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<SEC-DOCUMENT>0001019687-05-002531.txt : 20060925
<SEC-HEADER>0001019687-05-002531.hdr.sgml : 20060925
<ACCEPTANCE-DATETIME>20050907205600
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001019687-05-002531
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20050907

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN TECHNOLOGY CORP /DE/
		CENTRAL INDEX KEY:			0000924383
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651]
		IRS NUMBER:				870361799
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
		BUSINESS PHONE:		6196792114

	MAIL ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<html>
  <head>
    <title>
      Response Letter
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  <body bgcolor="#ffffff" style="MARGIN: 5%; TEXT-INDENT: 0pt">
    <div>&#160;</div>
    <div><img src="atco-logo.jpg" alt=""><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September
      7, 2005</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>VIA
      EDGAR AND OVERNIGHT COURIER</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
        and Exchange Commission</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Division
        of Corporation Finance</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">450
        Fifth
        Street, N.W., Mail Stop 0407</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
        D.C. 20549</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="8%"><font size="2">Attention:</font></td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Larry
                Spirgel</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Assistant
                Director</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 72pt">&#160;</td>
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Re:</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>American
                Technology Corporation </strong></font>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Form
                  10-K for Fiscal Year Ended September 30, 2004</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Filed
                  December 28, 2004</strong></font></div>
              </div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 72pt">&#160;</td>
            <td style="WIDTH: 36pt">&#160;</td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Forms
                10-Q for Fiscal Quarters Ended March 31, 2005 and </strong></font>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>June
                  30, 2005</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>File
                  No. 0-24248</strong></font></div>
              </div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dear
      Mr.
      Spirgel:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      responding to the comments in a letter from the Securities and Exchange
      Commission, dated August 18, 2005, addressed to Mr. Michael A. Russell, Chief
      Financial Officer and Secretary of American Technology Corporation. We sometimes
      refer to American Technology Corporation as "ATC."</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      facilitate your review of our responses to your comments, we have numbered
      the
      paragraphs in the following discussion to correspond to the numbering of the
      paragraphs of your letter of August 18, 2005. Our responses to the comments
      are
      italicized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      outside legal counsel&#160;had a telephone conversation with Albert G. Pappas,
      Staff Attorney, on August 24, 2005, and our responses to comments 1, 2, 4,
      5, 11
      and 13 reflect that discussion.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 2</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Form
      10-K for Fiscal Year Ended September 30, 2004</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Item
      9A. Controls and Procedures, page 37</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                note your disclosure that your disclosure controls and procedures
                are
                "designed to ensure that material information related to us, including
                our
                consolidated subsidiaries, is recorded, processed, summarized and
                reported
                within the time periods specified in the SEC rules and forms." Please
                note
                that under Rule 13a-15(e) of the Exchange Act, the term disclosure
                controls and procedures means controls and procedures that are designed
                to
                ensure that information required to be disclosed in the reports that
                you
                file under the Exchange Act is recorded, processed, summarized and
                reported, within the time periods specified in the Commission's rules
                and
                forms and are also effective to ensure that information required
                to be
                disclosed in the reports that you file or submit under the Exchange
                Act is
                accumulated and communicated to your management, including your principal
                executive and principal financial officers, to allow timely decisions
                regarding required disclosure. See Rule 13a-15(e) of the Exchange
                Act.
                Please revise accordingly.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally confirm that during all reporting periods subject to the Form
      10-K for the fiscal year ended September 30, 2004, and each of the Form 10-Q's
      for the fiscal quarters ended December 31, 2004, March 31, 2005 and June 30,
      2005, we maintained, and we continue to maintain, disclosure controls and
      procedures designed to ensure that material information related to us is
      recorded, processed, summarized and reported with the time periods specified
      in
      the Commission's rules and forms, and designed to ensure that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act is accumulated and communicated to our management, including our
      co-principal executive officers and principal financial officer, to allow timely
      decisions regarding required disclosure. We further confirm supplementally
      that
      we have no consolidated subsidiaries.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      future filings, we will describe the design of our disclosure controls and
      procedures using the language as set forth in your comment
      above.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                note your disclosure that your "co-principal executive officers and
                principal financial officer concluded, as of the date of such evaluation,
                that, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>except
                as set forth below</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the design and operation of such disclosure controls and procedures
                were
                effective." (emphasis added) Given the exception noted, it remains
                unclear
                whether your chief executive officer and chief financial officer
                have
                concluded that your disclosure controls and procedures are effective
                or
                not effective. Please revise your disclosure to state, in clear and
                unqualified language, the conclusions reached by your chief executive
                officer and your chief financial officer on the effectiveness of
                your
                disclosure controls and procedures. For example, if true, you can
                state
                that given the identified issue regarding the "tracking of and disclosure
                relating to Section 16 filings," your disclosure controls and procedures
                are not effective. You should not, however, state the conclusion
                in your
                current disclosure, which appears to state that your disclosure controls
                and procedures are effective except to the extent they are not effective.
                Please amend your Form 10-K accordingly.
</font></div>
            </td>
          </tr>

      </table>
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 3</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally confirm that with respect to their evaluations of the
      effectiveness of disclosure controls and procedures performed in connection
      with
      the filing of the Form 10-K/A (Amendment No. 2) on March 8, 2005, our
      co-principal executive officers and principal financial officer determined
      that
      disclosure controls and procedures were not effective as of September 30, 2004
      as a result of the exception noted in paragraph (a) of Item 9A of such report.
      Please see our response to comment 3 below for more information concerning
      this
      deficiency in disclosure controls and procedures.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      future filings, we will disclose the conclusions of our co-principal executive
      officers and principal financial officer regarding the effectiveness of our
      disclosure controls and procedures, with a single, unqualified conclusion as
      to
      whether such disclosure controls and procedures were effective or
      ineffective.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                describe the "steps to improve our tracking of and disclosure relating
                to
                Section 16 filings" that you implemented and disclose whether these
                steps
                have corrected this issue. Please disclose the date you identified
                the
                failure to disclose the late Section 16 filing and the respective
                dates
                you implemented each step to improve your
                procedures.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally advise you that we discovered in early March 2005 that we had
      failed to disclose a single late Section 16 filing during the fiscal year ended
      September 30, 2004, in Item 10 of our Form 10&#8212;K/A (Amendment No. 1) filed
      January 28, 2005. The error was discovered in connection with review of our
      proxy materials for the 2005 annual meeting, which materials are also required
      to contain disclosure of late Section 16 filings during the prior fiscal year.
      We determined that the error resulted from a miscommunication with our outside
      counsel. An attorney at our outside counsel had been alerted by us of the
      existence of a late filing, but another attorney at our outside counsel was
      unaware of such determination, and failed to include language in the Form 10-K/A
      (Amendment No. 1) disclosing the late filing. As a result of this error, we
      implemented in March 2005 a procedure whereby Section 16 filings are tracked
      under the supervision of our Chief Financial Officer, who is also charged with
      reviewing the disclosure required by Item 405 of Regulation S-K in our annual
      reports and proxy statements. We believe these procedures have corrected the
      identified deficiency in disclosure controls.</em></font></div>
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 4</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                note your disclosure that "[n]o </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>significant
                changes</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                were made in our internal control over financial reporting&#8230; during our
                most recent quarter that has materially affected, or is reasonably
                likely
                to material affect, our internal control over financial reporting."
                (emphasis added) Item 308(c) of Regulation S-K requires the disclosure
                of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>any
                </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">change
                in your internal control over financial reporting identified in connection
                with an evaluation thereof that occurred during your last fiscal
                quarter
                (or your fourth fiscal quarter in the case of an annual report) that
                has
                materially affected, or is reasonably likely to materially affect,
                your
                internal control over financial reporting. Please
                revise.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally advise you that we made no changes in our internal control over
      financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange
      Act) in connection with the evaluation required by paragraph (d) of
&#167;&#160;240.13a-15 or 240.15d-15 of Regulation S-K that occurred during our
      fourth fiscal quarter of 2004 that materially affected, or were reasonably
      likely to materially affect, our internal control over financial
      reporting.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      future filings, we will conform our disclosure language to the requirements
      of
      Item 308(c) of Regulation S-K as set forth in your comment
      above.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                note the disclosure under "Limitations" regarding your system of
                disclosure controls and procedures and internal controls. When discussing
                the design and evaluation of your control system, you discuss inherent
                limitations, lack of absolute assurance and resource constraints.
                Furthermore, you state that "[t]he design of any system of controls
                is
                based in part upon certain assumptions about the likelihood of future
                events, and any design may not succeed in achieving its stated goals
                under
                all potential future conditions. Over time, controls may become inadequate
                because of changes in conditions or deterioration in the degree of
                compliance with policies and
                procedures."</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                disclosure in this section is confusing to the extent that it implies
                that
                your disclosure controls and procedures might not operate effectively
                even
                under circumstances where your disclosure controls and procedures
                should
                reasonably be expected to operate effectively. It also implies that
                you
                will not conduct periodic evaluations of your disclosure controls
                and
                procedures to determine whether they have become inadequate. If true,
                this
                would appear to be inconsistent with your regulatory requirement
                to
                establish and maintain effective disclosure controls and
                procedures.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                revise to state, if true, that your disclosure controls and procedures
                are
                designed to provide a reasonable level of assurance of reaching your
                desired disclosure control objectives, and remove any disclosure
                suggesting otherwise. In addition, and if correct, similarly state
                clearly
                that your co-principal executive officers and principal financial
                officer
                concluded that your disclosure controls and procedures are effective
                in
                reaching that level of reasonable assurance. Finally, delete any
                language
                that states or implies that your disclosure controls and procedures
                will
                or could become inadequate over time or that you do not have an obligation
                to maintain effective disclosure controls and procedures. In the
                alternative, remove this entire paragraph and simply state the conclusion
                of your co-principal executive officers and your principal financial
                officer regarding the effectiveness of your disclosure controls and
                procedures.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        <div id="GLHDR" style="WIDTH: 100%; TEXT-ALIGN: center" align="right">&#160;</div>
        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 5</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
                Response</u></strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally advise you that our disclosure controls and procedures are
      designed to provide a reasonable level of assurance of reaching our desired
      disclosure control objectives, and that the conclusions of our co-principal
      executive officers and principal financial officer disclosed in each of the
      periodic reports referenced in your letter have been consistent with such design
      criteria. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      future filings, we will omit the disclosure under the heading
      "Limitations."</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Summary
      of Accounting Policies</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Contract
      Manufacturer, page F-9</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                tell us why it is appropriate to record amounts due from contract
                manufactures net of amounts payable to the manufacturer. Refer to
                paragraph 5 of FIN 39.</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Beginning
      in June 2004, we transitioned our manufacturing for our LRAD and HSS products
      from our San Diego facility to a contract manufacturer, Pemstar, Inc. of San
      Jose California. We purchased completed products from Pemstar, which were stored
      in Pemstar warehouses and shipped directly to our customers as required. In
      the
      event that some of the parts needed to build products were available from us,
      we
      and Pemstar orally agreed that Pemstar would purchase such parts from us to
      include in the manufacture of finished products for us. We agreed that Pemstar
      could return such parts to us if they were not used in products manufactured
      for
      us. Pemstar ordered parts from us only on the basis of firm purchase orders
      given by us to Pemstar. This arrangement was used to reflect the agreed transfer
      of title and risk of loss, and to simplify the pricing structure for finished
      products built by Pemstar.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>&#160;</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      recognized no revenue on the transfer of these parts to
      Pemstar.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Paragraph
      5 of FIN 39 indicates that a right of setoff exists when all of the following
      conditions are met: (a) each of two parties owes the other determinable amounts;
      (b) the reporting party has the right to set off the amount owed with the amount
      owed by the other party; (c) the reporting party intends to set off; and (d)
      the
      right of setoff is enforceable at law.</em></font></div>
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        </div>
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        </div>
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        </div>
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      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%; TEXT-ALIGN: center" align="right">&#160;</div>
        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 6</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      determined that each of these conditions were met. We owed Pemstar a
      determinable amount for finished products shipped to us, and Pemstar owed us
      a
      determinable amount for parts purchased from us. Under the oral agreement,
      we
      had the right to set off the amount receivable against the amount payable,
      we
      intended to set off the amount receivable (to the extent not previously paid
      by
      Pemstar) against the amount payable, and the right of setoff was enforceable
      at
      law. With respect to the last determination, we determined that California
      law
      would apply to our oral agreement with Pemstar, since both ATC and Pemstar
      were
      located in California. We noted that Section 431.70 of the California Code
      of
      Civil Procedure reads in relevant part as follows:</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>"Where
      cross-demands for money have existed between persons at any point in time when
      neither demand was barred by the statute of limitations, and an action is
      thereafter commenced by one such person, the other person may assert in the
      answer the defense of payment in that the two demands are compensated so far
      as
      they equal each other . . ."</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Accordingly,
      we concluded that the remaining balance due from Pemstar of $393,636 at
      September 30, 2004 for shipments made to it should be netted against the payable
      to Pemstar at September 30, 2004 to determine the amount included in accounts
      payable.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Revenue
      Recognition, page F-10</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                tell us in more detail about the nature of your engineering services
                and
                the basis for your accounting. Include in your response references
                to the
                appropriate accounting literature.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      the normal course of our business, we offer engineering services to our
      customers. In fiscal 2004, revenues recorded for these services was less than
      3%
      of our total revenues for the fiscal year. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Examples
      of the range of services we provided to different customers in fiscal 2004
      include:</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
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            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
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                services to provide confirmation that two parts of a system functioned
                together as specified;</em></font></div>
            </td>
          </tr>

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    <div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
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                services for a demonstration
                product;</em></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>fabrication
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                product;</em></font></div>
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          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
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                of various subcontractors to meet required goals;
                and</em></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>product
                testing supervision. </em></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 7</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>SAB
      101 indicates that revenue should not be recognized until it is realized or
      realizable and earned, which occurs when all of the following criteria are
      met:
      (a)&#160;persuasive evidence of an arrangement exists; (b) delivery has occurred
      or services have been rendered; (c) the seller&#8217;s price to the buyer is fixed and
      determinable; and (d) collectibility is reasonably assured. We recognized
      revenue for engineering services at the time we determined that all of the
      revenue recognition criteria of SAB 101 were met for each service.
</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Note
      7. Litigation, page F-26</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                tell us in more detail about the minimum film royalty settlement
                with
                NeoPlanar. Describe the transaction and provide us with the related
                journal entries.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      purchased our NeoPlanar speaker technology from Hucon Limited in February 2000.
      As part of the purchase, we took assignment of Hucon's rights and obligations
      under a technology license agreement between Hucon and Bohlender-Graebener
      Corporation, which we refer to as B-G. The technology license agreement required
      the licensee to pay a royalty to B-G equal to 50% of the purchase price of
      a
      propriety film identified by B-G, and a minimum royalty of $240,000 per year
      for
      a minimum of two years. After two years, if actual royalty payments were less
      than the minimum, the licensee would lose its exclusive rights unless it paid
      the minimum royalty. A dispute arose between us and B-G regarding a minimum
      royalty in the amount of approximately $228,000 that B-G believed was due for
      2002. We disputed that such royalty was due. In January 2003, B-G filed a
      statement of claim in private arbitration in Seattle, Washington. In August
      2003, B-G agreed to dismiss its claim against us for the alleged past due
      minimum royalty, and to eliminate all further royalties under the technology
      license agreement, in consideration of our issuance of 50,000 restricted shares
      of common stock. We accrued an estimated loss related to this litigation at
      September 30, 2003 of $292,500, which was based on the fair value at that date
      of the 50,000 shares ($5.85 per share). This was recorded as an entry to legal
      settlement expense offset by an entry to accrued expenses.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      policy is to estimate the range of liability relating to pending litigation,
      where the amount and range of loss can be estimated. We record our best estimate
      of a loss when the loss is considered probable. Where a liability is probable
      and there is a range of estimated loss with no best estimate in the range,
      we
      record the minimum estimated liability related to the claim. As additional
      information becomes available, we assess the potential liability related to
      our
      pending litigation and revise our estimates.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%; TEXT-ALIGN: center" align="right">&#160;</div>
        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 8</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      March 2004, we and B-G executed definitive settlement agreements. The terms
      of
      the settlement required us to issue 50,000 restricted shares of common stock
      to
      B-G, which had a fair value at the time of issuance of $4.96 per share, or
      $248,000 in total, and a cash payment of $25,000. The journal entries associated
      with entry into the definitive agreements were: a decrease in the accrued
      expenses previously recorded by $292,500, $248,000 recorded as equity, $25,000
      recorded as accounts payable (which entry was reversed shortly thereafter when
      the cash was actually paid) and $19,500 recorded as legal settlement
      expense.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                tell us in more detail about the "Legal Settlement" liabilities in
                the
                amount of $150,000 for 2004 and $292,500 for 2003. Describe the related
                transaction(s) and tell us how you determined the amount of the liability.
                Also tell us your basis for including the related expense in SG&amp;A. We
                also note your discussion on page
                21.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      legal settlement liability of $292,500 as of September 30, 2003 was the
      estimated settlement costs of the dispute with B-G, described more fully in
      the
      response to comment 8 above.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      legal settlement liability of $150,000 as of September 30, 2004 related to
      our
      dispute with eSOUNDideas, Inc. In September 2003, we filed a complaint against
      eSOUNDideas, Inc., in the Superior Court of California, County of San Diego,
      alleging breach of contract and seeking a declaratory judgment to the effect
      that a license, purchase and marketing agreement dated September 28, 2000,
      which
      we refer to as the ESI License Agreement, with eSOUNDideas, a California
      partnership, was properly terminated by us in May 2003. The principals of
      eSOUNDideas are Greg O. Endsley and Douglas J. Paschall. The principals also
      founded a corporation, eSOUNDideas, Inc., which purported to assume the
      contractual obligations of eSOUNDideas. We amended the complaint in November
      2003 to include eSOUNDideas (the general partnership), Mr. Endsley and Mr.
      Paschall as defendants. For convenience, the following discussion refers to
      eSOUNDideas and eSOUNDideas, Inc. collectively as &#8220;ESI.&#8221; In November 2003, we
      filed complaints in the Superior Court of California, County of San Diego,
      against Mr. Endsley and Paschall seeking declaratory judgments that options
      granted to each of Mr. Endsley and Mr. Paschall in April 2001 were terminated
      in
      October 2002. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      ESI License Agreement formerly appointed ESI as an exclusive distributor of
      our
      Hypersonic Sound&#174; (HSS&#174;) products specifically targeted to the point of
      sale/purchase, kiosk and display, and the event, trade show and exhibit markets
      in North America for five years. In June 2002, we and ESI purported to enter
      into an amendment to the ESI License Agreement, extending the term to ten years
      commencing on the first delivery of a commercial HSS product to an end user,
      and
      eliminating minimum purchase requirements for the first three years. We believed
      the amendment was invalid as it was given in consideration for a large order
      from ESI, which was later withdrawn by ESI due to a dispute over the payment
      and
      delivery terms of such order. In May 2003, we gave notice to ESI of termination
      of the ESI License Agreement. We based our termination on our belief that ESI
      had failed to fulfill certain covenants contained in the ESI License Agreement
      related to efforts and resources required to maximize the distribution and
      sales
      of HSS products in its product categories. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="1">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%; TEXT-ALIGN: center" align="right">&#160;</div>
        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 9</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      three cases were consolidated upon motion by the defendants and order of the
      court. The defendants filed a cross-action in the consolidated action alleging
      fraud, breach of contract in connection with the ESI License Agreement and
      the
      options, breach of the implied covenant of good faith and fair dealing,
      intentional interference with contract, negligent interference with contract,
      intentional interference with prospective economic advantage, negligent
      interference with prospective economic advantage, defamation, and violation
      of
      California Business and Professions Code &#167;17200. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      believed that the agreements with ESI were properly terminated, and that even
      if
      the court were to disagree, ESI would be unable to show material damages from
      such terminations. In June 2004, we made an offer of settlement to ESI, which
      ESI did not accept. At June 30, 2004, we determined to accrue $150,000 as an
      estimated loss for this litigation based on our policy for accruing estimated
      loss for loss contingencies described in our response to comment 8 above. We
      reviewed this accrual in connection with our preparation of financial statements
      for the fiscal year ended September 30, 2004, and determined that such amount
      remained an appropriate estimate of the loss from this loss
      contingency.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      and ESI settled this litigation in April 2005. We agreed to pay an aggregate
      of
      $150,000 cash and to issue an aggregate of 17,500 shares of common stock, which
      had a fair value at the time of issuance of $140,175. We also agreed to pay
      ESI
      a commission of 1% of net sales through September 2007 of HSS products sold
      in
      the categories generally described in the ESI License Agreement, subject to
      a
      maximum of $500,000, of which $202 was accrued through June 30, 2005. The
      related expenses for each of these transactions were recorded as general and
      administrative expense since they were incurred in the normal course of
      conducting business. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tell
                us in more detail about the settlement with Horizon Sports Technologies,
                Inc and describe to us how you accounted for the settlement
                costs.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>On
      May 27, 2003, Horizon Sports Technologies, Inc. d/b/a HST filed a complaint
      against us in the Superior Court of California, County of San Diego, alleging
      breach of contract and fraud in connection with various agreements between
      us
      and HST entered into in 2000 and 2001, including an exclusive supply and
      manufacturing agreement dated July 18, 2001. HST sought damages of approximately
      $811,000, plus other unspecified damages. We answered the complaint with a
      general denial on June 26, 2003. We and HST reached an agreement in principle
      to
      settle the litigation on August 11, 2003, and entered into a full settlement
      agreement on September 17, 2003. </em></font></div>
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          and Exchange Commission<br>September 7, 2005<br>Page 10</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      accrued an estimated loss related to this litigation of $950,000 at June 30,
      2003 based on our policy for accruing estimated loss for loss contingencies
      described in our response to comment 8 above. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Under
      the terms of the settlement agreement, HST acknowledged and retained our payment
      of $354,883 paid prior to the date of the agreement. This amount included
      $145,476 for raw material and equipment that we acquired from HST to be used
      for
      HSS product production. The balance of $209,407 was charged to settlement costs.
      We further agreed to pay invoices to HST vendors for amounts owed related to
      HSS
      materials in the amounts of $62,956 and $40,258, bringing the total paid out
      in
      settlement costs to approximately $313,000. Also, as part of the settlement,
      we
      conveyed tooling to HST valued at $43,179, which amount was charged to
      settlement costs, and we agreed to issue 100,000 shares of restricted stock
      to
      HST, with a fair value at the time of issuance of $5.85 per share. Finally,
      we
      granted to HST a non-exclusive, royalty-bearing license for our Stratified
      Field
      Technology and a subwoofer developed by us. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Form
      10-Q for the Fiscal Quarter Ended December 31, 2004</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                amend your Form 10-Q for the quarter ended December 31, 2004 to comply
                with the comments on your Form 10-K that are applicable to your Item
                307
                and 308(c) disclosure. Please also comply with the following
                comments.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Please
      see our response to comment 1 above with respect to the description of
      disclosure controls and procedures.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally advise you that we made no changes in our internal control over
      financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange
      Act) in connection with the evaluation required by paragraph (d) of &#167; 240.13a-15
      or 240.15d-15 of Regulation S-K that occurred during our first fiscal quarter
      of
      2005 that materially affected, or were reasonably likely to materially affect,
      our internal control over financial reporting.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally confirm that with respect to our evaluations of the effectiveness
      of disclosure controls and procedures performed in connection with the filing
      of
      the Form 10-Q and Form 10-Q/A (Amendment No. 1), each on February 11, 2005,
      our
      co-principal executive officers and principal financial officer determined
      that
      disclosure controls and procedures were not effective as of December 31, 2004
      as
      a result of the exception noted in paragraph (a) of Part II, Item 4 of such
      report. Please see the responses to comments 12 and 13 below for more
      information concerning this deficiency in disclosure controls and
      procedures.</em></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
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        </div>
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 11</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      reiterate our intentions set forth in the responses above to comments 1,2 4
      and
      5 to comply with your comments concerning Item 307 and 308(c) disclosure in
      future filings.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                note your disclosure regarding the "significant deficiency" in your
                internal controls. Please tell us in your response letter why this
                "significant deficiency" does not rise to the level of a "material
                weakness" in your internal controls. If this was a material weakness
                in
                your internal controls, please revise your disclosure
                accordingly.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Paragraph
      9 of PCAOB Auditing Standard No. 2 defines a significant deficiency as a control
      deficiency, or combination of control deficiencies, that adversely affects
      the
      company's ability to initiate, authorize, record, process, or report external
      financial data reliably in accordance with generally accepted accounting
      principles such that there is more than a remote likelihood that a misstatement
      of the company's annual or interim financial statements that is more than
      inconsequential will not be prevented or detected. Paragraph 10 defines a
      "material weakness" as a significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      determined that our procedures for determining whether bonuses should be accrued
      for executive officers as of fiscal year end were deficient in that such
      determination was made without a query to the compensation committee, which
      was
      scheduled to determine such bonuses after publication of our financial
      statements for the year ended September 30, 2004. We believed this control
      deficiency constituted a significant deficiency, as there was more than a remote
      likelihood that a misstatement of our annual financial statements that is more
      than inconsequential would not have been prevented or detected. However, we
      determined that there was not more than a remote likelihood that a material
      misstatement of the annual financial statements would not be prevented or
      detected, and accordingly, that this control deficiency was not a material
      weakness. We considered the following factors. First,&#160;the amount of
      the
      potential bonuses was not deemed to be material to our results of operations.
      Second, the problem was isolated and not systematic. Third, we were able to
      and
      did quickly identify and remediate the problem. See our response to comment
      13
      below concerning the nature of this remediation. </em></font></div>
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 12</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div>
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            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                note your disclosure that you "have taken steps to rectify this
                deficiency&#8230; " in your internal controls over financial reporting. Please
                disclose the dates you implemented these steps and disclose the date
                this
                deficiency was rectified. In this regard, you have included disclosure
                regarding the steps you implemented in your Item 308(c) disclosure
                in both
                your Form 10-Q for the quarter ended March 31, 2005 and your Form
                10-Q for
                the quarter ended June 30, 2005. Accordingly, it appears that changes
                were
                made in your internal controls in both quarters. Please clarify your
                disclosure accordingly.</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      supplementally advise you that immediately upon discovery in February 2005
      of
      the deficiency in disclosure controls and procedures related to accrual for
      executive bonuses (which was also a significant deficiency in internal control),
      our audit committee, in joint meeting with our compensation committee, approved
      a revision in procedures to make certain that the compensation committee is
      queried concerning anticipated bonuses to executive officers for the completed
      fiscal year, and an appropriate accrual is made, prior to the time financial
      statements for such year are first submitted to our independent registered
      public accounting firm. We believe the control deficiency was rectified upon
      such determination by the audit and compensation committees.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>All
      changes to internal control over financial reporting related to this deficiency
      occurred during the quarter ended March 31, 2005. The repetition of this
      disclosure in Part II, Item 4 of the Form 10-Q for the quarter ended June 30,
      2005 was an error. We believe this error was not material when viewed in the
      context of the history of disclosure concerning this matter and the
      immateriality of the amount involved.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Form
      10-Q for the Fiscal Quarters Ended March 31, 2005 and June 30,
      2005</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                revise your future filings to comply with our comments on your Item
                307
                and 308(c) disclosure above, as applicable.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      reiterate our intentions set forth in the responses above to comments 1,2 4
      and
      5 to comply with your comments concerning Item 307 and 308(c) disclosure in
      future filings.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 13</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Form
      10-Q for the Fiscal Quarter Ended June 30, 2005</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Note
      11. Committed Equity Financing Facility, page 12</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                tell us why it was appropriate to account for the warrant issued
                in
                connection with CEFF financing as a liability under EITF
                00-19.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Issuer's
      Response</u></strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>In
      December 2004, we entered into a $25 million Committed Equity Financing Facility
      (CEFF) with Kingsbridge Capital Limited. As part of the arrangement, we issued
      a
      warrant to Kingsbridge to purchase 275,000 shares of common stock at a price
      of
      $8.60 per share. The warrant was exercisable beginning six months after the
      date
      of grant and for a period of five years thereafter. The fair value of the
      warrant, which amounted to $843,105, and transaction costs initially estimated
      at $55,000, were recorded as prepaid transaction costs at December 31, 2004.
      These costs were to be reclassified to equity upon the sale of shares to
      Kingsbridge under the CEFF, or expensed if no sales were made prior to the
      expiration or termination of the CEFF. </em></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      and Kingsbridge agreed to terminate the CEFF in July 2005, and Kingsbridge
      returned the warrant, which was unexercised, to us for
      cancellation.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Under
      the terms of a registration rights agreement entered into as part of the CEFF,
      we were required to pay certain liquidated damages in the event that a
      registration statement was not available for the resale of securities purchased
      by Kingsbridge under the CEFF. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      analyzed the warrant under EITF Issue No. 00-19 &#8220;Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company&#8217;s Own
      Stock,&#8221; to determine if the warrant should be considered an equity instrument or
      a liability. The registration rights agreement required us to file with the
      Commission, within 45 calendar days after December 14, 2004, a registration
      statement and to use commercially reasonable efforts to have the registration
      statement declared effective by the Commission as soon as reasonably
      practicable, but in any event no later than 45 calendar days, or 120 calendar
      days in the event that the Commission reviewed the registration statement,
      after
      filing. </em></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Paragraph
      14 of EITF 00-19 states that if the contract permits the company to net-share
      or
      physically settle the contract only by delivering registered shares, it is
      assumed that the company will be required to net-cash settle the contract.
      </em></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Paragraph
      17 of EITF 00-19 contains the Task Force's observation that if (a) a derivative
      contract requires physical or net-share settlement by delivery of registered
      shares and does not specify any circumstances under which net-cash settlement
      would be permitted or required and (b) the contract does not specify how the
      contract would be settled in the event that the company is unable to deliver
      registered shares, then net-cash settlement is assumed if the company is unable
      to deliver registered shares (because it is unlikely that non-performance would
      be an acceptable alternative.)</em></font></div>
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        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 14</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>After
      a thorough review of the provisions of the warrant and the registration rights
      agreement, our management concluded that Paragraphs 14 and 17 of EITF 00-19
      required that the warrant be treated as a liability. We focused our review
      on
      the provision of the warrant which stated that the resale of the shares of
      common stock issuable upon exercise the warrant was subject to the provisions
      of
      the registration rights agreement, and the provision of the registration rights
      agreement requiring ATC to have effective a registration statement for resale
      of
      the warrant shares within 120 days after filing the registration statement.
      While there were no liquidated damages or other penalties stated in the warrant
      or the registration rights agreement for failure to perform the registration
      covenant with respect to the warrant shares, there also was no explicit relief
      of our responsibility to register the warrant shares. We </em></font><a name="STARTHERE"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>believed
      that it therefore could be concluded that the warrant, prior to effectiveness
      of
      the registration statement, did not specify how the warrant was to be settled,
      and Paragraph's 14 and 17 of EITF 00-19 indicate that in this situation, net
      cash settlement must be assumed and, therefore, liability treatment was
      required. </em></font></a></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Request
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with this response, we hereby acknowledge that:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="LINE-HEIGHT: 1.25">
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            <td style="WIDTH: 36pt">
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                company is responsible for the adequacy and accuracy of the disclosure
                in
                the filings;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">staff
                comments or changes to disclosure in response to staff comments in
                the
                filings reviewed by the staff do not foreclose the Commission from
                taking
                any action with respect to the filings;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
            <td style="WIDTH: 36pt">&#160;</td>
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                company may not assert staff comments as a defense in any proceeding
                initiated by the Commission or any person under the federal securities
                laws of the United States.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%; TEXT-ALIGN: center" align="right">&#160;</div>
        <div style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Securities
          and Exchange Commission<br>September 7, 2005<br>Page 15</font></div>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      you
      have any questions, please contact me at (858)&#160;679-3147.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="40%">&#160;</td>
            <td align="left" valign="top" width="40%">
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                truly yours,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
                Michael A. Russell</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                A. Russell</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Financial Officer and Secretary </font>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
                  American Technology
                  Corporation</font></div>
              </div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attachment</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Securities
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            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dean
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                facsimile)</font></div>
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          </tr>

      </table>
    </div>
    <div>
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    <div>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
