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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Registration Statement
on
FORM SB-2
Under The Securities Act of 1933
PATRIOT SCIENTIFIC CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 3674 84-1070278
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Code Number) Identification Number)
10989 VIA FRONTERA ROBERT PUTNAM, SECRETARY
SAN DIEGO, CALIFORNIA 92127 PATRIOT SCIENTIFIC CORPORATION
(619) 674-5000 10989 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(619) 674-5000
(Address and telephone number of (Name, address and telephone number
registrant's principal executive of agent for service)
offices and principal place of business)
COPIES TO:
OTTO E. SORENSEN, ESQ.
LUCE, FORWARD, HAMILTON & SCRIPPS LLP, ATTORNEYS AT LAW
600 WEST BROADWAY, #2600, SAN DIEGO, CALIFORNIA 92101
(619) 236-1414
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE(1)
=========================================================================================================
Title of Proposed Proposed
each Class Amount Offering Offering Amount of
of Securities Being Price Per Aggregate Registration
Being Registered Registered Share Price(2) Fee(3)
=========================================================================================================
Common Stock(1) ..................... 3,172,068 $2.00 $6,344,136 $1,922.47
(1) Shares of the Registrant's common stock, $.00001 par value per share, being
registered for resale on behalf of selling security holders.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) The fee with respect to these shares has been calculated pursuant to Rule
457(c) under the Securities Act of 1933, as amended, and is based upon the
average of the bid and asked prices per share of the Registrant's common
stock on July 11, 1997, as quoted on the OTC Electronic Bulletin Board.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION
8(a), MAY DETERMINE.
SUBJECT TO COMPLETION; JULY 17, 1997
P R O S P E C T U S
PATRIOT SCIENTIFIC CORPORATION
3,172,068 Common Shares
This Prospectus relates to 3,172,068 shares of the Common Stock, $.00001
par value ("Common Stock" or "Common Shares"), of Patriot Scientific
Corporation, a Delaware corporation ("Company"), being resold by the persons
listed herein as the Selling Shareholders. The Common Shares are being offered
hereunder for the respective accounts of the Selling Shareholders and will be
sold from time to time by the Selling Shareholders in the over-the-counter
market or otherwise at their prevailing market prices, or in negotiated
transactions. All 3,172,068 shares are presently outstanding. The expenses of
preparing and filing the Registration Statement of which this Prospectus forms a
part are being borne by the Company. The Company will receive no proceeds from
the sale of the Common Shares by the Selling Shareholders.
The Company has only recently emerged from the development stage and has
had only limited revenues amounting to approximately $1,847,000. See "Risk
Factors" and "Management's Discussion and Analysis."
THE COMMON SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Common Shares offered hereby were acquired by the Selling
Shareholders from the Company in private transactions and are "restricted
securities" under the Securities Act of 1933, as amended ("Act"). This
Prospectus has been prepared for the purpose of registering the Common Shares
under the Act to allow for future sales by the Selling Shareholders to the
public without restriction. To the knowledge of the Company, the Selling
Shareholders have made no arrangement with any brokerage firm for the sale of
the Common Shares. The Selling Shareholders may be deemed to be "underwriters"
within the meaning of the Act. Any commissions received by a broker or dealer in
connection with resales of the Common Shares may be deemed to be underwriting
commissions or discounts under the Act. See "Plan of Distribution."
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer
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to sell or the solicitation of an offer to buy, nor shall there be any sale of
these securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such state.
The Common Stock of the Company is traded in the over-the-counter market
and is quoted on the OTC Electronic Bulletin Board operated by the National
Association of Securities Dealers, Inc. under the symbol "PTSC". On July 11,
1997, the last bid and asked prices per share were $2.02 and $1.98,
respectively.
This Prospectus is dated July 17, 1997
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION,
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING
SECURITY HOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of Section
13(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
in accordance therewith files periodic reports and other information with the
Securities and Exchange Commission ("Commission") as a "small business" issuer
pursuant to Regulation S-B of the Commission. Reports, proxy statements and
other information filed by the Company with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 75 Park Place, New York, New York 10007; and
the Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621. Copies of such material may be obtained from the Public
Reference Section of the Commission's Washington, D.C. office at prescribed
rates.
The Company has filed with the Commission a registration statement on
Form SB-2 of which this Prospectus is a part. This registration statement or any
part thereof may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street N.W., Judiciary Plaza,
Washington, D.C. 20549. Copies of such material may be obtained from the Public
Reference Section of the Commission's Washington, D.C. office at prescribed
rates. . The Company's filings under the Exchange Act and its Registration
Statement on Form S-3 may also be accessed through the Commission's web site
(http://www.sec.gov).
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including all documents incorporated by reference, includes
"forward-looking" statements within the meaning of Section 27A of the Securities
Act and Section 12E of the Exchange Act and the Private Securities Litigation
Reform Act of 1995, and the Company desires to take advantage of the "safe
harbor" provisions thereof. Therefore, the Company is including this statement
for the express purpose of availing itself of the protections of such safe
harbor with respect to all of such forward-looking statements. The
forward-looking statements in this Prospectus reflect the company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties,
including specifically absence of significant revenues, history of losses, no
assurance that technology can be completed or that it might be delayed,
significant competition, the uncertainty of patent and proprietary rights, the
uncertainty as to royalty payments and indemnification risks, possible adverse
effects of future sales of shares on the market, trading risks of low-priced
stocks and those other risks and uncertainties discussed herein, that could
cause actual results to differ materially from historical results or those
anticipated. In this Prospectus, the words "anticipates," "believes," "expects,"
"intends," "future" and similar expressions identify forward-looking statements.
Readers are cautioned to consider the specific risk factors described herein and
in "Risk Factors", and not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that may arise after the date hereof. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by this section.
PROSPECTUS SUMMARY
The following summary is intended only to supply certain facts and
highlights from material contained in the body of this Prospectus and the
documents incorporated by reference herein and is qualified in its entirety by
the detailed information and financial statements (incorporated by reference)
appearing elsewhere below.
THE COMPANY. Patriot Scientific Corporation (the "Company" or "Patriot")
is engaged in the development and marketing of patented microprocessor
technology and high-performance digital communication products. These products
have applications in the Internet and computer, networking and telecommunication
markets. The Company also owns and is developing radar and antenna technology.
The Company's strategy is to exploit its technologies and products through
product sales, licensing, strategic alliances and government contracting.
The markets for digital communication products and microprocessors are
experiencing dramatic growth, in part due to the Internet. The Internet is a
global web of computer networks. Developed over 25 years ago, this "network of
networks" allows any computer connected to the Internet to talk to any other.
The Internet provides organizations and individuals with new means to conduct
business. The growth of the Internet and corporate Intranets is creating a
demand for hardware, software and peripherals. The large number of users
connecting to the Internet is creating a demand for traditional analog modems
and higher speed digital modems. New software, such as Java, is emerging to
serve the requirements of Internet users.
The Java programming language is an object-oriented language for the
Internet. With Java, data and programs do not have to be stored on the user's
computer, they can reside anywhere on the Internet to be called upon as needed.
Java can run on a variety of computer operating systems, thus avoiding the
problem of incompatibility across networks, and Java offers high data security.
Because of Java's useful features, it may also become a popular programming
language for embedded control applications. The growth of Java is also causing a
number of companies to consider it as a basis for a new style of computing
tailored to the Internet using inexpensive Internet computer devices.
A microprocessor is the computer chip providing intelligence for
electronic devices. The Company's microprocessor technology, trade named ShBoom,
uses a proprietary architecture in a high-performance microprocessor integrated
on a single silicon chip manufacturable at a low production cost. The Company's
first ShBoom-architecture microprocessors, the PSC-1000 family, are being
developed and targeted as Java programming language processors, for internally
developed digital communication products and for use as the computer or embedded
controller in sophisticated
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products including laser printers, motion and industrial controllers and digital
communication devices such as cable and satellite modems and television set-top
boxes. The Company believes the PSC1000 family can be competitive based on
factors such as cost, speed and performance with other newly announced
microprocessors targeted for the Internet device market. The Company is also
seeking to license the ShBoom core technology for use by others in
multi-function microprocessors.
Effective on December 26, 1996, in a business combination accounted for
as a pooling-of-interests, the Company acquired 96.9% of Metacomp, Inc.
("Metacomp") a company engaged in designing, manufacturing and marketing
high-performance digital communication products. As a result of the merger, the
Company no longer qualifies as a development stage company. In addition to the
Company's CyberShark digital modem providing consumers with a high-performance
interface between a computer and ISDN telephone lines (Integrated Services
Digital Network, a standard digital communication protocol using existing
telephone lines), the Company's communications division offers OEMs (original
equipment manufacturers), system integrators and VARs (value added resellers)
products for high speed access to the Internet, remote access drivers, video
conferencing equipment and digital telephony. Existing products include
electronic subassemblies used in building hubs and bandwidth-on-demand
applications for satellite and other communications.
The Company has been engaged in developing its radar targeted for ground
penetration applications and new antenna technology. The Company's GPR (ground
penetrating radar) prototype has demonstrated the ability to penetrate multiple
solid objects (walls and barriers); and in certain ground strata, the Company
has been able to resolve objects of six inch size at approximately ten feet in
depth. The Company also has patented new antenna technology for which a small
government contract was awarded in April, 1997 to evaluate and characterize the
antenna's performance. There can be no assurance of future contracts or grants
or alliances to further develop the radar or antenna technology. The Company
does not presently plan to devote any significant resources to further
development except with outside funding or assistance.
The Company has had limited revenues since its inception and, as a
result of the acquisition of Metacomp and initiation of CyberShark sales, has
only recently begun to generate revenues from sales. There can be no assurance
the Company can achieve profitable operations and the Company may need
additional financial resources during the next twelve months. The Company's
address is 10989 Via Frontera, San Diego, California 92127, and its telephone
number is (619) 674-5000. The Company's home page can be located on the World
Wide Web at ptsc.com. See "The Company" and "Business."
SECURITIES OFFERED. No securities will be offered or sold by the Company
pursuant to this Prospectus, which relates solely to the resale of 3,172,068
shares of the Common Stock of the Company held and beneficially owned by persons
listed herein as the Selling Security Holders. The Common Shares are being
offered hereunder for the respective accounts of the Selling Security Holders
and will be sold from time to time by the Selling Security Holders in the
over-the-counter market or otherwise at prevailing market prices or in
negotiated transactions. See "Plan of Distribution", "Selling Security Holders"
and "Description of Securities."
OUTSTANDING SHARES. As of the date of this Prospectus, 33,189,195 of the
Company's Common Shares are outstanding. A total of 5,000,000 of the outstanding
shares are subject to an earnout escrow arrangement which provides for the
release of the shares based on future revenues of the Company. See "Description
of Securities."
COSTS; USE OF PROCEEDS. The expenses of preparing and filing the
Registration Statement of which this Prospectus forms a part are being borne by
the Company. The Company will receive no proceeds from the sale of the Common
Shares by the Selling Security Holders.
RISK FACTORS. The securities offered involve a high degree of risk. See
"Risk Factors."
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RISK FACTORS
The securities offered for sale hereunder by the Selling Security
Holders are speculative in nature, involve a high degree of risk and should be
purchased by persons who can afford to lose the entire sum invested in the
Common Shares. Prospective purchasers of the Common Shares should carefully
consider the following factors relating to the business and prospects of the
Company, in addition to other information concerning the Company and its
business contained in this Prospectus, before purchasing any of the Common
Shares.
PREVIOUSLY A DEVELOPMENT STAGE BUSINESS; ABSENCE OF SIGNIFICANT REVENUES
The Company commenced its current operations in 1989, and its activities
have been primarily directed to research and development of its technologies and
administrative activities. The Company only recently emerged from the
development stage as a result of the acquisition of Metacomp and initiation of
CyberShark sales. The Company has had limited revenues and financial results
upon which prospective investors may base an assessment of its potential. There
is no assurance that the Company will become profitable. The Company has
experienced in the past and may experience in the future many of the problems,
delays and expenses encountered by any early stage business, some of which are
beyond the Company's control. These include, but are not limited to, substantial
delays and expenses related to testing and development of new products,
production and marketing problems in connection with new products and
technologies, unexpectedly high manufacturing costs, lack of market acceptance
of such products and technologies, and other unforeseen difficulties. See
"Company."
HISTORY OF LOSSES; UNCERTAIN PROFITABILITY
To date, the Company has incurred significant losses. As of May 31, 1997
its accumulated deficit was $11,344,838. For the fiscal years ended May 31, 1997
and 1996, the Company incurred net losses of $1,463,792 and $557,720
respectively, $612,333 of the loss for each of the years ended May 31, 1997 and
1996 resulted from amortization of purchased technology. The Company expects to
incur additional operating losses in the future until and if it is able to
generate operating revenues sufficient to support expenditures. There is no
assurance that sales of the Company's products will ever generate sufficient
revenues to fund its continuing operations, that the Company will generate
positive cash flow from operations or that the Company will attain or hereafter
sustain profitability in any future period.
NEED FOR ADDITIONAL FINANCING; INSUFFICIENT FUNDS FOR THE NEXT TWELVE MONTHS
Based on the potential rate of cash operating expenditures and current
plans, management anticipates the cash requirements for the next twelve months
have been satisfied with the June 1997 financing. The Company anticipates that
future cash requirements will be satisfied by improved product sales, the sale
of additional Company equity securities, debt financing and/or the sale or
licensing of certain of the Company's technologies. There can be no assurance
that any future funds required will be generated from operations or from the
aforementioned or other potential sources. The lack of additional capital could
force the Company to substantially curtail or cease operations and would
therefore have a material adverse effect on the Company's business. Further
there can be no assurance that any such required funds, if available, will be
available on attractive terms or that they will not have a significantly
dilutive effect on existing shareholders of the Company.
TECHNOLOGIES IN VARIOUS STAGES OF DEVELOPMENT; NO ASSURANCE OF COMPLETION; MAY
BE SUBJECT TO ADDITIONAL DELAYS
The Company's technologies and products are in various stages of
development. There can be no assurance that additional products can be
introduced or technologies completed to production or marketability due to the
inherent risks of new product and technology development, limitations on
financing, competition, obsolescence, loss of key personnel and other factors.
Although certain technology of the Company may be licensable at the current
stage of development, there can be no assurance thereof. The Company has
generated limited revenues from its various technologies to date and has no
agreements or arrangements providing any assurance of revenues in the future.
The Company's development projects are high risk in nature, where unanticipated
technical obstacles can arise at any time and result in lengthy and costly
delays or in a determination that further development is not feasible. Discovery
of chip design errors, frequent in the industry prior to and after production,
could result in lengthy and costly redesign, fabrication (production) and
testing in an industry where new technology rapidly eclipses prior innovations.
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The development of the Company's technologies has taken longer than
anticipated by management and could be subject to additional delays. Therefore,
there can be no assurance of timely completion and introduction of improved
ShBoom-architecture microprocessors on a cost-effective basis, or that if
introduced, that they will achieve market acceptance. See "Business - Stage of
Development."
FUTURE DEPENDENT ON MARKET ACCEPTANCE OF THE COMPANY'S TECHNOLOGIES AND
PRODUCTS
The future of the Company is dependent upon the success of the current
and future generations of one or more of the Company's technologies and the
success of its digital communication products. There can be no assurance the
Company can introduce any of its technologies or new products or that, if
introduced, they will achieve market acceptance such that in combination with
existing products they will sustain the Company or allow it to achieve
profitable operations. See "Business - Business Strategy."
SIGNIFICANT COMPETITION AND POSSIBLE OBSOLESCENCE
Technological competition from other and longer established
microprocessor, digital communication and radar and antenna companies is
significant and expected to increase. Most of the companies with which the
Company compete and expects to compete have far greater capital resources,
research and development staffs, marketing and distribution programs and
facilities, and many of them have substantially greater experience in the
production and marketing of products. The Company's ability to compete
effectively may be adversely affected by the ability of these competitors to
devote greater resources to the sales and marketing of their products than are
available to the Company. In addition, one or more of the Company's competitors
may succeed in developing technologies and products that are more effective than
any of those offered or being developed by the Company, rendering the Company's
technology and products obsolete or noncompetitive. See "Business Competition."
PATENTS AND PROPRIETARY RIGHTS SUBJECT TO UNCERTAINTY; POSSIBLE INFRINGEMENT BY
THE COMPANY
The Company relies on a combination of patents, trademarks, copyright
and trade secret laws, confidentiality procedures and licensing arrangements to
protect its intellectual property rights. The Company currently has four U.S.
patents issued and six U.S. patents pending. The Company has one patent pending
in Europe and Japan and has filed an application for another patent in Europe,
Japan and elsewhere. The Company is considering additional patent applications.
There can be no assurance that any patents held by the Company will not be
challenged and invalidated, that patents will issue from any of the Company's
pending applications or that any claims allowed from existing or pending patents
will be of sufficient scope or strength or be issued in all countries where the
Company's products can be sold so as to provide meaningful protection or any
commercial advantage to the Company. Competitors of the Company may also be able
to design around the Company's patents.
The fiercely competitive semiconductor industry is characterized by
vigorous protection and pursuit of intellectual property rights or positions,
which has resulted in significant and often protracted and expensive litigation.
There is currently no pending intellectual property litigation against the
Company. There is no assurance however, that the Company's technologies or
products do not and will not infringe the patents or proprietary rights of third
parties. Problems with patents or other rights could potentially increase the
cost of the Company's products or delay or preclude new product development and
commercialization by the Company. If infringement claims against the Company are
deemed valid, the Company may seek licenses which might not be available on
acceptable terms or at all. Litigation could be costly and time-consuming but
may be necessary to protect the Company's future patent and/or technology
license positions or to defend against infringement claims. A successful
challenge to the Company's technology could have a materially adverse effect on
the Company and its business prospects. There can be no assurance that any
application of the Company's technologies will not infringe upon the proprietary
rights of others or that licenses required by the Company from others will be
available on commercially reasonable terms, if at all. See "Business - Licenses, |
