Shrhldr ltr. This deserves a repost and reread.
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.
CONTACT: American Technology Corp.
Robert Putnam, 858/679-3168
robert@atcsd.com
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: AEROSPACE/DEFENSE ENTERTAINMENT HARDWARE SOFTWARE TELEVISION/RADIO |
