Letter to Shareholders
This letter is a direct communication from the Chairman
of American Technology Corp. (NASDAQ: ATCO).
December 23, 2003
Dear Shareholders,
"We appreciate this opportunity to update you on the business of
American Technology Corporation (ATC). We are finishing our audited
results for the fiscal year ended September 30, 2003 and expect to
announce these results later this month.
"As we transition from being a development organization to
preparing for volume production and sales support, we have made
important changes in personnel. We have recently added experienced
talent, necessary to move our business forward at an expanded pace.
With increasing activity in our sound technologies we have divided the
sales and marketing responsibility into two groups based on the
end-user markets they serve. Our Business Products and Licensing Group
(Business Group) markets and licenses our proprietary HSS(R),
NeoPlanar(R) and PureBass(R) technologies and products to companies
employing audio in consumer, commercial and professional applications.
Our Government and Force Protection Systems Group (Government Group)
markets LRAD(TM), NeoPlanar and HSS products as well as integral
engineering services to government and military customers and to the
expanding force protection market. Joe Zerucha leads the Business
Group and Carl Gruenler heads the Government Group.
Government/Military Activities
"We are experiencing significant growth in orders from our
Government group compared to fiscal 2003. We expect installations
completed to date to result in more new contracts during fiscal 2004.
Our strategy is to position LRAD, NeoPlanar, and HSS as the premium
sound solution product suite for force protection, emergency response,
and advanced audio systems throughout government and the security
industry, first in the U.S. and then internationally. Following are
examples of how our products are being used in force protection:
-- LRAD:
-- Sold and installed on ships in the 2nd, 3rd, and 7th
fleets for use in operations.
-- Sold and delivered units to the Naval Surface Warfare
Development Group for operations against the small boat
terrorist threat.
-- Sold and delivered units to two Navy fleet concentration
areas for use on piers against the small boat threat and
for security forces ashore.
-- Delivered units to the U.S. Army, U.S. Marine Corps, and
U.S. Coast Guard for use in crowd control, area denial of
personnel, and waterside force protection.
-- Demonstrated to various port authorities and police
departments.
-- NeoPlanar:
-- Supported the installation in Hangar Bay 2 on the USS Carl
Vinson (CVN 70) and helo hangar on the USS Winston S.
Churchill (DDG 81).
-- Delivered NeoPlanar "Sound Bars" for installation in a new
construction Navy aircraft hangar.
-- Installed NeoPlanar "Sound Squares" at a private academy
to establish a campus emergency response capability.
-- Establishing waterfront hailing and building security
system projects to demonstrate improved communication
intelligibility at long distances over varying levels of
ambient noise.
-- HSS:
-- Ongoing evaluation on the bridge of the USS Winston S.
Churchill (DDG 81) for improved command and control
communications.
-- Ongoing evaluations by government agencies for
next-generation command center communications.
"Deliveries of LRAD and NeoPlanar products to government customers
are growing. We remain very optimistic about the prospects of our
Government Group and look for a significant contribution from it in
fiscal 2004.
Business Group Activities
HSS
"Our HSS strategy is to seek OEM partners in growing markets that
can benefit from directed or narrowcast sound. This includes focus on
the following markets:
-- Digital Signage Market - Digital Signage is a generic term
used to describe the replacement of static (passive) signs or
displays with video screens (CRT, Plasma, LED) containing
still or motion video images. The image content, normally
advertising or informational, can be changed via network
control of each individual sign. Hyper-directional audio is
required to contain the audio program within a specifically
defined space eliminating objections to the repetitive message
from local workers and lowering the overall audio noise level
in a confined space.
-- Museums and Comparable Facilities - Hyper-directional audio is
required in museums and similar facilities to focus audio
information in targeted areas without distracting other
patrons. It is also required to allow multiple audio programs
to be played within a confined space.
-- Trade Show and Conventions - Trade shows and conventions
require hyper-directional audio to lessen overall room noise,
to focus informational audio to individual displays, as well
as contain audio programs within defined booth spaces.
-- Kiosks - Retail point of purchase or information kiosks
require hyper-directional audio to contain sound within the
immediate space of the kiosk and to maintain privacy for each
listener.
"We will be driving this market using our significantly
strengthened internal business development resources, which we believe
will result in exposure of our technology to a much broader group of
potential partners with more near-term product placement prospects
than previously available to us. Nonetheless, the success of our HSS
business strategy will depend on our ability to grow production of HSS
systems while reducing unit system costs during fiscal 2004. We
encountered significant difficulties in establishing HSS production
during fiscal 2003. We incurred manufacturing startup costs and also
experienced warranty costs from replacements of some systems in
response to component failures. We have made internal changes to
aggressively address the issues encountered in bringing this
revolutionary new technology to market for the first time.
"We expect our HSS rollout to ramp steadily as we match new
components and production to installations in early 2004 and expand
thereafter as we outsource higher volume production. We believe HSS is
the answer for the increasing demand for new directed sound
communications and advertising solutions.
NeoPlanar
"OEMs are integrating NeoPlanar into various products as our
customer list grows with new applications. In August we demonstrated
our NeoPlanar technology to a major Las Vegas venue that has since
resulted in our single largest NeoPlanar order to date. We are
currently delivering on the order and there are possibilities for
follow-on purchases. We are allocating additional resources for the
projected growth in NeoPlanar shipments in 2004.
Summary
"In addition to organizing sales into two groups, our business
operations are focusing on the rigorous steps required to produce and
manage quality and volume production. During fiscal 2003, our
manufacturing was spread amongst several internal and external
resources. Going forward, our overall strategy is to focus internally
on our core competencies while leveraging external partners for other
required capabilities. Manufacturing is an external key competency for
fiscal 2004 as we embark on volume manufacturing of several product
lines. HSS, LRAD and NeoPlanar product lines will be ramping
production during 2004. Our strategy for 2004 is to engage established
global contract manufacturing partners to meet our production needs.
"We continue to prosecute our growing patent portfolio which we
believe provides broad protection for our sound technologies. To date,
we own 30 U.S. patents and have approximately 33 U.S. patents (plus
additional foreign applications) pending on our sound technologies.
"We are targeting significant revenue growth in 2004. We
appreciate your continued support and commit to keeping you informed
on our progress in Shaping the Future of Sound(R)."
Elwood G. Norris
Chairman
Safe Harbor statement under the Private Securities Litigation
Reform Act of 1995: This document contains forward-looking statements
relating to future transactions, performance, technology, and product
development which 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 the ability of the company to
continue as a going concern, development of future products,
technological shifts, potential technical or manufacturing
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. American
Technology Corp. disclaims any intent or obligation to update those
forward-looking statements, except as otherwise specifically stated by
it. |
