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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________________

FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004; OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO __________________

Commission File Number 0-24248

AMERICAN TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)

Registrant's' telephone number, including area code:  (858) 679-2114

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, $.00001 par value per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding in 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ] 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes [X] NO [  ]

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (based on the closing price as reported on the NASDAQ SmallCap Market on March 31, 2004) was $94,391,214.*

The number of shares of Common Stock, $.00001 par value, outstanding on December 20, 2004, was 19,808,819.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A in connection with the registrant's 2005 Annual Meeting of Stockholders, to be filed subsequent to the date hereof, are incorporated by reference into Part III of this report. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the conclusion of the registrant's fiscal year ended September 30, 2004.

* Excludes the Common Stock held by executive officers, directors and stockholders whose ownership exceeds 5% of the Common Stock outstanding at March 31, 2004. This calculation does not reflect a determination that such persons are affiliates for any other purpose.

PART I

Forward Looking Statements

This report contains certain statements of a forward-looking nature relating to future events or the future performance of our company.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the only means of identifying forward-looking statements.  Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially.  In evaluating such statements, prospective investors should specifically consider various factors identified in this re port, including the matters set forth below under the caption “Risk Factors,” which could cause actual results to differ materially from those indicated by such forward-looking statements.

Item 1. Business

Overview

American Technology Corporation is an innovator of proprietary sound reproduction technologies and products. We believe our innovative proprietary sound technologies provide us a significant competitive advantage in our principal markets. We believe we are the leader in developing and commercializing parametric loudspeakers, branded as HyperSonic® sound or HSS®. We believe we are also the leader in developing and commercializing high intensity directed acoustical devices, branded as our Long Range Acoustic Device or LRAD™. We have filed over 70 patent applications in the United States, and over 90 patent applications internationally covering our various sound technologies and products.

We make significant investments in research and development to expand our technology and product portfolio. We are expanding our LRAD product family, introducing a new NeoPlanar product line for emergency notification and general announcing markets which require high intelligibility, and are utilizing our products to provide solutions for difficult acoustic challenges.  We offer our products for sale worldwide, but expect the largest markets to be the United States, Europe and Asia.

Our four major products from our technology portfolio are listed below.

• Our HyperSonic sound, or HSS, technology is a new parametric speaker technology that creates sound “in the air.” Sound is generated along an air column using ultrasonic frequencies, which are those above the normal range of hearing. The HSS sound beam is highly directional and maintains sound volume over longer distances than traditional loudspeakers. We believe our substantial intellectual property portfolio and pioneering HSS products support our leadership position in the field of parametric non-linear acoustics for sound reproduction. In October 2004, we released our HSS Generation III (T120 and T220) product family, which has higher reliability, lower distortion and higher output levels than previous models of our HSS products.
• Our Long Range Acoustic Device, or LRAD technology produces variable intensity acoustical sound intended for use in long-range delivery of directional sound information, which is effectively a supercharged megaphone. LRAD products are designed and used as directed long-range hailing and warning systems by both government and commercial customers. We believe our LRAD product innovation, our growing engineering capabilities, and our manufacturing and marketing competencies have established us as the leader in this new marketplace. We are marketing LRAD throughout the U.S. Department of Defense as “The Sound of Force Protection™”, and our markets are expanding to include law enforcement and commercial customers with significant security concerns. In fiscal 2004, we developed a remote controlled pan/tilt version of LRAD for critical infrastructure force protection applications, and we demonstrated our competency to engineer additional new sound solutions for the U.S. Department of Defense.
• Our NeoPlanar® technology is a thin film magnetic speaker that produces sound of high quality, low distortion and high volume.  NeoPlanar applications include high-end sound, emergency notification and public address systems. In fiscal 2004, we began marketing NeoPlanar for use in large indoor spaces and in outdoor environments for emergency notification. NeoPlanar offers customers a new capability by delivering remarkably intelligible communications in difficult spaces such as aircraft hangar bays and at distances up to one-half mile.

• Our SoundCluster^TM technology is a new multi-element speaker cluster optimized for even sound coverage over large areas. Our SoundCluster product offers an improved level of intelligibility and clarity in high ambient noise environments. The SoundCluster satisfies flight deck safety and large area emergency notification requirements. The flexible and ruggedized SoundCluster design lends itself to installation in harsh environments, where conventional speakers may fail. During fiscal 2004, we deployed the first SoundCluster for use on a U.S. naval warship.

In order to capitalize on our technology leadership position, we continue to focus on our organization, management processes and business relationships.

• Organization:
  • In fiscal 2004, we created a new Quality Department reporting directly to the President to ensure that we develop products that meet the high standards that our customers require.
  • During fiscal 2004, we increased the size of our engineering and quality organization to 20 people to more rapidly expand our product portfolio.  
• Management Processes:
  • In fiscal 2004, we continued to refine our phase gate development process. This process provides executive review of each project at key phases within the development cycle. The goal is to ensure development of products that meet our cost, reliability and business goals. Our new product developments use the phase gate development process.
  • In 2005, we intend to begin the ISO 9001 certification process to meet the needs of our customers.
• Business Relationships:
  • We will continue to seek relationships with national or global partners for sales, manufacturing and distribution to accelerate the worldwide adoption of our products.

  • The Business Group, described below, intends to expand HSS sales into Western Europe and Asia. The Government Group intends to expand LRAD and other product sales into Western Europe, Asia and the Middle East.

Recent Developments

In December 2004, we received a firm order for $4.5 million in LRAD products from ADS, Inc. for use by the U.S. Army 3rd Infantry Division, Fort Stewart, Georgia.  The order also includes $0.4 million in ancillary products which we are providing on a value-added reseller basis along with the LRAD units.  The order calls for deliveries in December 2004 and January 2005 and customary payment terms. 
 

Segment Reporting

We organize our business into two reporting segments by the end-user markets we serve. Our Business Products and Licensing Group, or Business Group, licenses and markets HSS and NeoPlanar products to companies that employ audio in consumer, commercial and professional applications. Our primary focus in the Business Group has been expanding sales of HSS. We are concentrating our efforts on the following vertical markets:

• Digital Signage, sometimes referred to as “In Store Television”;
• Command and Control Centers;
• Museums and Displays;
• Trade Shows and Conventions; and
• Kiosks.

Our Government and Force Protection Systems Group, or Government Group, markets LRAD, NeoPlanar, SoundCluster and HSS products to government and military customers and to the expanding force protection and commercial security markets. We also engineer custom sound solutions for these customers. Based on initial market response for long range hailing and warning, emergency response, and engineered acoustic solutions, we expect significant continued revenue growth for this segment in fiscal 2005.

During fiscal 2004, we improved the quality, performance and manufacturability of our HSS products, and starting in October of 2004, we began deliveries of our HSS Generation III (T120 and T220) products. We also expanded our Government Group product line by adding new LRAD features and new products. During fiscal 2004, we also expanded our Advanced Development and Engineering departments to accelerate new product development and support custom engineering solutions.

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We believe we are uniquely equipped to provide our technologies and products in rapidly growing markets for new sound applications not currently served by conventional sound devices and as an alternative to conventional loudspeakers. We believe market factors such as the rapid growth of plasma and flat panel screens offer significant growth opportunities for our HSS focused sound solutions. We also believe that the growth in defense and homeland security and related protection spending by commercial customers provides a growing market for our sound products to be used for intelligible communication over long distances.

Our shares of common stock trade through the NASDAQ SmallCap Market under the symbol “ATCO.”  Our address is 13114 Evening Creek Drive South, San Diego, California, our telephone number is 858-679-2114 and our internet website is located at www.atcsd.com. We make available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, reports filed by our directors, executive officers and certain significant shareholders pursuant to Section 16 of the Securities Exchange Act and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 as soon as reasonably practical after the reports are electronically filed with or furnished to the Securities and Exchange Commission.  The information on our website is not incorporated by reference into this report nor is it part of this report.

Our Technology and Products

HyperSonic Sound

We believe we have pioneered a new paradigm in sound production based on well-known principles of physics. The common speaker types in use today such as dynamic, electrostatic, ribbon and other transducer-based designs, are direct radiating, which are fundamentally a piston action directly pumping air molecules into motion to create audible sound waves we hear. Parametric or nonlinear acoustics use changing pressures in air to produce sound indirectly. We believe we are the first company to employ the "non-linearity" of air into a commercial sound product.

HSS employs ultrasonic frequencies to carry content, e.g. music and voice, into the air. Proprietary ultrasonic emitters, or transducers which convert electrical energy to high frequency acoustical energy, produce these ultrasonic frequencies beyond the range of hearing.  We have developed the ability to use such devices in lieu of loudspeakers to emit a custom-generated ultrasonic wave with the proper difference frequency characteristics to produce audible sound within and throughout an invisible beam. Sound does not appear on the surface of the ultrasonic emitter, which is a significant departure from a direct radiating loudspeaker.  For example, if the beam is directed towards a wall, the sound first emanates from the surface of the wall, or if the beam is directed to a person, the sound is created at the person. This directionality allows sound to be manipulated in space or diffused from a surface in a wide variety of ways to produce desired effects. The sound does not dissipate at the same rate over distance as it does with traditional speakers. This unique feature provides greater sound volume at selected distant points with less energy than traditional speakers, creating the ability to communicate directed sound at distances up to hundreds of feet.

With the rapid growth of alternative advertising such as digital signage, point-of-purchase and in-store TV networks, there is a trend towards sound clutter and even sound pollution. In-store display advertising tends to irritate customers if too intrusive and annoy workers due to the repetition. We have tested our sound with plasma displays to achieve focused controlled sound such that only those customers interested in the promotion are tuned in and nearby clerks do not hear the message. We believe this ability to locate sound will be a driving feature of HSS systems. We believe our HSS technology offers a number of advantages:

• The ability to create a beam of sound and place it only where you want it;
• Elimination of the need for a speaker enclosure;
• Reduction of the effect of room acoustics on sound quality;
• Ability to manipulate or selectively position or diffuse the source of sound;
• Ability to deliver a beam of sound over longer distances than conventional speakers;
• Ability to penetrate other competing sounds; and
• Elimination of feedback from live microphones.

We expect additional HSS applications to become evident as our products become more widely known. We believe HSS will ultimately have application in much broader consumer, home, vehicle, commercial and industrial environments.

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We are currently producing and selling our HSS Generation III hypersonic sound directed audio systems,  (Model T120 and T220), which have important improvements over prior generations including:

• Reduced distortion;
• Slimmer package;
• Wired remote control;
• Volume thumb wheel with digital volume display;
• Universal mounting studs;
• Swivel mount; and
• Choice of audio inputs including, XLR Microphone, RCA and Mini-Jack.

We expect to develop improved electronics and emitters and introduce new HSS systems in fiscal 2005. We seek to minimize distortion, improve output, reduce electronic packaging size, and trim production costs to expand the applications of HSS to new markets.

Long Range Acoustic Device

We believe our Long Range Acoustic Device, or LRAD, technology is a breakthrough directed acoustic beam device for long-range hailing and warning.  LRAD was developed to communicate at operationally-effective ranges with authority and superior intelligibility, even in high ambient noise environments. LRAD meets the need for clear voice communications at a distance to issue instructions, influence behavior, and determine intent.  LRAD was developed to support the security needs of military, government, law enforcement and commercial customers worldwide. Through intense marketing efforts, successful product deployments and extensive product demonstrations, we believe that LRAD is becoming well known by the U.S. Department of Defense as “The Sound of Force Protection™”. LRAD systems are currently in operational use in maritime, checkpoint, vehicular, airborne, and integrated system applications by the U.S. Navy, U.S. Marine Corps, U.S. Army and U.S. Coast Guard.  Operational feedback by the U.S. Navy, U.S. Marine Corps. and U.S. Army from LRAD deployment in Operation Iraqi Freedom has been favorable. LRAD also supports applications for the Department of Homeland Security, other government and law enforcement agencies and customers where there is a need to protect critical high-value commercial infrastructure, such as buildings, bridges, tunnels, dams, power plants, pipelines, airports, sea ports, communications towers and other similar important commercial facilities.

LRAD was developed in parallel with the release of Naval Vessel Protection Zone requirements to enforce a 500-yard Exclusion Zone and 100-yard Protection Zone around U.S. naval warships both in the U.S. and in the foreign ports and restricted waters. LRAD provides the critical long range communication and intense but not harmful ability to warn away friendlies, classify non-compliants as hostile and support lethal rules of engagement.  This ability also allows the LRAD operator to execute proactive responses at extended distances, which in turn increases safety and the time to diffuse tense situations, thereby potentially saving lives on both sides of the device. In the remote-operation pan/tilt configuration, LRAD provides a first responder, immediately escalating non-lethal capability for protecting important commercial facilities.

LRAD’s features include:

• High source level acoustic transmissions with a series of phase coherent transducers;
• Sound pressure levels in excess of 146 dB, or decibels during continuous operation at a distance of 1 meter with instantaneous peaks at 151 dB;
• Limits to 120 dB at 1 meter in normal operation, with a battle override key to allow maximum power to achieve longer hailing and warning distances for certain applications and ambient noise conditions;
• A beam center of 16 degrees on either side of center line;
• Effective hailing distances in excess of 500 yards, warning distances in excess of 750 yards;
• Both voice and warning tones for determining intent for multiple applications;
• Low operating power requirement, (400 watts); easily powered by 12/24 volt invertors;
• Input flexibility from networks, individual microphones, and audio output hand held and wearable computers;
• Easily transportable or vehicle mounted, 33” diameter x 4” thickness, lightweight at 45 lbs.;
• Powerful and safe when used properly; and
• Highly directional at distance.

We also have other customized LRAD applications under development to meet specific customer requirements each with broad government and commercial applications.

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NeoPlanar Speakers

Our NeoPlanar technology is a thin film planar magnetic type speaker that uses novel films, magnetic materials and a manufacturing process that we believe provides improved cost/performance benefits. Traditional planar magnetic speakers use materials with limited power handling ability and are generally associated with high distortion. Our NeoPlanar technology provides the ability to build flat and thin speakers with the following distinguishing features:

• High power handling;
• Low mass;
• High durability;
• Superior sound quality;
• High sensitivity;
• High sound pressure levels;
• Extended high frequency output compatible with new compact disk standards; and
• Exceptional clarity over long distances.

At present, we assemble NeoPlanar panels in 3, 8, and 24-inch segments of 3 inch width. Other lengths and widths are manufacturable. Our NeoPlanar Sound Bar product uses panels in an upright column and our NeoPlanar Sound Squares product organizes panels in a square box configuration. Both products are designed for public address with high intelligibility at very high output levels. NeoPlanar products can be engineered and customized to fit the needs of a particular facility or outdoor application. NeoPlanar speakers have been employed successfully for military and government installations in ships and hangars, and for outdoor public address and emergency response applications.

NeoPlanar technology provides a loud and clear outdoor and indoor public address and emergency response communication system for military, government and commercial facilities and areas.  Due to their unique intelligibility in high ambient noise environments and robust survivability in most operational environments, NeoPlanar products are useful for multiple military, government and force protection applications. Indoors, particularly in large spaces such as aircraft hangars, NeoPlanar provides a high level of clarity due to engineered reduction of multi-path and distortion. Outdoors, NeoPlanar provides an effective range, up to approximately a half mile, of clear high fidelity-quality communication even over high ambient noise.

SoundCluster

SoundCluster is a series of specifically engineered clusters of conventional high intensity ruggedized speakers modeled and designed to provide scalable highly intelligible and even sound coverage across the large areas.  For example, our first SoundCluster installation was for the flight deck of the USS Stennis (CVN-74), one of the most challenging acoustic environments anywhere.  The U.S. Navy is considering SoundCluster as a permanent replacement for the aging 5MC flight deck system. With this product, we have demonstrated that in addition to core proprietary technologies, we possess the core competency to provide a comprehensive engineered solution for unique industry acoustic challenges.
 

Other Proprietary Technologies

We have other sound inventions and technologies in various stages of development including our PureBass® Woofer technology for low frequency speakers, our Stratified Field Technology, or SFT®, that employs a thin form, non-magnetic film to produce high quality sound, and other technologies and products in various stages of development. In 2005, we expect our sales efforts to be focused on HSS, LRAD, NeoPlanar and SoundCluster.

Operating Segment Information

We organize our business into two reportable segments by the end-user markets we serve. Our Business Products and Licensing Group (Business Group) licenses and markets HSS and NeoPlanar speakers to companies that employ audio in consumer, commercial and professional applications. Our Government and Force Protection Systems Group (Government Group) markets LRAD, NeoPlanar, SoundCluster and HSS products to government and military customers and to the expanding force protection and commercial security markets.

Business Group

Our Business Group licenses and markets HSS and NeoPlanar technology and products to companies which employ audio in consumer, commercial, industrial and professional applications.  Our Business Group's primary marketing focus in fiscal 2005 will be on HSS product sales. Consumer applications for our products include home theater, consumer electronics, vehicle and computer multimedia sound systems. Commercial and industrial applications include digital signage, public address systems, point-of-purchase advertising, entertainment and messaging systems. Professional applications include sound systems for theaters, stadiums, production studios and indoor and outdoor entertainment venues.

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We sell our products to a range of customers including end-users, Original Equipment Manufacturers, or OEMs, who package our sound products with other products and system solutions, and to distributors who sell our products to others.

Our HSS strategy is to drive use in growing markets that can benefit from directed or narrowcast sound. The following are some key growing markets:

• Digital Signage - Digital Signage is a generic term used to describe the replacement of static, or passive, signs or displays with video screens such as cathode ray tube, or CRT, plasma, liquid crystal display, or LCD, or light-emitting diode, or LED, which may contain still or motion video images.  The image content, usually advertising or informational, can be changed via network control of each individual sign. Directional audio is required to contain the audio program within a defined space, to eliminate objections to the material from local workers, and to lower the overall audio noise level in a confined space.

• Command and Control Centers – Command and Control Centers require directed audio so that a person monitoring a control station can clearly hear alarms and notifications without disturbing someone that is monitoring an adjacent control station.

• Museums and Comparable Display Facilities - Directional audio is required in museums and similar facilities to focus audio information in targeted areas without distracting other patrons.  It is also required to allow multiple audio programs to be played within a confined space.

• Trade Show and Conventions - Trade shows and conventions require directional audio to lessen the overall room noise, attract patrons, focus instructional audio to individual displays, and contain audio programs within defined booth spaces.

• Kiosks - Retail point of purchase or information kiosks require directional audio to contain sound within the immediate space of the kiosk and to maintain some privacy for each individual listener.