SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
Post Effective Amendment No. 1 to Registration Statement
Under The Securities Act of 1933
PATRIOT SCIENTIFIC CORPORATION
(Exact name of Registrant as specified in charter)
Delaware 84-1070278
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
10989 Via Frontera Robert Putnam, Secretary
San Diego, California 92127 10989 Via Frontera
(619) 674-5000 San Diego, California 92127
(Address and telephone number of (619) 674-5000
registrant's principal executive (Name, address and telephone
offices and principal place of number of agent for service)
business)
1992 Non-Statutory Stock Option Plan
(Full Title of the Plan)
With 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
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with Dividend or Interest
Reinvestment Plans, check the following line: X
CALCULATION OF REGISTRATION FEE
Proposed
Proposed Maximum
Title of Each Class Naximum Aggregate Amount of
of Securities Being Amount Being Offering Price Offering Registration
Registered Registered Per Share Price(2) Fee(3)
Common Stock(1) 750,000 $1.26 $945,000 $286.34
(1) The securities registered hereunder are shares of the registrant's common
stock, $.0001 par value, subject to issuance upon the exercise of stock
Options granted under the registrant's 1992 Non-Statutory Stock Option
Plan.
(2) Estimated for purpose of calculating the registration fee.
(3) The fee with respect to these shares was calculated pursuant to Rules
457(h) and 457(c) under the Securities Act of 1933, as amended, and was
paid with the initial registration, SEC file number 333-23851.
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MARCH 20, 1998
PROSPECTUS
PATRIOT SCIENTIFIC CORPORATION
110,753 Common Shares
This Prospectus relates to 110,753 shares of the Common Stock, $.00001
par value ("Common Stock" or "Common Shares"), of Patriot Scientific
Corporation, a Delaware corporation ("Company"), which will be resold by the
persons listed herein as the Selling Shareholders ("Selling Shareholders" or
"Selling Security Holders"). 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 prevailing market prices or in negotiated transactions. All 110,753 shares
are issuable by the Company to the Selling Shareholders upon the exercise of
options granted or to be granted ("Options") under the Patriot Scientific
Corporation 1992 Non-Statutory Stock Option Plan ("Plan"). As of the date of
this Prospectus, 210,000 Options to purchase 210,000 shares of Common Stock had
been exercised and an additional 28,347 Options to purchase Common Stock were
still available for grant. The expenses of preparing and filing the Registration
Statement of which this Prospectus forms a part are being borne by the Company.
Although the Company will not receive proceeds from the sale of the Common
Shares by the Selling Security Holders, the Company will receive proceeds upon
the exercise of the Options. See "Selling Security Holders."
The number of shares of Common Stock issuable upon exercise of the
Options is either (i) equivalent to the number of Options granted if the
exercise price is paid in cash or equivalents, or (ii) less than the number of
Options granted if a cashless exercise provision is used in acquiring the
underlying Common Stock determined by subtracting from the number of Options
granted the product of (a) the exercise price of the Options divided by the
average of the closing bid and ask price of the stock on the day of exercise and
(b) the number of Options granted. For purposes of this Registration Statement
the Company has computed the number of shares issuable pursuant to the Plan to
be the maximum of 750,000.
The Selling Security Holders may from time to time sell all or a
portion of the securities offered hereby in over the counter transactions at
prevailing market prices, in privately negotiated transactions at negotiated
prices, or in a combination of such methods of sale. The Selling Security
Holders may sell the securities offered hereby to purchasers directly or may
from time to time offer the securities through dealers or agents, who may
receive compensation in the form of discounts, commissions, or concessions from
the Selling Security Holders or the purchasers of the securities for whom they
may act as agent.
The Company has only recently emerged from the development stage and
has had only limited revenues amounting to approximately $1,847,000 for the
fiscal year ended May 31, 1997.
The Common Shares offered hereby involve a high degree of risk. See
"Risk Factors" beginning on page 7 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 or will be acquired by the
Selling Security Holders from the Company pursuant the Plan. The issuance of
Options under the Plan and of Common Stock upon exercise of the Options have
been
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registered on Form S-8 under the Securities Act of 1933, as amended ("Securities
Act"). This Prospectus has been prepared for the purpose of allowing reoffers
and resales by the Selling Security Holders to the public without restriction.
To the knowledge of the Company, the Selling Security Holders have made no
arrangement with any brokerage firm for the sale of the Common Shares. The
Selling Security Holders may be deemed to be "underwriters" within the meaning
of the Securities 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 Securities 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 and is effective. This Prospectus shall not
constitute an offer 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
March 20, 1998, the last bid and asked prices per share were $0.98 and $0.99,
respectively.
This Prospectus is dated March 25, 1998
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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 has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-8 (together with all amendments
and exhibits hereto, the "Registration Statement"), of which this Prospectus is
a part, relating to the securities offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules of the Commission. For
further information, reference is made to the Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement, or other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement, or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
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, proxy and information
statements, and other information with the Commission as a "small business
issuer" pursuant to Regulation S-B of the Securities Act. Reports, proxy
statements and other information, as well as the Registration Statement, 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: 7 World Trade Center, New York, New York 10048, and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
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-8 may also be
accessed through the Commission's web site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents filed with the Commission:
1. The Company's Annual Report on Form 10-KSB for the year ended May
31, 1997 (the "Annual Report").
2. The Company's Quarterly Reports on Form 10-QSB for the three month
periods ended August 31, 1997 and November 30, 1997 (the Quarterly Reports").
3. The description of the Common Stock of the Company contained in its
Registration Statement on Form 8-A as filed with the Securities and Exchange
Commission.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. See "Additional Information." Any
statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference
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herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than exhibits
to such documents not specifically incorporated by reference). Written or
telephone requests for such documents should be directed to the Chief Financial
Officer of the Company at its principal executive offices.
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 21E 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 provisions 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 an absence of significant revenues, a history of losses,
no assurance that technology can be completed or that it will not be delayed,
significant competition, the uncertainty of patent and proprietary rights,
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.
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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 marked
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
digital communication products developed by the Company and for use as the
computer or embedded controller in sophisticated 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 the outstanding shares,
or 1,156,426 shares, of Metacomp, Inc., a California corporation, ("Metacomp")
from 56 shareholders of Metacomp pursuant to an Exchange Offer and Letter of
Transmittal dated December 4, 1996 (the "Offer"). As consideration for the
shares tendered pursuant to the Offer, the Company issued 1,272,068 unregistered
shares of its common stock. The exchange rate of 1.1 shares of the Company's
stock for each share of Metacomp stock tendered was determined by arms-length
negotiations between Metacomp and the Company. Based on the closing price of the
Company's stock, as reported on the OTC Electronic Bulletin Board system, on
December 26, 1996 of $1.375, the value of this acquisition was $1,749,094.
Sixteen persons who hold an aggregate of 1,059,574 common shares issued in the
Metacomp acquisition have agreed to a lock-up arrangement limiting sales by each
such holder to 5% of their shares per month through December 1998. Metacomp,
founded in 1978, was a privately-held, high technology company located in San
Diego, California. Metacomp designs, manufactures, and sells a wide range of
high performance data and telecommunications solutions for wide area networking
and digital telecommunications requirements. In 1990, Metacomp filed a Chapter
11 bankruptcy petition. As of July 31, 1996, all unsecured creditors' debt had
been discharged and one
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secured creditor had entered into a forbearance agreement with Metacomp for the
remaining balance. The secured creditor was paid in full, $252,796, by the
Company on January 6, 1997. Metacomp's product line has been incorporated into
the Company's communication division, and the Company will continue to use the
assets acquired as they had been previously employed by Metacomp. Norman J.
Dawson and Jayanta K. Maitra, who were officers and significant shareholders of
Metacomp, tendered their entire holdings pursuant to the Offer and, thereafter,
entered into employment contracts with the Company. See "Management." 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 of this technology 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 http://www.ptsc.com. See "The Company."
Securities Offered
No securities will be offered or sold by the Company pursuant to this
Prospectus, which relates solely to the resale of 110,753 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, 36,639,153 of the Company's Common
Shares are outstanding. A total of 4,500,000 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 Factor.
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 the
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 "The
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 the amortization of purchased technology. The Company expects
to incur additional operating losses in the future unless and until 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 and
thereafter 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 Company's cash requirements for the next
twelve months have been satisfied through financings in June and November of
1997. The Company anticipates that its future cash requirements may 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 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 will
be available on attractive terms, or at all, 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 a stage of development at which they can
be produced and marketed 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 its 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
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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.
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 such
microprocessors, if introduced, will achieve market acceptance.
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.
Significant Competition and Possible Obsolescence
Technological competition from other microprocessor, digital
communication and radar and antenna companies is significant and expected to
increase. Most of the companies with which the Company competes 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 sale 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.
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 seven U.S.
patents issued and eight 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.
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Uncertainty as to Royalty Payments and Indemnification Risks
The Company does not believe it is obligated to pay any royalties on
aspects of the ShBoom technology specified in prior agreements between the
company from which it acquired the basis of such technology, nanoTronics
Corporation, and previous inventors. The Company believes that, should there be
royalties due to previous inventors, the obligation is that of nanoTronics.
However, the Company could become subject to unindemnified claims relating to
any failure by nanoTronics to pay such royalties, if due. Also, the Company
could become liable for up to $1,250,000 to nanoTronics under certain
indemnification provisions. Should the Company be required to make any royalty
payments or indemnification payments, such payments could adversely impact
operating margins and sales volumes.
The Company obtained its rights to the basic ShBoom technology pursuant
to a chain of agreements from multiple inventors. Accordingly there can be no
assurance the Company will not be subject to claims from prior parties related
to the technology or that any such parties will not attempt to exploit the
technology independently of the Company's rights to do so. Pursuant to the
Assets Purchase Agreement and Plan of Reorganization between the Company,
nanoTronics Corporation and Helmut Falk, the Company was the recipient of a
number of warranties and indemnities related to the ownership of the technology
and other matters. The Company believes nanoTronics Corporation has been
liquidated and, due to Mr. Falk's death in July 1995, the Company may be limited
in its ability to obtain satisfaction from his estate should it have any future
claims pursuant to the Agreement. In January 1996 the Company filed a general
claim against Mr. Falk's estate in an attempt to preserve its ability to avail
itself of indemnification should claims arise against the Company that were
indemnified. However, there can be no assurance that the Company could obtain
indemnification from the estate of Mr. Falk.
Production Dependent on Outside Foundries, Manufacturers and Suppliers
With respect to the production of ShBoom-architecture microprocessors,
the Company is dependent on the availability of contract fabrication facilities.
To produce microprocessors for customers, the Company will be required to locate
a foundry or foundries that can allocate to the Company a portion of their
foundry capacity sufficient to meet the Company's needs, produce products of
acceptable quality and with acceptable manufacturing yields, and deliver these
products to the Company on time. There can be no assurance the Company can
locate a foundry to meet its needs. The contract fabrication industry has and is
expected to experience capacity shortages from time to time which could
adversely impact the Company. With respect to digital communication products,
the Company relies on contract assembly from standardized components purchased
from independent sources, and it is therefore dependent upon such outside
vendors for the components and assembly of end-products it sells to customers.
There can be no assurance that these manufacturers and suppliers will be able to
provide adequately for the future product needs of the Company's customers. In
the event that any of the targeted suppliers should suffer quality control
problems or financial difficulties, the Company would be required to find
alternative sources, which could result in temporary business dislocations and a
decline in revenues.
Company Products May be Dependent on the Internet, ISDN, Java and Government
Funding
The Company's digital communication products and ShBoom microprocessor
applications in Java processing will depend in large part upon a robust and
growing industry and infrastructure for providing Internet access and carrying
Internet traffic. There can be no assurance that the infrastructure or
complementary products necessary to make the Internet a viable commercial
marketplace will be developed, or, if developed, that the Internet will become a
viable commercial marketplace. Even if the Internet continues robust growth,
there can be no assurance of a market for the Company's ISDN products given
their dependence upon telephone company policies and rates and the intense
competition from other access technologies such as cable modems and satellites.
There can be no assurance that Java will become a widespread
programming language for the Internet or in embedded applications or that a
market will develop for devices to efficiently run Java. If the Internet does
not become a viable commercial marketplace, or if ISDN products become
technologically obsolete or if Java applications for microprocessors do not
develop, then the Company's business, operating results and financial condition
will be materially and adversely affected.
9
<PAGE>
The Company received its initial contract for characterization of its
antenna technology in April, 1997. The Company is devoting only limited
development and marketing efforts towards its radar and antennae technologies
and is seeking additional government or other funding to further develop these
technologies. Government defense and other funding is facing serious cutbacks,
and accordingly there is less opportunity to develop new technologies with the
assistance of the government. Opportunities for funding require significant
efforts and long lead times. The Company has limited experience in obtaining
government funding and is relying on consultants and agents to assist the
Company in its efforts in that regard. There can be no assurance the Company
will be successful in its efforts to obtain additional government assistance for
any of its projects or technologies.
Performance Dependent on Key Personnel; Absence of Key Person Life Insurance;
Success Dependent on Additional Personnel
The Company's performance is substantially dependent on the performance
of its executive officers and key technical employees. Given the Company's early
stage of development, the Company is dependent on its ability to retain and
motivate high quality personnel, especially its management and highly skilled
technical personnel. The Company does not have "key person" life insurance
policies on any of its executive officers or employees. The loss of the services
of any of its executive officers or other technical employees could have a
material adverse effect on the business, operating results or financial
condition of the Company.
The Company's future success and growth also depend on its continuing
ability to identify, hire, train and retain other highly qualified technical and
managerial personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to attract, assimilate or retain
other highly qualified technical and managerial personnel in the future. The
inability to attract and retain the necessary technical and managerial personnel
could have a material adverse effect upon the Company's business, operating
results or financial condition.
Possible Adverse Effects of Future Sales of Shares on Market
Future sales of Common Stock by existing stockholders pursuant to Rule
144 of the Securities Act or pursuant to currently effective registrations on
Form SB-2 and Form S-3 could have an adverse effect on the price of the Common
Stock. There were 2,505,867 shares registered in November, 1997, and an
additional 5,011,733 shares were registered in September, 1997, in each case on
Form S-3; 3,172,068 shares were registered in September, 1997 on Form SB-2; and
a total of an additional 9,884,764 shares of Common Stock currently outstanding
and not subject to escrow restrictions may be deemed "restricted securities," as
that term is defined in the Securities Act of 1933, as amended (the "Securities
Act"). Such shares may only be sold pursuant to a registration statement under
the Securities Act, in compliance with Rule 144 under the Securities Act, or
pursuant to another exemption from registration.
General Conflicts of Interest Due to Part-Time Management
Two of the Company's executive officers devote only part-time services
to the Company and have other employment and business interests to which they
devote significant attention and will continue to do so notwithstanding the fact
that management time should be devoted to the Company's business. Mr. Elwood
Norris, Chairman, and Mr. Robert Putnam, Secretary and Treasurer, presently
devote approximately 10% of their time to the affairs of the Company. They
expect to continue to devote time to the Company only on an as-needed basis over
at least the next twelve months. Certain conflicts of interest now exist and
will continue to exist between the Company and Mr. Norris and Mr. Putnam due to
the fact that each of Mr. Norris and Mr. Putnam has other employment or business
interests to which he devotes significant attention. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interest between the Company and its management or
management-affiliated entities. There can be no assurance that Mr. Norris and
Mr. Putnam will resolve all conflicts of interest in the Company's favor.
Special Conflicts of Interest Due to Relationship of Executives
One of the Company's officers and directors, Mr. Robert Putnam, also
acts as Secretary of Norris Communications, Inc. (NCI), a company in which Mr.
Elwood Norris is the acting chief executive officer and chairman of the board.
Mr.
10
<PAGE>
Putnam is also the president and chief executive officer of American Technology
Corporation (ATC), a company in which Mr. Norris is a significant shareholder
and director. In these positions Mr. Putnam is subordinate to Mr. Norris, and
the possibility exists that these relationships will affect Mr. Putnam's
independence as a director of the Company.
Indemnification of Officers, Directors and Others
The Company's Certificate of Incorporation provides for the
indemnification of its officers, directors, employees and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them and
judgments rendered against them in any litigation to which they become a party
arising from their association with or activities on behalf of the Company. The
Company may also bear the expenses of such litigation for any of its officers,
directors, employees or agents, upon their promise to repay such sums, if it is
ultimately determined that they are not entitled to indemnification. This
indemnification policy could result in substantial expenditures by the Company
which it may be unable to recoup even if so entitled.
Exclusion of Director Liability
The Company's Certificate of Incorporation excludes personal liability
on the part of its directors to the Company for monetary damages for breach of
fiduciary duty, except in certain specified circumstances. Accordingly, the
Company will have a much more limited right of action against its directors than
otherwise would be the case. This exclusionary provision does not affect the
liability of any director under federal or applicable state securities laws. See
"Exclusion of Director Liability."
No Dividends Will Be Paid in Foreseeable Future
The Company does not contemplate paying cash dividends in the
foreseeable future. Future dividends will depend on the Company's earnings, if
any, and its financial requirements.
Trading Risk of Low-Priced Stocks
The Company's common shares are currently defined as "penny stocks"
under the Exchange Act and rules of the Securities and Exchange Commission
adopted thereunder. The Exchange Act and such penny stock rules generally impose
additional sales practice and disclosure requirements upon broker-dealers who
sell the Company's securities to persons other than certain "accredited
investors" (generally, institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 jointly with spouse) or in transactions not recommended by
the broker-dealer. For transactions covered by the penny stock rules, the
broker-dealer must make a suitability determination for each purchaser and
receive the purchaser's written agreement prior to the sale. In addition, the
broker-dealer must make certain mandated disclosures in penny stock
transactions, including the actual sale or purchase price and actual bid and
offer quotations, and the compensation to be received by the broker-dealer and
certain associated persons, and deliver certain disclosures required by the
Securities and Exchange Commission. Consequently, the penny stock rules may
affect the ability and willingness of broker-dealers to make a market in or
trade the Company's shares and thus may also affect the ability of purchasers of
shares to resell those shares in the public markets.
Limited Active Trading Market; Market Volatility
The Company's shares are traded on the OTC Electronic Bulletin Board, a
screen-based trading system operated by the National Association of Securities
Dealers, Inc. Securities traded on the Bulletin Board are, for the most part,
thinly traded and, as the preceding Risk Factor indicates, subject to special
regulations not imposed on securities listed or traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system or on a
national securities exchange. The Company's shares have experienced in the past
and are expected to experience in the future significant price and volume
volatility, increasing the risk of ownership to investors
11
<PAGE>
Market Overhang of Registered Stock May Affect Market and Trading Price of
Company's Shares.
The purchase price of 1,325,000 shares of the common stock of the
Company registered on Form SB-2 in September, 1997 was $0.50 per common share;
75,000 of the common shares registered on such Form SB-2 were issued for
services at $0.30 per common share; 500,000 of the common shares registered on
such Form SB-2 were issued for technology at $0.38 per share; and 1,272,068 of
the common shares registered on such Form SB-2 were issued to shareholders of
Metacomp in exchange for Metacomp shares, many of which had been obtained for
nominal consideration. The aforementioned pricings are below the recent trading
price of the Company's Common Stock. Due to the lack of an active trading market
and past volatility of the Company's shares, sales by holders of shares
registered on the Form SB-2 described above or those registered on Forms S-3 in
September, 1997 and November, 1997 may have an adverse effect on the trading
price of and market for the Company's common shares. Sales of significant
numbers of registered shares into the open market probably will have a
depressive effect on the market for and trading price of the common stock, but
the Company cannot predict the likely timing or extent of any such sales or the
long- or short-term market effect of any sales.
Possible Adverse Effects of Authorization of Preferred Stock and
Anti-Takeover Provisions
The Company's Certificate of Incorporation authorizes the issuance of a
maximum of 5,000,000 shares of preferred stock on terms which may be fixed by
the Company's Board of Directors without stockholder action. The terms of any
series of preferred stock could make the possible takeover of the Company or the
removal of management of the Company more difficult, discourage hostile bids for
control of the Company in which stockholders may receive premiums for their
shares of Common Stock or otherwise dilute the rights of holders of Common
Stock. Additionally, the Company's Certificate of Incorporation provides that
the removal of a director from office or repeal of the Certificate of
Incorporation in its entirety requires the affirmative vote of a majority of the
total voting power of the Company and that certain other matters (including
amendment of the Bylaws by the shareholders and the amendment, adoption, or
repeal of any provision in the Certificate of Incorporation regarding the
indemnification of directors and officers) require the vote of two-thirds of the
total voting power of the Company. These provisions may also inhibit a possible
takeover of the Company, the removal of management, and hostile bids for control
of the Company.
THE COMPANY
General
Patriot Scientific Corporation (the "Company" or "Patriot") was
organized under Delaware law on December 16, 1992 as the successor by merger to
Patriot Financial Corporation, a Colorado corporation incorporated on June 10,
1987. Its 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 http://www.ptsc.com.
The Company is engaged in the development and marketing of patented
microprocessor technology and high-performance digital communication products.
The Company also owns and is developing innovative radar and antenna technology.
The Company's strategy is to exploit its technologies through product sales,
licensing, strategic alliances or government contracting.
The Company has had limited revenues since its inception and, as a
result of the acquisition of Metacomp and initiation of CyberShark sales, only
recently emerged from the development stage. There can be no assurance the
Company can achieve profitable operations.
Background
In February of 1989 the Company completed its initial public offering
pursuant to a Registration Statement on Form S-18 under the Securities Act of
1933 (the "Securities Act"), raising gross proceeds of $50,000 and net proceeds
of approximately $28,640 upon the sale of 2,500,000 units at $.02 per unit. Each
unit sold in the public offering consisted of one Common Share and one Class A
common stock purchase warrant exercisable to acquire one share of common stock
12
<PAGE>
and one Class B common stock purchase warrant. All Class A and Class B warrants
have since been exercised or have lapsed.
On August 10, 1989, the Company acquired its GPR technology from the
inventor, Mr. Elwood G. Norris, now the Company's Chairman. On May 12, 1992, the
Company redomiciled itself from Colorado to Delaware by merging into a
wholly-owned Delaware subsidiary (Patriot Scientific Corporation) organized for
that purpose. The reincorporation resulted in a combination (reverse split) of
each three of the Company's common shares, par value $.00001, into one share of
the Delaware corporation, par value $.00001. The reincorporation also effected a
change in the Company's charter and bylaws and a name change to Patriot
Scientific Corporation.
In May of 1993, the Company registered under the Securities Act a total
of 7,631,606 shares issuable upon the exercise of outstanding Class A and Class
B common stock purchase warrants. The Company received net proceeds of
$3,343,915 upon the exercise of those warrants and the issuance of 7,538,102
common shares. None of such warrants remain outstanding.
Effective May 31, 1994, pursuant to an Assets Purchase Agreement and
Plan of Reorganization ("nanoTronics Agreement") between the Company,
nanoTronics Corporation ("nanoTronics") located in Eagle Point, Oregon and
Helmut Falk ("Falk"), the Company issued a total of 10,000,000 restricted common
shares to nanoTronics to acquire certain microprocessor technology of
nanoTronics. The technology acquired ("ShBoom technology") is being used to
develop a sophisticated yet low cost microprocessor. 5,000,000 of the shares
were issued on a non-contingent basis, and the remaining 5,000,000 shares were
subject to the terms of an earnout escrow arrangement. 500,000 of the escrowed
shares have been released from escrow.
Effective December 26, 1996, pursuant to an exchange offer and letter
of transmittal, the Company acquired 96.9% of the outstanding shares of Metacomp
Inc., a California corporation ("Metacomp") from 56 shareholders in exchange for
the issuance of 1,272,068 shares of the Company's common stock. Based on the
closing price of the Company's common stock of $1.375 on the date of the
acquisition, the price of the acquisition was $1,749,094. This business
combination has been accounted for as a pooling-of-interests. Sixteen persons
who hold an aggregate of 1,059,574 common shares issued in the Metacomp
acquisition have agreed to a lock-up arrangement limiting sales by each holder
to 5% of their shares per month through December 1998.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
securities offered by the Selling Security Holders.
SELLING SECURITY HOLDERS
An aggregate of 110,753 shares of Common Stock are being offered for
resale by certain Security Holders of the Company pursuant to this Prospectus.
Those shares are issuable upon exercise by the holders of Options granted under
the Plan. All shares, to the extent they are being offered, are being offered
for the account of the following Security Holders and their donees or pledgees
(the "Selling Security Holders").
The following table sets forth certain information with respect to the
Selling Security Holders for whom the Company is registering the Common Stock
for resale to the public, including beneficial ownership of common stock as of
the date of this prospectus and the number of shares issuable upon exercise of
the Options, the percentage of class owned (assuming the number of shares were
issued upon exercise) and the number of shares offered by each Selling Security
Holder (assuming the maximum number of shares were issued upon exercise). The
Company has no knowledge of the intentions of any Selling Security Holder to
actually sell any of the shares listed under the column "Shares Issuable Upon
Exercise." There are no material relationships between any of the Selling
Security Holders and the Company other than as disclosed below. All such persons
have (or will have, upon the exercise of outstanding Options) sole voting and
investment power with respect to the shares being offered.
13
<PAGE>
<TABLE>
Beneficial
Ownership of Shares Issuable
Common Stock at Upon Exercise of Shares Percent of
Selling Security Holder Prospectus Date(1) Options(2) Offered(2) Class(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Putnam(4) 75,000 25,000 25,000 *
Donald Bernier(4) 125,000 50,000 50,000 *
Jayanta Maitra(4) 673,095 35,753 35,753 1.8%
-----------------------------------------------------------------------------
Total 873,095 110,753 110,753
</TABLE>
- -----------------
(1) The number of Common Shares reported above as beneficially owned by
each Selling Shareholder is comprised of the sum of (i) the Common
Shares issuable upon the exercise of the Options registered on Form S-8
and (ii) the number of Common Shares reported above as beneficially
owned by each Selling Shareholder based on a review of a list of the
Company's shareholders prepared by the Company's transfer agent and
registrar as of October 15, 1997.
(2) The number of shares of Common Stock issuable upon exercise of the
Options is the number of Options granted to the Selling Security Holder
under the Plan and assumes exercise of 100 percent of the Options.
(3) Represents maximum shares obtainable through exercise divided by the
current outstanding shares as of the date of this prospectus of
36,639,153 plus shares obtainable through exercise. An asterisk (*)
represents less than 1%.
(4) An officer and/or director of the Company.
PLAN OF DISTRIBUTION
The purpose of the Prospectus is to permit the Selling Security
Holders, if they desire, to offer 110,753 shares of Common Stock (the "Selling
Security Holder Shares") at such times and at such places as the Selling
Security Holders choose.
The decision to exercise the Options into shares, or to sell any
shares, is within the sole discretion of the holders thereof. There can be no
assurance that any of the Options will be exercised or any shares will be sold
by the Selling Security Holders.
Subsequent to exercise, if any, each Selling Shareholder is free to
offer and sell his or her Common Shares at such times, in such manner and at
such prices as he or she shall determine. The Selling Security Holders have
advised the Company that sales of Common Shares may be effected from time to
time in one or more types of transactions (which may include block transactions)
in the over-the-counter market, in negotiated transactions through the writing
of Options on the Common Shares, settlement of short sales of Common Shares, or
a combination of such methods of sale, at market prices prevailing at the time
of sale, or at negotiated prices. Such transactions may or may not involve
brokers or dealers. The Selling Security Holders have advised the Company that
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their securities, nor
is there an underwriter or coordinating broker acting in connection with the
proposed sale of the Common Shares by the Selling Security Holders.
The Selling Security Holders may effect such transactions by selling
Common Stock directly to purchasers or to or through broker-dealers, which may
act as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions, or commissions from the Selling Security Holders
and/or the purchasers of Common Shares for
14
<PAGE>
whom such broker-dealers may act as agents or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The Selling Security Holders and any broker-dealers that act in
connection with the sale of Common Shares might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any commissions
received by such broker-dealers and any profit on the resale of the Common
Shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. The Selling
Security Holders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Common Shares against
certain liabilities including liabilities arising under the Securities Act.
Because Selling Security Holders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling Security
Holders will be subject to the prospectus delivery requirements of the
Securities Act.
The Company has informed the Selling Security Holders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
Selling Security Holders also may resell all or a portion of the Common
Shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of such Rule.
The Company will not receive any proceeds from any sales of the Selling
Security Holder Shares, but will receive the proceeds from the exercise of
certain Options held by the Selling Security Holders, which proceeds, if any,
will be used for general corporate purposes.
In connection with this registration by the Company, the Company shall
use its best efforts to prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of the shares covered by the registration statement for the period
required to effect the distribution of such shares.
EXCLUSION OF DIRECTOR LIABILITY
Pursuant to the General Corporation Law of Delaware, the Company's
Certificate of Incorporation excludes personal liability on the part of its
directors to the Company for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any breach of the duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of Section 174 of
the General Corporation Law of Delaware, or any transaction from which a
director receives an improper personal benefit._This exclusion of liability does
not limit any right which a director may have to be indemnified and does not
affect any director's liability under federal or applicable state securities
laws.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 60,000,000
shares of Common Stock, $.00001 par value per share. At March 20, 1998, a total
of 36,639,153 Common Shares were issued and outstanding. The holders of Common
Stock are entitled to one vote for each share held. The affirmative vote of a
majority of votes cast at a meeting which commences with a lawful quorum is
sufficient for approval of most matters upon which shareholders may or must
vote, including the questions presented for approval or ratification at the
Annual Meeting. However, removal of a director from office or repeal of the
certificate of incorporation in its entirety require the affirmative vote of a
majority of the total voting power for approval, and certain other matters (such
as shareholder amendment of the bylaws, and amendment, repeal or adoption of any
provision inconsistent with provisions in the certificate of incorporation
regarding indemnification of directors, officers and others, exclusion of
director liability, and the Company's election not to be governed by statutory
15
<PAGE>
provisions concerning business combinations with interested shareholders)
require the affirmative vote of two-thirds of the total voting power for
approval. Common Shares do not carry cumulative voting rights, and holders of
more than 50% of the Common Stock have the power to elect all directors and, as
a practical matter, to control the Company. Holders of Common Stock are not
entitled to preemptive rights, and the Common Stock may only be redeemed at the
election of the Company.
A special meeting of shareholders may be called by or at the request of
the Chairman of the Board, the President or any two directors, and at the
request of persons owning in the aggregate not less than 20% of the issued and
outstanding Common Shares entitled to vote in elections for directors. After the
satisfaction of requirements with respect to preferential dividends, if any,
holders of Common Stock are entitled to receive, pro rata, dividends when and as
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding-up of the Company, after distribution in
full of the preferential amount, if any, to be distributed to holders of the
preferred stock, holders of Common Stock are entitled to share ratably in the
Company's assets legally available for distribution to its shareholders.
The Company's board of directors is authorized to issue 5,000,000
shares of undesignated preferred stock, $.00001 par value, without any further
action by the stockholders. The board of directors may also divide any and all
shares of preferred stock into series and fix and determine the relative rights
and preferences of the preferred stock, such as the designation of series and
the number of shares constituting such series, dividend rights, redemption and
sinking fund provisions, liquidation and dissolution preferences, exercise or
exchange rights and voting rights, if any. Issuance of preferred stock by the
board of directors will result in such shares having dividend and/or liquidation
preferences senior to the rights of the holders of Common Stock and could dilute
the voting rights of the holders of Common Stock. There are currently no shares
of preferred stock issued and outstanding.
The Company has not paid any cash dividends to date, and no cash
dividends will be declared or paid on the Common Shares in the foreseeable
future. Payment of dividends is solely at the discretion of the Company's board
of directors.
Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt
Lake City, Utah 84117, acts as transfer agent and registrar for the Common Stock
of the Company. Their telephone number is (801) 272-9294.
LEGAL OPINION
The validity of the Common Stock offered hereby will be passed on for
the Company by Luce, Forward, Hamilton & Scripps LLP, 600 West Broadway Street,
Suite 2600, San Diego, California 92101.
EXPERTS
The financial statements of the Company incorporated by reference in
the Prospectus and Registration Statement for the fiscal years ended May 31,
1997 and 1996, respectively, have been audited by BDO Seidman, LLP, independent
certified public accountants, as set forth in their report incorporated by
reference herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of said firm as experts in accounting
and auditing.
The financial statements of Metacomp, Inc. for the fiscal year ended
July 31, 1996 have been audited by Harlan & Boettger, LLP, independent certified
public accountants, as set forth in their report incorporated by reference
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing.
16
<PAGE>
No dealer, salesperson, or any person
has been authorized to give any
information or make any representation
not contained in, or incorporated by
reference in, this Prospectus, and, if 110,753 Shares
given or made, such information or of
representation must not be relied Common Stock
upon as having been authorized by offered by
authorized by the Company. This Selling Security Holders
Prospectus does not of an offer to sell,
or a solicitation of an offer to buy
any of the securities offered hereby
in any jurisdiction to person to whom
it is unlawful to make such offer in
such jurisdiction. Neither the
delivery of this Prospectus any sale
made hereunder shall, under any
circumstances, create any implication
that the information herein is correct PATRIOT SCIENTIFIC CORPORATION
as of any time subsequent to the
date hereof, or that there has been
no change in the affairs the Company
since such date.
----------------------
Table of Contents
Page
Additional Information...........3
Incorporation of Certain
Documents by Reference.........3
Disclosure Regarding Forward-
Looking Statements.............4 PROSPECTUS
Prospectus Summary...............5
Risk Factors.....................7
The Company.....................12
Use of Proceeds.................13
Selling Security Holders........13
Plan of Distribution............14
Exclusion of Director Liability.15
Description of Securities.......15
Legal Opinion...................16
Experts.........................16
March 25, 1998
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents are incorporated by reference in this
registration statement of Patriot Scientific Corporation, a Delaware corporation
("Company"), and in the related Section 10(a) prospectus:
(a) The Company's annual report on Form 10-KSB for the fiscal year
ended May 31, 1997;
(b) Company's quarterly reports on Form 10-QSB for the fiscal quarters
ended August 31, 1997 and November 30, 1997;
(c) Item 11 (Description of Securities) contained in registration
statement on Form 8-A of the Company, SEC file No. 0-22182.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities
registered hereunder have been sold and which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of filing of such
documents.
Item 4. Description of Securities.
The authorized capital stock of the Company consists of 60,000,000
shares of Common Stock, $.00001 par value per share. At March 20, 1998, a total
of 36,639,153 Common Shares were issued and outstanding. The holders of Common
Stock are entitled to one vote for each share held. The affirmative vote of a
majority of votes cast at a meeting which commences with a lawful quorum is
sufficient for approval of most matters upon which shareholders may or must
vote, including the questions presented for approval or ratification at the
Annual Meeting. However, removal of a director from office or repeal of the
certificate of incorporation in its entirety require the affirmative vote of a
majority of the total voting power for approval, and certain other matters (such
as shareholder amendment of the bylaws, and amendment, repeal or adoption of any
provision inconsistent with provisions in the certificate of incorporation
regarding indemnification of directors, officers and others, exclusion of
director liability, and the Company's election not to be governed by statutory
provisions concerning business combinations with interested shareholders)
require the affirmative vote of two-thirds of the total voting power for
approval. Common Shares do not carry cumulative voting rights, and holders of
more than 50% of the Common Stock have the power to elect all directors and, as
a practical matter, to control the Company. Holders of Common Stock are not
entitled to preemptive rights, and the Common Stock may only be redeemed at the
election of the Company.
A special meeting of shareholders may be called by or at the request of
the Chairman of the Board, the President or any two directors, and at the
request of persons owning in the aggregate not less than 20% of the issued and
outstanding Common Shares entitled to vote in elections for directors. After the
satisfaction of requirements with respect to preferential dividends, if any,
holders of Common Stock are entitled to receive, pro rata, dividends when and as
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding-up of the Company, after distribution in
full of the preferential amount, if any, to be distributed to holders of the
preferred stock, holders of Common Stock are entitled to share ratably in the
Company's assets legally available for distribution to its shareholders.
The Company's board of directors is authorized to issue 5,000,000
shares of undesignated preferred stock, $.00001 par value, without any further
action by the stockholders. The board of directors may also divide any and all
shares of preferred stock into series and fix and determine the relative rights
and preferences of the preferred stock, such as the designation of series and
the number of shares constituting such series, dividend rights, redemption and
sinking fund provisions, liquidation and dissolution preferences, exercise or
exchange rights and voting rights, if any. Issuance of preferred stock by the
board of directors will result in such shares having dividend and/or liquidation
preferences senior to
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<PAGE>
the rights of the holders of Common Stock and could dilute the voting rights of
the holders of Common Stock. There are currently no shares of preferred stock
issued and outstanding.
The Company has not paid any cash dividends to date, and no cash
dividends will be declared or paid on the Common Shares in the foreseeable
future. Payment of dividends is solely at the discretion of the Company's board
of directors.
Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt
Lake City, Utah 84117, acts as transfer agent and registrar for the Common Stock
of the Company. Their telephone number is (801) 272-9294.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Officers and Directors.
Pursuant to Article NINTH of the Company's Certificate of
Incorporation, and as permitted by Section 145 of the General Corporation Law of
Delaware, the Company may indemnify its directors and officers under certain
circumstances against reasonable expenses (including court costs and attorney's
fees), judgments, penalties, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which any of them is a
party by reason of his being a director, officer, employee, or agent of the
Company if it is determined that he acted in accordance with the applicable
standard of conduct set forth in such statutory provisions. Thus, the
indemnification provisions will protect officers and directors from liability
only if the officer or director meets the applicable standard of conduct and the
Company has the financial ability to honor the indemnity. Insofar as
indemnification for liabilities under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the General Corporation Law of Delaware, the Certificate of Incorporation, or
otherwise, the registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in such Securities Act, and is, therefore, unenforceable.
Item 7. Exemption from Registration Claimed.
Not applicable; no common shares of the Company registered hereunder
have been sold or issued.
Item 8. Exhibits.
5.2 Consent and opinion of Brasher & Company, counsel to the
Company
5.3 Consent and opinion of Luce, Forward, Hamilton & Scripps
LLP, at Law
10.2 1992 Non-Statutory Stock Option Plan of the Company
10.2.1 Amendment to 1992 Non-Statutory Stock Option Plan
23.3 Consent of BDO Seidman, LLP, independent certified public
23.4 Consent of BDO Seidman, LLP
23.5 Consent of Harlan & Boettger, LLP, Certified Public
ccountants
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers and sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
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<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at such time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be initial bona fide
offering thereof.
(5) Insofar as indemnification for liabilities under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-8 and has duly caused this Post Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in San Diego, California, on the date
below.
DATED: March 24, 1998 PATRIOT SCIENTIFIC CORPORATION
By: /s/ LOWELL W. GIFFHORN
Lowell W. Giffhorn, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities and on the dates respectively indicated.
Signature Title Date
/s/ MICHAEL A. CARENZO Director, President, Chief Executive 3/24/98
Michael A. Carenzo Officer
/s/ ROBERT PUTNAM Director, Secretary, Treasurer 3/24/98
Robert Putnam
/s/ LOWELL W. GIFFHORN Principal Financial Officer and Principal 3/24/98
Lowell W. Giffhorn Accounting Officer
/s/ RICHARD D. MCDANIEL Director 3/24/98
Richard D. McDaniel
/s/ DONALD R. BERNIER Director 3/24/98
Donald R. Bernier
/s/ HELMUT FALK, JR. Director 3/24/98
Helmut Falk, Jr.
/s/ NORMAN J. DAWSON Director, Vice President 3/24/98
Norman J. Dawson
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM S-8
Registration Statement
Under The Securities Act of 1933
EXHIBITS
PATRIOT SCIENTIFIC CORPORATION
(Exact name of registrant as specified in its charter)
EXHIBIT INDEX
The following exhibits are included as part of this registration
statement, except those marked as having previously been filed with the
Securities and Exchange Commission and which are incorporated by reference to
another registration statement, report or form. References to the "Company" in
this Exhibit Index mean PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation.
5.2 Consent and opinion of Brasher & Company, counsel to the
Company(1)
5.3 Consent and opinion of Luce, Forward, Hamilton & Scripps
LLP, Attorneys at Law(2)
10.2 1992 Non-Statutory Stock Option Plan of the Company(1)
10.2.1 Amendment to 1992 Non-Statutory Stock Option Plan(1)
23.3 Consent of BDO Seidman, LLP, independent certified public
accountants(1)
23.4 Consent of BDO Seidman, LLP(2)
23.5 Consent of Harlan & Boettger, LLP, Certified Public
Accountants(2)
(1) Exhibit filed with the initial filing of the Registration Statement on Form
S-8.
(2) Exhibit filed herewith this Amendment to the Registration Statement on Form
S-8.
II-5
March 19, 1998
Patriot Scientific Corporation
10989 Via Frontera
San Diego, California 92127
Re: Post-Effective Amendment No. 1 to the Registration Statement on Form S-8;
1992 Non-Statutory Stock Option Plan
Ladies and Gentlemen:
We are counsel for Patriot Scientific Corporation, a Delaware corporation
("Patriot"), in connection with the preparation of the Post-Effective Amendment
No. 1 to the Registration Statement on Form S-8 (the "Registration Statement")
of which this opinion is a part, to be filed with the Securities and Exchange
Commission, for the sale by certain selling security holders (the "Selling
Security Holders") of 110,753 shares of Patriot's common stock, $.00001 par
value (the "Common Stock"), issuable upon the exercise of stock options granted
by Patriot to the Selling Security Holders pursuant to Patriot's 1992
Non-Statutory Stock Option Plan (the "Plan").
For purposes of rendering this opinion, we have made such legal and factual
examinations as we have deemed necessary under the circumstances and, as part of
such examination, we have examined, among other things, originals and copies,
certified or otherwise, identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate. For the purposes of such examination , we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us.
On the basis of and in reliance upon the foregoing examination and assumptions,
we are of the opinion that assuming the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act of 1933, as amended,
the shares of Common Stock being offered under the Plan when issued in
accordance with the Registration Statement and the provisions of the Plan will
be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
LUCE, FORWARD, HAMILTON & SCRIPPS LLP
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Patriot Scientific Corporation
San Diego, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Post Effective Amendment No. 1 to the Registration
Statement of our report dated July 3, 1997 relating to the consolidated
financial statements of Patriot Scientific Corporation, appearing in the
Company's Annual Report on Form 10-KSB for the year ended May 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Denver, Colorado
March 24, 1998
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Patriot Scientific Corporation
San Diego, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Post Effective Amendment No. 1 to the Registration
Statement of our report dated December 17, 1996 relating to the financial
statements of Metacomp, Inc., referred to in Patriot Scientific Corporation's
Annual Report on Form 10-KSB for the year ended May 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ HARLAN & BOETTGER, LLP
San Diego, California
March 24, 1998
