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O.C.'s SRS Labs Plans Stock Sale of 3.1 Million Shares

June 07, 1996|LESLEY WRIGHT | SPECIAL TO THE TIMES

SANTA ANA — SRS Labs Inc., the designer of advanced audio technology for stereos, car radios, computers and other products, disclosed plans Thursday to sell 33% of its common stock to the public.

SRS Labs plans to sell 3.1 million shares of stock at $10 to $12 each, according to documents filed Thursday with the Securities and Exchange Commission. The 13-employee company expects to raise about $30.9 million after expenses.

Founded three years ago, the company develops and licenses a technology called SRS, the Sound Retrieval System, which is touted to replace stereo as the best method for reproducing sound. The system replicates three-dimensional sound from any audio source with as few as two conventional speakers.

The company, headed by Thomas C.K. Yuen, co-founder of Irvine-based AST Research, has picked up licensing agreements with more than 50 companies, including top names such as Packard Bell, NEC Technologies, Sony Corp., RCA and Yamaha.

But the company has yet to turn a yearly profit. The company lost $1.59 million last year and $1.83 million in 1994. Revenue declined to $844,000 in 1995 from $987,000 the previous year.

The company will use the funds for working capital and to develop technology, said SRS President Stephen V. Sedmak. "It's always been our intention to take advantage of the public market for our strategy," he said.

Once a novelty, the system is becoming more common, Sedmak said.

The company has expanded into five audio technology markets, beginning with home consumer electronics such as televisions and stereos. It also licenses to manufacturers in the car audio market, the computer multimedia industry, electronic video games and arcades and professional sound systems for movie theaters and musical instruments. SRS sound is heard in 250 theaters in 17 different countries.

Hughes Aircraft Co. originally developed the SRS technology, which is based on the design of the human hearing system. Hughes initially invested $4 million to refine and patent the SRS system, which was developed by acoustical engineer Arnold Klayman, now the director of advanced development at SRS.

Sedmak and investment banker Walter Cruttenden III teamed up with the Hughes engineers who developed the technology to acquire the assets and patents of the division in 1993. Yuen bought a majority stake in the company with a $2.71-million investment early in 1994.

The company will have 9.46 million shares outstanding once the stock sale is completed, according to the filing. The company's seven principal officers will retain 48% of the stock.

Salomon Brothers Inc., Montgomery Securities and Cruttenden Roth Inc. will underwrite the stock sale. Shares will be traded on the Nasdaq market.

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SRS Labs Inc. at a Glance

* Founded: 1993

* Headquarters: Santa Ana

* Chairman/CEO: Thomas C.K. Yuen

* President: Stephen V. Sedmak

* Employees: 13

* 1995 revenue: $844,000

* 1995 net income: loss of $1.6 million

* Business: Audio technology

Source: SRS Labs Inc.

Researched by JANICE L. JONES / Los Angeles Times

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