Microphonics,Inc.
(OTC BB: MRPS)
There's a world of sound inaudible to the human ear. Sound is made up of vibrations travelling
through the air in a series of waves. At certain frequencies, these sound waves are detectable
by the human ear but if the vibrations are too fast we simply cannot hear them. This high
pitched sound or ultrasound is above the upper range of normal human hearing.
If we could hear these higher frequency sounds, however, they could tell us a lot. For example,
because ultrasound waves are short, they reflect from objects more readily and give greater
information about those objects. This makes ultrasound an excellent diagnostic tool. The
medical field has known this for nearly 50 years.
Interpreting the Sounds of Silence
Nashville, Tennessee-based Microphonics, Inc. (OTC BB: MRPS) has developed a high-tech
mechanical ultrasound diagnostic device that detects the presence of ultrasonic sound waves
and translates those waves for the human ear. Known as the Ultraphonic Detector, this
hand-held device is so exact that it can detect a hole half the thickness of a human hair. Not
only can it pinpoint and identify leaks (pressurized, non-pressurized and vacuum), it can predict
mechanical malfunctions and certain electrical problems as well. Perhaps the most remarkable
benefit of the Walkman-sized equipment is that it warns of the impending trouble before a
costly malfunction occurs.
From Army Tanks to the Race Track
The technology was conceived in 1987 by a German engineer commissioned by the U.S.
Department of Defense to develop a hand-held tool capable of evaluating track bearings on
military tanks more specifically, to detect and predict bearing wear of the carriage in order to
avoid catastrophic damage to other components of the tank. Although tremendous market
potential existed, the Pentagon limited sale of the device to the U.S. Military. Finally, in 1989,
the restriction was lifted and the German company began seeking ways to expand its market.
During this expansion phase, Nashville businessman Jimmy Gayle was hired to explore the
potential of selling the device to the U.S. industrial market as a preventive maintenance tool. By
early 1990 Gayle and singer Lee Greenwood ("God Bless The U.S.A.") purchased the patent
and domestic manufacturing and distribution rights from the Germans, relocated the corporate
offices from Atlanta to Nashville, and perfected the receiver so that it could translate different
ultrasound waves into signature sounds.
In 1995 a mutual friend introduced Gayle to race car driver Geoff Bodine, who was
experiencing some engine problems. As a favor, Gayle flew to North Carolina to check an
engine out on the dyno. Everything appeared to be in working order, so Bodine and his team
went to the racetrack at Talladega. Unfortunately, Bodine's car failed to qualify. Gayle then
climbed atop a trailer and, with headphones and one of his Ultraphonics Detector units in hand,
listened to the car as it sped 100 m.p.h. along the track. Gayle determined what was wrong
with the engine, the mechanics corrected the malfunction then and there, and Bodine's car
finished second in the race. While at Talladega, Gayle evaluated other cars and informed their
drivers the engines were about to self destruct. "Would you believe every one of those engines
self destructed?" Gayle asked. "NASCAR then approached me and said they wanted our
technology as an entity to evaluate cars. We came up with an agreement to not only evaluate
equipment for malfunctions but to ensure the playing field is equal to keep illegal equipment
out."
NASCAR requires that all cars be precision tuned and pass rigid safety inspections prior to
competition. Because of its accuracy at identifying the type of problem and pinpointing the
source before it progresses into a costly repair, the Microphonics Automotive Diagnostic
System is finding its way into shops of major race teams nationwide. Not only can the device
detect problems while the car is making practice laps around the track, it can also detect
problems with competitors' cars. This is certainly an asset to a racing team's strategy.
Corporate Divisions
Microphonics has assembled a unique trio of divisions that unite the Company's ultrasound
hardware with software applications. The Microphonics Division develops and markets The
Microphonics Automotive Diagnostic System to the automotive and motor sports industries.
The system is a hand-held precision test device that operates on a 9-Volt battery and enables
professional mechanics to quickly and easily detect and diagnose various automotive related
operating problems within 1/8 inch of origin. The Ultraphonics Division develops and markets
The Ultraphonic Detector, a hand-held precision test device designed for industrial use. It
detects leaks, mechanical malfunctions and certain electrical problems in a variety of operating
systems. Maintenance technicians can easily detect and diagnose various problems, locating
their source within 1/8 of an inch. The SoundLogic division develops software which both
refines and elevates mechanical ultrasound diagnostics to state-of-the-art technology.
Strategic Alliances
In addition to an impressive client base including NASA, John Deere, Saturn, GM, Nissan,
Allied Signal and Proctor & Gamble to name a few Microphonics has aligned itself with
several high-profile companies on upcoming projects.
Microphonics is supplying Jasper Engines & Transmissions the nation's largest mass
remanufacturer of gas and diesel engines with units for its 48,000 dealer network. Jasper has
integrated Microphonics' equipment into its sophisticated quality assurance program, including
warranty opportunities and engine diagnostic testing.
ASPIRE (Automotive Support Programs for Inspection, Repair and Emissions) is conducting
an enhanced emissions research project for the State of Pennsylvania. Microphonics will
contribute its expertise and equipment. This represents a significant breakthrough for state
inspections because Microphonics' equipment allows mechanics to perform the same exact
evaluations at a fraction of the cost ($2,000 per unit) of existing $150,000 units. Microphonics
is targeting other states through ASPIRE.
Multi-Million-Dollar Potential With Ford
Microphonics is moving forward on an initial agreement with Ford Motor Corp. wherein Ford
has given approval for 6,500 dealerships to purchase up to six Microphonics Automotive
Diagnostic System (A07 model) units. The equipment _ which can detect small freon or fuel
leaks at long distances will be used in emissions testing in an effort to keep Ford vehicles in
compliance with recent Clean Air Act amendments requiring auto makers to reduce vehicle
emissions.
To date, Microphonics has been given approval by 11 of the 13 automotive OEMs for use of
their ultrasound diagnostic equipment.
The European Market
Microphonics has, through its Ultraphonics and SoundLogic divisions, consummated a $3.5+
million contract with Pennsylvania-based Digital Descriptor Systems Inc. (DDSI) to
distribute the company's signature mechanical ultrasound product line in Europe. DDSI is a
manufacturer and marketer of computerized digital imaging for the municipal and private
criminal enforcement markets. DDSI currently has offices in Brussels, Belgium and
Gothenburg, Sweden and plans to open branches in London, Rome and Hamburg, Germany.
They have been accepted as the supplier to key automotive OEMs in the United Kingdom,
including Ford Europe.
Teaming Up With Bulova Technologies
Microphonics entered an agreement with Bulova Technologies L.L.C. of Lancaster, Pa., in
August. Bulova will now manufacture Microphonics' A07 diagnostic kits, transmitters and
receivers, and will begin shipping them sometime in November. "Bulova brings a level of
expertise that would have taken us millions of dollars and many years to cultivate," Gayle said.
"Our current equipment and suppliers limit production to about 1,000 units per month. Bulova
will allow us to accelerate our production to 6,000 units per week. As a result, our annual
production capability will jump from a mere 12,000 units per year to 300,000 units per year."
The agreement will increase production and significantly reduce manufacturing costs. As a
result, 1998 sales projections for the Microphonics A07 unit would be increased by $2.7
million, and gross profit margin by $612,000.
A world-renowned manufacturer of watches and clocks since 1875, Bulova also develops
high-tech equipment for military applications. "We anticipate working hand in hand with Bulova
on military applications for sale to the U.S. Government," Gayle added. "They're a gigantic
military supplier and heavily into developing mechanisms for bombs and missile guidance
systems. Their equipment meets the highest government specifications. A venture with Bulova
on this level enables us to far exceed our technological capabilities."
The Microphonics Automotive Diagnostic System:
A hand-held precision test device that allows professional mechanics to quickly and easily
detect and diagnose various automotive related operating problems.
The Ultraphonic Detector:
A hand-held precision test device designed for industrial use. Detects leaks, mechanical
malfunctions and certain electrical problems in a variety of operating systems.
Beyond Automotive & Industrial Applications
Microphonics is a sponsor of the United States Olympic Bobsled Team and is supplying
equipment and support to the team through the 1998 Olympic Games in Tokyo. The
Microphonics equipment has helped the team diagnose problems, greatly improve their
performance and improve their ranking from 27th to third place. The Olympic Committee is
also utilizing Microphonics' equipment to detect possible cheating. Microphonics is currently
developing equipment for home use that will evaluate energy efficiency of windows, doors and
skylights.
Recommendation
Microphonics has all the qualities potential investors should look for in a company: leading
edge technology, inventiveness, a unique product, a newly created marketplace for not only its
hardware but complimentary software. Most importantly, alliances with industry giants such as
DDSI, ASPIRE, Jasper, Ford and Bulova represent multi-million-dollar potential and
tremendous worldwide exposure.
Gayle said he's "still amazed at some of the things this equipment can do." So are we.
Microphonics is sure to be a winner. We'll give it the checkered flag. |
