17. SPIN-OFF OF PARAMETRIC SOUND CORPORATION

On September 27, 2010, the Company completed a spin-off of Parametric, the subsidiary to which the Company's contributed its HSS technology business. The spin-off was approved by the Company's stockholders in a special meeting on June 2, 2010. Parametric filed a registration statement on Form 10 with the Securities and Exchange Commission in connection with the spin-off. On September 27, 2010, all outstanding shares of Parametric were distributed to the Company's stockholders of record on September 10, 2010 as a pro-rata, dividend of one Parametric common share for every two shares of the Company's common stock.

On September 27, 2010, the Company entered into a Separation and Distribution Agreement with Parametric that sets forth the terms and conditions of the separation of Parametric from the Company. The Separation and Distribution Agreement provides a framework for the relationship between the Company and Parametric following the separation regarding principal transactions necessary to separate Parametric from the Company, including (i) the contribution of assets to the business, (ii) retention of liabilities by the Company, (iii) use of HSS assets retained by the Company to fulfill any orders for such assets received prior to the distribution date, unsolicited follow-on orders received from current customers through December 31, 2010, and orders for a current project with Cardinal Health, Inc. through the completion of the project, (iv) the distribution by the Company on the distribution date of all outstanding shares of Parametric common stock to the Company's stockholders in the form of a pro rata dividend of one share of Parametric common stock for every two shares of the Company's common stock outstanding to stockholders on the record date, and (v) other provisions governing certain aspects of the Company's relationship with Parametric after the completion of the separation from the Company.

In addition, on September 27, 2010, the Company entered into a Tax Sharing Agreement with Parametric in connection with the spin-off, that generally governs the parties' respective rights, responsibilities and obligations after the separation with respect to taxes.

The net assets contributed by the Company to Parametric consisted of the following:


Inventories, net	$	21,293
Patents, net		432,713

Net assets transferred	$	454,006

Parametric's historical results of operations relating to the HSS business have been presented as discontinued operations in the Consolidated Statement of Operations. The current and prior year Consolidated Balance Sheets also identify historical assets and liabilities as well as assets and liabilities retained by the Company to fulfill remaining obligations per the terms of the Separation and Distribution Agreement.