Advanced Sound Technology

Business Plan Summary


AURICA has developed a new, high resolution, OEM Platform for the Audio Industry. It is similar to HDTV in scope and is based on AURICA's patented breakthrough in solid state analog electronics which uses advanced current feedback architectures. These advancements open a wide variety of opportunities across the Electronics Industry, from Servo Control and Robotics, to High Speed Instrumentation, and Data Conversion. Audio Electronics, however, shows the most tangible difference of current feedback's unique properties to the widest market base. Therefore, the Audio Industry was chosen as the best market to introduce this new analog circuitry.


THE ADVANTAGE: In Audio, this technology has a definite universal appeal. Even people without trained hearing instantly notice a significant and pleasing difference when listening to music through this wide band technology, --regardless of the speakers used. This ultra-sonic technology is completely analog, 100% backwards compatible, and extends the audio spectrum out to at least 300K Hertz. This low cost, high resolution circuitry can replace both Electron Tubes and Operational Amplifiers (Op-Amp's) throughout the entire Audio Industry with a significant improvement in sound quality and stereo imaging, especially in the low-end, high volume, mass markets.

THE PRESENT STATUS: The company AURICA Sound Labs has completed the technical development, patenting, market research, and product engineering necessary to meet these enhanced requirements for several specific audio markets. Prototypes of various configurations are available for demonstration purposes.

AURICA has been active in promoting the advantages of its proprietary technology. AURICA introduced this technology at the San Francisco A.E.S. Trade Show in October, 1992. Brochures, data sheets, power modules, and a 500 watt power amplifier were on display. AURICA also joined the C.E.S. Trade Show in January, 1995 to display the latest Hi-End Audio product, the OPUS Series III, 100 watt Power Amplifier. Responses from the Company's trade show appearance have been very positive. ( See the Opus III Specification Sheet for more information )

There is considerable demand for enhanced, wide band audio at consumer level prices. Based on this positive response and the favorable opinions of audiophile stores, AURICA is following up with the production of the OPUS Series III, a power amplifier for High-End audiophiles.


AURICA's Near Term Objectiveis to release the OPUS Series III and a matching Pre-Amplifier into the High- End audiophile markets introducing this new platform in audio sound quality. The sales team and nation-wide distribution will be supplied by the Lieby Group. AURICA will ramp up production quickly to match monthly orders by using one or more contract manufacturing houses in the Bay Area.

The Mid Term Goal is to increase AURICA's recognition base by licensing to medium priced, Mid-Fi Companies who will have the same Hi-End, "expensive", sound quality, yet, in a low cost package. This promotes fast growing name recognition in audio. See Future Product Offerings below.

Long Term Objectives entail developing various licensing arrangements with key audio companies that have high volume production. These arrangements will generate licensing, consulting, and royalty revenues that can be used for expansion. Further out, it is expected that AURICA will be enjoying a distributor relationship with several IC manufacturers. The Company wishes to employ the "DOLBY" business model: to be a research and development facility for licensing new technologies with additional manufacturing capability for hi-end audio equipment.

Just as Dolby Noise Reduction or the Compact Disc changed consumer expectations in audio equipment, AURICA believes this technology has much more to offer in becoming the 'de facto' standard across the entire Audio Industry in the next decade for High Definition Audio, TV, and Multi-Media.

(Dolby is a registered trade mark of Dolby Labs.)

The Marketing of AURICA's Technology

Initially, the Hi-End Audio Market is targeted for this entry. This 15 to 20 million dollar pinnacle market consists of about a thousand people a year buying audio systems of 3 to 5 components costing a sum of $8,000 to $24,000, or more. They are very particular about the look and feel, and less about the sound. For that, they rely heavily on what the audio magazines have to say. Based on this, about 40% of these people are continually upgrading one of their components about every year or so. And a third of the rest upgrade their whole system within five years just to stay current. AURICA's marketing strategy is based upon gaining Hi-End market name recognition early by offering superior sound in an elegant package at an affordable price. AURICA's patented sound quality and elegant styling combine favorably in the Hi-End Market to offset a reasonable $4800 selling price. Several Hi-End audio stores in the Bay Area are excited about the product and have already placed orders. A matching Pre-Amplifier with remote control will be offered in six months. The company will promote these products with a nationwide sales team. Also, reviews and articles in several audio magazines are a vital part of the sales effort. Continuing the R&D effort, as well various trade show appearances, will create additional products that enhance AURICA's market prominence as an industry leader in high speed, precision audio.

The initial offering of 50 units will capture about 2% of the hi-end amplifier market in the first three months; and will grow to as much as 10% at the end of the second year. Once established, AURICA will quickly license to competitive Mid-Fi, and Low-End Consumer OEM markets where AURICA's sustainable advantage can only increase. This will lay the foundation for new standards in High Resolution and 3-D Audio which will compliment the advancements made in HDTV, as well as Virtual Reality Booths and Music Arcades.

The Originators of AURICA

Greg Bender is the President, Inventor, and Technical Director. and Bill Driden, who has owned several audio companies himself, is the General Manager. Aurica has been working over nine years in R&D, Patenting, Product Development, Market Analysis, and Licensing efforts. Currently, there are several Analog IC Manufacturers and a few Audio Companies who are on notice for potential patent infringement.

Over the past nine years, the company has built up an equity of $600,000 through a variety of activities, including business planning, procuring patent rights, research and development, market analysis, pursuing licensing arrangements, building production prototypes, and producing promotional material. Our hourly rate is based at $45; the patent costs have totaled over $22,000; and at least $35,000 has been spent on hardware and product development.

The immediate need for a management team in the first two years will be minimal. Most of the daily activities of procurement, manufacturing, and shipping will be covered by Multi-Mec, a turnkey, contract manufacturer in Santa Clara, CA, that specializes in building low volume, high quality products.

However, AURICA would prefer partial involvement from the Investor(s) to ensure that operations run smoothly and common financial pitfalls are avoided. In addition, the Investor(s) will receive First Right of Refusal for future, majority equity investment plans of AURICA at the start of Year 3. As part of this right and sale of equity, the Investor(s) should be interested in building the appropriate management team for AURICA's long term, 10 year business planning.


The Company estimates a minimum of investment of $75,000 is needed to implement it's manufacturing and distribution plans during the first year. This will purchase the first 30 units of the OPUS Series III power amplifier and pay for advertising. These units will be shipped immediately to sales rep's across the nation and several key audio magazines for review. Netting $2000 per unit brings $60,000 gross in the next month to run operations and purchase new materials, net 30, for the next set of 50 units. After the initial two month ramp-up period, units will be ordered, built, and shipped on a monthly basis from a local Bay Area contract manufacturing house offering turnkey production. The remaining principle will be used to maintain patent rights as well as mount an extensive, nationwide publicity campaign to enhance early sales.

This particular business plan is for the first two years only. AURICA's success during the second year will set the tone for future, majority equity negotiations and long term investment planning.


Overall Strategy: "Knock the Tip Off the Iceberg"

Audio Markets in general work on the "trickle down effect". New ideas and technologies usually start at the top in price and "pizz-zazz-apeel" and, as they gradually gain acceptance from the High-End markets, they gradually move down the economic pricing structure to the Mid-Fi markets, and finally to the high volume, all-in-one Low-Fi's and "Boom-Boxes".

Once AURICA gets the name recognition as "Ultimate Hi-End Gear", the company can very easily move the technology down to the lower priced, higher volume markets where the product line can make a bigger impact on sound quality compared to the existing competition. Getting State-of-the-Art sound for half the price is a big lure in the Mid-Fi audio markets.

Obtaining favorable reviews from several audio magazines is also an integral part of developing this nation wide name recognition. Once production is in full swing, AURICA will "donate" amplifiers to various publications like Absolute Sound, Stereophile, Audio Video Interiors, and The Inner Ear Report for an unlimited period of time. When one or more reviewer adopts AURICA's advanced amplifiers as part of their "reference system", AURICA's name recognition will be effectively 'carved in stone'. Of course, for additional impact, advertisements will run for three to six months following each magazine review.

AURICA intends to institute another program for enhancing name recognition referred to as: "Musician of the Month Club". Each month AURICA will give away an amplifier to a well known, talented singer, song writer, or musician for their outstanding music. This will indirectly solicit volunteer endorsements from these musicians on the exceptional sound quality of AURICA's products and enhance AURICA's image as an industry leader in this new technology.


Hi-End Audiophiles Initially, this is AURICA's target market for the OPUS Series III. It comprises approximately, the top 2 - 5% of the home audio market, about 1000 people per year nation wide. They can be characterized as home owners spending as much or more on their sound system as their automobile; running about $2000 to $6000 per piece of audio equipment; ($8000 to $24,000 per system.) They are mostly concerned with "Impress-apeel" as they make choices based on looks, selling price, size, weight, and, what the audio magazines have to say. Unfortunately, sound quality may actually be a secondary concern. AURICA has spent a great deal of effort designing a total package "look-and-feel" that will fit in comfortably at the top of this market.

Mid-Fi Enthusiasts This is a rather large group, 30 - 40 %, of financially impaired, yet inspired audiophiles, who watch what the Hi-End Audiophiles buy, but can only afford medium priced "separates;" about $600 to $1200 per piece of audio equipment; ($1500 to $3500 per system.) Unfortunately, in this price category, there is little differentiation in the average sound quality of various name brands. They all use the same conventional, flat sounding, solid state transistor technology they've used for 20 years and they still cut the same cost corners for their profit margins. The Mid-Fi Enthusiasts group is AURICA's target market for licensing during the second year. AURICA's advanced technology can make a significant leap in sound quality over the rest of the competition, and still bring in a higher profit margin. Enthusiasts eager to buy Hi-End sound for a Mid-Fi price will raise AURICA's market recognition.

Home Theater Buffs These are older, rich home owners in the middle of some home renovation or remodeling. In an effort to build the home theater experience, they generally amass great piles of audio-visual equipment which usually requires a team of sub-contractors to install. Home Theater is an important, upcoming market for audio equipment manufacturers, because, in most cases, this elaborate set up requires not two, but five channels of amplifiers and speakers for the "surround sound" effect. AURICA will be part of this new trend in audio; supporting the ultimate Audio-visual experience with five and six channel units.


AURICA's initial business plan is structured around it's first two fiscal years and accordingly, the planning is kept simple on purpose. Year end progress will determine the time frame for incorporation, equity negotiations, and long term investment planning.

Investment: $75,000  Equity: 25%  Return: $100,000  R.O.I. 30 %  Time: Two Years

Total group investment will not exceed $100,000 in the first six months, and R.O.I. on this initial investment is fixed at 30%. Additional funding and the subsequent equity sale and R.O.I. may be re-negotiated after six months.

Investment capital is returned in quarterly payments of $12,500; totaling $100,000 at the end of year two. Quarterly progress reports will be issued.

Most of the capital investment will be secured against the value of the completed 30 units from the first production run of the OPUS Amplifier; estimated at $60,000 gross.

The Investor(s) will receive First Right of Refusal for the future, equity investment plans of AURICA at the start of Year 3. As part of this right and sale of equity, the Investor(s) should be interested in building the appropriate management team for AURICA's long term business planning.

The first $20,000 will be used to recoup AURICA's development costs, making 40% of your investment eligible for federal tax incentives.

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