Exhibit
      10.13.1


**SEPARATION
      AND LEASE AGREEMENT**




I,
      Kalani
      Jones ('Employee," "me" or "I"), understand that my position with American
      Technology Corporation (the "Company") was terminated effective October 17,
      2005
      (the "Separation Date"). The Company has agreed that in exchange for my
      signature on this Agreement and the promises and covenants herein, the Company
      will pay me severance in the amount of $82,500.00 (Eighty-Two Thousand Five
      Hundred Dollars and No Cents). This payment will be made within five (5)
      business days after the expiration of the revocation period described below,
      and
      will be subject to standard withholdings and deductions. The Company will also
      pay on my behalf the premiums for continuing health benefits under COBRA, until
      the earlier to occur of my being eligible for health care coverage through
      my
      next employer, or February 28, 2006. The Company will also agree to extend
      until
      February 15, 2006 the period of time for which the vested portion (as of the
      Separation Date) of all Company stock options I hold may be exercised. I
      understand that as a result of these extensions, those stock options designated
      as incentive stock options (as defined under Section 422(b) of the Internal
      Revenue Code) will no longer be treated as such, and will be treated instead
      as
      non-statutory stock options. I understand that I am not entitled to the
      above-described severance benefits unless I sign and do not revoke this
      Agreement. I understand and agree that in addition to these severance benefits,
      the Company has paid me all of my accrued salary and vacation, to which I am
      entitled by law.




In
      exchange for the consideration provided to me by this Agreement that I am not
      otherwise entitled to receive, I hereby unconditionally and completely release
      the Company and its directors, officers, employees, shareholders, partners,
      agents, attorneys, predecessors, successors, parent and subsidiary entities,
      insurers, affiliates, and assigns from any and all claims, liabilities and
      obligations, both known and unknown, that arise out of or are in any way related
      to events, acts, conduct, or omissions occurring prior to my signing this
      Agreement. This general
      release includes, but is not limited to: (1) all claims arising out of or in
      any
      way related to my
      employment with the Company or the termination of that employment; (2) all
      claims related to my compensation or benefits from the Company, including
      salary, bonuses, commissions, vacation pay, expense reimbursements, severance
      pay, fringe benefits, stock, stock options, or any other ownership interests
      in
      the Company; (3) all claims for breach of contract, wrongful termination, and
      breach of the implied covenant of good faith and fair dealing; (4) all tort
      claims, including claims for fraud, defamation, emotional distress, and
      discharge in violation of public policy; and (5) all federal, state, and local
      statutory claims, including claims for discrimination, harassment, retaliation,
      attorneys' fees, or other claims arising under the federal Civil Rights Act
      of
      1964 (as amended), the federal Americans with Disabilities Act of 1990, the
      federal Age Discrimination in Employment Act of 1967 (as amended) ("AREA"),
      and
      the California Fair Employment and Housing Act (as amended) and other analogous
      state and local laws or regulations.




In
      giving
      this release, which includes claims which may be unknown to me at present,
      I hereby acknowledge that I have read and understand Section 1542 of the Civil
      Code of the
      State of California which reads as follows:


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**A
      general release does not extend to claims which the creditor does not know
      or
      suspect to exist in his favor at the time of executing the release, which if
      known by him must have materially affected his settlement with the
      debtor.**




I
      hereby
      expressly waive and relinquish all rights and benefits under Section
      1542 and any
      law or legal principle of similar effect in any jurisdiction with respect to
      claims released hereby.





I
      acknowledge that I am knowingly and voluntarily waiving and releasing any rights
      I
      may have under the federal Age Discrimination in Employment Act of 1967, as
      amended ("ADEA"). I also acknowledge that the consideration given for the waiver in
      the
      above paragraph is in addition to anything of value to which I was already
      entitled. I have been advised by this writing, as required by the ADEA that:
      (a)
      my waiver and release do not apply to any claims that may arise after my signing
      of this Agreement; (b) I should consult with an attorney prior to executing
      this
      release; (c) I have twenty-one (21) days within which to consider this release
      (although I may choose to voluntarily execute this release earlier); and (d)
      as
      set forth in the
      following paragraph, I have seven (7) calendar days following the execution
      of
      this release to revoke
      the Agreement.




Within
      three (3) calendar days of signing and dating this Agreement, I agree to deliver
      the executed original of this Agreement to David B. Chidlaw, Sheppard, Mullin,
      Richter & Hampton LLP, 501
      West
      Broadway, 19th Floor, San Diego, CA 92101-3598. However, I and the Company
      acknowledge and agree that I may revoke this Agreement for up to seven (7)
      calendar days following my execution of this Agreement and it shall not become
      effective or enforceable until the revocation period has expired. I and the
      Company further acknowledge and agree
      that such revocation must be in writing addressed to and received by David
      B.
      Chidlaw not  later
      than midnight on the 7 " ' day
      following execution of this Agreement by me. Should I revolve this
      Agreement under this paragraph, this Agreement shall not be effective or
      enforceable and I will not receive the monies and benefits described
      above.




I
      acknowledge my continuing obligations under my Employee Nondisclosure Agreement
      (attached as Exhibit A). Pursuant to the Employee Nondisclosure Agreement I
      understand that among other things, I must not use or disclose any confidential
      or proprietary information of the Company and I must immediately return all
      Company property and documents (including all embodiments of proprietary
      information) and all copies thereof in my possession or control. I acknowledge
      that I have acquired no rights by license or otherwise in any "Information"
      as
      such term is defined in the Employee Nondisclosure Agreement. I also acknowledge
      the Mutual Agreement to Arbitrate (attached as Exhibit B) between myself and
      the Company
      dated September 2, 2003, and agree to that Mutual Agreement to Arbitrate's
      validity and application to any disputes arising under this Agreement. I also
      agree that any arbitration regarding this Agreement shall take place in San
      Diego County, California.




I
      agree
      not to make any statement or take any action which would damage the reputation or promotion of the Company or its products.


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If
      either
      I or the Company commences an action against the other party to
      enforce any of
      the terms hereof or because of the breach by such other party of any of the
      terms hereof, the prevailing party shall be entitled, in addition to any other
      relief granted, to all actual out-of pocket
      costs and expenses incurred by such prevailing party in connection with such
      action and the enforcement and collection of any judgment rendered therein,
      including, without limitation, all reasonable attorneys' fees, consultant fees
      and expert witness fees, and a tight to such costs and expenses shall be deemed
      to have accrued upon the commencement of such action and shall be enforceable
      whether or not such action is prosecuted to judgment.






This
      Agreement, including Exhibits A and **S** hereto,
      constitutes the complete, final and exclusive embodiment of the entire agreement
      between the Company and me with regard to the subject matter hereof. I am not
      relying on any promise
      or representation by the Company that is not expressly stated herein- This
      Agreement may only be modified by a writing signed by both me and a duly
      authorized officer of the Company.




I
      accept
      and agree to the terms and conditions stated above:




10/20/05
              
              /s/
                  Kalani JonesDate
              
              Kalani
                  Jones12/21/2005
              
              **AMERICAN
                  TECHNOLOGY CORPORATION**Date
              
              By:
                  /s/ John ZavoliTitle:
                  President






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