This Letter is a Direct Communication From The Chairman/CEO and the President of
American Technology Corp.
SAN DIEGO--(BUSINESS WIRE)--Dec. 26, 2001--
To the Shareholders of American Technology Corp.(Nasdaq:ATCO):
The purpose of this letter is to provide Shareholders with an
update on ATC's business strategy and schedules, and to summarize
annual and recent developments at the company.
HSS(R)
After more than four years of intense development we are poised to
launch our first HSS products. This year we completed the design of
the first mass manufacturable platform, verified government regulatory
compliance, and designed and are procuring tooling and associated
items for production. We have made tremendous strides in improving
electronics and emitters through production engineering thereby
enhancing the sound volume and sound quality of HSS.
Our manufacturing partner, HST Inc. of San Diego, has begun
installing equipment for HSS production in a portion of their new
state-of-the-art 108,000 square foot facility in Tijuana, Mexico. The
first HSS products, scheduled to begin production this winter, are
capable of storing and beaming pre-recorded messages of a customer's
choice.
The primary market for our first model is in the advertising and
point-of-sale arena. Our sales staff, agents at eSoundIdeas,
International Robotics, Americhip, and others have developed the keen
interest of major corporate clients as we've completed the last
technical development milestones. In early 2002, we will begin
manufacturing an array of other HSS products that can accept and then
beam audio program material in "real time" from any source.
Interest in HSS products outside the United States has been
growing also and we are diligently working to procure HSS sales and
installation partners overseas. We will continue to update you about
all these international developments as they occur.
Pricing for licensed distributors and availability dates for
initial models of HSS products and emitters will be released in late
January. There are other significant marketing, licensing, and testing
activities underway that our customers wish to keep confidential at
this time. HSS licensees who want to manufacture their own products
may do so using the same complex, yet small, low-cost circuit topology
as used in our product. Of particular interest to our long-term
shareholders is the fact that HSS, the first commercialization of
parametric loudspeaker technology in history, is protected by 11
patents, additional applications, trade secrets, and other contracts
and confidentiality agreements.
NeoPlanar(R)
This year has seen great progress on our NeoPlanar technology.
NeoPlanar technology is fully developed, including manufacturing
methods. In 2001 we chose to develop the capability in-house to fill
niche orders profitably while licensees build higher-volume production
facilities for mass markets. The first such order was for speakers to
be installed aboard a large private yacht. The order value is more
than $200,000 and the majority of the deliveries occurred in the
current quarter (Q1-2002). We expect immediate additional orders from
other parties desiring to procure these breakthrough speakers.
We granted a non-exclusive license to Harman International
(NYSE:HAR) allowing them to produce NeoPlanar speakers for the OEM
automotive market. Only a small portion of the revenue from the
license fee and an accompanying consulting agreement was recognized in
the last quarter of the 2001 fiscal year, and recognition will
continue to occur throughout 2002 in accordance with accounting
guidelines acceptable to the Securities and Exchange Commission.
Though non-refundable payment has been received, pre-paid royalties
and production royalties will be recognized as production begins.
We look forward to sharing news of other significant NeoPlanar
licenses and contracts. Our NeoPlanar devices are capable of extreme
loudness while maintaining high intelligibility and low distortion,
and can withstand severe environmental conditions. We expect NeoPlanar
to perform strongly in the professional sound and military markets.
NeoPlanar speakers are installed aboard the destroyer USS Winston S.
Churchill and are currently being tested along with other ATC
technologies at this time.
PureBass(R)
As we announced on December 12, we received notice from the U.S.
patent and trademark office that our PureBass patent has been allowed.
The value of this intellectual property to ATC is of particular
significance. PureBass is an extremely effective sub-woofer technology
in terms of compact dimensions, clarity, crossover matching and sound
quality. It is available for many high-volume audio markets including
general audio, home theater, automotive, and professional
applications. The issuance of our new patent validates the uniqueness
of the technology and allows licensing work to proceed more rapidly.
We have three PureBass licensees, and so far there are three products
scheduled to enter the market in 2002 that will generate our first
PureBass-related revenue. We expect to execute additional license
agreements with major brands and their manufacturing partners in the
near future.
Stratified Field(R)
Our focus has been on supporting Thomson in bringing spectacular
new high-fidelity products featuring Stratified Field technology to
the retail market. We expect to receive royalties and other income
from this technology during the 2002 fiscal year. Loudspeakers that
employ Stratified Field technology have a very high audio
quality-to-cost ratio. We have brought the sound quality of
multi-thousand dollar electrostatic speakers to the mass market in a
novel and patented design providing for thin speakers of multiple
sizes and shapes. We expect additional licensing of Stratified Field
after Thomson introduces retail products.
Military
Several offices of the military both here and abroad have
indicated that our sound technologies, with their special abilities to
provide highly directed audio, are of great interest to them and that
they wish to explore their use to enable better communications, and
for acoustic personnel deterrence. To this end, we have entered into a
Cooperative Research and Development Agreement (CRADA) with the U.S.
Army (TACOM-ARDEC), effective in January. Other activities related to
the Department of Defense are underway as well, and we will keep you
updated to the extent possible.
Directed Stick Radiator Technology (DSR)
The company's DSR technology, related research, and prototypes
have recently captured the keen interest of military and law
enforcement agencies and equipment manufacturers worldwide. This
acoustic device is capable of transmitting very high levels of sound
pressure and, depending upon design goals, can achieve various audio
dispersion patterns from sharp uni-directional beams to fully
omni-directional. Potential applications include non-lethal weapons,
active noise cancellation, and extremely high-output signaling
devices. At this time, we are working with select agencies and
military contractors based in the United States.
Retail Products
Retail product sales were disappointing this past year due
primarily to difficult times for several retailers in our space. In
order to generate new vitality in this area of our business we have
re-tooled the line to include several new sports- and nature-related
radio products. A new low-cost earbud radio is under development
featuring wireless transmission between the tiny belt or pocket radio
and its companion earbud. We are seeking licenses from Major League
Baseball and the National Football League in order to open new sales
channels for our miniature radio products. The retail radio division
remains lean and efficient with all significant design and
manufacturing work borne by our manufacturing partners.
Company Developments
The horrific events of 9/11 and threats that have ensued have
caused most equity market investors to consider the effects of these
events, and often make some changes in their strategies. We want you
to be aware that we have experienced minor schedule and travel
impacts, but have detected no change whatsoever in the interest in our
technologies among companies in commercial markets, and a considerable
increase in the interest of government agencies and military
contractors. We have made minor procedural changes internally in order
to ensure the security of our facilities, data, and personnel, and do
not believe that the recent terrorist actions will have a negative
effect on the company's progress.
The company expects some reduction in total General &
Administrative and Research & Development expenses in the coming year
compared to 2001 since the most expensive legal, research, and tooling
activities related to our present technologies have been completed.
This bodes well for future financial results since increased revenue
flow will not be accompanied by proportionately higher spending. In
October and November, the first two months of fiscal 2002, our
revenues are significantly ahead of last year's pace.
While we will not have a booth at the coming Consumer Electronics
Show (CES) in Las Vegas, we will be assisting our OEM customers in
their booths and we have a full schedule of meetings in locations
throughout the show. Due to our full schedule and commitments at CES,
we will not be hosting a shareholder open house there this year. We
will be demonstrating the latest versions of our technology at our
Annual Shareholders meeting this spring.
We are pleased to announce that we have retained the services of
Donald W. Mathias, who will coordinate and assist with media and
public relations activities throughout the coming year. Dr. Mathias
has previously held the communication management positions with NCR,
Epson, and AST and was the executive vice president with Grey
Advertising's public relations division. In that role, he led teams
that launched key products for Microsoft, IBM, Toshiba, Siemens,
Hyundai, and other leading companies.
We are proud of our entrepreneurial and experienced team's
accomplishments over this past year. We enjoy strengthened industry
alliances and are convinced, along with our customers, that our
acoustic technologies will be on the leading edge for many years to
come. We remain focused on translating these technologies into growing
shareholder value.
Sincerely,
Elwood G. Norris, Chairman and CEO / Terry Conrad, President
About American Technology Corp.
American Technology Corp. is Shaping the Future of Sound(R) by
developing and licensing its technology and intellectual property
portfolio which includes: the award-winning HSS(R) (HyperSonic(R)
Sound Technology); Stratified Field(R) Technology; NeoPlanar(R);
PureBass(R) Sub-Woofer Technology; Directed Stick Radiator technology
and FM Sounds(TM) consumer radio products. The company is establishing
a strong portfolio of patents, trademarks, and know-how including over
110 U.S. and Foreign patents and patent filings to date. For more
information on the company and its technologies and products please
visit our Web site at www.atcsd.com.
Safe Harbor statement under the Private Securities Litigation
Reform Act of 1995: This document contains forward-looking statements
relating to future performance, technology and product development
that may affect future results and the future viability of the
company. Actual results could be affected or differ materially from
those projected in the forward-looking statements as a result of risks
and uncertainties, including future products and results,
technological shifts, potential technical difficulties that could
delay new products, competition, general economic factors, pricing
pressures, the uncertainty of market acceptance of new products and
services by OEMs and end-user customers, and other factors identified
and discussed in the company's most recent filings with the Securities
and Exchange Commission. These forward-looking statements are based on
information and management's expectations as of the date hereof.
Future results may differ materially from the company's current
expectations.
--30--jf/sd* dw/sd
CONTACT: American Technology Corp.
Robert Putnam, 858/679-3168
robert@atcsd.com |
