Patriot Scientific Corp. Likes ShBoom Chip So Much, ShBam, It Buys It

Poway's Patriot Scientific Corp. closely examined a piece of technology developed by Nanotronics Corp. of Eagle Point, Ore.

Patriot decided it wanted Nanotronics' sophisticated low-cost 32-bit RISC-based microprocessor, the ShBoom Chip, to add to its radar technology base.

In early summer the two companies were in discussion and by June 28 the deal was done.

Patriot acquired virtually all of Nanotronics' technology and assets in exchange for 5 million shares of Patriot common stock and 5 million more in an earnout escrow agreement.

Helmut Falk, founder, president and sole shareholder of Nanotronics gained control of 36 percent of Patriot. Falk became chairman and CEO, replacing Elwood Norris, who stayed on as a director.

Patriot is hopeful the ShBoom Chip will complement its exciting sensor and computer processing technology. "Management believes the ShBoom Chip has applications in a variety of existing and new embedded control systems but because of its advanced features it has applications beyond," the company reported in its latest 10KSB filing. "Although generally more expensive per unit and requiring more support logic and memory, these devices offer many advantages for more sophisticated embedded control systems."

The company may integrate the product into its core research on ground penetrating radar (GPR), a technology developed by Norris.

Patriot is testing GPR through a penetrating microwave radar evaluation system (PMR), a mix of laboratory equipment with internal software and hardware and specialized components such as antennae, power generators and amplifiers.

It uses electromagnetic radiation techniques capable of "seeing" up to 200 feet below the surface of earth or through solid objects such as buildings.

Patriot says the technology holds several advantages over existing systems. Because GPR isn't required to touch the object it is looking through, the system is mobile and can look sideways--through walls, for example. The images are produced on-site, allowing the user to change surveying strategies if needed.

GPR technology is designed to provide cross-sectional, color-enhanced images of sub-surface objects as small as 12 inches in diameter. Previous technology penetrated only a few meters and provided only crude graphical or chart depiction of surface characteristics. One of Patriot's goals is to provide 3-D subsurface images.

Patriot thinks its technology will have a variety of applications in industries such as oil and gas exploration, mining, archaeology, geology, water drilling, pollution control, defense and law enforcement.

In February the company readied PMR for commercial deployment and testing. Three months later the company said it discovered a new sensor-related development with broad applications in the technology industry. Then-president Mark Gaspar said Patriot is preparing patent filings before releasing technical details.

Earnings and Revenues

In 1995's first quarter ended Aug. 31, Patriot lost $459,986, or 2 cents per share, on revenue of $15,890, compared with losing $212,673 on $6,517 in the same quarter the year before.

For its entire 1994 year ended May 31, the company lost $973,290, or 8 cents per share, with interest revenue of $64,196. This compared with a loss of $386,924 on $8,726 in '93.

Directors and Officers

Helmut Falk replaced Elwood Norris as chairman and CEO in June and took over for Mark Gaspar as president in August. Falk founded DH Technology Inc. and is president and founder of Nanotronics. Norris remains a director. Robert Putnam, CEO of American Technology Corp., is secretary, treasurer and a director. Each is affiliated with Norris Communications Corp.

Executive Compensation

In fiscal 1994 Norris was paid $42,000 and a $10,000 bonus from Patriot, compared with the $42,000 salary and 150,000 shares of longterm compensation in 1993.

Major Shareholders

Falk beneficially owns 10 million shares, or 36 percent, of Patriot stock. Five million of these shares are in escrow. Norris controls 5.15 million shares, or 18.5 percent of the common stock. Putnam owns 93,332, less than 1 percent. All officers and directors as a group own 15.24 million shares, 54.5 percent.

Stock Price

Traded over the counter, Patriot stock closed the calendar year at 28.2 cents, following an annual high of $3 and low of 21 cents.

Less Vital Statistics

Address: 12875 Brookprinter Place, Suite A, Poway, CA 92064. Phone: (619) 679-4428. Last annual meeting: Jan. 11, 1995.