcher and Mack, a San Diego, California law firm. Mr. Correia holds a B.S. Degree in Accounting from San Diego State University, and is a Certified Public Accountant in the state of California.

Steve Brightbill, Vice President, Sales & Marketing, joined the company in October 1993. He has more than 20 years experience in the sales and marketing of electronic products, much of it with his own software company which sold products through catalogues and national retail outlets. He holds a B.S. Degree in Engineering and Business from Ferris State College.

Ron A. Viano, President, American Surface Mounted Devices, Inc., joined the Company in October 1993. He has more than 15 years of experience with contract manufacturers, and was most recently Director of Marketing & Sales for Senior Systems Technology, a company engaged in contract and end-item product manufacturing.

CAPTION: Flashback™ voice recorder...totally digital, no tape, no moving parts.

Norris Communications Corporation

SELECTED FINANCIAL INFORMATION

BALANCE SHEET

December 31, 1993 (Unaudited)

ASSETS

Current Assets

Cash $ 696,891

Accounts receivable, net $ 1,321,994

Inventory 951,764

Prepaid expenses and other 93,365

Total Current Assets

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