Nevada
|
27-2767540
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
1941 Ramrod Avenue, Suite #100
Henderson, Nevada 89014
(888) 477-2150
|
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
|
Item No.
|
Caption
|
Location in Information Statement
|
|
Item 1.
|
Business
|
See “Executive Summary,” “The Spin-Off,” “Capitalization and Financing,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and “Certain Relationships and Related Party Transactions”
|
|
Item 1A.
|
Risk Factors
|
See “Risk Factors”
|
|
Item 2.
|
Financial Information
|
See “Capitalization and Financing,” “Unaudited Pro Forma Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
|
|
Item 3.
|
Properties
|
See “Business — Properties”
|
|
Item 4.
|
Security Ownership of Certain Beneficial Owners and Management
|
See “Security Ownership of Certain Beneficial Owners and Management”
|
|
Item 5.
|
Directors and Executive Officers
|
See “Management”
|
|
Item 6.
|
Executive Compensation
|
See “Director Compensation” and “Executive Compensation”
|
|
Item 7.
|
Certain Relationships and Related Transactions, and Director Independence
|
See “Management” and “Certain Relationships and Related Party Transactions”
|
|
Item 8.
|
Legal Proceedings
|
See “Legal Proceedings”
|
|
Item 9.
|
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
|
See “Executive Summary” and “Dividend Policy”
|
|
Item 10.
|
Recent Sales of Unregistered Securities
|
Not applicable
|
|
Item 11.
|
Description of Registrant’s Securities to be Registered
|
See “The Spin-Off,” “Dividend Policy” and “Description of Our Capital Stock”
|
|
Item 12.
|
Indemnification of Directors and Officers
|
See “Limitation of Liability and Indemnification of Directors and Officers”
|
|
Item 13.
|
Financial Statements and Supplementary Data
|
See “Unaudited Pro Forma Financial Statements” and “Index to Financial Statements” and the statements referenced therein
|
|
Item 14.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Not applicable
|
|
Item 15.
|
Financial Statements and Exhibits
|
See “Unaudited Pro Forma Financial Statements” and “Index to Historical Financial Statements” and the statements referenced therein
|
Exhibit No.
|
|
Exhibit Description
|
|
2.1
|
|
Form of Separation and Distribution Agreement by and between LRAD Corporation and Parametric Sound Corporation
|
|
3.1
|
* |
|
Articles of Incorporation of Parametric Sound Corporation
|
3.2
|
* |
|
Bylaws of Parametric Sound Corporation
|
4.1 | Form of Common Stock Certificate of Parametric Sound Corporation | ||
4.2 | Form of Stock Purchase Warrant | ||
4.3
|
|
Form of 8% Subordinated Promissory Note
|
|
10.1
|
*
|
|
Form of Tax Sharing Agreement by and between Parametric Sound Corporation and LRAD Corporation
|
10.2
|
* |
|
Form of License and Royalty Agreement between Syzygy Licensing LLC and Parametric Sound Corporation
|
10.3
|
* |
|
Parametric Sound Corporation 2010 Stock Option Plan
|
10.4
|
* |
|
Form of Stock Option Grant Notice and Stock Option Agreement under the 2010 Stock Option Plan
|
10.5
|
* |
|
Form of Indemnification Agreement to be entered into between Parametric Sound Corporation and its directors and officers
|
10.6 | Funding Commitment Letter dated July 26, 2010 | ||
99.1
|
|
Preliminary Information Statement of Parametric Sound Corporation, dated July 26, 2010
|
|
|
PARAMETRIC SOUND CORPORATION | |||
Dated: July 26, 2010
|
By:
|
/s/ ELWOOD G. NORRIS | |
Name: Elwood G. Norris | |||
Title: Chief Executive Officer | |||
Exhibit No.
|
|
Exhibit Description
|
|
2.1
|
|
Form of Separation and Distribution Agreement by and between LRAD Corporation and Parametric Sound Corporation
|
|
3.1
|
* |
|
Articles of Incorporation of Parametric Sound Corporation
|
3.2
|
* |
|
Bylaws of Parametric Sound Corporation
|
4.1 | Form of Common Stock Certificate of Parametric Sound Corporation | ||
4.2 | Form of Stock Purchase Warrant | ||
4.3
|
|
Form of 8% Subordinated Promissory Note
|
|
10.1
|
*
|
|
Form of Tax Sharing Agreement by and between Parametric Sound Corporation and LRAD Corporation
|
10.2
|
* |
|
Form of License and Royalty Agreement between Syzygy Licensing LLC and Parametric Sound Corporation
|
10.3
|
* |
|
Parametric Sound Corporation 2010 Stock Option Plan
|
10.4
|
* |
|
Form of Stock Option Grant Notice and Stock Option Agreement under the 2010 Stock Option Plan
|
10.5
|
* |
|
Form of Indemnification Agreement to be entered into between Parametric Sound Corporation and its directors and officers
|
10.6 | Funding Commitment Letter dated July 26, 2010 | ||
99.1
|
|
Preliminary Information Statement of Parametric Sound Corporation, dated July 26, 2010
|
|
|
If to LRAD, to:
|
If to Parametric, to:
|
LRAD Corporation
|
Parametric Sound Corporation
|
15378 Avenue of Science, Suite 100
|
1941 Ramrod Avenue, Suite 100
|
San Diego, California 92128
|
Henderson, Nevada 89014
|
Attn: Thomas R. Brown
|
Attn: Elwood G. Norris
|
Facsimile: (858) 676-1112
|
Facsimile: (888) 639-2150
|
LRAD Corporation,
|
Parametric Sound Corporation,
|
a Delaware corporation
|
a Nevada corporation
|
________________________________
|
________________________________
|
By:
|
By:
|
Its:
|
Its:
|
|
·
|
The 27 U.S. patents, three foreign and four pending applications listed below with a book value of approximately $501,500 at March 31, 2010. The technology related to the six additional U.S. patents previously abandoned by LRAD:
|
|
·
|
The following 4 U.S. trade names along with certain additional foreign rights to such names:
|
|
·
|
Parts inventory consisting of emitter film and emitter and electronic parts with a book value of approximately $23,434 and an original cost of approximately $1,192,324, the difference being previous LRAD inventory reserves for excess parts.
|
|
·
|
Tooling and molds that have been fully depreciated and have no remaining book value.
|
|
·
|
Manufacturing jigs, testing and other equipment that have been fully depreciated and have no remaining book value.
|
|
·
|
Drawings, technical descriptions, assembly details and component listings.
|
|
·
|
Customer, representative and supplier lists.
|
|
·
|
Manufacturing methods, knowhow and trade secrets related to HSS and HSS production.
|
|
·
|
Cash
|
|
·
|
Accounts Receivable
|
|
·
|
Parts inventory with a book value of approximately $184,734 and an original cost of approximately $442,616, the difference being previous LRAD inventory reserves for excess parts.
|
$[__________]
|
Henderson, Nevada
[__________], 2010
|
PARAMETRIC SOUND CORPORATION
|
|
By: _________________________
|
|
Name: _________________________
|
|
Title: _________________________
|
|
Address: _______________________
|
|
_______________________
|
Signature: __________________________________ |
[NAME OF HOLDER]
By: ____________________________
Name: ______________________
Title: _______________________
|
Sincerely,
By: /s/ ELWOOD G. NORRIS
Elwood G. Norris
|
Executive Summary
|
1
|
Questions and Answers About the Spin-Off
|
7
|
Risk Factors
|
11 |
Special Note About Forward-Looking Statements
|
19 |
The Spin-Off
|
20 |
Dividend Policy
|
27 |
Capitalization and Financing
|
27 |
Unaudited Pro Forma Financial Statements
|
28 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
34 |
Business
|
39 |
Management
|
46 |
Director Compensation
|
47 |
Executive Compensation
|
47 |
Security Ownership by Certain Beneficial Owners and Management
|
51 |
Our Relationship with LRAD Corporation After the Spin-Off
|
52 |
Certain Relationships and Related Party Transactions
|
55 |
Legal Proceedings | 56 |
Description of Our Capital Stock
|
56 |
Limitation of Liability and Indemnification of Directors and Officers
|
58 |
Description of Indebtedness
|
59 |
Where You Can Find More Information
|
59 |
Index to
Historical
Financial Statements
|
60 |
|
·
|
We pioneered parametric sound, and there is limited competition in this market niche.
|
|
·
|
We have a strong intellectual property position in this market.
|
|
·
|
We have an improved electronics solution that enhances our product offering in this market.
|
|
·
|
Through earlier marketing efforts, we have gained an understanding of the needs of customers and have designed our new product with additional features to meet those needs.
|
|
·
|
Our focus only on parametric sound affords us greater marketing flexibility to meet customer requirements.
|
|
·
|
We have limited overhead that allows for efficient results for our stockholders
.
|
|
·
|
Our management team has a strong technical base in this technology and experience in bringing products to market
.
|
|
·
|
We need to rapidly, profitably and successfully develop, produce and market new products now in the early stage of production development.
|
|
·
|
Our products must meet the needs of existing and new customers, and we need to grow revenues sufficient to sustain profitable operations.
|
|
·
|
We have limited personnel and financial resources to develop required business functions, including research and development, production, marketing, sales, distribution, service and administration.
|
|
·
|
We will be required to obtain sufficient financing until we are able to produce revenues and profitability to sustain future operations.
|
|
·
|
We face the uncertainties and risks facing any new business startup including but not limited to the risk factors described in the section entitled “Risk Factors” starting on page 11.
|
|
·
|
Produce a product line meeting customer requirements for easy and flexible installation using content from a range of media sources, complementing equipment such as video devices, kiosks and vending machines.
|
|
·
|
Develop a turnkey manufacturing relationship to produce our products, thereby reducing a need for manufacturing space and production personnel.
|
|
·
|
Develop relationships with customers requiring large numbers of products, including value added resellers (VARs), original equipment manufacturers (OEMs) and distributors that focus on specific end user solutions.
|
Distributing company
|
LRAD Corporation, a Delaware corporation.
|
|
Distributed company
|
Parametric Sound Corporation, a Nevada corporation (“Parametric Sound”), owns most of the assets of the HSS technology business of LRAD Corporation and following the distribution will license technology developed by our Chief Executive Officer. Parametric Sound’s principal executive offices are located at 1941 Ramrod Avenue, Suite #100, Henderson, Nevada 89014.
|
|
Distribution ratio
|
Each holder of LRAD Corporation common stock will receive a dividend of one share of Parametric Sound common stock for every two shares of LRAD Corporation common stock held on the record date. Any fractional shares will be rounded up to the next whole share.
|
|
Securities to be distributed
|
Approximately 15,305,728 shares of Parametric Sound common stock, which will constitute all of the outstanding shares of Parametric Sound common stock immediately after the spin-off (based on the 30,611,456 shares of LRAD Corporation common stock that we expect to be outstanding on the record date). If holders of outstanding stock options of LRAD Corporation exercise their stock options on or before the record date, we will be required to issue up to 1,730,068 additional shares of Parametric Sound common stock (based on 3,460,135 options that are exercisable as of March 31, 2010), and we will not receive any proceeds from the option exercise.
|
|
Record date
|
The record date is 5:00 p.m., California time, __________, 2010. To receive shares of Parametric Sound common stock in the spin-off, holders of LRAD Corporation common stock must be stockholders as of 5:00 p.m., California time, on the record date.
|
|
Distribution date
|
The distribution date will be on or about __________, 2010.
|
|
Relationship between
|
||
Parametric Sound and LRAD
|
||
Corporation after the spin-off
|
Following the spin-off, each of LRAD Corporation and Parametric Sound will be an independent, publicly-traded
company. We have entered into an agreement with LRAD Corporation primarily relating to the transfer of most of its HSS technology business assets to us, including the transfer of emitter manufacturing equipment, parts inventory, test equipment, fixtures, tooling, patents and trade secrets, see “
The Spin-Off – Contributed Assets”
beginning on page 22. LRAD Corporation may complete certain HSS business with current customers after the distribution date. We have agreed to reimburse Syzygy Licensing LLC (“Syzygy”), an entity in which our Chief Executive Officer, Elwood G. Norris is majority owner, an estimated $155,000 for the legal, accounting, consulting, mailing, filing and other costs associated with the spin-off, including the special meeting of stockholders of LRAD Corporation approving the spin-off and the preparation and distribution of this information statement. After the distribution, other than some initial and limited manufacturing and technical support, we do not expect any material transition services between Parametric Sound and LRAD Corporation. We do not expect to share any employees or contract for any services from LRAD Corporation. For additional information regarding our relationship with
LRAD Corporation after the spin-off, see “
Our Relationship with LRAD Corporation After the Spin-Off
”
beginning on page 52.
|
License of Improvements to
|
||
Parametric Technology
|
We intend to enter into a license agreement with Syzygy promptly following the distribution. Mr. Norris has assigned to Syzygy certain patent pending technology and trade secrets related to a new and more cost-effective method of controlling and processing media input to create parametric sound output for parametric emitter devices such as those employed by us. He has also invented improvements to the current HSS emitter. Pursuant to the license agreement, we will reimburse patent, prototype and testing costs incurred to date (an amount estimated at $90,000) and to pay future patent related costs. These prior costs include up to a maximum of $25,000 for Mr. Norris’ time in producing and testing prototypes and preparing for production. The license will provide for royalties of not more than 5% of net sales from products employing the technology. For additional information regarding the license arrangement, see “
Business-License
”
beginning on page 41.
|
|
Funding of Parametric Sound
|
||
after the spin-off
|
Parametric Sound is the recipient of most of the business assets of LRAD Corporation’s HSS technology business. These assets consist of emitter manufacturing equipment, parts inventory, test equipment, fixtures, tooling, patents and trade secrets. LRAD Corporation will be responsible for any warranty liability for any HSS product sales that it has made or makes completing certain HSS business with current customers.
|
|
We have limited prospects for near-term revenues in part due to our plans to introduce a new product line. We will receive no cash or liquidity at the distribution date.
|
||
We expect to fund a minimum of $350,000 and a maximum of $750,000 of subordinated note financing with accompanying stock purchase warrants at the distribution date. The proceeds of this financing are intended to fund the spin-off and related costs described above and provide initial working capital to start the process of bringing our new product line to production. We have
received
nonbinding
, verbal
indications of interest
from seven individual accredited investors to provide an aggregate of $450,000 in cash financing and from Syzygy to
convert
$200,000 of
the
amount owed to Syzygy. We have received a written commitment from Mr. Norris
that at least $350,000 will be funded at the distribution date through conversion of amounts owed to Syzygy and additional cash on the same terms as other investors.
Conversion
or repayment
of amounts owed to Syzygy will not represent cash available for working capital.
See “
Capitalization and Financing
” beginning on page 27.
|
||
We expect that we will need to refinance this debt and/or arrange additional debt or equity or equity-based financing in the first 12 months after the distribution date. Management has not yet determined the amounts required in future financings, which will depend in part on the time required to bring the new product line to production and customer acceptance, if any, of the new product. There is no assurance we will be successful in arranging financing for our company or the terms of any such financing. Any future financing could be dilutive to existing Parametric Sound stockholders. See
“Risk Factors”
beginning on page 11 and “
Description of Indebtedness
” beginning on page 59.
|
||
Dividend policy
|
The declaration and amount of future dividends, if any, will be determined by our Board of Directors and will depend on our financial condition, earnings, capital requirements, financial covenants, regulatory constraints, industry practice and other factors our Board of Directors deems relevant.
|
|
·
|
Approval of the spin-off by the stockholders of LRAD Corporation at a special stockholders meeting held on June 2, 2010.
|
|
·
|
Entry into a Separation and Distribution Agreement (the “Separation Agreement”) to effect the separation. For more information on this agreement, see
“Our Relationship with LRAD Corporation After the Spin-Off”
beginning on page 52.
|
|
·
|
Prior to or at the distribution date, the transfer of certain assets related to our business (LRAD Corporation’s HSS technology business) from LRAD Corporation to us, see “
The Spin-Off
—
Contributed Assets”
beginning on page 22.
|
|
·
|
Declaration of the effectiveness of our registration statement on Form 10, of which this information statement is a part, by the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934, as amended, and the mailing by LRAD Corporation of this information statement to its stockholders.
|
|
·
|
A minimum of $350,000 in debt financing proceeds will be contributed to Parametric Sound at the distribution date.
|
|
·
|
Following the distribution, adoption by our Board of Directors of the Parametric Sound Corporation 2010 Stock Option Plan and related stock option agreement.
|
|
·
|
Following the distribution, reimbursement by Parametric Sound to Syzygy of an estimated $155,000 for the legal, accounting, consulting, mailing, filing and other costs associated with the spin-off and the preparation and distribution of this information statement.
|
|
·
|
Following the distribution, upon execution of a licensing agreement with Syzygy, Parametric Sound will reimburse Syzygy an estimated $90,000 for patent, testing and prototyping costs incurred through the distribution date.
|
|
·
|
Following the separation, the application for listing and quotation of Parametric Sound common stock on the OTCBB.
|
|
·
|
our ability to manufacture reliable products that have the features required by our customers;
|
|
·
|
our ability to develop relationships with new customers that will lead to sales of our products;
|
|
·
|
our ability to develop and expand new markets for directed sound products; and
|
|
·
|
our ability to develop international product distribution directly or through strategic partners.
|
|
·
|
our ability to develop and supply sound reproduction components to customers, distributors, VARs or OEMs or in the future to license our technologies;
|
|
·
|
market acceptance of, and changes in demand for, our products or our customers’ products;
|
|
·
|
gains or losses of significant customers, distributors or strategic relationships;
|
|
·
|
unpredictable volume and timing of customer orders;
|
|
·
|
the availability, pricing and timeliness of delivery of components for our products;
|
|
·
|
fluctuations in the availability of manufacturing capacity or manufacturing yields and related manufacturing costs;
|
|
·
|
timing of new technological advances, product announcements or introductions by us, by OEMs or licensees and by our competitors;
|
|
·
|
product obsolescence and the management of product transitions and inventory;
|
|
·
|
unpredictable warranty costs associated with our products;
|
|
·
|
installation or order delays by customers, distributors, OEMs or production delays by us or our suppliers;
|
|
·
|
seasonal fluctuations in sales;
|
|
·
|
general consumer electronics industry conditions, including changes in demand and associated effects on inventory and inventory practices;
|
|
·
|
general economic conditions that could affect the timing of customer orders and capital spending and result in order cancellations or rescheduling; and
|
|
·
|
general political conditions in this country and in various other parts of the world that could affect spending for the products that we intend to offer.
|
|
·
|
the timing and extent of our research and development efforts;
|
|
·
|
investments and costs of maintaining or protecting our intellectual property;
|
|
·
|
the extent of marketing and sales efforts to promote our products and technologies; and
|
|
·
|
the timing of personnel and consultant hiring.
|
|
·
|
cease selling, incorporating or using products or services that incorporate the challenged intellectual property;
|
|
·
|
obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, if at all; and
|
|
·
|
redesign products or services that incorporate the disputed technology.
|
|
·
|
general economic, market and political conditions;
|
|
·
|
quarterly variations in results of operations or results of operations that are below public market analyst and investor expectations;
|
|
·
|
changes in financial estimates and recommendations by securities analysts;
|
|
·
|
operating and market price performance of other companies that investors may deem comparable;
|
|
·
|
press releases or publicity relating to us or our competitors or relating to trends in our markets; and
|
|
·
|
sales of common stock or other securities by insiders.
|
|
·
|
risks that we may not have sufficient capital in the amounts and at the times needed to finance our business;
|
|
·
|
risks inherent in spin-offs, including those related to the capital resources required for business risks, legal risks and risks associated with the tax and accounting treatment of spin-off transactions;
|
|
·
|
risks associated with our future revenue source dependent on a new product line not yet in production;
|
|
·
|
risks that any future potential revenue opportunities from customers may not materialize to any meaningful degree or at all;
|
|
·
|
risks of delays or unforeseen technical obstacles in arranging production and bringing our new product line to market;
|
|
·
|
risks of operating as an independent, stand-alone company and loss of certain benefits associated with being owned as part of a larger company;
|
|
·
|
risks that the expected benefits of the spin-off may not be fully realized or may take longer to realize than anticipated;
|
|
·
|
absence of a public market for our common stock;
|
|
·
|
our ability to attract and retain qualified personnel and key employees;
|
|
·
|
our ability to establish our own financial, administrative and other support functions;
|
|
·
|
difficulty in predicting the timing or outcome of new product development efforts;
|
|
·
|
the amount and timing of costs associated with research and development of our product line;
|
|
·
|
our ability to generate operating revenue;
|
|
·
|
market adoption of any new products;
|
|
·
|
the competitive nature of the sound reproduction industry;
|
|
·
|
our ability and that of our suppliers to comply with laws, regulations and standards, and the application and interpretation of those laws, regulations and standards, that govern or affect the electronics and sound reproduction industries, the non-compliance with which may delay or prevent the development of products;
|
|
·
|
the availability and price of acceptable raw materials and components from third-party suppliers;
|
|
·
|
volatility in the financial markets;
|
|
·
|
any adverse outcome in litigation to which we may become a party;
|
|
·
|
general economic, political and business conditions that adversely affect our company or our suppliers or any company to which we sell our products;
|
|
·
|
changes in costs, including changes in labor costs and raw material prices;
|
|
·
|
the impact on our product development of patents and other proprietary rights licensed or owned by us; and
|
|
·
|
the ability to successfully have our products manufactured in an efficient, time-sensitive and cost-effective manner.
|
|
·
|
Allow us to capitalize on the opportunity to complement existing HSS emitter technology with new processing and control electronics developed independently by Mr. Norris. Parametric Sound intends to introduce a new product line based on the combined technology.
|
|
·
|
Separate the risk of new parametric sound product development and introduction, including the likely operating losses generally associated with such product development, from LRAD Corporation’s LRAD and other business and operating results.
|
|
·
|
Reduce internal competition for capital and enhance the possibility of raising capital for the parametric sound business. Recently, the availability of financial and personnel resources for the HSS business has been limited because LRAD Corporation’s business strategy has been focused on building its LRAD business. As an independent company, we will have direct access to the public and private capital markets to allow us to seek to finance our operations and growth without having to compete with LRAD Corporation’s LRAD and other businesses with respect to financing.
|
|
·
|
Allow management of each separate company to (1) design and implement corporate strategies and policies that are based primarily on the business characteristics of that company, (2) maintain a sharper focus on core business and growth opportunities, (3) concentrate their financial resources wholly on their own operations. LRAD Corporation’s management believes that a separate focus on these items could allow each company to generate stockholder value not currently being realized.
|
|
·
|
Allow each separate company to recruit and retain employees pursuant to compensation policies that are appropriate for their respective lines of business. As a separate, publicly-traded company with our own executive management team, we may be able to attract greater media attention and press coverage, which could strengthen our ability to promote our product brand.
|
|
·
|
Provide both companies heightened strategic flexibility to form strategic business alliances in their target markets, unencumbered by considerations of the potential impact on the other business.
|
|
·
|
Create common equity shares for Parametric Sound including options after the distribution, providing the appropriate incentive mechanisms to motivate and reward our management, employees and consultants. The common stock of the independent, publicly-traded Parametric Sound will have a value that reflects the efforts and performance of our management and employees. As a result, following the distribution we will be able to develop better incentive programs to attract and retain key employees through the use of stock-based and performance-based incentive plans that more directly link their compensation with our financial performance. These programs will be designed to more directly reward employees based on our performance.
|
|
·
|
Increase transparency and clarity into the different businesses of LRAD Corporation and Parametric Sound. The investment community, including the respective analysts, stockholders and investors of LRAD Corporation and Parametric Sound will be better able to evaluate the merits and future prospects of each company. This will enhance the likelihood that each company will receive appropriate market recognition of its individual performance and potential.
|
|
·
|
our capital structure;
|
|
·
|
the one-time and on-going costs of the spin-off;
|
|
·
|
the diversion of management attention resulting from the time and effort necessary to complete the spin-off;
|
|
·
|
the effects of a possible overlap during the transition from the existing product sold by LRAD Corporation and the introduction of new product;
|
|
·
|
the risk that the businesses of the two companies may overlap or compete in the future;
|
|
·
|
the risk that Parametric Sound may fail as an independent entity due to a lack of financing, lack of new product success or for any variety of other reasons including but not limited to those described in “
Risk Factors
” and the impact, if any, that such a failure would have on LRAD Corporation; and
|
|
·
|
the risk that the combined trading prices of our common stock and LRAD Corporation common stock after the distribution may be lower than the trading price of LRAD Corporation common stock before the distribution.
|
|
·
|
28 U.S. Patents, 3 foreign patents and 6 pending patents related to the HSS technology with a book value of approximately $502,000 at March 31, 2010. The technology related to six additional U.S. patents previously abandoned by LRAD Corporation will also be part of the assignment;
|
|
·
|
4 U.S. trade names (including HSS® and HyperSonic®) along with certain additional foreign rights to such names;
|
|
·
|
inventory consisting of emitter film and emitter and electronic parts with a book value of approximately $23,434 and an original cost of approximately $1.1 million, the difference being previous LRAD Corporation inventory allowances for excess parts, with an estimated $170,000 of such parts usable in future production based on our new product design;
|
|
·
|
tooling and molds that have been fully depreciated and have no remaining book value;
|
|
·
|
manufacturing jigs, testing and other equipment that has been fully depreciated and has no remaining book value;
|
|
·
|
drawings, technical descriptions, assembly details and component listings;
|
|
·
|
customer, representative and supplier lists; and
|
|
·
|
manufacturing methods, know-how and trade secrets related to HSS and HSS production.
|
|
·
|
holders of LRAD Corporation common stock will not recognize any income, gain or loss as a result of the receipt of shares of our common stock in the spin-off;
|
|
·
|
holders of LRAD Corporation common stock will apportion the tax basis of their LRAD Corporation common stock between such LRAD Corporation common stock and our common stock received in the spin-off in proportion to the relative fair market values of such stock at the time of the spin-off;
|
|
·
|
the holding period for our common stock received in the spin-off by holders of LRAD Corporation common stock will include the period during which such holders held the LRAD Corporation common stock with respect to which the spin-off was made; and
|
|
·
|
neither we nor LRAD Corporation will recognize gain or loss as a result of the spin-off.
|
|
·
|
the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Securities Exchange Act of 1934, as amended, and no stop order relating to the registration statement is in effect; and
|
|
·
|
no action, proceeding or investigation shall have been instituted or threatened before any court or administrative body to restrain, enjoin or otherwise prevent the consummation of the spin-off, and no restraining order or injunction issued by any court of competent jurisdiction shall be in effect restraining the consummation of the spin-off.
|
March 31, 2010
|
||||||||
Historical
|
Pro Forma
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
|
$ | - | $ | 105,000 | ||||
Notes payable, net
|
$ | - | $ | 304,400 | ||||
Stockholders' equity:
|
||||||||
LRAD Corporation, net investment
|
694,919 | - | ||||||
Preferred stock, $0.001 par value, 1,000,000 shares
|
||||||||
authorized, none issued and outstanding
|
- | - | ||||||
Common stock, $0.001 par value, 50,000,000 shares
|
||||||||
authorized, 15,305,728 shares issued and outstanding
|
- | 15,306 | ||||||
Additional paid-in capital
|
- | 555,240 | ||||||
Accumulated deficit
|
- | (237,500 | ) | |||||
Total capitalization
|
$ | 694,919 | $ | 637,446 |
|
·
|
any future patent or inventory impairment that may result from transition to our new product line.
|
|
·
|
a reduction of revenues relating to sales to customers that are expected to be fulfilled by LRAD Corporation after the distribution date.
|
|
·
|
the value and use of inventory with no value as a result of previous obsolescence reserves.
|
|
·
|
the effect of any possible manufacturing cost savings or improved gross margins from our new product design if successfully produced.
|
|
·
|
the effect on revenues if the new product line is priced as planned at a lower unit selling price than in reported periods or the effect on revenues of customer acceptance, if any, of the new product.
|
|
·
|
any potential decrease in manufacturing overhead or operating costs management believes may be achievable or any increased incremental expenses, over the amount of general allocation of corporate overhead, associated with being an independent, public company as more fully discussed in the notes below.
|
|
·
|
the effect of non-cash expense of any new stock option grants that may be made from the Parametric Sound 2010 Stock Option Plan that we intend to adopt following the distribution compared to the amounts included in the historical financial statements.
|
|
·
|
any financing cost of capital such as interest or other expenses associated with funding operations beyond the costs of the minimum $350,000 of new financing described below. Actual financing costs could be significantly more than the amounts assumed and reflected below. The historical financial statements included in this information statement do not reflect any additional cost of capital and additional capital is expected to be required beyond the minimum of $350,000 described below and no costs of such capital is included in the pro forma financial statements.
|
|
Pro Forma
|
||||||||||||
Historical
|
Adjustments
|
Pro Forma
|
|||||||||||
|
|||||||||||||
ASSETS
|
|||||||||||||
Current assets:
|
|||||||||||||
Cash
|
$ | - | $ | 350,000 |
(A)
|
$ | 105,000 | ||||||
(245,000 | ) |
(C)
|
|||||||||||
Accounts receivable, net
|
46,854 | (46,854 | ) |
(B)
|
- | ||||||||
Inventories, net
|
208,168 | (184,734 | ) |
(B)
|
23,434 | ||||||||
Total current assets
|
255,022 | 128,434 | |||||||||||
Patents
, net
|
501,512 | 7,500 |
(C)
|
509,012 | |||||||||
Total assets
|
$ | 756,534 | $ | (119,088 | ) | $ | 637,446 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||||||||||
Current liabilities:
|
|||||||||||||
Accounts payable
|
$ | 4,815 | $ | (4,815 | ) |
(B)
|
$ | - | |||||
Accrued liabilities
|
56,800 | (56,800 | ) |
(B)
|
- | ||||||||
Notes payable, net of discount
|
- | 304,400 |
(A)
|
304,400 | |||||||||
Total current liabilities
|
61,615 | 304,400 | |||||||||||
Stockholders' equity:
|
|||||||||||||
LRAD Corporation, net investment
|
694,919 | (169,973 | ) |
(B)
|
- | ||||||||
(524,947 | ) |
(D)
|
|||||||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized;
|
|||||||||||||
none issued and outstanding
|
- | - | - | ||||||||||
Common stock, $0.001 par value; 50,000,000 shares authorized;
|
|||||||||||||
15,305,728 shares issued and outstanding
|
- | 15,306 |
(D)
|
15,306 | |||||||||
Additional paid-in capital
|
- | 555,240 |
(A) (D)
|
555,240 | |||||||||
Accumulated deficit
|
- | (237,500 | ) |
(C)
|
(237,500 | ) | |||||||
Total stockholders' equity
|
694,919 | 333,048 | |||||||||||
Total liabilities and stockholders' equity
|
$ | 756,534 | $ | (119,088 | ) | $ | 637,446 |
Pro Forma
|
|||||||||||||
Historical | Adjustments | Pro Forma | |||||||||||
Revenues:
|
|||||||||||||
Product sales
|
$ | 345,145 | $ | 345,145 | |||||||||
Other revenue
|
52 | 52 | |||||||||||
Total revenues
|
345,197 | (1) | 345,197 | ||||||||||
Cost of revenues
|
291,496 | $ | 17,257 | (2) | 308,753 | ||||||||
Gross profit
|
53,701 | 36,444 | |||||||||||
Operating expenses:
|
|||||||||||||
Selling, general and administrative
|
152,134 | 152,134 | |||||||||||
Research and development
|
55,440 | 250 | (3) | 55,690 | |||||||||
Total operating expenses
|
207,574 | 207,824 | |||||||||||
Loss from operations
|
(153,873 | ) | (171,380 | ) | |||||||||
Interest expense
|
- | 36,800 | (4) | 36,800 | |||||||||
Loss before income taxes
|
(153,873 | ) | (208,180 | ) | |||||||||
Provision for income taxes
|
- | (5) | - | ||||||||||
Net loss
|
$ | (153,873 | ) | $ | (208,180 | ) | |||||||
Loss per common share - basic and diluted
|
(6) | $ | (0.01 | ) | |||||||||
Weighted average common shares outstanding - basic and diluted
|
15,283,417 |
Pro Forma
|
|||||||||||||
Historical | Adjustments | Pro Forma | |||||||||||
Revenues:
|
|||||||||||||
Product sales
|
$ | 586,693 | $ | 586,693 | |||||||||
Other revenue
|
20,413 | 20,413 | |||||||||||
Total revenues
|
607,106 | (1) | 607,106 | ||||||||||
Cost of revenues
|
638,763 | $ | 29,335 | (2) | 668,098 | ||||||||
Gross loss
|
(31,657 | ) | (60,992 | ) | |||||||||
Operating expenses:
|
|||||||||||||
Selling, general and administrative
|
839,971 | 839,971 | |||||||||||
Research and development
|
114,798 | 500 | (3) | 115,298 | |||||||||
Total operating expenses
|
954,769 | 955,269 | |||||||||||
Loss from operations
|
(986,426 | ) | (1,016,261 | ) | |||||||||
Interest expense
|
- | 73,600 | (4) | 73,600 | |||||||||
Loss before income taxes
|
(986,426 | ) | (1,089,861 | ) | |||||||||
Provision for income taxes
|
- | (5) | - | ||||||||||
Net loss
|
$ | (986,426 | ) | $ | (1,089,861 | ) | |||||||
Loss per common share - basic and diluted
|
(6) | $ | (0.07 | ) | |||||||||
Weighted average common shares outstanding - basic and diluted
|
15,268,712 |
(A)
|
Reflects the minimum debt financing of $350,000 as if funded on March 31, 2010. The $45,600 value assigned to warrants issued with the debt is included in paid-in capital and as a debt discount. For illustrative purposes, the warrants are valued assuming the minimum floor price is the market price and using volatility of 80% (historical volatility of a selected peer group), a term of 5 years and a risk-free rate of 2.5%.
Assuming the maximum exercise price and a market price of $0.30 per share would value the warrants, using the same assumptions, at $136,800, which would reduce pro forma net debt ($350,000 less the unamortized note discount) at March 31, 2010 from a net of $304,400 to $213,200 and correspondingly increase stockholders’ equity from $333,048 to $424,248. On a pro forma basis, noncash interest expense would increase by $45,600 for the six months ended March 31, 2010 and $91,200 for the year ended September 30, 2009, compared to the amounts reported in the illustrated pro forma statements of operations. If the market price exceeds the warrant exercise price, then the warrant value and the note discount could further increase and the discount amortization would increase noncash interest expense over the term of the debt. Changes to the valuation of the warrants has no impact on cash debt service requirements.
|
(B)
|
The LRAD Corporation net investment account represents the cumulative investments in, distribution from, and losses of our company. LRAD Corporation is retaining certain inventory to complete sales to existing customers, including Cardinal Health, Inc., and is retaining accounts receivable and is responsible for accounts payable and accrued liabilities at the spin-off.
|
(C)
|
Reflects reimbursement to Syzygy of $155,000 in estimated spin-off costs (effectively nonrecurring organization costs) and $90,000 reimbursement to Syzygy of estimated patent and pre spin-off research costs. The patent costs estimated at $7,500 are capitalized and other research costs are considered as an expense. These costs are not included in the pro forma statements of operations for the respective periods as they are considered nonrecurring charges resulting directly from the transaction and would be duplicative of research and development costs otherwise incurred. Actual costs incurred and reimbursed could differ from our estimates depending on the timing of the actual distribution and actual costs incurred for legal, accounting, printing, mailing, research and other costs.
|
(D)
|
Common stock issued and outstanding was calculated assuming a distribution ratio of one share of our common stock for every two shares of LRAD Corporation common stock. The pro forma number of shares is based on the number of shares of LRAD Corporation outstanding at March 31, 2010. The actual number of our shares outstanding will not be known until the actual distribution date.
|
|
(1)
|
A pro forma adjustment has not been made for revenues to Cardinal Health, Inc. and other customers that will be fulfilled by LRAD Corporation after the spin-off because these revenues are part of the product line that is transferring to Parametric Sound in the spin-off.
|
|
(2)
|
Royalties of 5% computed as if the new license agreement had been in effect for the respective period.
|
|
(3)
|
Reflects amortization of additional patent costs assuming a 15 year estimated useful life.
|
|
(4)
|
Reflects interest of 8% on the minimum debt financing assuming it had been funded at the beginning of each period and amortization of the value of warrants as a note discount amortized over the term of the debt. Assumes the minimum balance remained outstanding for the period presented.
|
|
(5)
|
No tax benefit is recognized as any deferred tax assets resulting from the net losses are offset by a full valuation allowance as those tax benefits are not likely to be realized.
|
|
(6)
|
Pro forma basic net loss per share is computed as if the shares of our common stock were issued and outstanding for the periods presented, assuming a distribution ratio of one share of our common stock for every two shares of LRAD Corporation common stock. The pro forma number of shares is based on the number of shares of LRAD Corporation outstanding for the respective periods presented. The actual number of our basic shares outstanding will not be known until the distribution date. The dilutive effect of stock options for employees was excluded from the calculation of diluted loss per share as the effect would have been antidilutive.
|
|
·
|
Direct costs of HSS product development, sales and administrative personnel are included along with associated stock-based compensation and allocated employee benefits on a specific identification basis.
|
|
·
|
HSS patent amortization costs, including impairments, are included in research and development costs.
|
|
·
|
Certain shared administrative salaries and costs including accounting, payroll, human resources, information technology and other services along with legal, auditing and other administrative costs were allocated based on estimates of the proportionate cost incurred by LRAD Corporation related to the Parametric Sound business.
|
|
·
|
Other costs including facility and occupancy costs were allocated proportionately based on revenues.
|
|
·
|
the timing of the availability of our new product line for sale to customers;
|
|
·
|
the timing and extent of any market acceptance of our products;
|
|
·
|
the costs, timing and outcome of planned production and required customer and regulatory compliance of our new products;
|
|
·
|
the costs of preparing, filing and prosecuting our patent applications, maintaining and enforcing our issued patents and defending intellectual property-related claims;
|
|
·
|
the costs and timing of additional product development;
|
|
·
|
the costs, timing and outcome of any future warranty claims or litigation against us associated with any of our products; and
|
|
·
|
the timing and costs associated with any new financing.
|
|
·
|
Produce a product line meeting customer requirements for easy and flexible installation using content from a range of media sources, complementing equipment such as video devices, kiosks and vending machines.
|
|
·
|
Develop a turnkey manufacturing relationship to produce our products, thereby reducing a need for manufacturing space and production personnel.
|
|
·
|
Develop relationships with customers requiring large numbers of products, including value added resellers (VARs), original equipment manufacturers (OEMs) and distributors that focus on specific end user solutions.
|
|
·
|
delivery of more effective advertisements to store patrons;
|
|
·
|
ability to create a beam of sound and place it only where it is intended;
|
|
·
|
ability to manipulate or selectively position or diffuse the source of sound;
|
|
·
|
ability to deliver a beam of sound over longer distances than conventional speakers, such as down a grocery store aisle;
|
|
·
|
ability to penetrate other competing sounds; and
|
|
·
|
elimination of feedback from live microphones.
|
Name
|
Age
|
Position(s)
|
Elwood G. Norris
|
71
|
Director, President and Chief Executive Officer
|
Daniel Hunter
|
59
|
Director
|
James A. Barnes
|
55
|
Secretary and Treasurer
|
|
·
|
each person or entity known by us to be the beneficial owner of 5% or more of the outstanding shares of Parametric Sound common stock;
|
|
·
|
each person who we currently anticipate will be one of our directors at the time of the distribution;
|
|
·
|
each person who we currently anticipate will be one of our named executive officers at the time of the distribution; and
|
|
·
|
all persons who we currently anticipate will be our directors and executive officers at the time of the distribution as a group.
|
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||
Common Stock
|
Austin W. Marxe and David M. Greenhouse
|
1,598,592
|
(1) |
|
10.4%
|
||
527 Madison Avenue, Suite 2600
|
|||||||
New York, New York 10022
|
|||||||
Common Stock
|
Elwood G. Norris
|
1,985,312
|
(2) |
|
13.0%
|
||
1941 Ramrod Avenue, Suite #100
|
|||||||
Henderson, Nevada 89014
|
|||||||
Common Stock
|
Daniel Hunter
|
95,750
|
(3) |
|
*
|
||
1941 Ramrod Avenue, Suite #100
|
|||||||
Henderson, Nevada 89014
|
|||||||
Common Stock
|
James A. Barnes
|
235,587
|
(4) |
|
1.5%
|
||
1941 Ramrod Avenue, Suite #100
|
|||||||
Henderson, Nevada 89014
|
|||||||
All directors and executive
|
2,316,649
|
15.1%
|
|||||
officers as a group (3 persons)
|
*
|
less than 1%.
|
(1)
|
Beneficial joint ownership by Mr. Marxe and Mr. Greenhouse is based on information provided by the stockholder as of February 12, 2010. Consists of 1,598,592 shares. These shares are in the following entities
:
729,896 shares owned by Special Situations Fund III QP, L.P., 255,213 shares
owned by Special Situations Private Equity Fund, L.P., 85,019 shares owned by Special Situations Technology Fund, L.P., and 528,464 shares owned by Special Situations Technology Fund II, L.P. MGP Advisors Limited Partnership, or MGP, is the general partner of the Special Situations Fund III, L.P. and the Special Situations Fund III QP, L.P. and AWM Investment Company, Inc., or AWM, is the general partner of MGP. SST Advisers, L.L.C., or SSTA, is the general partner of the Special Situations Technology Fund, L.P. and Special Situations Technology Fund II, L.P. MG Advisers, L.L.C., or MG, is the general partner of the Special Situations Private Equity Fund, L.P. AWM is the investment adviser to Special Situations Fund III QP, L.P., Special Situations Technology Fund, L.P., Special Situations Technology Fund II, L.P. and Special Situations Private Equity Fund, L.P. Austin W. Marxe and David M. Greenhouse are the principal owners of MGP, AWM, SSTA and MG, and are principally responsible for the selection, acquisition, voting and disposition of the portfolio securities by each investment adviser on behalf of its fund. Both Messrs. Marxe and Greenhouse share voting and dispositive power with respect to shares held by these stockholders,
|
(2)
|
Includes 1,962,815 shares held by a family trust for which Mr. Norris serves as trustee and 22,497 shares held by an investment company controlled by Mr. Norris.
|
(3)
|
Includes 3,000 shares held by a personal Individual Retirement Account.
|
(4)
|
Includes 12,500 shares held by Sunrise Capital, Inc., 114,837 shares held by Sunrise Management, Inc. Profit
Sharing Plan, 102,500 shares held by Palermo Trust, 3,000 shares by a personal retirement plan and 2,250 shares by a personal retirement plan of his spouse. Mr. Barnes is President of Sunrise Capital, Inc. and Trustee of Sunrise Management, Inc. Profit Sharing Plan, the Palermo Trust and his personal retirement plan. He disclaims any beneficial interest in the 2,250 shares held in his spouse’s personal retirement plan.
|
|
·
|
restricting dividends on our common stock;
|
|
·
|
diluting the voting power of our common stock;
|
|
·
|
impairing the liquidation rights of our common stock; or
|
|
·
|
delaying or preventing a change in control of our company without further action by our stockholders.
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Balance Sheets as of September 30, 2009 and 2008
|
F-3
|
Statements of Operations for the Years Ended September 30, 2009 and 2008
|
F-4
|
Statements of Changes in LRAD Corporation Net Investment for the Years Ended September 30, 2009 and 2008
|
F-5
|
Statements of Cash Flows for the Years Ended September 30, 2009 and 2008
|
F-6
|
Notes to Financial Statements
|
F-7 – F-19
|
Preface
|
F-20
|
Balance Sheets as of March 31, 2010 and September 30, 2009
|
F-21
|
Statements of Operations for the Six Months Ended March 31, 2010 and 2009
|
F-22
|
Statements of Cash Flows for the Six Months Ended March 31, 2010 and 2009
|
F-23
|
Notes to Unaudited Interim Financial Statements
|
F-24 – F-29
|
/
S
/ S
QUAR
, M
ILNER
, P
ETERSON
, M
IRANDA
& W
ILLIAMSON
, LLP
|
September 30,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Accounts receivable, less allowance of $222,864 and
|
||||||||
$225,403 for doubtful accounts
|
$ | 29,910 | $ | 69,677 | ||||
Inventories, net
|
422,457 | 954,792 | ||||||
Total current assets
|
452,367 | 1,024,469 | ||||||
Equipment and tooling
, net
|
- | 1,134 | ||||||
Patents
, net
|
553,645 | 637,856 | ||||||
Total assets
|
$ | 1,006,012 | $ | 1,663,460 | ||||
LIABILITIES AND LRAD CORPORATION NET INVESTMENT
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 4,662 | $ | 9,888 | ||||
Accrued liabilities
|
78,146 | 65,378 | ||||||
Total current liabilities
|
82,808 | 75,266 | ||||||
Commitments and contingencies | ||||||||
LRAD Corporation, net investment
|
923,204 | 1,588,193 | ||||||
Total liabilities and LRAD Corporation net investment
|
$ | 1,006,012 | $ | 1,663,459 |
Years Ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Revenues:
|
||||||||
Product sales
|
$ | 586,693 | $ | 713,294 | ||||
Other revenue
|
20,413 | 30,050 | ||||||
Total revenues
|
607,106 | 743,344 | ||||||
Cost of revenues
|
638,763 | 811,845 | ||||||
Gross loss
|
(31,657 | ) | (68,501 | ) | ||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
839,971 | 1,340,649 | ||||||
Research and development
|
114,798 | 740,582 | ||||||
Total operating expenses
|
954,769 | 2,081,231 | ||||||
Loss from operations
|
(986,426 | ) | (2,149,732 | ) | ||||
Net loss
|
$ | (986,426 | ) | $ | (2,149,732 | ) |
Balance at September 30, 2007
|
$ | 2,362,545 | ||
Net loss for the year
|
(2,149,732 | ) | ||
Net transfers from parent
|
1,375,380 | |||
Balance at September 30, 2008
|
$ | 1,588,193 | ||
Net loss for the year
|
(986,426 | ) | ||
Net transfers from parent
|
321,437 | |||
Balance at September 30, 2009
|
$ | 923,204 |
Years Ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Increase (Decrease) in Cash and Cash Equivalents:
|
||||||||
Operating Activities:
|
||||||||
Net loss
|
$ | (986,426 | ) | $ | (2,149,732 | ) | ||
Adjustments to reconcile net loss to net cash provided by (
used in) operating activities:
|
||||||||
Depreciation and amortization
|
69,620 | 113,215 | ||||||
Provision for doubtful accounts receivable
|
(2,538 | ) | 704 | |||||
Warranty provision
|
(5,437 | ) | (23,904 | ) | ||||
Inventory obsolescence
|
69,079 | 106,548 | ||||||
Share-based compensation
|
447,893 | 797,805 | ||||||
Loss on impairment of patents
|
46,312 | 202,170 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
42,305 | 42,612 | ||||||
Inventories
|
463,256 | 526,679 | ||||||
Accounts payable
|
(5,226 | ) | (85,815 | ) | ||||
Warranty settlements
|
(929 | ) | (5,598 | ) | ||||
Accrued liability
|
19,134 | 14,124 | ||||||
Net cash provided by (used in) operating activities
|
157,043 | (461,192 | ) | |||||
Investing Activities:
|
||||||||
Patent costs paid
|
(30,587 | ) | (116,384 | ) | ||||
Net cash used in investing activities
|
(30,587 | ) | (116,384 | ) | ||||
Financing Activities:
|
||||||||
Net change in investment from LRAD Corporation
|
(126,456 | ) | 577,576 | |||||
Net cash provided by (used in) financing activities
|
(126,456 | ) | 577,576 | |||||
Net increase (decrease) in cash and cash equivalents
|
- | - | ||||||
Cash and cash equivalents, beginning of year
|
- | - | ||||||
Cash and cash equivalents, end of year
|
$ | - | $ | - |
·
|
Direct costs of HSS research and development, sales and administrative personnel are included along with associated stock-based compensation and allocated employee benefits on a specific identification basis.
|
·
|
HSS patent amortization costs, including impairments, are included in research and development costs.
|
·
|
Certain shared administrative salaries and costs including accounting, payroll, human resources, information technology and other services along with legal, auditing and other administrative costs were allocated based on estimates of the proportionate cost incurred by LRAD Corporation related to Parametric Sound.
|
·
|
Other costs including facility and occupancy costs were allocated proportionately based on revenues.
|
Years Ended September 30,
|
2009
|
2008
|
||||||
Finished goods
|
$ | 102,104 | $ | 490,420 | ||||
Work in process
|
- | 9,385 | ||||||
Raw materials
|
1,760,656 | 1,826,211 | ||||||
1,862,760 | 2,326,016 | |||||||
Reserve for obsolescence
|
(1,440,303 | ) | (1,371,224 | ) | ||||
Total, net
|
$ | 422,457 | $ | 954,792 |
Years Ended September 30,
|
2009
|
2008
|
||||||
Equipment and tooling
|
$ | 179,835 | $ | 179,835 | ||||
Office equipment
|
1,401 | 1,401 | ||||||
181,236 | 181,236 | |||||||
Accumulated depreciation
|
(181,236 | ) | 180,102 | |||||
Equipment and tooling, net
|
$ | - | $ | 1,134 |
Years Ended September 30,
|
2009
|
2008
|
||||||
Cost
|
$ | 1,015,572 | $ | 1,044,541 | ||||
Accumulated amortization
|
(461,927 | ) | (406,685 | ) | ||||
Patents, net
|
$ | 553,645 | $ | 637,856 |
September 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
Payroll and related
|
$ | 48,757 | $ | 29,623 | ||||
Warranty reserve
|
29,389 | 35,755 | ||||||
Total
|
$ | 78,146 | $ | 65,378 |
Years Ended September 30,
|
2009
|
2008
|
||||||
Beginning balance
|
$ | 35,755 | $ | 65,257 | ||||
Warranty provision
|
(5,437 | ) | (23,904 | ) | ||||
Warranty settlements
|
(929 | ) | (5,598 | ) | ||||
Ending balance
|
$ | 29,389 | $ | 35,755 |
Year Ended September 30,
|
|||
2009
|
2008
|
||
Volatility
|
71.0% - 83.0%
|
71.0%
|
|
Risk-free interest rate
|
1.30% - 2.46%
|
2.79% - 3.49%
|
|
Forfeiture rate
|
20.0%
|
20.0%
|
|
Dividend yield
|
0.0%
|
0.0%
|
|
Expected life in years
|
3.4 - 4.9
|
3.4 - 4.9
|
Number
|
Weighted Average
|
|||||||
of Shares
|
Exercise Price
|
|||||||
Fiscal 2008:
|
||||||||
Outstanding October 1, 2007
|
1,151,090 | $ | 4.27 | |||||
Granted
|
115,000 | $ | 2.05 | |||||
Canceled/expired
|
(313,090 | ) | $ | 3.18 | ||||
Outstanding September 30, 2008
|
953,000 | $ | 4.08 | |||||
Exercisable at September 30, 2008
|
690,500 | $ | 4.24 | |||||
Fiscal 2009:
|
||||||||
Outstanding October 1, 2008
|
953,000 | $ | 4.08 | |||||
Granted
|
40,000 | $ | 0.52 | |||||
Canceled/expired
|
(953,000 | ) | $ | 4.00 | ||||
Exercised
|
(5,833 | ) | $ | 0.48 | ||||
Outstanding September 30, 2009
|
34,167 | $ | 2.80 | |||||
Exercisable September 30, 2009
|
27,500 | $ | 3.24 | |||||
Weighted average fair value of options granted during the year
|
$ | 0.23 |
Weighted Average
|
Weighted
|
Weighted
|
|||||||||||||||||||
Range of
|
Remaining
|
Average
|
Average
|
||||||||||||||||||
Exercise
|
Number
|
Contractual
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Prices
|
Outstanding
|
Life
|
Price
|
Exercisable
|
Price
|
||||||||||||||||
$ 0.48-$1.88 | 19,167 | 3.56 | $ | .58 | 12,500 | $ | 1.88 | ||||||||||||||
$ 4.37 | 15,000 | 2.38 | $ | .37 | 15,000 | $ | 4.37 | ||||||||||||||
$ 0.48-$4.37 | 34,167 | 3.04 | $ | 2.80 | 27,500 | $ | 3.24 |
Years Ended September 30,
|
2009
|
2008
|
||||||
Cost of revenue
|
$ | 3,229 | $ | 1,513 | ||||
Selling, general and administrative
|
444,664 | 664,321 | ||||||
Research and development
|
- | 131,971 | ||||||
Total
|
$ | 447,893 | $ | 797,805 |
Years Ended September 30,
|
2009
|
2008
|
||||||
Revenues
|
||||||||
United States
|
$ | 266,654 | $ | 149,913 | ||||
Other
|
340,452 | 593,431 | ||||||
Total
|
$ | 607,106 | $ | 743,344 |
March 31,
|
||||||||
2010
|
September 30,
|
|||||||
(Unaudited)
|
2009
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Accounts receivable, less allowance of $222,864 each
period for doubtful accounts
|
$ | 46,854 | $ | 29,910 | ||||
Inventories, net
|
208,168 | 422,457 | ||||||
Total current assets
|
255,022 | 452,367 | ||||||
Patents
, net
|
501,512 | 553,645 | ||||||
Total assets
|
$ | 756,534 | $ | 1,006,012 | ||||
LIABILITIES AND LRAD CORPORATION NET INVESTMENT
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 4,815 | $ | 4,662 | ||||
Accrued liabilities
|
56,800 | 78,146 | ||||||
Total current liabilities
|
61,615 | 82,808 | ||||||
Commitments and contingencies | ||||||||
LRAD Corporation, net investment
|
694,919 | 923,204 | ||||||
Total liabilities and LRAD Corporation net investment
|
$ | 756,534 | $ | 1,006,012 |
For the six months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Revenues:
|
||||||||
Product sales
|
$ | 345,145 | $ | 170,346 | ||||
Other revenue
|
52 | 8,379 | ||||||
Total revenues
|
345,197 | 178,725 | ||||||
Cost of revenues
|
291,496 | 144,610 | ||||||
Gross profit
|
53,701 | 34,115 | ||||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
152,134 | 477,899 | ||||||
Research and development
|
55,440 | 71,700 | ||||||
Total operating expenses
|
207,574 | 549,599 | ||||||
Loss from operations
|
(153,873 | ) | (515,484 | ) | ||||
Net loss
|
$ | (153,873 | ) | $ | (515,484 | ) |
Six Month Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Increase (Decrease) in Cash and Cash Equivalents:
|
||||||||
Operating Activities:
|
||||||||
Net loss
|
$ | (153,873 | ) | $ | (515,484 | ) | ||
Adjustments to reconcile net loss to net cash
provided by operating activities:
|
||||||||
Depreciation and amortization
|
33,144 | 35,657 | ||||||
Provision for doubtful accounts receivable
|
- | (2,538 | ) | |||||
Warranty provision
|
(6,406 | ) | (7,143 | ) | ||||
Inventory obsolescence
|
13,531 | (9,754 | ) | |||||
Share-based compensation
|
4,382 | 329,140 | ||||||
Loss on impairment of patents
|
22,296 | 37,177 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
(16,944 | ) | 50,760 | |||||
Inventories
|
200,758 | 116,093 | ||||||
Accounts payable
|
153 | (2,078 | ) | |||||
Warranty settlements
|
15,054 | (18 | ) | |||||
Accrued liability
|
(29,994 | ) | (13,383 | ) | ||||
Customer deposit
|
- | 5,580 | ||||||
Net cash provided by operating activities
|
82,101 | 24,009 | ||||||
Investing Activities:
|
||||||||
Patent costs paid
|
(3,307 | ) | (1,369 | ) | ||||
Net cash used in investing activities
|
(3,307 | ) | (1,369 | ) | ||||
Financing Activities:
|
||||||||
Net change in investment from LRAD Corporation
|
(78,794 | ) | (22,640 | ) | ||||
Net cash used by financing activities
|
(78,794 | ) | (22,640 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
- | - | ||||||
Cash and cash equivalents, beginning of period
|
- | - | ||||||
Cash and cash equivalents, end of period
|
$ | - | $ | - |
·
|
Direct costs of HSS research and development, sales and administrative personnel are included along with associated stock-based compensation and allocated employee benefits on a specific identification basis.
|
·
|
HSS patent amortization costs, including impairments, are included in research and development costs.
|
·
|
Certain shared administrative salaries and costs including accounting, payroll, human resources, information technology and other services along with legal, auditing and other administrative costs were allocated based on estimates of the proportionate cost incurred by LRAD Corporation related to Parametric Sound.
|
·
|
Other costs including facility and occupancy costs were allocated proportionately based on revenues.
|
March 31,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Finished goods
|
$ | 61,384 | $ | 102,104 | ||||
Work in process
|
7,423 | - | ||||||
Raw materials
|
1,566,133 | 1,760,656 | ||||||
1,634,940 | 1,862,760 | |||||||
Reserve for obsolescence
|
(1,426,772 | ) | (1,440,303 | ) | ||||
Total, net
|
$ | 208,168 | $ | 422,457 |
March 31,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Payroll and related
|
$ | 18,762 | $ | 48,757 | ||||
Warranty reserve
|
38,038 | 29,389 | ||||||
Total
|
$ | 56,800 | $ | 78,146 |
Six Months Ended March 31,
|
2010
|
2009
|
||||||
Beginning balance
|
$ | 29,390 | $ | 35,755 | ||||
Warranty provision
|
15,054 | (7,143 | ) | |||||
Warranty settlements
|
(6,406 | ) | (18 | ) | ||||
Ending balance
|
$ | 38,038 | $ | 28,594 |
March 31,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Cost
|
$ | 986,066 | $ | 1,015,572 | ||||
Accumulated amortization
|
(484,554 | ) | (461,927 | ) | ||||
Patents, net
|
$ | 501,512 | $ | 553,645 |
Balance at September 30, 2009
|
$ | 923,204 | ||
Net loss for the period
|
(153,873 | ) | ||
Net transfers to parent
|
(74,412 | ) | ||
Balance at March 31, 2010
|
$ | 694,919 |