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As 2002 comes to a close, we are pleased to provide you with this brief summary of your company's progress and business. We look forward with anticipation to 2003, a year we expect will be the most significant in the history of the Company.

We are pleased to report that the first quarter of fiscal 2003, ending December 31, will mark our third straight quarter of revenue growth, and the best in our history based on revenue from our proprietary sound technologies. We expect this trend to continue, fueled mainly by new HSS® products and growth in our military and government-related business.

HSS® sales at this stage can best be described as an intense "seeding" campaign, with hundreds of single-unit and small quantity orders being shipped to a wide variety of customers ranging from start-ups to well-known, global companies. Customers purchasing HSS systems include sound contractors, retailers, display and kiosk manufacturers, major consumer brands, motion picture studios, vehicle manufacturers, local and national government agencies, and many other customers desirous of using our patented HyperSonic Sound® in their products. The order rate density is increasing among some customers who have evaluated HSS for their specific purposes and who are beginning to re-order in larger quantities. We continue to build U.S. and world-wide distribution by carefully qualifying each company desirous of marketing products based on this unique and revolutionary technology.

We are also at an important business stage, listening to and learning from new customers. This has focused our innovative engineering team to begin creating new products that leverage the laser-like directionality of HSS. These developments will include both small AC-powered units and certain battery-powered devices targeted at two major business markets. Our research team has discovered new methods and opportunities that we will announce once our intellectual property is appropriately protected in these new areas.

Our military and government-related business consists of research and development contracts, sales of prototype high-intensity directed acoustics (HIDA) devices, and NeoPlanar® sales in specific applications such as the recent successful installation of more than 400 linear feet of hardened NeoPlanar® speakers aboard a nuclear aircraft carrier. HIDA technology can be used as a highly directional long-range hailing device and as a non-lethal weapon to meet the increasing need to warn and protect ships, vehicles and facilities from intruders. HIDA has been tested in field conditions to hail intruders at 500 yards or more, a true breakthrough in directional sound. We are very encouraged about the many opportunities for rapid deployment of HIDA devices commencing in 2003. Revenue from our military and government business quadrupled in 2002 compared to the prior year and we expect very strong growth in 2003.

We expect to provide specific information as to our customers and potential revenue on both our commercial and military/government business as our customers, whose wishes for confidentiality we value highly, announce their important projects, products and systems.

ATC has continued to attract the attention of the media during the past three months. Recent press coverage includes: The Nikkei Marketing Journal, Business 2.0, interviews on several radio and television stations as well as CNN Headline News. HSS was honored with the Popular Science 15th Annual 2002 "Best of What's New" Grand Award in the General Technology category, beating out such notable technologies as the Segway Scooter. Recently, HSS was awarded the most innovative new product in the General Technology category from the University of California at San Diego CONNECT Awards. We expect continued media coverage in 2003.

We have received many favorable comments and questions regarding future webcasts and/or conference calls from the Company. In response, we expect to hold these events around the release of our quarterly financial statements and at other appropriate times. Of financial importance, the 12% Convertible Subordinated Promissory Notes originally due on December 31, 2002 have been extended by the holders to December 31, 2003. No other modifications were made to the Notes.

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Author Notes:

Mark Harris contributes and publishes news editorial to http://www.the-scooters-report.com.  Find all kinds of mopeds, electric, gas and motorized scooters online plus parts and accessories.

 
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