This letter is a direct communication from the Chairman of American Technology Corporation (NASDAQ: ATCO). It is included with the Proxy materials currently being mailed to American Technology Corporation Shareholders.
SAN DIEGO, California, April 23, 2003 - American Technology Corporation (NASDAQ: ATCO)
To the Shareholders of American Technology Corporation:
After many years of research and development and many millions of dollars of investment, we are marketing, selling and licensing our revolutionary audio innovations. Let me re-state what we have stated before, we are shaping the future of sound. In spite of our technological successes in basic product development, over the last twelve months, we have faced numerous challenges in moving our HSS® technology from in-house, hand produced products to quality, high volume production. The challenges were not simple ones and required intense, close cooperation between ATC, several of our parts vendors as well as the contract house charged with final assembly and testing of the products.
I am pleased to report that the relentless cooperative efforts of all parties are paying off and we are establishing the volume production we had hoped would already be under way. While we have lost some time due to the delays experienced, we have not lost customers or the substantial HSS opportunity before us. Over the last six months, we have refined our overall approach to market, sell and license each of our sound technologies to their respective commercial and government/military markets. We have implemented a modified business model that includes delivery of finished product to certain customers, supplying critical sub-assemblies to others and licensing. We believe this model overcomes the limitations associated with strictly licensing and maximizes our long-term revenues and margins.
One year ago, most of our revenue was derived from our since-shuttered retail radio products division; now, we are generating increasing revenue from our innovative sound technologies. This increasing revenue demonstrates the maturity of our sound technologies and the emergence of ATC from a research and development organization into the beginnings of a sales and marketing machine. The hiring of James M. Irish and our subsequent new corporate structure represents a sea change at ATC as we focus on our goal of becoming a recognized leader in sound reproduction, both technologically and financially.
Our business progress over the year includes:
Beginning the manufacturing, delivery and seeding campaign of HSS
Issuance of several new patents and filing of additional patent applications
Building and shipping our first ATC-branded NeoPlanar®/PureBass® speaker system
Installation of NeoPlanar on board the aircraft carrier USS Carl Vinson
Successful testing and launch of our HIDA devices to government, military and Homeland
Security agencies
Substantial revenue growth in our Military Operations division
Five-Year licensing and sales agreements with two divisions of General Dynamics
While our deliveries are not yet in the thousands, we believe they will soon be as individual customers have signaled their desire for tens of thousands of HSS product solutions for new sound applications. Many hundreds of HSS units have been shipped and are currently in use by more than 200 major customers worldwide. These customers are providing us with valuable information and feedback regarding their specialized applications so that we may provide our HSS technology, packaged and customized to meet their specifications. We are seeing a market larger than we knew existed a year ago including customers that are identifying HSS as a solution for novel, high-volume applications. General areas where we are experiencing substantial interest in HSS for innovating sound solutions include:
Displays, kiosks and tradeshow exhibitions and booths
Movie companies
Point-of-Purchase
Retail (Chain stores)
Theme Parks
Restaurants and Sports bars
Vending machines
Las Vegas stage productions
Casinos, gaming and arcades
Large-venue road show productions
Museums
Devices for the hearing impaired
Military and Government
Specific applications exist in each of these markets for specific customers representing many tens of thousands of HSS units. Through a network of independent representatives and dealer/installers, the establishment of global distribution of HSS is well underway. As stated, we have encountered challenges in moving our revolutionary HSS technology from the laboratory to mass production. This has delayed the realization of the very high expectations for this technology. We are aggressively focused on matching production capabilities and product features to meet market demand. As with many breakthrough technologies we plan to rapidly introduce future generations of HSS product. Each new generation is expected to be simpler and more economical to produce and with improved performance and quality. As prices decline and performance improves, new applications become economical for a larger range of customers, greatly expanding the overall market for HSS products.
Beyond our own limited edition NeoPlanar/PureBass sound system and our Harman International automotive NeoPlanar licensing agreement, we are currently working and negotiating with companies interested in licensing, branding, marketing and selling NeoPlanar and PureBass audio systems for:
Home theaters
Home audio
Flat panel televisions
PCs
Theaters
We have utilized unique concepts and innovative approaches to translate our commercial sound technologies to support government, military and Homeland Security requirements. Military applications based on our sound technologies include:
Shipboard loudspeakers having substantially more clarity than currently installed speaker
systems
Secure communications
Long distance hailing and warning systems
Non-lethal weapons capability
Specialized audio tool for counter-terrorism
Recent world events have focused attention on the need to communicate at long distances in a focused and clear manner. Traditional sound technologies are not capable of meeting this need. HIDA is an elegant solution to this emerging problem and ATC is rapidly developing this explosive market opportunity.
We have demonstrated our acoustic technologies to many naval commands and agencies. We have signed a Cooperative Research and Development Agreement (CRDA) with the Army Research and Development Engineering Command (ARDEC). This month, we received a combination of purchase orders from major defense contractors and direct contractors for the development and prototyping of a new technology for the National Research and Development Program for combating terrorism. Due to global geo-political conditions, the maturity of our designs, and our ability to manufacture and fulfill government, military and Homeland Security contracts and purchase orders, we anticipate escalating growth in our Military Operations division. We are fielding ever-increasing inquiries from government and military contacts of U.S. allies. With the blessing of our government and military officials, we intend to branch out into international government and military sales.
In addition to having our HSS technology receive awards from UC San Diego CONNECT and Popular Science magazine, this year we have had our sound technologies featured on over 30 different television and radio stations nationwide. ATC and our technologies have also been featured in/on:
ABC (World News Tonight with Peter Jennings)
Associated Press
BBC
BusinessWeek
Business 2.0
CNN
Forbes.com and Forbes Magazine
Fox News (four stories)
Los Angeles Times
MSNBC
NBC (Nightly News and Early Today)
Newsweek
New York Times Magazine
Nikkei Marketing Journal
Popular Science (two stories)
Tech TV
More coverage of ATC and our technologies is planned as an integral part of our marketing and sales focus.
Our Board of Directors and all of us as employee-shareholders express our appreciation for your continued support. We believe your patience will be amply rewarded. We look forward to meeting with you on May 29th and sharing further details on the latest developments of your company as we continue Shaping the Future of Sound™.
Sincerely,
Elwood G. Norris,
Chairman |
