Ionatron, Inc.

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Ionatron, Inc.

3590 East Columbia Street
Tucson, Arizona 84714
U.S.A.
Telephone: (520) 628-7415
Fax: (520) 622-3835
Web site: http://www.ionatron.com

Public Company
Incorporated: 2002
Employees: 104
Sales: $18.9 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: IOTN
NAIC: 332994 Small Arms Manufacturing; 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; 335999 All Other Miscellaneous Electrical Equipment and Component Manufacturing

Ionatron, Inc., is active in the development of directed-energy weapons. In layperson's terms, the technology aims to use lasers to guide "man-made lightning" to kill or stun human enemies or disable vehicles and communications equipment. As might be expected from a defense contractor on the cutting edges of science, the company maintains a culture of secrecy, often to the chagrin of those in the financial press. Ionatron became public in 2004 by merging with the corporate shell of a company that had originally been in the garden products business.

ORIGINS

Many novel technologies were studied in the rush to develop new weapons for the homeland defense and anti-terror missions that followed the September 11, 2001, terrorist attacks on the United States. Ionatron, Inc., was launched in June 2002 to develop directed-energy weapons. Its founders were Robert Howard, Thomas Dearmin, Joe Hayden, and Stephen McCahon. Howard, who had previously founded New Hampshire printing technology company Presstek Inc., served as Ionatron's first chairman, while Dearmin became chief executive officer. Hayden and McCahon had been engineers at Raytheon Missile Systems.

While Taser International Inc.'s famous namesake product shot out electricity over wires, Ionatron's technology, named Laser Guided Energy (LGE) and Laser Induced Plasma Channel (LIPC; pronounced "lipsy"), used a laser to create a path for energy to follow. Prior attempts to do this had been limited by the size of lasers required; however, more compact laser sources had been developed that held the possibility of making the concept feasible for mobile use.

If successful, the technology would overcome many of the limitations of the Taser, which had a range of about 30 feet. It could be used to apply nonlethal force in crowd situations, rather than simply against individuals. Variations could be configured to selectively disable vehicles or communications equipment.

Ionatron was not the only company working along these lines. Others working on some sort of Taser alternative included HSV Technologies of San Diego, California, and Xtreme Alternative Defense Systems of Anderson, Indiana.

Ionatron ended 2003 with just a dozen employees. Revenues were $383,273, and the company posted a net loss of $3.2 million.

PUBLIC IN 2004

Ionatron, Inc., became a public company in March 2004 when it was acquired by U.S. Home & Garden, Inc., which renamed itself Ionatron, Inc. on April 29, 2004. U.S. Home & Garden's former board, including longtime Chairman Robert Kassel, resigned during the transaction. Previously sold over-the-counter, the company's shares were trading on the NASDAQ by the end of the year. (The ticker symbol changed from USHG to IOTN.)

U.S. Home & Garden was known as Natural Earth Technologies before 1995. Originally based in Santa Barbara, California, it had its initial public offering on the NASDAQ in 1992 (ticker symbol: NETX).

Natural Earth Technologies began by producing natural and organic humic acid fertilizers under the Garden Thunder brand. It had sales of about $3 million in the early 1990s. It grew through acquisitions, buying Golden West Agri-Products Inc. for about $2 million in 1992. A couple of years later, it made a much larger acquisition, adding Easy Gardener, Inc., a Texas producer of landscaping fabric, for $21 million in 1994.

Easy Gardener and most of the other operating subsidiaries were sold to a management-led group in October 2003. U.S. Home & Garden had unsuccessfully attempted an online "E-garden" initiative before finally divesting its weed and seed assets and merging with Ionatron. (Easy Gardener was ultimately acquired in 2006 by Miami's H.I.G. Capital.)

North Star Research Corporation was acquired in September 2004. North Star had been formed in 1989. It produced a variety of high voltage equipment, making it a strategic fit with Ionatron's laser requirements. At the time of the acquisition, North Star had 20 employees and annual revenues of nearly $3 million. It was soon relocated from New Mexico to Tucson.

A BUSY YEAR IN 2005

Ionatron had another busy year in 2005. In January it showed off its ominous-sounding Portal Denial System. It used the company's LIPC technology to disable or kill unauthorized visitors with electricity.

Robert Howard retired in the spring of 2005 at the age of 83. He stated he was having difficulty doing the traveling expected of his position. Howard, who remained the largest shareholder, had been shadowed by controversy; in the late 1990s, the Securities and Exchange Commission had fined him $2.7 million over alleged improprieties at Presstek, an earlier start-up. Howard was succeeded as chairman by David C. Hurley, an executive with experience in the telecommunications and aerospace industries.

Ionatron posted a net loss of $3.6 million on revenues of $18.9 million for 2005. The company had grown to about 100 employees. Within the space of one year, Ionatron had developed products for locating and detonating improvised explosive devices (IEDs). This was dubbed the Joint IED Neutralizer (JIN). An armored version, the "JIN II," was also in the works, designed to neutralize rocket-propelled grenades and small arms.

COMPANY PERSPECTIVES

Ionatron is a fast-moving, forward-looking technology leader dedicated to flexible, near instantaneous national security and defense solutions. We're prepared to take security into the future—through the War on Terror and beyond. Ionatron's innovative LIPC technology is the modern, humane answer to the threats we face at home and abroad.

Ionatron is a publicly traded company that develops laser-guided directed-energy technology. Since our start-up, we've focused on just one thing: developing technology to ensure safety in a time of terrorism and commercial security risks. Our LIPC "man-made lightning" has attracted attention and investment from federal government sources. Forward-thinking private companies can also explore and develop the use of these instruments to address everevolving commercial security needs.

Gearing up for production runs of the JIN, Ionatron moved its manufacturing people to Mississippi's Stennis Space Center, a venerable, secure facility that once housed an Army weapons plant. Ionatron said it expected to employ up to 300 people there. However, Hurricane Katrina soon forced the closure of the Stennis plant. It was open again within a year, but there were other obstacles.

Ionatron delivered a dozen preproduction models to the military. It asked the government for about $10 million for these devices, plus at least as much for support, spares, training, and testing in Iraq. Field tests were halted when the remote-controlled vehicle on which the prototype was mounted was found to not be durable enough. Some shareholders subsequently sued, saying they were misled about the status of the JIN project.

CHANGING LEADERSHIP IN 2006

In the spring of 2006, Ionatron signed an agreement with DRS Technologies to jointly develop directed-energy weapons. In September, the company announced it was licensing electromagnetic vehicle disabling technology from L-3 Communications to accompany its own Vehicle Interrupt System (VIS).

Dana Marshall was appointed the company's newest CEO and president in August 2006. He had previously built and sold a laser manufacturing company, Cutting Edge Optronics, to TRW Inc. and had worked at leading defense contractors McDonnell Douglas Corp. and General Dynamics Corp.

KEY DATES

1989:: North Star Research Corp. is formed.
1992:: Natural Earth Technologies holds initial public offering.
1995:: Natural Earth Technologies is renamed U.S. Home & Garden, Inc.
2002:: Ionatron, Inc., is launched to make directed-energy weapons.
2004:: Ionatron, Inc., merges with a subsidiary of publicly traded U.S. Home & Garden, Inc., acquires North Star Research Corp.
2005:: "JIN" product for finding and detonating improvised explosive devices is introduced.

Serious challenges awaited Marshall. While Ionatron continued to take in millions of dollars from various government agencies to fund its research, skeptics voiced doubts the company and others like it would be able to make a practical reality of a vision described by Jules Verne, countless other science fiction writers, and inventor Nikola Tesla.

Frederick C. Ingram