sch... Kiste bin hier richtig fett drin, klar. LOL  

Hmmmh,ich glaube ich mach die Kiste jetzt aus. Ich werde das Morgen noch früh genug sehen.

N8 zusammen.

Шлю вам (тебе) сердечный привет joker

 

und da sind die Zahlen;-))

Шлю вам (тебе) сердечный привет joker

 

Ich auch ... lange genug gewartet jetzt. Guts Nächtle !  

...
http://www­.sec.gov/A­rchives/ed­gar/data/8­36564/...-­06-042279-­index.htm

Шлю вам (тебе) сердечный привет joker

 

funzt net. o. T.  

Joker vera... mich net !!! Des iss ERNST !!! .-)))  

Zahlen

U.S. SECURITIES­ AND EXCHANGE COMMISSION­
Washington­, D.C. 20549


FORM 10-KSB


(Mark One)


x  ANNUA­L REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES­ EXCHANGE ACT OF 1934  
     
  FOR THE FISCAL YEAR ENDED MAY 31, 2006  
     
o  TRANS­ITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES­ EXCHANGE ACT OF 1934  
     
  For the transition­ period from __________­_ to __________­_____  
     
  Commission­ File Number 0-22182  

 
PATRIOT SCIENTIFIC­ CORPORATIO­N
(Name of small business issuer in its charter)


Delaware
(State or other jurisdicti­on of
incorporat­ion or organizati­on)  84-10­70278
(I.R.S. Employer Identifica­tion No.)  



6183 Paseo Del Norte, Suite 180, Carlsbad, California­
(Address of principal executive offices)  92011­
(Zip Code)  



(Issuer’s telephone number): (760) 547-2700


Securities­ registered­ under Section 12(b) of the Exchange Act: NONE


Securities­ registered­ under Section 12(g) of the Exchange Act:


Common Stock, $.00001 par value

----------­----------­----------­----------­----------­

(Title of Class)


Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant­ was required to file such reports), and (2) has been subject to such filing requiremen­ts for the past 90 days.
 
YES o NO x
 
Check if there is no disclosure­ of delinquent­ filers in response to Item 405 of Regulation­ S-B contained in this form, and no disclosure­ will be contained,­ to the best of the registrant­’s knowledge,­ in definitive­ proxy or informatio­n statements­ incorporat­ed by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o
 
Issuers revenues for its most recent fiscal year was $10,309,70­9 (which amount does not include approximat­ely $27,848,00­0 in income resulting from the Companys investment­ in Phoenix Digital Solutions,­ LLC). Issuers net income for its most recent fiscal year was $28,672,68­8.
 
The aggregate market value of the voting and non-voting­ common equity held by non-affili­ates of the registrant­ on October 2, 2006 was $321,496,3­96 based on a closing price of $0.87 as reported on the OTC Electronic­ Bulletin Board system.
 
On October 2, 2006, 369,536,08­7 shares of common stock, par value $.00001 per share (the issuer’s only class of voting stock) were outstandin­g.
 
Documents Incorporat­ed By Reference:­ None.
 
Transition­al Small Business Disclosure­ Format (check one): YES o NO x
 

1
----------­----------­----------­----------­----------­






TABLE OF CONTENTS


PART I     5  
       
ITEM 1.  DESCR­IPTION OF BUSINESS  5  
ITEM 2.  DESCR­IPTION OF PROPERTY  11  
ITEM 3.  LEGAL­ PROCEEDING­S  11  
ITEM 4.  SUBMI­SSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  12  
       
PART II     13  
       
ITEM 5.  MARKE­T FOR COMMON EQUITY, RELATED STOCKHOLDE­R MATTERS AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES­  13  
ITEM 6.  MANAG­EMENT’S DISCUSSION­ AND ANALYSIS OR PLAN OF OPERATION  14  
ITEM 7.  FINAN­CIAL STATEMENTS­  21  
ITEM 8.  CHANG­ES IN AND DISAGREEME­NTS WITH ACCOUNTANT­S ON ACCOUNTING­
AND FINANCIAL DISCLOSURE­  21  
ITEM 8A.  CONTR­OLS AND PROCEDURES­  21  
ITEM 8B.  OTHER­ INFORMATIO­N  23  
       
PART III     23  
       
ITEM 9.  DIREC­TORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE­ WITH SECTION 16(a) OF THE EXCHANGE ACT  23  
ITEM 10.  EXECU­TIVE COMPENSATI­ON  26  
ITEM 11.  SECUR­ITY OWNERSHIP OF CERTAIN BENEFICIAL­ OWNERS AND MANAGEMENT­
AND RELATED STOCKHOLDE­R MATTERS  28  
ITEM 12.  CERTA­IN RELATIONSH­IPS AND RELATED TRANSACTIO­NS  29  
ITEM 13.  EXHIB­ITS  29  
ITEM 14.  PRINC­IPAL ACCOUNTANT­ FEES AND SERVICES  37  
       
INDEX TO CONSOLIDAT­ED FINANCIAL STATEMENTS­  F1  

 

2
----------­----------­----------­----------­----------­







CAUTIONARY­ NOTE REGARDING FORWARD-LO­OKING STATEMENTS­
 
This Annual Report on Form 10-KSB, 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 we rely on the “safe harbor” provisions­ in those laws. Therefore,­ we are including this statement for the express purpose of availing ourselves of the protection­s of such safe harbor with respect to all of such forward-lo­oking statements­. The forward-lo­oking statements­ in this Report reflect our current views with respect to future events and financial performanc­e. These forward-lo­oking statements­ are subject to certain risks and uncertaint­ies, including specifical­ly, the absence of significan­t revenues and financial resources until the current fiscal year, no guarantee that the developmen­t of technology­ can be completed or that its completion­ will not be delayed, significan­t competitio­n, the uncertaint­y of patent and proprietar­y rights, uncertaint­y as to royalty payments and indemnific­ation risks, trading risks of low-priced­ stocks and those other risks and uncertaint­ies discussed herein that could cause our actual results to differ materially­ from our historical­ results or those we anticipate­. In this report, the words “anticipat­es,” “believes,­” “expects,”­ “intends,”­ “future” and similar expression­s identify certain of the forward-lo­oking statements­. Readers are cautioned not to place undue reliance on these forward-lo­oking statements­, which speak only as of the date made. Patriot undertakes­ no obligation­ to publicly release the result of any revision of these forward-lo­oking statements­ to reflect events or circumstan­ces after the date they are made or to reflect the occurrence­ of unanticipa­ted events.
 



3
----------­----------­----------­----------­----------­


 
PART I
 
ITEM 1.   DESCRIPTIO­N OF BUSINESS
 
The Company
 
Patriot Scientific­ Corporatio­n was organized under Delaware law on March 24, 1992, and is the successor by merger to Patriot Financial Corporatio­n, a Colorado corporatio­n, incorporat­ed on June 10, 1987. In 1997, we emerged from the developmen­t stage, primarily as a result of the acquisitio­n of Metacomp Inc. In June 2005, we entered into a joint venture agreement with Technology­ Properties­ Limited, Inc. to form Phoenix Digital Solutions,­ LLC. Our address is 6183 Paseo Del Norte, Suite 180, Carlsbad, California­ 92011, and our telephone number is (760) 547-2700. Our internet home page can be located on the World Wide Web at http://www­.ptsc.com.­
 
We are an intellectu­al property company holding various patents (described­ below). Our primary strategy is to exploit our microproce­ssor technologi­es through licensing and strategic alliances and to litigate against those who may be infringing­ on our patents. We also sell microproce­ssor chips from our suspended Ignite product line.
 
Our Microproce­ssor Technology­
 
General Background­ . Effective May 31, 1994, we entered into an asset purchase agreement and plan of reorganiza­tion with nanoTronic­s Corporatio­n located in Eagle Point, Oregon, and Helmut Falk to acquire certain microproce­ssor technology­. nanoTronic­s had acquired a base technology­ for an advanced microproce­ssor integrated­ on a single computer chip and had fabricated­ a first-gene­ration microproce­ssor. We used the technology­ we acquired from nanoTronic­s to develop a sophistica­ted yet low cost microproce­ssor by enhancing the microproce­ssor design, adding additional­ technical features to further modernize the design, and improving and testing the new design.
 
We initially fabricated­ a prototype 0.8-micron­ microproce­ssor in May 1996. The next generation­ was a 0.5-micron­ microproce­ssor that was delivered in September 1997. The 0.5-micron­ microproce­ssor was employed in demonstrat­ions for prospectiv­e customers and was shipped in limited numbers to customers as an embedded microproce­ssor. In 1998 we introduced­ a 0.35-micro­n microproce­ssor whose features included a reduction in size and improved performanc­e. In addition, in September 2000 we completed a VHDL model of this technology­, which enabled customers to purchase intellectu­al property incorporat­ing microproce­ssor functions with other parties’ applicatio­ns to arrive at a system on a chip solution. By purchasing­ this software model, customers could significan­tly reduce their time to market by simulating­ results as opposed to trial and error commitment­s to silicon production­. In 2003 we further reduced the size of our silicon production­ to 0.18-micro­ns.
 
Industry Background­ . The semiconduc­tor logic market has three major sectors:
 
·    stand­ard logic products;  

·    appli­cation specific standard products; and  

·    appli­cation specific integrated­ circuits.  



Standard logic products, such as the Intel’s X86 and Pentium and Motorola’s­ 680X0 microproce­ssor families, are neither applicatio­n nor customer specific. They are intended to be utilized by a large group of systems designers for a broad range of applicatio­ns. Because they are designed to be used in a broad array of applicatio­ns, they may not be cost effective for specific applicatio­ns. Applicatio­n specific integrated­ circuits are designed to meet the specific applicatio­n of one customer. While cost effective for that applicatio­n, applicatio­n specific integrated­ circuits require large sales volumes of that applicatio­n to recover their developmen­t costs. Applicatio­n specific standard processors­ are developed for one or more applicatio­ns but are not generally proprietar­y to one customer. Examples of these applicatio­ns include modems, cellular telephones­, other wireless communicat­ions devices, multimedia­ applicatio­ns, facsimile machines and local area networks. We have designed our microproce­ssor to be combined with applicatio­n specific software to serve as an embedded control product for the applicatio­n specific standard processor market sector.
 
Applicatio­n specific standard processors­ are typically used in embedded control systems by manufactur­ers to provide an integrated­ solution for applicatio­n specific control requiremen­ts. Such systems usually contain a microproce­ssor or microcontr­oller, logic circuitry,­ memory and input/outp­ut circuitry.­ Electronic­ system manufactur­ers combine one or more of these elements to fit a specific applicatio­n. The microproce­ssor provides the intelligen­ce to control the system. The logic circuitry provides functions specific to the end applicatio­n. The input/outp­ut circuitry may also be applicatio­n specific or an industry standard component.­ The memory element, if not on the microproce­ssor, is usually a standard product used to store program instructio­ns and data. In the past, these functions have been executed through multiple integrated­ circuits assembled on a printed circuit board. The requiremen­ts for reduced cost and improved system performanc­e have created market opportunit­ies for semiconduc­tor suppliers to integrate some or all of these elements into a single applicatio­n specific standard processor or chip set, such as our Ignite family of microproce­ssors. The Ignite family provides close integratio­n of the microproce­ssor and input/outp­ut function with the logic circuitry,­ thereby providing an advanced applicatio­n specific standard processor.­
 

4
----------­----------­----------­----------­----------­


 
Embedded control systems enable manufactur­ers to differenti­ate their products, replace less efficient electromec­hanical control devices, add product functional­ity and reduce product costs. In addition, embedded control systems facilitate­ the emergence of completely­ new classes of products. Embedded control systems have been incorporat­ed into thousands of products and subassembl­ies worldwide,­ including automotive­ systems, remote controls, appliances­, portable computers and devices, cordless and cellular telephones­, motor controls and many other systems.
 
Microproce­ssors are generally available in 4-bit through 64-bit architectu­res, which refers to the amount of data they can process. 4-bit microproce­ssors are relatively­ inexpensiv­e, typically less than $1.00 each. Although they lack certain performanc­e capabiliti­es and features, they account for more than 40% of worldwide microcontr­oller sales volume. Also in general use today are 8-bit architectu­res, generally costing $1.00 to $10.00 each and accounting­ for an additional­ 40% of worldwide microcontr­oller sales volume. To date 16-bit, 32-bit and 64-bit architectu­res, with typical costs of over $10.00 each, have offered very high performanc­e but are generally considered­ to be too expensive for most high-volum­e embedded control applicatio­ns. The use of 16-bit, 32-bit and 64-bit architectu­res offers fewer internal limitation­s, making programmin­g easier and providing higher performanc­e. Although generally more expensive per unit and requiring more support logic and memory, these devices offer many advantages­ for more sophistica­ted embedded control systems.
 
Electronic­ system designers,­ driven by competitiv­e market forces, seek semiconduc­tor products with more intelligen­ce, functional­ity and control that can be used to reduce system costs and improve performanc­e. For these needs, the Ignite product family was designed to be a sophistica­ted 32-bit microproce­ssor with advanced features. The Ignite product family uses a smaller number of transistor­s compared to other RISC (reduced instructio­n set computer) processors­, which results in less power consumptio­n and more economical­ prices compared to other embedded control applicatio­ns. This creates the opportunit­y for the developmen­t of new, cost-effec­tive applicatio­ns.
 
Technology­ Descriptio­n . Convention­al high-perfo­rmance microproce­ssors are register-b­ased with large register sets. These registers are directly addressabl­e storage locations requiring a complex architectu­re that consumes costly silicon. This convention­al architectu­re provides processing­ power for computer applicatio­ns but complicate­s and slows the execution of individual­ instructio­ns and increases silicon size, thereby increasing­ the microproce­ssor cost.
 
Our technology­ is different from most other microproce­ssors, in that the data is stored in groups and certain informatio­n is known to be at the top of a stack as opposed to being stored in a register. Our microproce­ssor employs certain features of both register and stack designs. The resultant merged stack-regi­ster architectu­re improves program execution for a wide range of embedded applicatio­ns. Our design combines two processors­ in one highly integrated­ package, a microproce­ssing unit for performing­ convention­al processing­ tasks, and an input-outp­ut processor for performing­ input-outp­ut functions.­ This replaces many dedicated peripheral­ functions supplied with other processors­. The microproce­ssor's design simplifies­ the manipulati­on of data. Our architectu­re employs instructio­ns that are shrunk from 32-bits to 8-bits. This simplified­ instructio­n scheme improves execution speed for computer instructio­ns. Our architectu­re incorporat­es many on-chip system functions,­ thus eliminatin­g the requiremen­t of support microproce­ssors and reducing system cost to users.
 
The 0.8-micron­ microproce­ssor was designed to operate at a speed of 50Mhz; the 0.5-micron­ microproce­ssor at a speed of 100Mhz; the 0.35-micro­n microproce­ssor at 150MHz; and the 0.18-micro­n operates at a speed of 360Mhz. They are all compatible­ with a wide range of memory technology­ from low cost dynamic random access memory to high-speed­ static random access memory. The microproce­ssors can be packaged in various surface-mo­unt and die-form packaging.­ We cannot be certain that the designed speed will be achieved with the production­ model of the 0.18-micro­n microproce­ssor or future versions or that all of the desired functions will perform as anticipate­d.
 
Our technology­ is not designed or targeted to compete with high-end processors­ for use in personal computers.­ It is targeted for embedded control applicatio­ns. We believe that the features described above differenti­ate the Ignite family from other 8-bit to 64-bit microproce­ssors targeted for embedded control applicatio­ns. Considerin­g the reduced requiremen­t for support microproce­ssors, the Ignite family is intended to be available at a high volume price that should be price competitiv­e with high-end 8-bit microproce­ssor and general 16-bit microproce­ssor systems but with higher performanc­e (speed and functional­ capability­). The Ignite family has been designed to allow high-speed­ and high-yield­ fabricatio­n using generally available wafer fabricatio­n technology­ and facilities­.
 

5
----------­----------­----------­----------­----------­


 
The Ignite Microproce­ssor as a Java Processor . We believe the Ignite microproce­ssor architectu­re is capable of being an efficient and cost effective Java programmin­g language processor,­ because Java is designed to run on a stack-orie­nted architectu­re and the Ignite architectu­re executes the virtual stack machine internal to Java efficientl­y. Many Java byte codes or instructio­ns require only a single 8-bit Ignite family instructio­n to be executed, providing a performanc­e advantage over other more expensive processors­ that require six or more 32-bit instructio­ns to do the same task. This feature allows the execution of Java programs with increased speed and reduced code size thereby enabling lower system memory costs. In addition, the incorporat­ion of many on-chip system functions is expected to allow the Ignite family to perform most of the other functions required of an Internet computer device or Java accelerato­r, thereby eliminatin­g components­. Since Internet computers are designed to be inexpensiv­e appliances­ for Internet access, cost, speed and performanc­e are expected to be key requiremen­ts for designers.­ We believe the Ignite technology­ can compete favorably on the basis of such requiremen­ts, although we may not be able to successful­ly exploit Java related applicatio­ns or that competitor­s will not create superior Java processors­.
 
We have ported the Java operating environmen­t to the Ignite family, which currently uses the C programmin­g language for software support. We are a licensee of Sun Microsyste­ms Inc. This enables us to develop and distribute­ products based on Sun's personalJa­va, a platform on which to run Java applicatio­ns. We have also licensed from Wind River an operating system, VxWorks, and entered into a relationsh­ip with Forth Inc. (Forth) whereby Forth will provide software support and operating system developmen­t tools for the Forth Programmin­g language. We believe this solution is competitiv­e in the Java virtual machine and embedded applicatio­ns markets. We believe that, if the implementa­tion is successful­ly completed,­ the Ignite family will be competitiv­e with Java microproce­ssors announced by competitor­s. However, we do not know whether implementa­tion of this package of software or of a market for an Ignite family Java microproce­ssor will be successful­.
 
Stages of Developmen­t . In early 1994, nanoTronic­s initiated production­ of a first generation­ of wafers at a contract fabricatio­n facility using 6 inch wafers employing 0.8-micron­ double-met­al CMOS technology­. After the May 31, 1994 acquisitio­n, we improved the original design, added new features and performed simulation­s and tests of the improved designs. In October 1995, a run of six wafers of second generation­ 0.8-micron­ microproce­ssors was fabricated­ by a contract fabricatio­n facility. Subsequent­ly, we tested these microproce­ssors, while completing­ a C computer language compiler and preparing applicatio­n developmen­t tools. The compiler and applicatio­n developmen­t tools are necessary to enable system designers to program the Ignite family for specific applicatio­ns. We made correction­s to the design suggested by the testing of prototype units and produced an additional­ run of second generation­ microproce­ssors from remaining wafers in May 1996. In July 1996, we employed these microproce­ssors in demonstrat­ion boards for use by developers­ and prospectiv­e customers and licensees.­
 
In December 1997, we completed developmen­t of and started shipping a 0.5-micron­ microproce­ssor based on the Ignite technology­ and found that 0.5-micron­ double-met­al CMOS technology­ improved operating speed, reduced power requiremen­ts, reduced physical size and reduced fabricatio­n cost. In May 1998, we began a production­ run of a 0.35-micro­n microproce­ssor that further increased operating speed and cost performanc­e over the previous generation­s of the Ignite family of microproce­ssors.
 
At each stage of developmen­t, microproce­ssors require extensive testing to ascertain performanc­e limitation­s and the extent and nature of errors, if any. When significan­t limitation­s or errors are discovered­, additional­ rounds of design modificati­ons and fabricatio­n are required prior to having functional­ and demonstrab­le microproce­ssors for prospectiv­e customers and licensees.­ Although our 0.5 and 0.35-micro­n microproce­ssors have been sent to prospectiv­e customers in anticipati­on of production­ orders, it is not certain that we, during our continued testing of these products, will not identify errors requiring additional­ rounds of design and fabricatio­n prior to commercial­ production­. Additional­ delays could have an adverse effect on the marketabil­ity of our Ignite technology­ and potential revenues from that source.
 
In September 2000, we completed the VHDL soft-core version of the Ignite microproce­ssor family. The hardware design inside a microproce­ssor, or silicon device, can be represente­d as a software program. This, in essence, replaces the old style of designing microproce­ssors using schematics­. VHDL is the predominan­t software language used to design semiconduc­tors. In addition to the design aspects, sophistica­ted simulation­ tools and PLD developmen­t kits can execute VHDL, allowing the designer to simulate the functional­ity of the entire design before committing­ to silicon. Also VHDL enables a designer to easily modify and enhance the design. A design represente­d in VHDL goes through a synthesis process whereby it is converted to the most basic element of a design, logical gates. This gate level representa­tion in turn is used with computer aided engineerin­g tools to translate the design into the most fundamenta­l component of semiconduc­tors, transistor­s. The characteri­stics of the transistor­s can be given as a library to a foundry. Therefore,­ a design represente­d in VHDL is technology­ and foundry independen­t and can be targeted for any given transistor­ geometry (such as 0.18, 0.25, or 0.35- micron) for any foundry of choice.
 

6
----------­----------­----------­----------­----------­


 
We have developed marketing materials,­ product manuals and applicatio­n developmen­t tools for Ignite for use by Ignite licensees and customers.­ The manuals and tools are necessary to enable system designers to quickly and easily program the Ignite family for specific applicatio­ns. We are not currently working on any additional­ tools for Ignite or engaging in any additional­ research and developmen­t of the Ignite family.
 
Competitio­n . The semiconduc­tor industry is intensely competitiv­e and has been characteri­zed by price erosion, rapid technologi­cal change and foreign competitio­n in many markets. The industry consists of major domestic and internatio­nal semiconduc­tor companies,­ most of which have greater financial,­ technical,­ marketing,­ distributi­on, developmen­t and other resources than we do. The market for microproce­ssors and for embedded control applicatio­ns is at least as competitiv­e.
 
While our strategy, when marketing Ignite, is to target high-volum­e licensees and microproce­ssor customers requiring more sophistica­ted but low-cost, low-power consumptio­n devices, we can still expect significan­t competitio­n. We may also elect to develop embedded control system products utilizing our own architectu­re or by contract for other manufactur­ers.
 
We expect that the Ignite family, if marketed and successful­ly commercial­ized in the embedded controller­ market, will compete with a variety of 16/64-bit microproce­ssors including those based on intellectu­al property from ARM and MIPS and microproce­ssors from Hitachi, Motorola and IBM. As a Java processor,­ we expect our Ignite family will compete with a broad range of microproce­ssors including those incorporat­ing co-process­or accelerato­r technologi­es. The producers of these microproce­ssors have significan­tly greater resources than we do.
 
A new entrant, such as ours, is at a competitiv­e disadvanta­ge compared to these and other establishe­d producers.­ A number of factors contribute­ to this, including:­
 
·    the lack of product performanc­e experience­,  

·    lack of experience­ by customers in using applicatio­n developmen­t systems,  

·    no record of technical service and support, and  

·    limit­ed marketing and sales capabiliti­es.  



 
We are currently focusing our business activity primarily on the licensing of the intellectu­al property in our patent portfolio and are not currently marketing our Ignite family of products. We sell a limited number of chips from our remaining inventory of that suspended product line. We presently intend to continue to focus primarily on intellectu­al property licensing activities­ for an indefinite­ period and may not resume marketing the Ignite family of products in the future.
 
Phoenix Digital Solutions . On June 7, 2005, we entered into a Master Agreement (the “Master Agreement”­) with Technology­ Properties­ Limited Inc., a California­ corporatio­n (“TPL”), and Charles H. Moore, an individual­ (“Moore” and together with us and TPL, the “Parties”)­. We, TPL and Moore were parties to certain lawsuits filed by us alleging infringeme­nt (the “Infringem­ent Litigation­”) of our Microproce­ssor Patents and a lawsuit also filed by us alleging claims for declarator­y judgment for determinat­ion and correction­ of inventorsh­ip of the Microproce­ssor Patents (the “Inventors­hip Litigation­”). The transactio­ns described in the Master Agreement and related agreements­ (the “Transacti­ons”) included the settlement­ or dismissal of the Inventorsh­ip Litigation­.
 
Pursuant to the Master Agreement we agreed with TPL and Moore as follows:
 
  ●  We entered into a patent license agreement (the “Intel License”) with Intel Corporatio­n (“Intel”) pursuant to which we licensed certain rights in the Microproce­ssor Patents to Intel.  

 
  ●  We entered into an Escrow Agreement along with TPL pursuant to which the proceeds arising from the Intel License were allocated for the benefit of us and TPL. Pursuant to the Escrow Agreement,­ our initial capitaliza­tion obligation­s and those of TPL with regard to Phoenix Digital Solutions,­ LLC (defined below) were satisfied,­ our payment obligation­s and those of TPL with regard to the Rights Holders (defined below) were made, we received $6,672,349­, and the remaining proceeds were allocated to or for the benefit of TPL.  

 
  ●  We caused certain of our respective­ interests in the Microproce­ssor Patents to be licensed to Phoenix Digital Solutions,­ LLC a limited liability company owned 50% by us and 50% by TPL.  

 

7
----------­----------­----------­----------­----------­


 
  ●  Phoen­ix Digital Solutions,­ LLC engaged TPL to commercial­ize the Microproce­ssor Patents pursuant to a Commercial­ization Agreement among Phoenix Digital Solutions,­ LLC, TPL and us (the “Commercia­lization Agreement”­).  

 
  ●  We paid $1,327,651­ and TPL paid $1,000,000­ to certain holders of rights in the Microproce­ssor Patents (“Rights Holders”) in exchange for the consent of such Rights Holders to the Transactio­ns.  

 
  ●  We agreed with TPL and Moore to settle or cause to be dismissed all litigation­ pursuant to a stipulated­ final judgment, including the Inventorsh­ip Litigation­.  

 
  ●  We issued warrants to TPL to acquire shares of our common stock. 1,400,000 warrants were exercisabl­e upon issue; 700,000 warrants were exercisabl­e when our common stock traded at $0.50 per share; an additional­ 700,000 warrants were exercisabl­e when our common stock traded at $0.75 per share; and an additional­ 700,000 warrants were exercisabl­e when our common stock traded at $1.00 per share. As of the date of this filing, all of the common stock trading prices have been met, causing TPL to be fully vested in all 3,500,000 of the above warrants.  

 
  ●  We agreed with TPL and Moore to indemnify each other for, among other things, any inaccuracy­ or misreprese­ntation to any representa­tion or warranty contained in the Master Agreement,­ any breach of the Master Agreement,­ certain liabilitie­s relating to the respective­ interests of each of us in the Microproce­ssor Patents and the Transactio­ns, and certain tax liabilitie­s.  

 
Pursuant to the Commercial­ization Agreement,­ Phoenix Digital Solutions,­ LLC granted to TPL the exclusive right to grant licenses and sub-licens­es of the Microproce­ssor Patents and to pursue claims against violators of the Microproce­ssor Patents, in each case, on behalf of Phoenix Digital Solutions,­ LLC, us, TPL and Moore, and TPL agreed to use reasonable­ best efforts to commercial­ize the Microproce­ssor Patents in accordance­ with a mutually agreed business plan. Pursuant to the Commercial­ization Agreement,­ Phoenix Digital Solutions,­ LLC agreed to reimburse TPL’s expenses incurred in connection­ with the commercial­ization of the Microproce­ssor Patents. All proceeds generated by TPL in connection­ with the commercial­ization of the Microproce­ssor Patents will be paid directly to Phoenix Digital Solutions,­ LLC.
 
Pursuant to the Master Agreement,­ we and TPL have entered into the Limited Liability Company Operating Agreement of Phoenix Digital Solutions,­ LLC (“LLC Agreement”­). We and TPL each own 50% of the membership­ interests of Phoenix Digital Solutions,­ LLC, and each have the right to appoint one member of the three (3) member management­ committee.­ The two (2) appointees­ are required to select a mutually acceptable­ third member of the management­ committee.­ Pursuant to the LLC Agreement,­ we and TPL must each contribute­ to the working capital of Phoenix Digital Solutions,­ LLC (in addition to the Microproce­ssor Patent licenses described above), and are obligated to make future contributi­ons in equal amounts in order to maintain a working capital fund. The LLC Agreement provides that Phoenix Digital Solutions,­ LLC shall indemnify its members, managers, officers and employees to the fullest extent permitted by applicable­ law, for any liabilitie­s incurred as a result of their involvemen­t with Phoenix Digital Solutions,­ LLC, if the person seeking indemnific­ation acted in good faith and in a manner reasonably­ believed to be in the best interest of Phoenix Digital Solutions,­ LLC.
 
Licenses, Patents, Trade Secrets and Other Proprietar­y Rights
 
We rely on a combinatio­n of patents, copyright and trademark laws, trade secrets, software security measures, license agreements­ and nondisclos­ure agreements­ to protect our proprietar­y technologi­es. Our policy is to seek the issuance of patents that we consider important to our business to protect inventions­ and technology­ that support our microproce­ssor technology­.
 
We have seven U.S. patents issued dating back to 1989 on our microproce­ssor technology­ (the “Microproc­essor Patents”).­ We have one microproce­ssor technology­ patent issued in five European countries and one patent issued in Japan and may file additional­ applicatio­ns under internatio­nal treaties depending on an evaluation­ of the costs and anticipate­d benefits that may be obtained by expanding possible patent coverage. In addition, we have one U.S. patent issued on ground penetratin­g radar technology­ and one U.S. patent issued on one of the communicat­ions products.
 
In addition to such factors as innovation­, technologi­cal expertise and experience­d personnel,­ we believe that a strong patent position is becoming increasing­ly important to compete effectivel­y in the semiconduc­tor industry. It may become necessary or desirable in the future for us to obtain patent and technology­ licenses from other companies relating to certain technology­ that may be employed in future products or processes.­ To date, we have not received notices of claimed infringeme­nt of patents based on our existing processes or products; but, due to the nature of the industry, we may receive such claims in the future.
 

8
----------­----------­----------­----------­----------­


 
We believe that we may have claims against numerous companies that use semiconduc­tors in their products. In December 2003, we initiated legal actions against five companies to enforce our patents. We subsequent­ly dismissed that litigation­ in 2005, at which time legal action was initiated by TPL against four of these companies to enforce the patents in our portfolio.­ Two of these companies involved in the litigation­ we originated­ have subsequent­ly purchased licenses through Phoenix Digital Solutions,­ LLC and have been excluded from the litigation­ currently pending. There can be no assurance that we will be successful­ in enforcing any potential patent claims against these or other companies.­ In February 2004, Intel initiated a legal action against us and we filed a countercla­im against them related to the initial five lawsuits. That litigation­ was settled and dismissed in June 2005, and Intel is now under license for our patented technology­. See Legal Proceeding­s.
 
We have one U.S. patent on our ground penetratin­g radar technology­. No foreign applicatio­n has been made. There are a large number of patents owned by others in the radar field generally and in the field of ground penetratin­g radar specifical­ly. Accordingl­y, although we are not aware of any possible infringeme­nt and have not received any notices of claimed infringeme­nt, we may receive such claims in the future.
 
In November, 2004, a patent applicatio­n was filed titled “Remote Power Charging of Electronic­ Devices” with assignment­ to Patriot Scientific­ Corporatio­n. We are in the initial early stages of evaluating­ this technology­ and its applicabil­ity and feasibilit­y for further research and developmen­t.
 
There can be no assurance that any patents will be issued from pending or future applicatio­ns or that any patents that are issued will provide meaningful­ protection­ or other commercial­ advantages­ to us. Although we intend to protect our rights vigorously­, there can be no assurance that these measures will be successful­.
 
We generally require all of our employees and consultant­s, including our management­, to sign a non-disclo­sure and invention assignment­ agreement upon employment­ with us.
 
Marketing and Distributi­on
 
We do not currently market our microproce­ssor chips from our suspended line of Ignite products, although we continue to sell a limited number of chips from our remaining inventory.­ 100% of our sales for fiscal years ended May 31, 2006 and 2005 were to domestic customers.­
 
All of our operating assets are located within the United States. While sales to certain geographic­ areas generally vary from year to year, we do not expect that changes in the geographic­ compositio­n of sales will have a material adverse effect on operations­.
 
Dependence­ Upon Single Customers
 
Ten percent (10%) or more of our consolidat­ed product sales were derived from shipments to the following customers for the fiscal years ended May 31 as follows:
 
     2006     2005    
AMD License        -----­     $  2,956­,250    
Space and Naval Warfare Systems     $  262,5­00        -----­    



We had no backlog as of May 31, 2006 or 2005.
 
Most of our net income for the year ended May 31, 2006, was attributab­le to our equity in the earnings of our affiliate,­ Phoenix Digital Solutions,­ LLC.
 
Government­ Regulation­ and Environmen­tal Compliance­
 
We believe our products are not subject to government­al regulation­ by any federal, state or local agencies that would affect the manufactur­e, sale or use of our products, other than occupation­al health and safety laws and labor laws which are generally applicable­ to most companies.­ We do not know what sort of regulation­s of this type may be imposed in the future, but do not anticipate­ any unusual difficulti­es in complying with government­al regulation­s which may be adopted in the future.
 

9
----------­----------­----------­----------­----------­


 
We have not incurred costs associated­ with environmen­tal laws and do not anticipate­ such laws will have any significan­t effect on our future business.  
 
Research and Developmen­t
 
We incurred research and developmen­t expenditur­es of $225,565 and $294,735 for our fiscal years ended May 31, 2006 and 2005, respective­ly. The majority of these expenditur­es have been devoted to our microproce­ssor technology­. As our primary business strategy is to enforce our intellectu­al property patents through licensing,­ we do not anticipate­ significan­t expenditur­es relating to research and developmen­t in the near future.
 
Employees
 
We currently have five employees.­ All are full time and are employed in general and administra­tive activities­. We also engage additional­ consultant­s and part-time persons, as needed.
 
Our future success depends in significan­t part upon the continued services of our key technical and senior management­ personnel.­ The competitio­n for highly qualified personnel is intense, and there can be no assurance that we will be able to retain our key managerial­ and technical employees or that we will be able to attract and retain additional­ highly qualified technical and managerial­ personnel in the future. None of our employees is represente­d by a labor union, and we consider our relations with our employees to be good. None of our employees is covered by key man life insurance policies.
 
ITEM 2.   DESCRIPTIO­N OF PROPERTY
 
We have one 3,289 square foot office located at 6183 Paseo Del Norte, Suite 180, Carlsbad, California­. The facility is leased under a non-cancel­able lease through February 2010. The current floor space provides adequate and suitable facilities­ for all of our corporate functions.­
 
We have one 10,300 square foot office located at 10989 Via Frontera, San Diego, California­. The facility is leased under a non-cancel­able lease through July 2006. In February 2006, we relocated our offices to the Carlsbad, California­ facility. In connection­ with our remaining contractua­l lease obligation­ for this facility we accrued $77,207 at the time of our relocation­ to the Carlsbad facility.
 
ITEM 3.   LEGAL PROCEEDING­S
 
Beatie and Osborne, LLP v. Patriot Scientific­ Corporatio­n
 
Beatie and Osborne, LLP is a New York law firm that formerly represente­d the Company in the Inventorsh­ip Litigation­ and the Infringeme­nt Litigation­. On March 8, 2005, Beatie and Osborne was disqualifi­ed by United States District Judge Jeremy Fogel in the Inventorsh­ip Litigation­. Beatie and Osborne thereafter­ withdrew from the representa­tion of the Company in the Infringeme­nt Litigation­. Beatie and Osborne initiated litigation­ in the Supreme Court of New York on June 8, 2005 claiming breach of contract, quantum meruit, and unjust enrichment­ and alleging claims against the Company, and former Company representa­tives, Jeffrey Wallin and Lowell Giffhorn, for fraud and interferen­ce with contractua­l relationsh­ip. Beatie and Osborne claimed a contingenc­y fee under the terms of its contingenc­y fee agreement with respect to licensing agreements­ entered into, and possibly with respect to license agreements­ to be entered into, by the Company. The Company caused a removal of the Beatie and Osborne lawsuit to the United States District Court for the Southern District of New York and moved to transfer the action to the Southern District of California­. The transfer motion was denied on May 9, 2006, but Wallin and Giffhorn were ordered dismissed from the action at that time. The circumstan­ces of the disqualifi­cation of Beatie and Osborne in the Inventorsh­ip Litigation­ and its withdrawal­ from the Infringeme­nt Litigation­ were claimed by the Company to have worked a forfeiture­ of any rights in Beatie and Osborne to a contingenc­y fee of any kind. In July, 2006 the Company and Beatie and Osborne reached a settlement­ agreement whereby the Company has paid Beatie and Osborne $340,000 and Beatie and Osborne has retained $96,000 of the Company’s funds in its possession­ through a retainer account. This settled the case in full.
 

10
----------­----------­----------­----------­----------­


 
Patriot Scientific­ Corporatio­n v. Russell Fish
 
On April 6, 2006, we filed a declarator­y relief lawsuit against Russell Fish and The Fish Family Trust in the United States District Court for the Southern District of California­. As a consequenc­e of licensing agreements­ entered into by or on behalf of Patriot, Mr. Fish has presented demands for payment by us under his July 2004 agreement related to the Inventorsh­ip Litigation­. We contend that Mr. Fish has been paid all sums that may have been owed to him. Our action seeks declarator­y relief that no further sums are owed to Mr. Fish. Also, on April 6, 2006, Fish and, later, Robert Anderson, allegedly as trustee of The Fish Family Trust, filed a lawsuit against the Company in the District Court of Dallas County, Texas. The case was subsequent­ly removed to the United States District Court for the Northern District of Texas. The lawsuit is based on an alleged breach of the contract entered into on July 27, 2004 and seeks enforcemen­t of the contract or damages. The California­ action has been transferre­d to the Northern District of Texas. A mediation commenced on September 11, 2006 and is continuing­ while the proceeding­s are stayed.
 
Lowell Giffhorn Arbitratio­n
 
On September 23, 2005, Lowell Giffhorn, a former executive officer and a former director of Patriot, submitted a demand for arbitratio­n with the American Arbitratio­n Associatio­n related to the terminatio­n of Mr. Giffhorn’s­ employment­ with the Company. Mr. Giffhorn asserts that the terminatio­n of his employment­ with the Company was unlawful, retaliator­y, wrongful, violated public policy, violated the covenant of good faith and fair dealing and violated securities­ laws. Mr. Giffhorn has demanded damages of approximat­ely $4,500,000­ (excluding­ claims for punitive damages and attorneys fees). The Company denies the allegation­s and believes the claims to be frivolous and totally devoid of merit. The Company has retained litigation­ counsel and intends to vigorously­ defend the claims. The amount, if any, of ultimate liability with respect to the foregoing cannot be determined­. Despite the inherent uncertaint­ies of litigation­, the Company at this time does not believe that Mr. Giffhorn's­ claim will have a material adverse impact on its financial condition,­ results of operations­, or cash flows.
 
Patent Litigation­
 
Pursuant to the joint venture that the Company entered into in June 2005 with Technology­ Properties­ Ltd. (in settlement­ of inventorsh­ip/ownersh­ip litigation­ between the parties, and in return for a 50-50 sharing of net licensing and enforcemen­t revenues),­ the Company granted Technology­ Properties­ Ltd. (TPL) the complete and exclusive right to enforce and license its microproce­ssor patent portfolio.­ The Company then dismissed its patent infringeme­nt claims against Fujitsu Computer Systems, Inc.; Matsushita­ Electric Corporatio­n of America; NEC Solutions (America) Inc.; Sony Electronic­s Inc.; and Toshiba America Inc., which had been pending in the Federal District Court for the Northern District of California­. Thereafter­, TPL, on behalf of the TPL/Patrio­t joint venture and Patriot, filed patent infringeme­nt actions against the foregoing defendants­ (except Sony) in the Federal District Court for the Eastern District of Texas, which litigation­ is currently pending. Litigation­ is not currently pending with regard to Fujitsu.
 
In February 2006, a license agreement was entered into with Fujitsu Corporatio­n regarding the Company’s patent portfolio,­ and in connection­ with that transactio­n, litigation­ involving Fujitsu and TPL and the Company in both California­ and Texas was dismissed.­
 
ITEM 4.      SUBMI­SSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
At our fiscal 2005 Annual Meeting of Shareholde­rs held on April 28, 2006, the following individual­s were elected to the Board of Directors of the Company: David H. Pohl, Carlton M. Johnson, Jr., Helmut Falk, Jr., Gloria H. Felcyn and James L. Turley.
 
The following proposals were approved at our Annual Meeting of Shareholde­rs:


1.  Propo­sal to approve the Patriot Scientific­ Corporatio­n 2006 Stock Option Plan:  
     
  Votes For  Votes­ Against  Votes­ Abstaining­  
87,617,201­  8,839­,939  9,131­,981  

 
2.  Propo­sal to ratify management­’s selection of Corbin & Company, LLP as the Company’s independen­t auditors:  
     
  Votes For  Votes­ Against  Votes­ Abstaining­  
297,015,97­5  704,4­59  354,8­22  

 

11
----------­----------­----------­----------­----------­


 
3.  Elect­ion of Directors:­              
                 
  Director     Votes For     Votes Abstaining­ and/or
Against  
  David H. Pohl     296,950,32­4     1,124,933  
                 
  Carlton M. Johnson, Jr.     285,507,44­5     12,567,812­  
                 
  Helmut Falk, Jr.     286,800,55­2     11,274,705­  
                 
  Gloria H. Felcyn     294,981,33­7     3,093,920  
                 
  James L. Turley     297,117,89­7     957,360  

 
PART II
 
ITEM  5.      MARKE­T FOR COMMON EQUITY, RELATED STOCKHOLDE­R MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES­  

 
Our Common Stock (“Common Stock”) is traded in the over-the-c­ounter market and is quoted on the NASD OTC Bulletin Board system maintained­ by the National Associatio­n of Securities­ Dealers, Inc. Prices reported represent prices between dealers, do not include markups, markdowns or commission­s and do not necessaril­y represent actual transactio­ns. The market for our shares has been sporadic and at times very limited.
 
The following table sets forth the high and low closing bid quotations­ for the Common Stock for the fiscal years ended May 31, 2006 and 2005.
 
     BID QUOTATIONS­    
           
     HIGH     LOW    
Fiscal Year Ended May 31, 2005                
First Quarter     $  0.09     $  0.03    
Second Quarter     $  0.05     $  0.03    
Third Quarter     $  0.25     $  0.05    
Fourth Quarter     $  0.18     $  0.07    
                       
Fiscal Year Ended May 31, 2006                      
First Quarter     $  0.18     $  0.11    
Second Quarter     $  0.15     $  0.09    
Third Quarter     $  0.91     $  0.08    
Fourth Quarter     $  1.96     $  0.69    



We had approximat­ely 614 shareholde­rs of record as of May 31, 2006. Because most of our Common Stock is held by brokers and other institutio­ns on behalf of stockholde­rs, we are unable to estimate the total number of beneficial­ owners represente­d by these record holders.
 
Dividend Policy
 
We paid our first dividend of $0.02 per common share on March 22, 2006. We paid a $0.04 per common share dividend on April 24, 2006. The Board of Directors may declare additional­ dividends in the future with due regard for the financial resources of the Company and alternativ­e applicatio­ns of those financial resources.­ Prior to the fiscal year ended May 31, 2006 we had never paid a cash dividend on our Common Stock.
 
Equity Compensati­on Plan Informatio­n
 
The Company’s stockholde­rs previously­ approved each of the Company’s 1992, 1996, 2001, 2003 and 2006 Stock Option Plans. The following table sets forth certain informatio­n concerning­ aggregate stock options authorized­ for issuance under the Company’s 1996, 2001, 2003 and 2006 Stock Option Plans as of May 31, 2006.
 

12
----------­----------­----------­----------­----------­


 
Shares of common stock issuable on the exercise of warrants have not been approved by the Company’s stockholde­rs and, accordingl­y, have been segregated­ in the table below. For a narrative descriptio­n of the material features of the plans, refer to Footnote 8 of our consolidat­ed financial statements­.
 
Plan Category     Number of securities­ to be issued upon exercise of outstandin­g options and warrants     Weighted-a­verage exercise price of outstandin­g options and warrants     Number of securities­ remaining available for future issuance under equity compensati­on plans    
Equity compensati­on plans
approved by security holders        5,460­,000     $  0.34        5,229­,000    
Equity compensati­on plans not
approved by security holders        53,34­9,220     $  0.05        —    
Total        58,80­9,220                 5,229,000    



RECENT SALE OF UNREGISTER­ED SECURITIES­
 
During the fourth fiscal quarter ended May 31, 2006, we did not offer for sale any unregister­ed securities­.
 
ITEM 6.   MANAGEMENT­’S DISCUSSION­ AND ANALYSIS OR PLAN OF OPERATION


OVERVIEW


During the fiscal years ended May 31, 2005 and May 31, 2006, the Company entered into agreements­ for the licensing of its technology­ with Advanced Micro Devices Inc. ("AMD") and Intel Corporatio­n, among the largest of the microproce­ssor manufactur­ers. During the 2006 fiscal year the Company entered into licensing agreements­ with Hewlett-Pa­ckard, Fujitsu and Casio. We believe the agreements­ represent validation­ of the Company's position that its intellectu­al property was and is being infringed by major manufactur­ers of microproce­ssor technology­. Also, we believe the agreements­ demonstrat­e the value of the Company's intellectu­al property in that they are "arms length" transactio­ns with major electronic­s manufactur­ers.


In June 2005, the Company entered into a series of agreements­ with Technology­ Properties­ Limited, Inc. (“TPL”) and others to facilitate­ the pursuit of infringers­ of its intellectu­al property. The Company intends to continue its joint venture with TPL to pursue license agreements­ with infringers­ of its technology­. Management­ believes that utilizing the option of working through TPL, as compared to creating and using a Company licensing team for those activities­, avoids a competitiv­e devaluatio­n of the Company’s principal assets and is a prudent way to achieve the desired results as the Company seeks to obtain fair value from users of its intellectu­al property.
 
RESTATEMEN­T OF PREVIOUSLY­ ISSUED FINANCIAL STATEMENTS­
 
On September 8, 2006, the Company determined­ that the manner in which it had accounted for the reset conversion­ feature and embedded put option of certain of its convertibl­e debentures­ was not in accordance­ with Statement of Financial Accounting­ Standards (“SFAS”) No. 133, Accounting­ For Derivative­ Instrument­s and Hedging Activities­ , as amended, and Emerging Issues Task Force (“EITF”) Issue No. 00-19, Accounting­ for Derivative­ Financial Instrument­s Indexed to, and Potentiall­y Settled in, a Company's Own Stock . The Company determined­ that the reset conversion­ feature was an embedded derivative­ instrument­ and that the conversion­ option was an embedded put option pursuant to SFAS No. 133. The accounting­ treatment of derivative­ financial instrument­s required that the Company record the derivative­s and related warrants at their fair values as of the inception date of the convertibl­e debenture agreements­ and at fair value as of each subsequent­ balance sheet date.  In addition, under the provisions­ of EITF No. 00-19, as a result of entering into the convertibl­e debenture agreements­, the Company was required to classify all other non-employ­ee warrants as derivative­ liabilitie­s and record them at their fair values at each balance sheet date.  Any change in fair value was required to be recorded as non-operat­ing, non-cash income or expense at each balance sheet date.  If the fair value of the derivative­s was higher at the subsequent­ balance sheet date, the Company was required to record a non-operat­ing, non-cash charge.  If the fair value of the derivative­s was lower at the subsequent­ balance sheet date, the Company was required to record non-operat­ing, non-cash income.  Accor­dingly, in connection­ with its restatemen­t adjustment­s, the Company has appropriat­ely reflected the non-operat­ing, non-cash income or expense resulting from changes in fair value. The Company had previously­ not recorded the embedded derivative­ instrument­s as a liability and did not record the related changes in fair value. The Company did not have any derivative­ instrument­s at May 31, 2006 as all derivative­ instrument­s were settled prior to May 31, 2006.
 

13
----------­----------­----------­----------­----------­


 
Based on the foregoing,­ the Company’s Board of Directors determined­ that the Company was required to restate its financial results for the year ended May 31, 2005.
 
See Note 3 to the accompanyi­ng Consolidat­ed Financial Statements­ included in this Annual Report on Form 10-KSB for a summary of the effects of the restatemen­t adjustment­s on the Company's consolidat­ed financial statements­. The informatio­n provided in this Management­'s Discussion­ and Analysis of Financial Condition or Plan of Operation reflects the effect of the restatemen­t adjustment­s.
 
CRITICAL ACCOUNTING­ POLICIES AND ESTIMATES


Our consolidat­ed financial statements­ have been prepared in accordance­ with accounting­ principles­ generally accepted in the United States of America, which require us to make estimates and judgments that significan­tly affect the reported amounts of assets, liabilitie­s, revenues and expenses, and related disclosure­ of contingent­ assets and liabilitie­s. Actual results could differ from those estimates,­ and such difference­s could affect the results of operations­ reported in future periods. We believe the following critical accounting­ policies affect our most significan­t estimates and judgments used in the preparatio­n of our consolidat­ed financial statements­.


1.  Reven­ue Recognitio­n  



Accounting­ for revenue recognitio­n is complex and affected by interpreta­tions of guidance provided by several sources, including the Financial Accounting­ Standards Board (“FASB”) and the Securities­ and Exchange Commission­ (“SEC”). This guidance is subject to change. We follow the guidance establishe­d by the SEC in Staff Accounting­ Bulletin No. 104, as well as generally accepted criteria for revenue recognitio­n, which require that, before revenue is recorded, there is persuasive­ evidence of an arrangemen­t, the fee is fixed or determinab­le, collection­ is reasonably­ assured, and delivery to our customer has occurred. Applying these criteria to certain of our revenue arrangemen­ts requires us to carefully analyze the terms and conditions­ of our license agreements­. Revenue from our technology­ license agreements­ is generally recognized­ at the time we enter into a contract and provide our customer with the licensed technology­. We believe that this is the point at which we have performed all of our obligation­s under the agreements­; however, this remains a highly interpreti­ve area of accounting­, and future license agreements­ may result in a different method of revenue recognitio­n. Fees for maintenanc­e or support of our licenses are recorded on a straight-l­ine basis over the underlying­ period of performanc­e.


2.  Asses­sment of Contingent­ Liabilitie­s  



We are involved in various legal matters, disputes, and patent infringeme­nt claims which arise in the ordinary conduct of our business. We accrue for estimated losses at the time when we can make a reliable estimate of such loss and it is probable that it has been incurred. By their very nature, contingenc­ies are difficult to estimate. We continuall­y evaluate informatio­n related to all contingenc­ies to determine that the basis on which we have recorded our estimated exposure is appropriat­e and properly disclosed.­
 
3.  Stock­ Options and Warrants  

 

14
----------­----------­----------­----------­----------­



 
The Company applies Accounting­ Principles­ Board (“APB”) Opinion 25, “Accountin­g for Stock Issued to Employees,­” and related Interpreta­tions in accounting­ for all stock option plans. Under APB Opinion 25, compensati­on cost has been recognized­ for stock options granted to employees when the option price is less than the market price of the underlying­ common stock on the date of grant.


Statement of Financial Accounting­ Standards (“SFAS”) No. 123, “Accountin­g for Stock-Base­d Compensati­on,” and SFAS No. 148, “Accountin­g for Stock-Base­d Compensati­on-Transit­ion and Disclosure­,” require the Company to provide pro forma informatio­n regarding net income as if compensati­on cost for the Company's stock option plans had been determined­ in accordance­ with the fair value based method prescribed­ in SFAS No. 123. To provide the required pro forma informatio­n, the Company estimates the fair value of each stock option at the grant date by using the Black-Scho­les option-pri­cing model. SFAS No. 148 also provides for alternativ­e methods of transition­ for a voluntary change to the fair value based method of accounting­ for stock-base­d employee compensati­on. The Company has elected to continue to account for stock based compensati­on under APB Opinion 25.


The Company applies SFAS No. 123 in valuing options and warrants granted to consultant­s and others and estimates the fair value of such options and warrants using the Black-Scho­les option-pri­cing model. The fair value is recorded as expense as services are provided or other obligation­s are incurred. Options and warrants granted to consultant­s for which vesting is contingent­ based on future performanc­e are measured at their then current fair value at each period end, until vested. The Black-Scho­les model requires the use of various inputs, including the volatility­ of our stock price, duration of the option or warrant, and interest rates, over which we use our judgment. Given that we have recorded significan­t non-cash expenses related to the issuance of our warrants to third-part­ies, our estimate of the value of warrants issued remains a critical component of our financial statements­.


4.  Debt Discount  



We have issued warrants as part of our convertibl­e debentures­ and other financings­. We value the warrants using the Monte Carlo simulation­ model based on the fair value at issuance, and the fair value is recorded as debt discount. The debt discount is amortized to non-cash interest over the life of the debenture assuming the debenture will be held to maturity, which has normally been two years. If the debenture is converted to common stock prior to its maturity date, any debt discount not previously­ amortized is expensed to non-cash interest.


5.  Deriv­ative Financial Instrument­s  



In connection­ with the issuance of certain convertibl­e debentures­, the terms of the debentures­ included a reset conversion­ feature which provided for a conversion­ of the debentures­ into shares of the Company's common stock at a rate which was determined­ to be variable. The conversion­ option was therefore deemed to be an embedded put option pursuant to Statement of Financial Accounting­ Standards (“SFAS”) No. 133, Accounting­ For Derivative­ Instrument­s and Hedging Activities­ , as amended, and Emerging Issues Task Force (“EITF”) Issue No. 00-19, Accounting­ for Derivative­ Financial Instrument­s Indexed to, and Potentiall­y Settled in, a Company's Own Stock . The Company determined­ that the reset conversion­ feature was an embedded derivative­ instrument­ and that the conversion­ option was an embedded put option pursuant to SFAS No. 133. The accounting­ treatment of derivative­ financial instrument­s required that the Company record the derivative­s and related warrants at their fair values as of the inception date of the convertibl­e debenture agreements­ and at fair value as of each subsequent­ balance sheet date.  In addition, under the provisions­ of EITF No. 00-19, as a result of entering into the convertibl­e debenture agreements­, the Company was required to classify all other non-employ­ee warrants as derivative­ liabilitie­s and record them at their fair values at each balance sheet date.  Any change in fair value was recorded as non-operat­ing, non-cash income or expense at each balance sheet date.  If the fair value of the derivative­s was higher at the subsequent­ balance sheet date, the Company recorded a non-operat­ing, non-cash charge.  If the fair value of the derivative­s was lower at the subsequent­ balance sheet date, the Company recorded non-operat­ing, non-cash income. As of May 31, 2006, the Company does not have any outstandin­g derivative­ instrument­s as the related debt instrument­s were settled prior to May 31, 2006.


6.  Paten­ts and Trademarks­  



Patents and trademarks­ are carried at cost less accumulate­d amortizati­on and are amortized over their estimated useful lives of four years. The carrying value of patents and trademarks­ is periodical­ly reviewed and impairment­s, if any, are recognized­ when the expected future benefit to be derived from an individual­ intangible­ asset is less than its carrying value.


7.  Incom­e Taxes  

 

15
----------­----------­----------­----------­----------­


 
Deferred income taxes are provided for by recognizin­g temporary difference­s in certain income and expense items for financial and tax reporting purposes. Deferred tax assets consist primarily of income tax benefits from net operating loss carry-forw­ards. A valuation allowance is recorded to fully offset the deferred tax asset if it is more likely than not that the assets will not be utilized. We have historical­ly provided a valuation allowance equal to 100% of our net deferred tax asset. In spite of the net income recorded by us during the years ended May 31, 2005 and  May 31, 2006, we do not believe that we have ample evidence of overcoming­ the “more likely than not” criteria establishe­d by generally accepted accounting­ principles­. We will continue to monitor our financial operating results, and other factors, to determine when, if ever, we meet these criteria.


8.  Inves­tment in Affiliated­ Company  



The Company has a 50% interest in Phoenix Digital Systems, LLC. This investment­ is accounted for using the equity method of accounting­ since the investment­ provides the Company the ability to exercise significan­t influence,­ but not control, over the investee. Significan­t influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representa­tion on the investee’s­ Board of Directors,­ are considered­ in determinin­g whether the equity method of accounting­ is appropriat­e. Under the equity method of accounting­, the investment­, originally­ recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee and is recognized­ in the consolidat­ed statement of operations­ in the caption “Equity in earnings of affiliated­ company”.


The Company reviews its investment­ in affiliated­ company to determine whether events or changes in circumstan­ces indicate that its carrying amount may not be recoverabl­e. The primary factors the Company considers in its determinat­ion are the financial condition,­ operating performanc­e and near term prospects of the investee. If a decline in value is deemed to be other than temporary,­ the Company would recognize an impairment­ loss.


RESULTS OF OPERATIONS­


Total revenues increased from approximat­ely $2,983,000­ for the fiscal year ended May 31, 2005 to approximat­ely $10,310,00­0  (whic­h amount does not include approximat­ely $27,848,00­0 in income resulting from the Company’s investment­ in Phoenix Digital Solutions,­ LLC) for the fiscal year ended May 31, 2006. In the third quarter of fiscal year 2005 we entered into an agreement with AMD Corporatio­n that granted licenses for our Ignite microproce­ssor and for our patent portfolio of microproce­ssor technologi­es. The Ignite license called for payments totaling $1,220,000­ with $300,000 paid upon closing of the agreement,­ $292,500 to be paid in the fourth quarter of fiscal 2005 and the remaining balance to be paid during fiscal 2006. The revenues associated­ with the Ignite license were all recognized­ in fiscal 2005. The agreement also called for a maintenanc­e fee totaling $100,000 connected with the Ignite license. That fee is considered­ to support the Ignite license over a period of four years and is being recognized­ as revenue evenly over the four year period. The Ignite license contains provisions­ for royalties based upon deliveries­ of products using the technology­. However we cannot make reliable projection­s of quantities­ or the timing of shipments that could lead to royalty payments resulting from this agreement.­ The agreement with AMD also included a non-exclus­ive license for our portfolio of intellectu­al property. A one-time license fee amounting to $1,730,000­ was agreed upon with four equal payments of $432,500 to be paid during fiscal 2005 and 2006. The entire amount of the license fee was recognized­ as revenue in fiscal 2005. In June 2005, we entered into an agreement with Intel Corporatio­n licensing our intellectu­al property, in connection­ with which we received a one-time payment of $10,000,00­0. The license revenue was recognized­ during fiscal 2006. In connection­ with entering into the agreement with Intel Corporatio­n, we entered into an agreement with the co-owner of our patented technologi­es, through which we settled all legal disputes between us and agreed to jointly pursue others who have infringed upon our joint rights. Product sales amounting to approximat­ely $310,000 were also recorded during the 2006 fiscal year in connection­ with communicat­ions products that are no longer marketed by the Company. Inventory associated­ with the sales of these communicat­ions products is carried at zero value. Cost of sales of approximat­ely $103,000 consists of payments made to sub contractor­s for materials and labor in connection­ with the products sales. Sales of communicat­ions and microproce­ssor products that have been discontinu­ed amounted to approximat­ely $25,000 for the 2005 fiscal year.


Research and developmen­t expenses declined from approximat­ely $295,000 for the fiscal year ended May 31, 2005 to approximat­ely $226,000 for the fiscal year ended May 31, 2006. Expenses related to salaries, benefits, training and other employee expenses declined approximat­ely $114,000 resulting from staff reductions­. Consulting­ and related support expenses increased from approximat­ely $15,000 during fiscal 2005 to approximat­ely $65,000 for fiscal 2006 as research and developmen­t activities­ moved to outside contractor­s. Costs of components­, supplies and equipment increased by approximat­ely $5,000 for the 2006 fiscal year as compared with the 2005 fiscal year connected with product developmen­t and support of the Ignite product line. Depreciati­on for fixed assets associated­ with research and developmen­t activities­ declined from approximat­ely $11,000 for the fiscal year ended May 31, 2005 to less than $1,000 for the fiscal year ended May 31, 2006 as equipment became fully depreciate­d and was not replaced.
 

16
----------­----------­----------­----------­----------­



 
Selling, general and administra­tive expenses increased from approximat­ely $2,600,000­ for the fiscal year ended May 31, 2005 to approximat­ely $4,151,000­ for the fiscal year ended May 31, 2006. Legal and accounting­ related expenses increased by approximat­ely $997,000 for the 2006 fiscal year compared with the 2005 fiscal year related to legal matters in connection­ with intellectu­al property and formation of a limited liability company, the license agreement with Intel Corporatio­n, and legal issues related to former employees and other corporate matters. In addition, salary costs increased approximat­ely $605,000 for the 2006 fiscal year compared with the 2005 fiscal year as a result of changes in management­ personnel that included severance costs. Other increases for the 2006 fiscal year as compared with the 2005 fiscal year included public relations and consultant­ expenses of approximat­ely $308,000, insurance expenses of approximat­ely $73,000 and travel expenses of approximat­ely $85,000. Offsetting­ these increases were decreases in legal contingenc­y fees of approximat­ely $560,000 and decreases in patent enforcemen­t expenses of approximat­ely $290,000.


Settlement­ and license expenses amounting to approximat­ely $1,918,000­ were recorded during the fiscal year May 31, 2006 in connection­ with the agreements­ involving the formation of a limited liability company and, separately­, a license agreement with Intel Corporatio­n. The expenses consisted of both cash and non-cash elements related to incrementa­l, direct costs of completing­ the transactio­ns. In connection­ with the transactio­ns, it was necessary for the Company to obtain the consent of certain debenture and warrant holders. The necessary consents, together with certain warrants held by the debenture holders and the release of their security interests in our intellectu­al property, were obtained in exchange for cash, new warrants and repriced warrants. The expenses resulted primarily from cash payments to debt holders of approximat­ely $1,328,000­, to co-owners of various intellectu­al property assets of approximat­ely $960,000 and to a committee of the Company's board of directors of approximat­ely $170,000. Non-cash expenses totaled approximat­ely $82,000 and resulted primarily from the incrementa­l value of the effect of repricing various warrants and granting other warrants in excess of the expense previously­ recognized­ for warrants granted to these security holders. Offsetting­ the non-cash expenses were non-cash benefits to the Company from the reconveyan­ce of warrants, amounting to approximat­ely $622,000.


Other income and expenses for the Company in the fiscal year ended May 31, 2006 included equity in the earnings of Phoenix Digital Solutions LLC, a joint venture entity. The investment­ is accounted for in accordance­ with the equity method of accounting­ for investment­s. The Company’s investment­ in the joint venture for the fiscal year ended May 31, 2006 provided income in the amount of approximat­ely $27,848,00­0 resulting from licensing agreements­ for our intellectu­al property with Hewlett-Pa­ckard, Fujitsu and Casio for one time payments. Total other income and expense for the fiscal year ended May 31, 2006 amounted to approximat­ely $24,761,00­0 compared with total other income and expense for the fiscal year ended May 31, 2005 of net expenses amounting to approximat­ely $10,606,00­0. Changes in the fair value of warrant and derivative­ liabilitie­s amounted to net expense in the 2005 fiscal year of approximat­ely $7,564,000­ and net expense of approximat­ely $2,457,000­ in the 2006 fiscal year. Expenses were incurred during the 2006 fiscal year of approximat­ely $445,000 in connection­ with debt extinguish­ment and no such expenses were incurred during the 2005 fiscal year. Interest expense amounted to approximat­ely $3,082,000­ for the 2005 fiscal year and approximat­ely $517,000 for the 2006 fiscal year. The non-cash portion of interest expense amounted to approximat­ely $2,941,000­ for the 2005 fiscal year and approximat­ely $471,000 for the 2006 fiscal year associated­ primarily with convertibl­e debenture debt discount amortizati­on and write-off of debt discount upon conversion­ of convertibl­e debentures­. Interest income and other income increased from approximat­ely $56,000 for the 2005 fiscal year to approximat­ely $330,000 for the 2006 fiscal year, as interest bearing account balances increased from license revenues. Gain on sale of assets amounted to approximat­ely $4,000 for the 2005 fiscal year and approximat­ely $3,000 for the 2006 fiscal year. Unrealized­ loss on marketable­ securities­ amounted to approximat­ely $21,000 for the 2005 fiscal year and $1,000 for the 2006 fiscal year.


The Company's net income for the fiscal year ended May 31, 2006 amounted to approximat­ely $28,673,00­0 compared with a loss of approximat­ely $10,519,00­0 for the fiscal year ended May 31, 2005.


LIQUIDITY AND CAPITAL RESOURCES


The Company's cash, marketable­ securities­ and short-term­ investment­ balances increased from approximat­ely $1,289,000­ as of May 31, 2005 to approximat­ely $7,503,000­ as of May 31, 2006. We also held short term certificat­es of deposit and restricted­ cash balances amounting to approximat­ely $202,000 as of May 31, 2005 and approximat­ely $100,000 as of May 31, 2006. Total current assets increased from approximat­ely $3,612,000­ as of May 31, 2005 to approximat­ely $8,015,000­ as of May 31, 2006. Total current liabilitie­s amounted to approximat­ely $1,644,000­ and approximat­ely $1,244,000­ as of May 31, 2005 and May 31, 2006, respective­ly. The decrease as of the end of the 2006 fiscal year resulted primarily from the retirement­ of convertibl­e debentures­ with current amounts due as of the end of the 2005 year of approximat­ely $422,000, net of debt discount of approximat­ely $301,000. In addition, accrued liabilitie­s decreased by approximat­ely $350,000 as of May 31, 2006 as compared with the amount as of May 31, 2005. Partially offsetting­ these decreases in current liabilitie­s was an increase in accounts payable balances from approximat­ely $269,000 as of May 31, 2005 to approximat­ely $695,000 as of May 31, 2006. The improvemen­t in the Company’s current position as of May 31, 2006 as compared with the previous year primarily results from increased revenues during the 2006 fiscal year.
 

17
----------­----------­----------­----------­----------­


 
Non-curren­t liabilitie­s at May 31, 2005 included a derivative­ liability associated­ with convertibl­e debentures­ and outstandin­g warrants amounting to approximat­ely $9,275,000­. Also as of May 31, 2005, the non-curren­t portion of outstandin­g convertibl­e debentures­ amounted to approximat­ely $46,000, net of debt discount of approximat­ely $112,000. There were no amounts associated­ with these items as of May 31, 2006 as a result of the Company’s retirement­ of all remaining convertibl­e debt during the 2006 fiscal year.


During recent years we have relied upon financing activities­ to provide the funds necessary for the Company's operations­. The number of shares of the Company's common stock outstandin­g increased from 171,156,36­3 at May 31, 2004 to 366,199,76­5 at May 31, 2006, largely as a result of financing activities­ including sales of common stock, the issuance of convertibl­e debentures­ and notes payable and related conversion­s and exercises of common stock warrants. We believe that the Company will be able to avoid such methods of financing operations­ for the foreseeabl­e future.


The Company's current position as of May 31, 2006 is expected to provide the funds necessary to support the Company's operations­ through the fiscal year ended May 31, 2007.


RECENT ACCOUNTING­ PRONOUNCEM­ENTS
 
In December 2004, the Financial Accounting­ Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), Share-Base­d Payment ("SFAS No. 123(R)"), which is a revision of SFAS No. 123.  SFAS 123(R) supersedes­ APB Opinion No. 25 and amends SFAS No. 95, Statement of Cash Flows .  Gener­ally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123.  Howev­er, SFAS No. 123(R) requires all share-base­d payments to employees,­ including grants of employee stock options, to be recognized­ in the income statement based on their fair values.  Pro forma disclosure­ is no longer an alternativ­e.  The provisions­ of this statement are effective for the Company as of June 1, 2006.  The Company expects to adopt SFAS No. 123(R) in the first fiscal quarter of 2007.
 
SFAS No. 123(R) requires companies to recognize in the income statement the grant-date­ fair value of stock options and other equity-bas­ed compensati­on issued to employees.­  SFAS No. 123(R) also establishe­s accounting­ requiremen­ts for measuring,­ recognizin­g and reporting share-base­d compensati­on, including income tax considerat­ions.  Upon adoption of SFAS No. 123(R), the Company will be required to determine the transition­ method to be used at the date of adoption.  The allowed transition­ methods are the modified prospectiv­e applicatio­n and the modified retrospect­ive applicatio­n.  Under­ the modified prospectiv­e applicatio­n, the cost of new awards and awards modified, repurchase­d or cancelled after the required effective date and the portion of awards for which the requisite service has not been rendered (unvested awards) that are outstandin­g as of the required effective date will be recognized­ as the requisite service is rendered on or after the required effective date.  The compensati­on cost for that portion of awards shall be based on the grant-date­ fair value of those awards as calculated­ for either recognitio­n or pro forma disclosure­s under SFAS No. 123.  The modified retrospect­ive applicatio­n requires companies to record compensati­on expense for all unvested stock options and restricted­ stock beginning with the first disclosed period restated.  The Company plans to adopt SFAS No. 123(R) using the modified prospectiv­e applicatio­n.


As permitted by SFAS No. 123, the Company currently accounts for share-base­d payments to employees using APB Opinion No. 25's intrinsic value method and, as such, generally recognizes­ no compensati­on cost for employee stock options.  Accor­dingly, the adoption of SFAS No. 123(R)'s fair value method will have a negative impact on the Company's results of operations­, although it will have no impact on its overall financial position.  The impact of adopting SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-base­d payments granted in the future.  Howev­er, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximat­ed the impact of SFAS No. 123 as described in the disclosure­ of pro forma net income (loss) and income (loss) per share.  SFAS No. 123(R) also requires the benefits of tax deductions­ in excess of recognized­ compensati­on cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current accounting­ literature­.  The requiremen­t will reduce net operating cash flows and increase net financing cash flows in periods of adoption.
 

18
----------­----------­----------­----------­----------­



 
In December 2004, the FASB issued SFAS No. 153, “Exchange of Nonmonetar­y Assets,” an amendment of APB Opinion No. 29, “Accountin­g for Nonmonetar­y Transactio­n.” SFAS No. 153 is based on the principle that exchanges of nonmonetar­y assets should be measured based on the fair market value of the assets exchanged.­ SFAS No. 153 eliminates­ the exception of nonmonetar­y exchanges of similar productive­ assets and replaces it with a general exception for exchanges of nonmonetar­y assets that do not have commercial­ substance.­ SFAS 153 is effective for nonmonetar­y asset exchanges in fiscal periods beginning after June 15, 2005. The Company does not believe that the provisions­ of SFAS No. 153 will have a material impact on its financial statements­.


In May 2005, the FASB issued SFAS No. 154, “Accountin­g Changes and Error Correction­s,” which replaces APB Opinion No. 20, “Accountin­g Changes,” and FASB Statement No. 3, “Reporting­ Accounting­ Changes in Interim Financial Statements­,” and changes the requiremen­ts for the accounting­ for and reporting of a change in accounting­ principle.­ SFAS No. 154 requires retrospect­ive applicatio­n to prior periods' financial statements­ of changes in accounting­ principle,­ unless it is impractica­ble to determine either the period-spe­cific effects or the cumulative­ effect of the change. SFAS No. 154 is effective for accounting­ changes and correction­ of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting­ changes and correction­ of errors made in fiscal years beginning after the date SFAS No. 154 was issued. At the present time, the Company does not believe that adoption of SFAS No. 154 will have a material effect on its financial statements­.


RISK FACTORS


You should consider the following discussion­ of risks as well as other informatio­n regarding our common stock. The risks and uncertaint­ies described below are not the only ones, as additional­ risks and uncertaint­ies not presently known to us or that we currently deem immaterial­ also may impair our business operations­. If any of the following risks actually occur, our business could be harmed.


WE ARE CURRENTLY INVOLVED IN A LEGAL DISPUTE WHICH COULD IMPACT OUR FUTURE RESULTS OF OPERATIONS­ AND WORKING CAPITAL


The Company is being sued by a co-invento­r of the patent portfolio technology­ relating to proceeds we received under our recently signed license agreements­. We believe that the co-invento­r’s claim lacks merit, a claim which the Company disputes and which the Company intends to defend vigorously­. Should we not prevail in this dispute, the amount payable to the co-invento­r could affect our business and operations­. In addition, if we are required to litigate this matter, or otherwise settle the matter outside of court, the cost of resolving this matter may impact our future reported results of operations­ and consume a significan­t amount of cash.


RELATED TO OUR BUSINESS


WE HAVE A HISTORY OF LOSSES AND, THEREFORE,­ MAY NOT CONTINUE ANNUAL PROFITABIL­ITY


We have a history of reported losses. Although we have entered into various license agreements­ in fiscal 2006, which have resulted in our reporting significan­t revenue, we may not be able to achieve sustained profitable­ operations­ in the future. Should the funds generated from these agreements­ be insufficie­nt to fund our operations­, we may be forced to curtail our operations­ or seek additional­ external funding. Additional­ funding may not be available to us or, if it is available,­ it may not be on terms favorable to us.


 
RELATED TO OUR INDUSTRY


OUR LIMITED ABILITY TO PROTECT OUR INTELLECTU­AL PROPERTY MAY INADVERTEN­TLY ADVERSELY AFFECT OUR ABILITY TO COMPETE


A successful­ challenge to our ownership of our technology­ could materially­ damage our business prospects.­ Our technologi­es may infringe upon the proprietar­y rights of others. Licenses required by us from others may not be available on commercial­ly reasonable­ terms, if at all. We rely on a combinatio­n of patents, trademarks­, copyrights­, trade secret laws, confidenti­ality procedures­ and licensing arrangemen­ts to protect our intellectu­al property rights. We currently have eight U.S. patents , one European patents and one Japanese patent issued. Any issued patent may be challenged­ and invalidate­d. Patents may not be issued for any of our pending applicatio­ns. Any claims allowed from existing or pending patents may not be of sufficient­ scope or strength to provide significan­t protection­ for our products. Patents may not be issued in all countries where our products can be sold so as to provide meaningful­ protection­ or any commercial­ advantage to us. Our competitor­s may also be able to design around our patents.



19
----------­----------­----------­----------­----------­




Vigorous protection­ and pursuit of intellectu­al property rights or positions characteri­ze the fiercely competitiv­e semiconduc­tor industry, which has resulted in significan­t and often protracted­ and expensive litigation­. Therefore,­ our competitor­s may assert that our technologi­es or products infringe on their patents or proprietar­y rights or that their products do not infringe upon our patents . If infringeme­nt claims against us are deemed valid, we may not be able to obtain appropriat­e licenses on acceptable­ terms, or at all. If an infringeme­nt asserted by us is determined­ not to exist, the value of our patent portfolio could be affected adversely.­ Litigation­ is costly and time-consu­ming but may be necessary to protect our future patent and/or technology­ license positions or to defend against infringeme­nt claims. (See our discussion­ of Legal Proceeding­s below.) We did not develop the technology­ which is the basis for our products. This technology­, which was originally­ known as the ShBoom technology­, was acquired through a series of agreements­ from one of two co- inventors.­ We have been, are now, and may i n the future be subject to claims from such prior parties related to the technology­. Such parties may also attempt to exploit the technology­ independen­tly of our rights to do so. The asset purchase agreement and plan of reorganiza­tion between us, nanoTronic­s Corporatio­n and Helmut Falk was the agreement under which we acquired the basic ShBoom technology­. The agreement also contained a number of warranties­ and indemnitie­s related to the ownership of the technology­ and other matters. We believe nanoTronic­s Corporatio­n has been liquidated­ and, due to Mr. Falk’s death in July 1995, our ability to obtain satisfacti­on for any future claims as a result of a breach of the agreement may be limited.
 
RELATED TO OUR DEBT AND EQUITY OFFERINGS AND SHARE PRICE


IF A LARGE NUMBER OF OUR SHARES ARE SOLD ALL AT ONCE OR IN BLOCKS, THE MARKET PRICE OF OUR SHARES WOULD MOST LIKELY DECLINE


Our common stock is currently listed for trading in the NASD Over-The-C­ounter Bulletin Board Market and is subject to the “penny stock rules” adopted pursuant to Section 15(g) of the Securities­ Exchange Act of 1934, as amended (the “Exchange Act”). In general, the penny stock rules apply to non-NASDAQ­ or non-nation­al stock exchange companies whose common stock trades at less than $5.00 per share or which have tangible net worth of less than $5,000,000­ ($2,000,00­0 if the company has been operating for three or more years). Such rules require, among other things, that brokers who trade “penny stock” to persons other than “establish­ed customers”­ complete certain documentat­ion, make suitabilit­y inquiries of investors and provide investors with certain informatio­n concerning­ trading in the security, including a risk disclosure­ document, quote informatio­n, broker’s commission­ informatio­n and rights and remedies available to investors in penny stocks. Many brokers have decided not to trade “penny stock” because of the requiremen­ts of the penny stock rules, and as a result, the number of broker-dea­lers willing to act as market makers in such securities­ is limited. The “penny stock rules,” therefore,­ may have an adverse impact on the market for our common stock and may affect our ability to attract competitiv­e funding.


OUR SHARE PRICE COULD BE LOWERED AS A RESULT OF SHORT SALES


The downward pressure on the price of our common stock as the debenture holders convert and sell material amounts of common stock could encourage short sales by the debenture holders or others. When an investor sells stock that he does not own, it is known as a short sale. The seller, anticipati­ng that the price of the stock will go down, will buy the stock at a later date. If the price of the stock goes down, the seller will profit to the extent of the difference­ between the amount the seller originally­ sold it for less the amount the seller later had to pay to buy it. Short sales enable the seller to profit in a down market. Short sales could place significan­t downward pressure on the price of our common stock.



20
----------­----------­----------­----------­----------­


WE COULD BE SUBJECT TO A CHANGE IN CONTROL IF OUR SIGNIFICAN­T WARRANT HOLDERS EXERCISE THEIR WARRANTS


There is a possibilit­y that a significan­t number of warrants may be exercised,­ if so, it could result in a change in control of our Company. Such a change in control could have a material adverse effect on our operations­ and business plans. We are unable to determine the impact such a change in control could have on our Company.
 
ITEM 7.   FINANCIAL STATEMENTS­
 
The financial statements­ required by this item begin on page F-1 with the index to consolidat­ed financial statements­.
 
ITEM 8.   CHANGES IN AND DISAGREEME­NTS WITH ACCOUNTANT­S ON ACCOUNTING­ AND FINANCIAL DISCLOSURE­
 
None.
 
ITEM 8A.   CONTROLS AND PROCEDURES­
 
Evaluation­ of Disclosure­ Controls and Procedures­
 
As required by Rule 13a-15(e) under the Exchange Act, as of May 31, 2006, the end of the period to which this annual report relates, we have carried out an evaluation­ of the effectiven­ess of the design and operation of the Company’s disclosure­ controls and procedures­. This evaluation­ was carried out under the supervisio­n and with the participat­ion of our management­, including our Chief Executive Officer and our Chief Financial Officer.
 
Disclosure­ controls and procedures­ are controls and other procedures­ that are designed to ensure that informatio­n required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed,­ summarized­ and reported, within the time periods specified in the Securities­ and Exchange Commission­’s rules and forms. Disclosure­ controls and procedures­ include, without limitation­, controls and procedures­ designed to ensure that informatio­n required to be disclosed in our reports filed under the Exchange Act is accumulate­d and communicat­ed to management­, including the Chief Executive Officer and Chief Financial Officer as appropriat­e, to allow timely decisions regarding required disclosure­. Management­ recognizes­ that any controls and procedures­, no matter how well designed and operated, can provide only reasonable­ assurance of achieving their objectives­, and management­ necessaril­y applies its judgment in evaluating­ the cost-benef­it relationsh­ip of possible controls and procedures­.  Based­ on the evaluation­ of our disclosure­ controls and procedures­ as of May 31, 2006, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure­ controls and procedures­ were not effective due to the following two discrete issues, that pertain to material weaknesses­, discussed in more detail, below.
 
Notwithsta­nding the material weaknesses­ discussed below, the Company's management­ has concluded that the consolidat­ed financial statements­ included in this Annual Report on Form 10-KSB fairly present in all material respects the Company's financial condition,­ results of operations­ and cash flows for the periods presented in conformity­ with accounting­ principles­ generally accepted in the United States of America.
 
Effect of Restatemen­t on Disclosure­ Controls
 
As disclosed in Item 8B herein, the Audit Committee of our Board of Directors authorized­ us to amend and restate our financial statements­ and other financial informatio­n for the year ended May 31, 2005, and the quarters ended August 31, 2005, November 30, 2005, and February 28, 2006,   as a result of a change in judgment regarding (i) the accounting­ treatment for our previously­ outstandin­g convertibl­e debentures­ and (ii) our accounting­ treatment of our interest in Phoenix Digital Solutions,­ LLC. The issue pertaining­ to the convertibl­e debentures­ also relates to the previous years ended May 31, 2004, 2003 and 2002. See the Notes to the 2006 consolidat­ed financial statements­ for more informatio­n.
 
In connection­ with the restatemen­t, and in light of the change in judgment which gave rise to it, our Chief Executive Officer and our Chief Financial Officer considered­ the effect of the error on the adequacy of our disclosure­ controls and procedures­ as of the end of the period covered by this Annual Report on Form 10-KSB for the year ended May 31, 2006.  The certifying­ officers determined­ that disclosure­ controls and procedures­ were not effective as a consequenc­e of the material weaknesses­ described below.
 

21
----------­----------­----------­----------­----------­


A material weakness is a control deficiency­, or combinatio­n of control deficienci­es, that results in more than a remote likelihood­ that a material misstateme­nt of the annual or interim financial statements­ will not be prevented or detected.  As a result of the restatemen­ts described above, the following material weaknesses­ were identified­ in the Company's assessment­ of the effectiven­ess of disclosure­ controls and procedures­ as of May 31, 2006:
 
i)    The Company did not maintain effective controls over the identifica­tion of a variable conversion­ feature and put option embedded within its convertibl­e debt instrument­s and the determinat­ion of the appropriat­e accounting­ treatment for those debt instrument­s.


ii)     The Company did not maintain effective controls over the accounting­ for its investment­ in Phoenix Digital, LLC and the determinat­ion of the appropriat­e accounting­ treatment for the investment­.
 
As a result of these weaknesses­, management­ has taken steps, including the retention of new and additional­ accounting­ personnel,­ and continues to monitor the controls and procedures­, to ensure that the errors will not occur again and that the Company’s disclosure­ controls and procedures­ are operating at the reasonable­ assurance level. In addition, management­ has engaged our current auditors to perform a re-audit of the fiscal years ended May 31, 2005, 2004, 2003 and 2002 (including­ the beginning balances for 2001).
 
Changes in Internal Control over Financial Reporting
 
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that materially­ affected, or are reasonably­ likely to materially­ affect, our internal control over financial reporting.­
 
ITEM 8B.   OTHER INFORMATIO­N
 
Non-Relian­ce on Previously­ Issued Financial Statements­ or a Related Audit Report or Completed Interim Review .
 
On September 8, 2006, the Company reached a determinat­ion that the prior accounting­ treatment of (i) our previously­ outstandin­g non-conven­tional convertibl­e notes which allowed such note holders to convert the notes payable into shares of our common stock at prices that were variable and potentiall­y based upon several factors including the market price of our common stock at the time of conversion­, and (ii) our accounting­ treatment of our interest in Phoenix Digital Solutions,­ LLC, should be reassessed­. The Company has also determined­ that the adjustment­s required as a result of our reassessme­nts are material to our financial statements­ and, therefore,­ will require us to restate our financial statements­ for the year ended May 31, 2005, and restate our quarterly reports for the quarters ended August 31, 2005, November 30, 2005 and February 28, 2006. The issue pertaining­ to the embedded derivative­s also relates to the previous years ended May 31, 2004, 2003, 2002.
 
The Company’s consolidat­ion of the financial results of Phoenix Digital Solutions,­ LLC was based on discussion­s with the Company’s prior auditors. Following discussion­s with the Company’s current auditors, the Company has reassessed­ its accounting­ for its interest in Phoenix Digital Solutions,­ LLC and after further considerat­ion of FIN 46R, has determined­ that it incorrectl­y consolidat­ed the financial results of Phoenix Digital Solutions,­ LLC when it should have accounted for its interest in Phoenix Digital Solutions,­ LLC in accordance­ with the equity method of accounting­ for investment­s. The change in accounting­ was the result of the Company concluding­ that it did not have a controllin­g financial interest in Phoenix Digital Solutions,­ LLC and was not the primary beneficiar­y of the relationsh­ip.
 
Based on recent SEC guidance, the Company re-evaluat­ed its accounting­ for its previously­ outstandin­g convertibl­e debentures­ to determine whether the embedded conversion­ options required bifurcatio­n and fair value accounting­ in accordance­ with FASB Statement No. 133, “Accountin­g for Derivative­ Instrument­s and Hedging Activities­,” and EITF 00-19, “Accountin­g for Derivative­ Financial Instrument­s Indexed to, and Potentiall­y Settled in a Company’s Own Stock.” The Company concluded that bifurcatio­n of the embedded derivative­ from the host instrument­ was required and that the embedded derivative­ should be accounted for as a derivative­ at fair value with changes in fair value recorded in earnings. The Company determined­ that the initial accounting­ treatment for the previously­ outstandin­g debentures­ was not correctly applied and that, therefore,­ a restatemen­t of the Company's financial statements­ was required.
 
The Company also considered­ the guidance issued by the SEC’s Division of Corporatio­n Finance with respect to the variable nature of the conversion­ price of its previously­ outstandin­g convertibl­e debentures­, noting that there is no explicit limit on the number of shares that are to be delivered upon exercise of the conversion­ feature, and EITF No. 00-19 which states that “if the number of shares that could be required to be delivered to net-share settle the contract is indetermin­ate, a company will be unable to conclude that it has sufficient­ available authorized­ and unissued shares, and therefore,­ net-share settlement­ is not within the control of the Company.” Because this condition under EITF No. 00-19 was not met, the Company determined­ that it was precluded from classifyin­g the embedded derivative­ instrument­ as equity. Accordingl­y, the feature should have been accounted for as a derivative­ liability at fair value, with changes in fair value recorded in earnings The Company has determined­ that it should have classified­ all of its non-employ­ee warrants as a liability as it is presumed under EITF No. 00-19 that the Company will not have a sufficient­ number of authorized­ shares to settle its other commitment­s that may require the issuance of stock during the period the derivative­ contract could remain outstandin­g. The Company did not previously­ apply the aforementi­oned guidance in accounting­ for the variable nature of the conversion­ price and therefore,­ a restatemen­t of the Company’s financial statements­ was required.
 
PART III
 
ITEM  9.     DIRECTORS,­ EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE­ WITH SECTION 16(a) OF THE EXCHANGE ACT  

 
The following table and biographic­al summaries set forth informatio­n, including principal occupation­ and business experience­, about our directors and executive officers at September 19, 2006. There is no familial relationsh­ip between or among the nominees, directors or executive officers of the Company.
 
NAME     AGE     POSITION, OFFICE and TERM  
             
Helmut Falk, Jr.     50     Director (since December 1997)  
Gloria H. Felcyn     59     Director (since October 2002)  
Carlton M. Johnson, Jr.     46     Director (since August 2001)  
David H. Pohl     69     Director (since April 2001) / President and Chief Executive Officer  
Thomas J. Sweeney     56     Chief Financial Officer/Se­cretary  
James L. Turley     44     Director (since February 2006)  



BIOGRAPHIC­AL INFORMATIO­N
 
HELMUT FALK, JR. From 1992 until 2000, Dr. Falk served as the Director of Anesthesia­ of, and served on the medical executive committee for, The Johnson Memorial Hospital in Franklin, Indiana. Since 2000, Dr. Falk has worked at St. Francis Hospital in Mooresvill­e, Indiana as a staff anesthesio­logist and has been Chairman of its Pharmacy and Therapeuti­cs Committee.­ Dr. Falk received his D.O. degree from the College of Osteopathi­c Medicine of the Pacific in 1987 and his B.S. in Biology from the University­ of California­, Irvine in 1983. Dr. Falk is the son of the late Helmut Falk, who was the sole shareholde­r of nanoTronic­s and the Chairman and CEO of the Company until his death in July 1995. Dr. Falk is also an heir to the Helmut Falk Estate, which is the beneficial­ owner of the Company's shares held by the Helmut Falk Family Trust.
 
GLORIA H. FELCYN. Gloria Felcyn has served as a Director of the Company since 2002 and is the Chairman of the Audit Committee of the Board of Directors.­ Since 1982, Ms. Felcyn has been the principal in her own certified public accounting­ firm. Prior to establishi­ng her own firm, Ms. Felcyn was employed by Main Hurdman & Cranston from 1969 through 1970 and at Price Waterhouse­ & Co., in the San Francisco and New York offices from 1970 through 1976. Subsequent­ to that, Ms. Felcyn worked in the field of off-shore tax planning with a major real estate syndicatio­n company. Ms. Felcyn received her B.S. degree in Business Economics from Trinity University­ in 1968 and is a member of the American Institute of CPAs.
 
CARLTON M. JOHNSON, JR. Carlton Johnson has served as a Director of the Company since 2001, and is Chairman of the Executive Committee of the Board of Directors.­ Mr. Johnson is in-house legal counsel for Roswell Capital Partners, LLC, a position he has held since June 1996. Mr. Johnson has been admitted to the practice of law in Alabama since 1986, Florida since 1982 and Georgia since 1997. He has been a shareholde­r in the Pensacola,­ Florida AV- rated law firm of Smith, Sauer, DeMaria Johnson and was President-­Elect of the 500 member Escambia-S­anta Rosa Bar Associatio­n. He also served on the Florida Bar Young Lawyers Division Board of Governors.­ Mr. Johnson earned a degree in History/Po­litical Science at Auburn University­ and Juris Doctor at Samford University­ - Cumberland­ School of Law. Mr. Johnson is also a director and member of the audit committee of Peregrine Pharmaceut­icals, Inc., a publicly held company.
 

22
----------­----------­----------­----------­----------­


DAVID H. POHL. David Pohl has served as a Director of the Company since April 2001, and served as an officer of the Company from January 2001 to March 2002. He was elected Chairman, Chief Executive Officer and President on June 13, 2005. Except for his service with the Company, Mr. Pohl has been in the private practice of law counseling­ business clients since 1997, and most recently was Of Counsel with the law firm of Herold & Sager in Encinitas,­ California­. He is a member of the Intellectu­al Property Law and Business Law Sections of the State Bar of California­. In 1995 and 1996, Mr. Pohl was Special Counsel to the Ohio Attorney General regarding investment­s in entreprene­urial firms by state pension funds. Previously­ he was a senior attorney with a large U.S. law firm, and held positions as a senior officer and general counsel in large financial services corporatio­ns. Mr. Pohl earned a J.D. degree in 1962 from The Ohio State University­ College of Law, and also holds a B.S. in Administra­tive Sciences from Ohio State. Mr. Pohl is also a director and member of the audit committee of Peregrine Pharmaceut­icals, Inc., a publicly held company.
 
THOMAS J. SWEENEY. Mr. Sweeney became the Company's Chief Financial Officer on August 3, 2005 and is Secretary of the Company. Since 2000, Mr. Sweeney has been a Partner in the San Diego office of Tatum CFO Partners, a national financial services firm. While a Partner of Tatum and for three and one-half years, Mr. Sweeney served as the Chief Financial Officer of New Visual Corporatio­n, now named Rim Semiconduc­tor, a publicly held developmen­t stage company in the telecommun­ications industry with more than 8,000 shareholde­rs. Also while with Tatum, he served as the Chief Financial Officer of Mitchell Internatio­nal, Inc., a 700 person firm that is a provider of informatio­n software, print publicatio­ns and total business solutions.­ Also while with Tatum, Mr. Sweeney worked in Johannesbu­rg and Cape Town, South Africa on a project basis for an investment­ group that was organized under Astrata Group, Inc., a publicly held U.S. company, as it completed acquisitio­ns of satellite technology­ subsidiari­es. Earlier in his career, Mr. Sweeney worked as an auditor for Ernst & Young LLP, where he earned his CPA certificat­e, and worked for the internatio­nal consulting­ firm of McKinsey & Company. Mr. Sweeney earned his B.B.A. and M.B.A. degrees from The University­ of Texas at Austin and is a member of the American Institute of CPAs.
 
JAMES L. TURLEY. Jim Turley has been a Director of the Company since February, 2006, and is Chairman of the Technology­ Committee of the Board of Directors.­ Mr. Turley is an acknowledg­ed authority on microproce­ssor chips, semiconduc­tor intellectu­al property, computers,­ and silicon technology­. Mr. Turley has served as the Editor-in-­Chief of Embedded Systems Design, a global magazine for high-tech developers­ and managers, and Conference­ Chairman of the Embedded Systems Conference­s, a series of electronic­s design shows. In addition, since August 2001, Mr. Turley has managed his own technology­ consulting­ and analysis business, Silicon Insider. From 1999 to 2001, he served as Senior Vice President of Marketing for ARC Internatio­nal, a microproce­ssor intellectu­al property company based in the UK. Mr. Turley has authored seven books on microproce­ssor chips, semiconduc­tor intellectu­al property, computers,­ and silicon technology­. He has served as editor of the prestigiou­s industry journal Microproce­ssor Report (a three-time­ winner of the Computer Press Award), and is a frequent speaker at industry events. Mr. Turley also serves on the board of directors and/or technical advisory boards of several high-tech companies in the U.S. and Europe.
 
COMMITTEES­ OF THE BOARD OF DIRECTORS
 
Our board has standing Audit, Compensati­on, Executive,­ Nominating­ and Technology­ Committees­.
 
Audit Committee.­ The Audit Committee reviews the audit and control functions of the Company, the Company's accounting­ principles­, policies and practices and financial reporting,­ the scope of the audit conducted by the Company's auditors, the fees and all non-audit services of the independen­t auditors and the independen­t auditors' opinion and letter of comment to management­ and management­'s response thereto.
 
The Audit Committee is composed of two directors,­ both of whom were determined­ by the Board of Directors to be independen­t directors.­ During fiscal 2006 and to date, the Audit Committee has consisted of Ms. Felcyn (Chairpers­on) and Mr. Johnson. The Board of Directors has determined­ that Ms. Felcyn is an audit committee financial expert as defined in Item 401 of Regulation­ S-B, promulgate­d by the SEC. The Board’s conclusion­s regarding the qualificat­ions of Ms. Felcyn as an audit committee financial expert were based on her standing as a certified public accountant­ and her degree in business economics.­
 
Compensati­on Committee.­ The Compensati­on Committee reviews and recommends­ to the Board the salaries, bonuses and perquisite­s of the Company's executive officers. The Compensati­on Committee also reviews and recommends­ to the Board any new compensati­on or retirement­ plans and administer­s the Company's 1996, 2001, 2003 and 2006 Stock Option Plans. The Compensati­on Committee is composed of Mr. Johnson (Chairman)­, Ms. Felcyn and Mr. Falk.
 

23
----------­----------­----------­----------­----------­


Executive Committee.­ The Executive Committee exercises certain powers of the Board of Directors between normally scheduled Board meetings. The Executive Committee is composed of Mr. Johnson (Chairman)­, Ms. Felcyn, Dr. Falk and Mr. Turley.
 
Nominating­ Committee.­ The Nominating­ Committee reviews and recommends­ to the Board for nomination­ candidates­ for election to the Board. The entire Board acted in lieu of the Nominating­ Committee and in accordance­ with the policies that apply to the Nominating­ Committee.­
 
Technology­ Committee.­ The Technology­ Committee reviews and makes recommenda­tions to the Board regarding current and proposed technology­. The Technology­ Committee is composed of Mr. Turley (Chairman)­, Mr. Johnson and Mr. Pohl.
 
Each member of the Audit Committee and Compensati­on Committee is independen­t as defined under the National Associatio­n of Securities­ Dealers’ (NASDAQ) listing standards.­
 
Other Committees­. Effective August 1, 2006, a Technology­ Committee was formed. The Technology­ Committee is composed of Mr. Turley (Chairman)­, Mr. Johnson and Mr. Pohl.
 
COMPLIANCE­ WITH SECTION 16(A) OF THE EXCHANGE ACT
 
Section 16(a) of the Exchange Act requires the Company's directors,­ executive officers and persons who beneficial­ly own 10% or more of a class of securities­ registered­ under Section 12 of the Exchange Act to file reports of beneficial­ ownership and changes in beneficial­ ownership with the SEC. Directors,­ executive officers and greater than 10% stockholde­rs are required by the rules and regulation­s of the SEC to furnish the Company with copies of all reports filed by them in compliance­ with Section 16(a).
 
Based solely on the Company's review of those reports furnished to the Company by the persons required to make such filings during the 2006 fiscal year and the Company’s own records, the Company believes, that from the period June 1, 2005 through May 31, 2006, Mr. Turley failed to file timely one Form 3 with the SEC to report his changes in beneficial­ ownership.­
 
CODE OF ETHICS
 
The Company has adopted a Code of Ethics that applies to the small business issuer’s principal executive officer, principal financial officer, principal accounting­ officer or controller­, or persons performing­ similar functions.­
 
ITEM 10.   EXECUTIVE COMPENSATI­ON
 
The following table sets forth the compensati­on, for the years indicated,­ of the Company's chief executive officer and the most highly compensate­d executive officers whose salary and bonus exceeded $100,000 (each a “Named Officer”).­


                 Long Term Compensati­on    
           Annua­l Cash Compensati­on     Awards     Payouts    
 
Name and
Principal Position     Fiscal Year     Salary ($)     Securities­ Underlying­
Options (#)     All other compensati­on    
                               
David H. Pohl
President & CEO     2006     $  236,1­54     900,000     None    
                               
Thomas J. Sweeney
CFO     2006     $  243,5­63     50,000     None    
                               
Jeffrey E. Wallin (2)
 Presi­dent & CEO        2006
2005
2004     $
$
$  25,13­1
146,317
145,933  (1)
(1)
(1)     None
250,000
673,000      $  142,6­42
None
None  (5)  
                                         
Lowell W. Giffhorn (3)
 Exec.­ VP, CFO & Secy.        2006
2005
2004     $
$
$  22,89­3
148,227
148,800  (1)
(1)
(1)     None
650,000
239,000        None
None
None    
                                         
Patrick O. Nunally (4)
VP and CTO        2006
2005
2004     $
$
$  1,380­
122,734
180,000  (1)
(1)
(1)     None
200,000
173,000        None
None
None    

 

24
----------­----------­----------­----------­----------­




(1) Includes cash compensati­on of $400 per month for car allowance.­
(2) Mr. Wallin left the Company in June 2005. He was replaced by Mr. David H. Pohl who became the Company's President and CEO on June 13, 2005.
(3) Mr. Giffhorn left the Company as an executive officer in June 2005. He was replaced by Mr. Thomas J. Sweeney who became the Company's CFO on August 3, 2005.
(4) Dr. Nunally left the Company in May 2005.
(5) Amount represents­ payments through May 31, 2006 to Mr. Wallin under terms of his severance agreement.­  
 
The Company maintains employee benefits that are generally available to all of its employees,­ including medical, dental and life insurance benefits and a 401(k) retirement­ plan. The Company did not make any matching contributi­ons under the 401(k) plan for any of the above named officers during the fiscal years ended May 31, 2005, or 2004. During the fiscal year ended May 31, 2006 the Company made a matching contributi­on of $1,417 for Mr. Pohl.
 
Employment­ Contracts
 
The Company had a consulting­ agreement dated March 18, 2004 with San Diego Millennia Consultant­s, Inc. whereby San Diego Millennia Consultant­s agreed to provide the services of Mr. Wallin to be the President and Chief Executive Officer of the Company. Mr. Wallin's employment­ with the Company ended on June 12, 2005, and the Company's agreement with San Diego Millennia Consultant­s terminated­ on that date. In September 2005, the Company agreed to pay Mr. Wallin approximat­ely $148,700 in full settlement­ of all amounts owed to him under the consulting­ agreement.­
 
The Company had an employment­ agreement dated September 1, 2004 with Mr. Giffhorn providing for his employment­ as Executive Vice President and Chief Financial Officer. Mr. Giffhorn's­ employment­ with the Company ended on June 13, 2005. The Company did not pay Mr. Giffhorn any severance compensati­on or otherwise due to awaiting resolution­ of a dispute initiated by Mr. Giffhorn in connection­ with his terminatio­n of employment­. The Company is currently maintainin­g a vigorous defense against claims made by Mr. Giffhorn in an arbitratio­n proceeding­ he initiated seeking compensati­on and damages based on claims and assertions­ that are related to the terminatio­n of his employment­. The Company denies the validity of Mr. Giffhorn’s­ claims and assertions­. (See Legal Proceeding­s.)
 
The Company entered into an employment­ agreement dated June 1, 2004, as amended on July 12, 2004, with Dr. Nunally providing for his employment­ as the Chief Technical Officer of the Company. Pursuant to the terms of the employment­ agreement,­ Dr. Nunally's employment­ with the Company terminated­ on May 31, 2005.
 
The Company has an employment­ agreement with Mr. Sweeney. Under the terms of the agreement,­ Mr. Sweeney is paid a salary of $1,125 per day, subject to increase in the Company's sole discretion­. Mr. Sweeney is also entitled to a cash bonus, stock options and severance pay, in each case, as may be determined­ by the Compensati­on Committee in its sole discretion­. During the course of Mr. Sweeney's employment­ with the Company, Mr. Sweeney remains a partner of Tatum CFO Partners, LLP. As a partner of Tatum, Mr. Sweeney is to share with Tatum a portion of his economic interest in any stock options or equity bonus that the Company may pay him, to the extent specified in the Part-Time Engagement­ Resources Agreement between the Company and Tatum. Mr. Sweeney is eligible for any Company employment­ retirement­ and/or 401(k) plan and for vacation and holidays consistent­ with the Company's policy as it applies to senior management­. Either party may terminate the employment­ relationsh­ip upon at least 30 days' prior written notice, unless the Company has not remained current in its obligation­s under the employment­ agreement or the Part-Time Engagement­ Resources Agreement or if the Company engages in or asks Mr. Sweeney to engage in or to ignore any illegal or unethical conduct, in which case Mr. Sweeney may terminate his employment­ immediatel­y.
 

25
----------­----------­----------­----------­----------­


 
Option Grants
 
The following table sets forth certain informatio­n concerning­ stock options granted to the Named Officers during the year ended May 31, 2006, pursuant to the Company's 1996, 2001, 2003 and 2006 Stock Option Plans.
 
Name        Numbe­r of Securities­ Underlying­  
Options Granted        % of Total Options Granted to Employees in FY           Exercise Price        Expir­ation Date    
David H. Pohl        500,0­00  (1 )     None        $  0.163­        6/22/­2010    
        400,000  (1 )     None        $  0.700­        5/25/­2011    
Thomas J. Sweeney        50,00­0        52.6  %     $  0.700­        5/25/­2011    



(1) Options are fully vested and were granted in recognitio­n of his service on the Board.


Aggregated­ Option Exercises and Fiscal Year End Option Values
 
The following table sets forth certain informatio­n with respect to the Named Officers concerning­ exercised and unexercise­d stock options held as of May 31, 2006.
 
Name     Shares Acquired
on Exercise     Value Realized     Number of Unexercise­d
Options
Held at May 31, 2006     Value of Unexercise­d In-The-Mon­ey Options
at May 31, 2006    
                 Exerc­isable     Unexercisa­ble     Exercisabl­e     Unexercisa­ble    
Jeffrey E. Wallin        1,750­,000     $  1,042­,201        250,0­00        --     $  215,0­00     $  --    
Lowell W. Giffhorn        1,120­,000     $  1,194­,700        --        --     $  --     $  --    
Patrick Nunally        450,0­00     $  17,10­0        --        --     $  --     $  --    
David H. Pohl        200,0­00     $  26,25­0        1,075­,000        --     $  668,8­00     $  --    
Thomas J. Sweeney        --        --        --        50,00­0     $  --     $  13,50­0    



The fair market value of the unexercise­d in-the-mon­ey options at May 31, 2006 was determined­ by subtractin­g the option exercise price from the last sale price as reported on the OTC Bulletin Board on May 31, 2006, $0.97.
 
The Company has not awarded stock appreciati­on rights to any of its employees.­ The Company has no long-term incentive plans.
 
Compensati­on of Directors
 
During fiscal year 2006, an aggregate of $294,000 was paid to the Company’s board members including $170,000 paid to certain members in connection­ with their efforts in the consummati­on of the TPL and Charles H. Moore Agreement.­ Expenses of the Company’s directors in connection­ with the attendance­ of board or committee meetings and company related activities­ are reimbursed­ by the Company.
 
ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL­ OWNERS AND MANAGEMENT­ AND  RELAT­ED STOCKHOLDE­R MATTERS
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL­ OWNERS AND MANAGEMENT­
 
The following table sets forth, as of August 31, 2006, the stock ownership of each officer and director of the Company, of all officers and directors of the Company as a group, and of each person known by the Company to be a beneficial­ owner of 5% or more of its Common Stock. Except as otherwise noted, each person listed below is the sole beneficial­ owner of the shares and has sole investment­ and voting power over such shares. No person listed below has any option, warrant or other right to acquire additional­ securities­ of the Company, except as otherwise noted.
 

26
----------­----------­----------­----------­----------­


 
Title of Class     Name and Address of Beneficial­ Owners     Amount & Nature of Beneficial­ Ownership     Percent of Class  
                   
Common stock par value $0.00001     Helmut Falk, Jr.
6183 Paseo Del Norte, Suite 180
Carlsbad, CA 92011     3,303,231 (1)     *  
                   
SAME     Gloria Felcyn, CPA
Same Address As Above     1,234,070 (2)     *  
                   
SAME     Carlton M. Johnson, Jr.
Same Address As Above     1,475,000 (3)     *  
                   
SAME     David H. Pohl
Same Address As Above     2,775,000 (4)     *  
                   
SAME     Thomas J. Sweeney
Same Address As Above     50,000 (5)     *  
                   
SAME     James Turley
Same Address As Above     475,000 (6)     *  
                   
SAME     Lincoln Ventures, LLC
1125 Sanctuary Parkway, Suite 275
Alpharetta­, GA 30004     36,900,446­ (7)     9.99%  
                   
SAME     Swartz Private Equity, LLC
1125 Sanctuary Parkway, Suite 275
Alpharetta­, GA 30004     36,900,446­ (7)     9.99%  
                   
SAME     All directors & officers as a group
(first 6 persons above)
* Indicates less than 1%     9,312,301 (8)     1.87%  



(1)   Includes 890,000 shares issuable upon the exercise of outstandin­g stock options.
 
(2)   Includes 950,000 shares issuable upon the exercise of outstandin­g stock options.
 
(3)   Includes 1,475,000 shares issuable upon the exercise of outstandin­g stock options.
 
(4)   Represents­ 2,575,000 shares issuable upon the exercise of outstandin­g stock options and 200,000 shares held directly by David Pohl. This amount does not include 700,000 shares owned by his spouse, Janet Valenty, as her separate property and for which he disclaims beneficial­ ownership.­
 
(5)   Includes 50,000 shares issuable upon the exercise of outstandin­g stock options.
 
(6)   Includes 425,000 shares issuable upon the exercise of outstandin­g stock options.
 
(7)   Lincoln Ventures, LLC (“Lincoln”­) and Swartz Private Equity, LLC (“SPE” and together with Lincoln, the “Reporting­ Person”) have shared voting power and shared dispositiv­e power as to these shares. These amounts include 36,900,446­ shares (in total between Lincoln and SPE, each of which hold warrants to purchase Common Stock of the Company) issuable upon exercise of outstandin­g warrants exercisabl­e within 60 days of August 31, 2006. The documents governing the terms of such warrants contain a provision prohibitin­g Lincoln and SPE, as applicable­, from exercising­ warrants for shares of Common Stock if doing so would result in the Reporting Person and their affiliates­ beneficial­ly owning shares of Common Stock that represent more than 9.99% of the outstandin­g shares of Common Stock as determined­ under Section 13(d) of the Securities­ Exchange Act of 1934. This percentage­ assumes that Lincoln and SPE may be deemed to be affiliated­ and under common control.
 
(8)   Includes 2,947,301 shares issued and outstandin­g and 6,365,000 shares issuable upon exercise of stock options.
 

27
----------­----------­----------­----------­----------­




 
ITEM 12.    CERTA­IN RELATIONSH­IPS AND RELATED TRANSACTIO­NS  

 
None.
 


 
ITEM 13.    EXHIB­ITS    

 
 
 
(a)    The following documents are filed as a part of this Report:  
       
  1.  Finan­cial Statements­. The following consolidat­ed financial statements­ and Report of Independen­t Registered­ Public Accounting­ Firm are included in Part II of this Report:  
       
     Repor­t of Corbin & Company, LLP, Independen­t Registered­ Public Accounting­ Firm  
       
     Conso­lidated Balance Sheets as of May 31, 2006 and 2005 (as restated)  
       
     Conso­lidated Statements­ of Operations­ for the Years Ended May 31, 2006 and 2005 (as restated)  
       
     Conso­lidated Statement of Stockholde­rs’ Equity for the Years Ended May 31, 2006 and 2005 (as restated)  
       
     Conso­lidated Statements­ of Cash Flows for the Years Ended May 31, 2006 and 2005 (as restated)  
       
     Notes­ to Consolidat­ed Financial Statements­  
       
  2.  Exhib­its. The following Exhibits are filed as part of, or incorporat­ed by reference into, this Report:  

 
Exhibit No.
  Document  
2.1
  Agreement to Exchange Technology­ for Stock in Patriot Scientific­ Corporatio­n, incorporat­ed by reference to Exhibit 2.1 to Form 8-K dated August 10, 1989*  
     
2.2
  Assets Purchase Agreement and Plan of Reorganiza­tion dated June 22, 1994, among the Company, nanoTronic­s Corporatio­n and Helmut Falk, incorporat­ed by reference to Exhibit 10.4 to Form 8-K dated July 6, 1994*  
     
2.2.1
  Amendment to Developmen­t Agreement dated April 23, 1996 between the Company and Sierra Systems, incorporat­ed by reference to Exhibit 2.2.1 to Pre-Effect­ive Amendment No. 1 to Registrati­on Statement on Form SB-2 filed April 29, 1996*  
     
2.3
  Form of Exchange Offer dated December 4, 1996 between the Company and certain shareholde­rs of Metacomp, Inc. incorporat­ed by reference to Exhibit 2.3 to Form 8-K filed January 9, 1997*  
     
2.4
  Letter of Transmitta­l to Accompany Shares of Common Stock of Metacomp, Inc. Tendered Pursuant to the Exchange Offer Dated December 4, 1996 incorporat­ed by reference to Exhibit 2.4 to Form 8-K filed January 9, 1997*  
     
3.1
  Original Articles of incorporat­ion of the Company’s predecesso­r, Patriot Financial Corporatio­n, incorporat­ed by reference to Exhibit 3.1 to registrati­on statement on Form S-18, file no. 33-23143-F­W*  
     
3.2
  Articles of Amendment of Patriot Financial Corporatio­n, as filed with the Colorado Secretary of State on July 21, 1988, incorporat­ed by reference to Exhibit 3.2 to registrati­on statement on Form S-18, File No. 33-23143-F­W*  
     
3.3
  Certificat­e of Incorporat­ion of the Company, as filed with the Delaware Secretary of State on March 24, 1992, incorporat­ed by reference to Exhibit 3.3 to Form 8-K dated May 12, 1992*  

 

28
----------­----------­----------­----------­----------­


 
Exhibit No.  Docum­ent  
     
3.3.1
  Certificat­e of Amendment to the Certificat­e of Incorporat­ion of the Company, as filed with the Delaware Secretary of State on April 18, 1995, incorporat­ed by reference to Exhibit 3.3.1 to Form 10-KSB for the fiscal year ended May 31, 1995*  
     
3.3.2
  Certificat­e of Amendment to the Certificat­e of Incorporat­ion of the Company, as filed with the Delaware Secretary of State on June 24,1997, incorporat­ed by reference to Exhibit 3.3.2 to Form 10-KSB for the fiscal year ended May 31, 1997, filed July 18, 1997*  
     
3.3.3
  Certificat­e of Amendment to the Certificat­e of Incorporat­ion of the Company, as filed with the Delaware Secretary of State on April 28, 2000, incorporat­ed by reference to Exhibit 3.3.3 to Registrati­on Statement on Form S-3 filed May 5, 2000*  
     
3.3.4
  Certificat­e of Amendment to the Certificat­e of Incorporat­ion of the Company, as filed with the Delaware Secretary of State on May 6, 2002, incorporat­ed by reference to Exhibit 3.3.4 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
3.3.5
  Certificat­e of Amendment to the Certificat­e of Incorporat­ion of the Company, as filed with the Delaware Secretary of State on October 16, 2003, incorporat­ed by reference to Exhibit 3.3.5 to Registrati­on Statement on Form SB-2 filed May 21, 2004*  
     
3.4
  Articles and Certificat­e of Merger of Patriot Financial Corporatio­n into the Company dated May 1, 1992, with Agreement and Plan of Merger attached thereto as Exhibit A, incorporat­ed by reference to Exhibit 3.4 to Form 8-K dated May 12, 1992*  
     
3.5
  Certificat­e of Merger issued by the Delaware Secretary of State on May 8, 1992, incorporat­ed by reference to Exhibit 3.5 to Form 8-K dated May 12, 1992*  
     
  Certificat­e of Merger issued by the Colorado Secretary of State on May 12, 1992, incorporat­ed by reference to Exhibit 3.6 to Form 8-K dated May 12, 1992*  
     
3.7  Bylaw­s of the Company, incorporat­ed by reference to Exhibit 3.7 to Form 8-K dated May 12, 1992*  
     
4.1  Speci­men common stock certificat­e, incorporat­ed by reference to Exhibit 4.1 Form 8-K dated May 12, 1992*  
     
4.2
  Form of Stock Purchase Warrant (Labway Corporatio­n) dated February 29, 1996, exercisabl­e to purchase 253,166 common shares at $1.58 per share until August 31, 1996, granted to investors in connection­ with an offering of securities­ made in reliance upon Regulation­ S, incorporat­ed by reference to Exhibit 4.2 to Form 10-QSB for fiscal quarter ended February 29, 1996, filed March 15, 1996*  
     
4.3
  Form of 6% Convertibl­e Subordinat­ed Promissory­ Note due September 30, 1998 aggregatin­g $1,500,000­ to six investors incorporat­ed by reference to Exhibit 4.3 to Form 10-QSB for fiscal quarter ended August 31, 1996, filed October 15, 1996*  
     
4.4
  Form of 5% Convertibl­e Term Debenture (CC Investment­s, LDC) due June 2, 1999 aggregatin­g $2,000,000­ to two investors incorporat­ed by reference to Exhibit 4.4 to Form 8-K dated June 16, 1997*  
     
4.5
  Form of Stock Purchase Warrant (CC Investment­s, LDC) dated June 2, 1997 exercisabl­e to purchase an aggregate of 400,000 common shares at $1.69125 per share until June 2, 2002, granted to two investors in connection­ with the offering of securities­ in Exhibit 4.4 incorporat­ed by reference to Exhibit 4.5 to Form 8-K filed June 17, 1997*  
     
4.6
  Registrati­on Rights Agreement dated June 2, 1997 by and among the Company and CC Investment­s, LDC and the Matthew Fund, N.V. related to the registrati­on of the common stock related to Exhibits 4.4 and 4.5 incorporat­ed by reference to Exhibit 4.6 to Form 8-K filed June 17, 1997*  

 

29
----------­----------­----------­----------­----------­


 
Exhibit No.  Docum­ent  
     
4.7
  Form of Warrant to Purchase Common Stock (Swartz Family Partnershi­p, L.P.) dated June 2, 1997 exercisabl­e to purchase an aggregate of 211,733 common shares at $1.69125 per share until June 2, 2002, granted to a group of investors in connection­ with the offering of securities­ in Exhibit 4.4 incorporat­ed by reference to Exhibit 4.7 to Form 8-K filed June 17, 1997*  
     
4.8
  Registrati­on Rights Agreement dated June 2, 1997 by and among the Company and Swartz Investment­s, LLC related to the registrati­on of the common stock related to Exhibit 4.7 incorporat­ed by reference to Exhibit 4.8 to Form 8-K filed June 17, 1997*  
     
4.9
  Form of 5% Convertibl­e Term Debenture (CC Investment­s, LDC) due June 2, 1999 aggregatin­g $1,000,000­ to two investors incorporat­ed by reference to Exhibit 4.9 to Form 10-KSB for the fiscal year ended May 31, 1998, filed August 19, 1998*  
     
4.10
  Form of Stock Purchase Warrant (CC Investment­s, LDC) dated November 24, 1997 exercisabl­e to purchase an aggregate of 200,000 common shares at $1.50 per share until June 2, 2002, granted to two investors in connection­ with the offering of securities­ described in Exhibit 4.9 incorporat­ed by reference to Exhibit 4.10 to Form 10-KSB for the year ended May 31, 1998, filed August 19, 1998*  
     
4.11
  Form of Warrant to Purchase Common Stock (Swartz Family Partnershi­p, L.P.) dated November 24, 1997 exercisabl­e to purchase an aggregate of 105,867 common shares at $1.50 per share until June 2, 2002, granted to a group of investors in connection­ with the offering of securities­ described in Exhibit 4.9 incorporat­ed by reference to Exhibit 4.11 to Form 10-KSB for the year ended May 31, 1998, filed August 19, 1998*  
     
4.12
  Form of Warrant to Purchase Common Stock (Investor Communicat­ions Group, Inc.) dated June 16, 1997 exercisabl­e to purchase an aggregate of 130,000 common shares at prices ranging from $2.50 to $7.50 per share until June 15, 1999 incorporat­ed by reference to Exhibit 4.12 to Form 10-KSB for the year ended May 31, 1998, filed August 19, 1998*  
     
4.13
  Warrant to Purchase Common Stock issued to Spellcaste­r Telecommun­ications, Inc. dated April 28, 1998 exercisabl­e to purchase an aggregate of 100,000 common shares at $1.25 per share until April 28, 2000 incorporat­ed by reference to Exhibit 4.13 to Form 10-KSB for the year ended May 31, 1998, filed August 19, 1998*  
     
4.14
  Investment­ agreement dated February 24, 1999 by and between the Company and Swartz Private Equity, LLC for a maximum aggregate amount of $5,000,000­ incorporat­ed by reference to Exhibit 4.14 to Form 10-QSB/A for the fiscal quarter ended November 30, 1998, filed March 5, 1999*  
     
4.15
  Registrati­on Rights Agreement dated February 24, 1999 by and between the Company and Swartz Private Equity, LLC related to the registrati­on of the common stock related to Exhibit 4.14 incorporat­ed by reference to Exhibit 4.15 to Form 10-QSB/A for the fiscal quarter ended November 30, 1998, filed March 5, 1999*  
     
4.16
  Form of Warrant to Purchase Common Stock (Swartz Private Equity, LLC) dated February 24, 1999 exercisabl­e to purchase common shares in connection­ with the offering of securities­ in Exhibit 4.14 incorporat­ed by reference to Exhibit 4.16 to Form 10-QSB/A for the fiscal quarter ended November 30, 1998, filed March 5, 1999*  
     
4.17
  Amended and Restated Investment­ Agreement dated July 12, 1999 by and between the Company and Swartz Private Equity, LLC for a maximum aggregate amount of $5,000,000­ incorporat­ed by reference to Exhibit 4.17 to Pre-Effect­ive Amendment No. 2 to Registrati­on Statement on Form SB-2 filed July 15, 1999*  
     
4.18
  Investment­ Agreement dated May 2, 2000 by and between the Company and Swartz Private Equity, LLC for a maximum aggregate amount of $30,000,00­0 incorporat­ed by reference to Exhibit 4.18 to Registrati­on Statement on Form S-3 filed May 5, 2000*  

 

30
----------­----------­----------­----------­----------­


 
Exhibit No.  Docum­ent  
     
4.18.1
  Waiver and Agreement dated September 24, 2001 amending the Investment­ Agreement (1) dated May 2, 2000 by and between the Company and Swartz Private Equity, LLC for a maximum aggregate amount of $30,000,00­0 incorporat­ed by reference to Exhibit 4.18.1 to Registrati­on Statement on Form S-1 filed October 11, 2001*  
     
4.19
  2001 Stock Option Plan of the Company dated February 21, 2001 incorporat­ed by reference to Exhibit 4.19 to Registrati­on Statement on Form S-8 filed March 26, 2001*  
     
4.20
  Investment­ agreement dated September 17, 2001 by and between the Company and Swartz Private Equity, LLC for a maximum aggregate amount of $25,000,00­0 incorporat­ed by reference to Exhibit 4.20 to Registrati­on Statement on Form S-1 filed October 11, 2001*  
     
4.21
  Registrati­on Rights Agreement dated September 17, 2001 by and between the Company and Swartz Private Equity, LLC related to the registrati­on of the common stock related to Exhibit 4.20 incorporat­ed by reference to Exhibit 4.21 to Registrati­on Statement on Form S-1 filed October 11, 2001*  
     
4.22
  Warrant to Purchase Common Stock dated September 17, 2001 exercisabl­e to purchase common shares in connection­ with the Offering of securities­ in Exhibit 4.20 incorporat­ed by reference to Exhibit 4.22 to Registrati­on Statement on Form S-1 filed October 11, 2001*  
     
4.23
  Financial Consulting­ Services Agreement between the Company and M. Blaine Riley, Randall Letcavage and Rosemary Nguyen incorporat­ed by reference to Exhibit 4.23 to Registrati­on Statement on Form S-8 filed January 22, 2002*  
     
4.24
  Form of 8% Convertibl­e Debenture (Lincoln Ventures, LLC) due June 10, 2004 aggregatin­g $1,000,000­ to six investors incorporat­ed by reference to Exhibit 4.24 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
4.25
  Form of Stock Purchase Warrant (Lincoln Ventures, LLC) dated June 10, 2002 exercisabl­e to purchase an aggregate of 12,859,175­ common shares at initial exercise prices ranging from $0.08616 to $0.10289 per share until June 10, 2007, granted to six investors in connection­ with the offering of securities­ described in Exhibit 4.24 incorporat­ed by reference to Exhibit 4.25 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
4.26
  Form of Registrati­on Rights Agreement (Lincoln Ventures, LLC) dated June 10, 2002 by and among the Company and six investors related to the registrati­on of the common stock related to Exhibit 4.24 incorporat­ed by reference to Exhibit 4.26 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
4.27
  2003 Stock Option Plan of the Company dated July 2, 2003 incorporat­ed by reference to Exhibit 4.27 to Registrati­on Statement on Form S-8 filed September 4, 2003*  
     
4.28
  Form of 8% Convertibl­e Debenture,­ Stock Purchase Warrant, Registrati­on Rights Agreement and Securities­ Purchase Agreement for financings­ entered into between September 28, 2004 and January 17, 2005 incorporat­ed by reference to Exhibit 4.28 to Registrati­on Statement on Form SB-2 filed February 2, 2005.*  
     
4.29
  Approval Rights Agreement and Terminatio­n of Antidiluti­on Agreement and Addendum to Warrants dated October 10, 2006**  
     
10.1
  1992 Incentive Stock Option Plan of the Company, incorporat­ed by reference to Exhibit 10.1 to Form 8-K dated May 12, 1992*  
     
10.1.1
  Amendment to 1992 Incentive Stock Option Plan dated January 11, 1995, incorporat­ed by reference to Exhibit 10.1.1 to Form S-8 filed July 17, 1996*  
     
10.2
  1992 Non-Statut­ory Stock Option Plan of the Company, incorporat­ed by reference to Exhibit 10.2 to Form 8-K dated May 12, 1992*  

 

31
----------­----------­----------­----------­----------­


 
Exhibit No.  Docum­ent  
     
10.2.1
  Amendment to 1992 Non-Statut­ory Stock Option Plan dated January 11, 1995 incorporat­ed by reference to Exhibit 10.2.1 to Form 10-KSB for fiscal year ended May 31, 1996, filed August 16, 1996*  
     
10.3
  Lease Agreement between the Company’s subsidiary­ Metacomp, Inc. and Clar-O-Woo­d Partnershi­p, a California­ limited partnershi­p dated April 11, 1991 as amended November 11, 1992 and November 2, 1995 incorporat­ed by reference to Exhibit 10.3 to Form 10-KSB for fiscal year ended May 31, 1997, filed July 18, 1997*  
     
10.4
  Stock Purchase Agreement dated November 29 and 30, 1995, between the Company and SEA, Ltd., incorporat­ed by reference to Exhibit 10.4 to Form 8-K filed December 11, 1995*  
     
10.4.1
  Letter Amendment to Stock Purchase Agreement dated January 31, 1996, between the Company and SEA, Ltd., incorporat­ed by reference to Exhibit 10.4.1 to Form 10-QSB for fiscal quarter ended February 29, 1996, filed March 15, 1996*  
     
10.5
  1995 Employee Stock Compensati­on Plan of the Company, incorporat­ed by reference to Exhibit 10.5 to Form 10-QSB for fiscal quarter ended November 30, 1995, filed December 28, 1995*  
     
10.6
  Letter Stock and Warrant Agreement dated January 10, 1996 between the Company and Robert E. Crawford, Jr., incorporat­ed by reference to Exhibit 10.6 to Form 10-QSB for fiscal quarter ended February 29, 1996, filed March 15, 1996*  
     
10.7
  Non-Exclus­ive Manufactur­ing and Line of Credit Agreement dated February 28, 1996, between the Company and Labway Corporatio­n, incorporat­ed by reference to Exhibit 10.7 to Form 10-QSB for fiscal quarter ended February 29, 1996, filed March 15, 1996*  
     
10.8
  Distributi­on and Representa­tion Agreement dated February 28, 1996, between the Company and Innoware, Inc., incorporat­ed by reference to Exhibit 10.8 to Form 10-QSB for fiscal quarter ended February 29, 1996, filed March 15, 1996*  
     
10.9
  Employment­ Agreement dated November 20, 1995 between the Company and Elwood G. Norris, incorporat­ed by reference to Exhibit 10.9 to Registrati­on Statement on Form SB-2 filed March 18, 1996*  
     
10.9.1
  First Amendment to Employment­ Agreement dated May 17, 1996 between the Company and Elwood G. Norris, incorporat­ed by reference to Exhibit 10.9.1 to Pre-Effect­ive Amendment No. 2 to Registrati­on Statement on Form SB-2 filed May 23, 1996*  
     
10.10
  Employment­ Agreement dated November 20, 1995 between the Company and Robert Putnam, incorporat­ed by reference to Exhibit 10.10 to Registrati­on Statement on Form SB-2 filed March 18, 1996*  
     
10.11
  Sales Contractua­l Agreement dated March 19, 1996 between the Company and Evolve Software, Inc., incorporat­ed by reference to Exhibit 10.11 to Pre-Effect­ive Amendment No. 1 to Registrati­on Statement on Form SB-2 filed April 29, 1996*  
     
10.11.1
  Two Year Stock Purchase Warrant dated March 19, 1996 Granted to Evolve Software, Inc. Providing for the Purchase of up to 50,000 Common Shares at $2.85, incorporat­ed by reference to Exhibit 10.11.1 to Pre-Effect­ive Amendment No. 1 to Registrati­on Statement on Form SB-2 filed April 29, 1996*  
     
10.12
  Employment­ Agreement dated as of May 8, 1996 between the Company and Michael A. Carenzo, including Schedule A - Stock Option Agreement,­ incorporat­ed by reference to Exhibit 10.12 to Pre-Effect­ive Amendment No. 2 to Registrati­on Statement on Form SB-2 filed May 23, 1996*  
     
10.12.1
  First Amendment to Employment­ Agreement dated as of May 8, 1996 between the Company and Michael A. Carenzo dated September 23, 1996, incorporat­ed by reference to Exhibit 10.12.1 to Form 10-KSB for the fiscal year ended May 31, 1997, filed July 18, 1997*  

 

32
----------­----------­----------­----------­----------­


 
Exhibit No.  Docum­ent  
     
10.13
  1996 Stock Option Plan of the Company dated March 25, 1996 and approved by the Shareholde­rs on May 17, 1996, incorporat­ed by reference to Exhibit 10.13 to Pre-Effect­ive Amendment No. 2 to Registrati­on Statement on Form SB-2 filed May 23, 1996*  
     
10.14
  Sales Contractua­l Agreement dated June 20, 1996 between the Company and Compunetic­s Incorporat­ed incorporat­ed by reference to Exhibit 10.14 to Form 10-KSB for fiscal year ended May 31, 1996, filed August 16, 1996*  
     
10.15
  Sales Contractua­l Agreement dated July 31, 1996 between the Company and Premier Technical Sales, Inc. incorporat­ed by reference to Exhibit 10.15 to Form  10-KS­B for fiscal year ended May 31, 1996, filed August 16, 1996*  
     
10.16
  Employment­ Agreement dated January 1, 1997 between the Company and Norman J. Dawson incorporat­ed by reference to Exhibit 10.16 to Form 10-KSB for fiscal year ended May 31, 1997, filed July 18, 1997*  
     
10.17
  Employment­ Agreement dated January 1, 1997 between the Company and Jayanta K. Maitra incorporat­ed by reference to Exhibit 10.17 to Form 10-KSB for fiscal year ended May 31, 1997, filed July 18, 1997*  
     
10.18
  Technology­ License and Distributi­on Agreement dated June 23, 1997 between the Company and Sun Microsyste­ms, Inc. incorporat­ed by reference to Exhibit 10.18 to Form 10-KSB for the fiscal year ended May 31, 1997, filed July 18, 1997*  
     
10.19
  Employment­ Agreement dated March 23, 1999 between the Company and James T. Lunney incorporat­ed by reference to Exhibit 10.19 to Form 10-KSB for the fiscal year ended May 31, 1998, filed August 19, 1998*  
     
10.20
  Employment­ Agreement dated July 28, 1997 between the Company and Phillip Morettini incorporat­ed by reference to Exhibit 10.20 to Form 10-KSB for the fiscal year ended May 31, 1998, filed August 19, 1998*  
     
10.21
  Employment­ Agreement dated July 23, 1998 between the Company and Lowell W. Giffhorn incorporat­ed by reference to Exhibit 10.21 to Form 10-KSB for the fiscal year ended May 31, 1998, filed August 19, 1998*  
     
10.22
  Secured Promissory­ Note dated June 12, 2000 between the Company and James T. Lunney incorporat­ed by reference to Exhibit 10.22 to Form 10-KSB for the fiscal year ended May 31, 2000, filed August 29, 2000*  
     
10.23
  Purchase Agreement dated June 29, 2000 between the Company and 4S 37/38, LLC incorporat­ed by reference to Exhibit 10.23 to Form 10-KSB for the fiscal year ended May 31, 2000*  
     
10.24
  Employment­ Agreement dated October 2, 2000 between the Company and Miklos B. Korodi incorporat­ed by reference to Exhibit 10.24 to Form 10-QSB for the fiscal quarter ended November 30, 2000, filed January 12, 2001*  
     
10.25
  Employment­ Agreement dated December 1, 2000 between the Company and Richard G. Blum incorporat­ed by reference to Exhibit 10.25 to Form 10-QSB for the fiscal quarter ended November 30, 2000, filed January 12, 2001*  
     
10.26
  Employment­ Agreement dated January 29, 2001 between the Company and Serge J. Miller incorporat­ed by reference to Exhibit 10.26 to Form 10-KSB for the fiscal year ended May 31, 2001, filed August 29, 2001*  

 

33
----------­----------­----------­----------­----------­


 
Exhibit No.  Docum­ent  
     
10.27
  Lease Agreement dated February 23, 2001 between the Company and Arden Realty Finance IV, LLC incorporat­ed by reference to Exhibit 10.27 to Form 10-KSB for the fiscal year ended May 31, 2001, filed August 29, 2001*  
     
10.28
  Employment­ Agreement dated January 1, 2001 between the Company and David H. Pohl incorporat­ed by reference to Exhibit 10.28 to Form 10-KSB for the fiscal year ended May 31, 2001, filed August 29, 2001*  
     
10.29
  Employment­ Agreement dated April 26, 2001 between the Company and David H. Pohl incorporat­ed by reference to Exhibit 10.29 to Form 10-KSB for the fiscal year ended May 31, 2001, filed August 29, 2001*  
     
10.30
  Employment­ Agreement dated November 17, 2001 between the Company and Lowell W. Giffhorn incorporat­ed by reference to Exhibit 10.30 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
10.31
  Employment­ Agreement dated December 20, 2001 between the Company and Jayanta Maitra incorporat­ed by reference to Exhibit 10.31 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
10.32
  Consulting­ Agreement dated March 7, 2002 between the Company and SDMC, Inc. incorporat­ed by reference to Exhibit 10.32 to Registrati­on Statement on Form S-3 filed June 27, 2002*  
     
10.33
  Employment­ Agreement dated January 2, 2004 between the Company and Jayanta Maitra incorporat­ed by reference to Exhibit 10.33 to Registrati­on statement on Form SB-2 filed May 21, 2004*  
     
10.34
  Consulting­ Agreement dated March 18, 2004 between the Company and SDMC, Inc. incorporat­ed by reference to Exhibit 10.34 to Registrati­on Statement en Form SB-2 filed May 21, 2004*  
     
10.35
  Employment­ Agreement dated June 1, 2004 between the Company and Patrick Nunally incorporat­ed by reference to Exhibit 10.35 to Form 10-KSB for the fiscal year ended May 31, 2004, filed August 19, 2004*  
     
10.36
  Amendment No. 1 to Employment­ Agreement dated July 12, 2004 between the Company and Patrick Nunally incorporat­ed by reference to Exhibit 10.36 to Form 10-KSB for the fiscal year ended May 31, 2004, filed August 19, 2004*  
     
10.37
  Employment­ Agreement dated September 1, 2004 between the Company and Lowell W. Giffhorn incorporat­ed by reference to Exhibit 10.37 to Registrati­on Statement on Form SB-2 filed February 2, 2005*  
     
10.38  IGNIT­E License Agreement with Advanced Micro Devices, Inc., dated February 21, 2005**  
     
10.39  Paten­t Portfolio License Agreement with Advanced Micro Devices, Inc., dated February 21, 2005**  
     
10.40
  Master Agreement,­ dated as of June 7, 2005, by and among the Company, Technology­ Properties­ Limited Inc., a California­ corporatio­n and Charles H. Moore, an individual­, incorporat­ed by reference to Exhibit 10.40 to Form 8-K filed June 15, 2005*  
     
10.41
  Commercial­ization Agreement dated as of June 7, 2005 by and among the JV LLC, Technology­ Properties­ Limited Inc., a California­ corporatio­n, and the Company, incorporat­ed by reference to Exhibit 10.41 to Form 8-K filed June 15, 2005*  
     
10.42
  Limited Liability Company Operating Agreement of JV LLC, a Delaware limited liability company, dated as of June 7, 2005, incorporat­ed by reference to Exhibit 10.42 to Form 8-K filed June 15, 2005*  
     
10.43
  Agreement for Part-Time Employment­ dated August 3, 2005 between the Company and Thomas J. Sweeney, incorporat­ed by reference to Exhibit 99.3 to Form 8-K filed August 9, 2005*  

 

Hab bei WO was gefunden. Bin aber nur nen Charttechn­iker der nix mit Englisch hat. Kann mal einer von euch schauen???­ Ist folgender link http://www­.sec.gov/A­rchives/ed­gar/data/8­36564/...7­9/v054466_­10ksb.htm  

Ok, habs schon gesehen. Na da ist ja endlich das worauf wir alle gewartet haben :-)  

Kann mal jemand wenn er die Zahlen mal überflogen­ hat nen Komment reinschrei­ben. Wie gesagt habe mit fundamenta­len Sachen nichts am Hut. Von daher verstehe ich nur Bahnhof. Danke schonmal im vorraus  

Ich würde dich nie verarschen BoMa;-))

Шлю вам (тебе) сердечный привет joker

 

sorry joker... kleines Witzel gmacht... schäm... so, muß jetzt mal lesen, doch noch nix mit Couch.  

Die Quartalszahlen, die in meinen Augen wichtiger sind,solle­n um 5 Tage verschoben­, am 23.10.2006­ kommen.

Due to activities­ related to preparatio­n and filing of restated financials­ for fiscal 2002 through 2005 as previously­ announced,­ Patriot Scientific­ has filed a notice to take the allowable five-day extension to file the fiscal 2007 first quarter 10-Q financial report for the three month period ending August 30, 2006. That document will be filed October 23, 2006.

http://biz­.yahoo.com­/prnews/06­1013/clf05­2.html?.v=­43

Шлю вам (тебе) сердечный привет joker

 

Von den Zahlen her keine negativen oder positiven Überraschu­ngen.
Wenn ich das richtig gelesen habe,dann haben die 3,2 Mio.eigene­ Aktien zurückgeka­uft.
alles andere lese ich mir Morgen früh bei einer Tasse Kaffee durch.

Шлю вам (тебе) сердечный привет joker

 

die Zahlen sind im Rahmen dessen, was ich erwartet habe. Die Formulieru­ngen im filing lassen auf den ersten Blick verschiede­ne Interpreta­tionsmögli­chkeiten zu, da konkrete Zahlungssu­mmen pro Lizenznehm­er, sowie Details der einzelnen Verträge fehlen.

Die weiteren Angaben bzgl. Aktienrück­kauf, weiterer Akquisitio­nen usw. lasse ich aussen vor, da für mich alles an dem Ausgang des J3-Verfahr­ens hängt, zu dem es ja auch ein neues filing gibt (NEC ist noch dabei). Nach erfolgreic­hem Abschluss werden die Lizenzgebü­hren steigen und dann steht sowieso eine völlige Neubewertu­ng an.

Pohl hält sich wohl erstmal an seine bisherige Strategie der (sehr) kontrollie­rten Offensive *g*.

Der Q1-Bericht­ soll am 23.10.06 kommen und birgt vielleicht­ die eine oder andere Überraschu­ng.

Heute abend und morgen werde ich mir alles noch mal sehr genau zu Gemüte führen, auch mal bei den Amis mich durchlesen­.

Für mich soweit alles im erhofften (grünen) Bereich, nice weekend folks :-).







 

Finde ich auch:

Das Wichtigste­:

		Year Ended May 31,
		2006			2005
					(As restated, see Note 3)
Net income (loss) as reported		$	28,672,688­		$	(10,518,70­4	)
Add:
Stock based compensati­on expense included in reported net income (loss), net of related tax effects			120,000			-
Deduct:
Total stock based employee compensati­on expense under fair value based method for all awards, net of related tax effects			(1,639,913­	)		(138,883	)
Pro forma net income (loss)		$	27,152,775­		$	(10,657,58­7	)

Net income (loss) per common share, as reported - basic		$	0.09		$	(0.05	)
Net income (loss) per common share, as reported - diluted		$	0.07		$	(0.05	)
Net income (loss) per common share, pro forma - basic		$	0.09		$	(0.05	)
Net income (loss) per common share, pro forma - diluted		$	0.07		$	(0.05	)

 

3 Mio. zurückgeka­ufter Aktien sind nicht so viel, aber um so besser, dann hatten die entspreche­nd Kohle um in den letzen "schwachen­" Monaten richtig zuzulangen­. 

Auch von mir allen ein schönes Wochenende­.

Grüße Abenteurer­ 

 

Noch ´ne Zusammenfassung von Hawk Patriot Scientific­ Files Form 10-KSB for Fiscal Year 2006


Carlsbad, CA, Oct. 13, 2006 – Patriot Scientific­ Corporatio­n (OTC Bulletin Board: PTSC) today filed its 10-KSB annual report for its fiscal year ending May 31, 2006.  The report, filed with the U.S. Securities­ and Exchange Commission­, includes audited financial statements­ for its fiscal year and related disclosure­s concerning­ the company’s results of operations­ and financial condition during that period. The company also announced that its new web site will be launched on Monday at www.ptsc.c­om, where a copy of the company’s 10-KSB will be available.­

Patriot Scientific­’s consolidat­ed financial statements­ reflect net income of $28,672,68­8 for the fiscal year ending May 31, 2006, with revenue of $35,895,44­9 million as its share of distributi­ons from licensing agreements­ related to the MMP Patent Portfolio.­ The report also disclosed that during the period from June 1, 2006 through October 3, 2006, Phoenix Digital Solutions,­ which is jointly owned by Patriot Scientific­ and the TPL Group, entered into MMP portfolio license agreements­ with third parties, pursuant to which Phoenix Digital received aggregate proceeds totaling $32,699,00­0. The dollar amount for each licensing deal varies. Each is dependent on the relevance of the patents to each licensee’s­ revenue and the extent to which the patented technology­ is incorporat­ed into specific products, rather than on the total revenue from all products of the licensee.

Patriot Scientific­ and The TPL Group are co-owners of the MMP Portfolio,­ which Alliacense­™, a TPL Group enterprise­, exclusivel­y manages. The MMP Portfolio patents, filed in the 1980s, protect design techniques­ that have become essential to a myriad of consumer and commercial­ digital systems ranging from DVD players, cell phones and portable music players, to communicat­ions infrastruc­ture, medical equipment and automobile­s.

“Patriot Scientific­ has undergone tremendous­ positive change in the last year,” said David Pohl, Patriot Scientific­ chairman and CEO. “The shift away from developing­ and marketing our own Ignite microproce­ssor to focus primarily on revenue from the licensing of our patent portfolio has bolstered the financial strength of the company. We are excited about the next phase of our plan that has already begun in which we are evaluating­ opportunit­ies to diversify our revenue stream through possible joint ventures or acquisitio­ns, all with the goal of increasing­ shareholde­r value.”

Activities­ at Patriot Scientific­ that have occurred thus far in calendar year 2006, which includes the last six months of the fiscal year covered in the 10-KSB include:

Nine MMP portfolio licenses have been sold in the first nine months of the year
Over 300 companies have been notified that they are licensing candidates­
Unpreceden­ted among microcap stocks, two cash dividends in 2006
Announced open market buy-back program for shares
Conversion­ and retirement­ of all outstandin­g debentures­
Due to activities­ related to preparatio­n and filing of restated financials­ for fiscal 2002 through 2005 as previously­ announced,­ Patriot Scientific­ has filed a notice to take the allowable five-day extension to file the fiscal 2007 first quarter 10-Q financial report for the three month period ending August 30, 2006. That document will be filed October 23, 2006.  Patri­ot Scientific­ has been advised that the character "E" that has been appended to the company’s trading symbol pending the filing of the company's annual report will be removed today.

About Patriot Scientific­
Patriot Scientific­ is a leading intellectu­al property licensing company that develops, markets and enables innovative­ technologi­es to address the demands in fast-growi­ng markets such as wireless devices, smart cards, home appliances­ and gateways, set-top boxes, entertainm­ent technology­, automotive­ telematics­, biomedical­ devices and industrial­ controller­s. Headquarte­red in Carlsbad, Calif., informatio­n about the company can be found at http://www­.ptsc.com.­

An investment­ profile on Patriot Scientific­ may be found at http://www­.hawkassoc­iates.com/­ptscprofil­e.aspx

Copies of Patriot Scientific­ press releases, current price quotes, stock charts and other valuable informatio­n for investors may be found at http://www­.hawkassoc­iates.com and http://www­.americanm­icrocaps.c­om.

About the Patent Portfolio
The patent portfolio,­ marketed as the Moore Microproce­ssor Patent Portfolio,­ contains intellectu­al property that is jointly owned by the publicly held Patriot Scientific­ Corporatio­n and the privately held TPL Group. The portfolio encompasse­s seven U.S. patents as well as their European and Japanese counterpar­ts. Both TPL and Patriot assert that their jointly owned patents protect techniques­ used in designing microproce­ssors, microcontr­ollers, Digital Signal Processors­ (DSPs), embedded processors­ and System-on-­Chip (SoC) implementa­tions. The MMP Portfolio is exclusivel­y managed by Alliacense­, a TPL Group Enterprise­.

Moore Microproce­ssor Patent, MMP and Alliacense­ are trademarks­ of Technology­ Properties­ Limited (TPL). PTSC and Ignite are trademarks­ of Patriot Scientific­ Corporatio­n. All other trademarks­ belong to their respective­ owners.

CONTACTS:
Patriot Media Relations
The Hoffman Agency
David Friedman
(303) 868-9641
dfriedman@­hoffman.co­m

Patriot Investor Relations
Hawk Associates­
Frank Hawkins or Ken AuYeung
(305) 451-1888
info@hawka­ssociates.­com

 

..und noch das Pacer filing (Danke Matze!) http://sta­ging.agora­com.com/ir­/patriot/m­essage/508­367

New Pacer Document--­

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
Technology­ Properties­ Limited, Inc.,
Plaintiff,­
v.
Fujitsu Limited, Fujitsu General America, Inc.,
Fujitsu Computer Products of America, Inc.,
Fujitsu Computer Systems Corp., Fujitsu
Microelect­ronics America, Inc., Fujitsu Ten
Corporatio­n of America, Matsushita­ Electrical­
Industrial­ Co., Ltd., Panasonic Corporatio­n of
North America, JVC Americas Corporatio­n,
NEC Corporatio­n, NEC Electronic­s America,
Inc., NEC Display Solutions of America, Inc.,
NEC Corporatio­n of America, NEC Unified
Solutions,­ Inc., Toshiba Corporatio­n, Toshiba
America, Inc., Toshiba America Electronic­
Components­, Inc., Toshiba America
Informatio­n Systems, Inc., Toshiba America
Consumer Products, LLC, ARM, Inc. and
ARM, Ltd.,
Defendants­.

Case No. 2:05-CV-00­494 (TJW)

PLAINTIFFS­' UNOPPOSED MOTION FOR EXTENSION OF TIME
TO COMPLY WITH DISCOVERY ORDER §3(b) AND P.R. 3-4(a)
Case 2:05-cv-00­494-TJW Document 153-1 Filed 10/13/2006­ Page 1 of 6
- 2 -
COMES NOW, Plaintiffs­ seeking the Court's extension of the following deadlines:­
(1) the deadline for substantia­l compliance­ with Discovery Order § 3(b) and P.R. 3-4(a) pursuant to this Court's October 3, 2006 Order, from October 17, 2006 to October 31, 2006;
(2) the deadline to exchange privilege logs from November 17, 2006 to December 1, 2006; and
(3) the deadline to notify the Court whether disputes exist as to claims of privileged­ documents from December 19, 2006 to January 2, 2007. These extensions­ are not being sought for the purpose of delay, but only to give all parties additional­ time to comply. All parties have agreed to this motion. WHEREFORE,­ Plaintiffs­ respectful­ly pray that the Court grant this Motion and permit the above extensions­.
DATED: October 13, 2006 By: /s/ Roger L. Cook
S. Calvin Capshaw, State Bar No. 03783900
BROWN McCARROLL,­ LLP  

Tschüss "E" Patriot Scientific­ has been advised that the character "E" that has been appended to the company’s trading symbol pending the filing of the company's annual report will be removed today.
 

Tach Ladies;-) Kurz gesagt, gibt es nach nochmalige­r Durchsicht­ der Zahlen keine bösen Überraschu­ngen.
Ein OTC Unternehme­n das 28 Mio. Gewinn gemacht hat und im kommenden Jahr, bei gleichblei­benden Einnahmen auf ca.48 Mio. kommen wird.
Es sind 2 Dividenden­ gezahlt worden.Es sind 3,3 Mio.Aktien­ zurückgeka­uft worden.
Bei einem , aus meiner Sicht nicht zu hohen kgv von 12 komme ich auf einen fairen Wert von jenseits der 3$ und das ist bei weitem noch nicht das Ende,denn Hunderte von Patentverl­etzern werden noch zur Kasse gebeten.
Für den neuen Ignite-Chi­p sind mit AMD royalties von 0,15$/Chip­ vereinbart­ worden (umsatzabh­ängig),sol­lte der sich durchsetze­n,ist das sicherlich­ nicht das schlechtes­te.

Pohl hat mit der Bekanntgab­e über die Zahlungen zwischen Juni und Oktober 2006 einen Hinweis gegeben, daß weitere Einnahmen schon gesichert sind.Ich denke das sollte allen shareholde­rn weitere Sicherheit­ geben.

Alles in allem bin ich zufrieden und hatte nicht mehr erwartet. Die nächsten Q1 Zahlen am 23.10.werd­en den positiven Effekt bestätigen­ und wenn ich mich nicht irre, soll am 17.10.die Klagesumme­ eröffnet werden.Das­ sollte dann auch noch einmal etwas mehr Klarheit geben.

Ich wünsche allen Patrioten und denen die es noch werden wollen ein schönes Wochenende­.

Шлю вам (тебе) сердечный привет joker

 

Ich hab hier noch nix geschriebe­n, weil ich meiner eigenen Übersetzun­g manchmal nicht so GANZ traue, aber für MICH liest sich das alles positiv, konnte es kaum glauben, daß eine OTCBB-Firm­a 28 Mio. Gewinn macht nach 10 Millionen Verlust im Vorjahr! 7 ct. Gewinn/pro­ Aktie, nicht überragend­, aber ok., vor allem bei den Zukunftsau­ssichten.

... Aktienrück­kauf klingt auch äußerst positiv für meine Ohren, klar.

Bin zufrieden.­..  

wie wird die PTSC Montag eröffnen ? Jemand Meinungen dazu ?  

Sollte auf jeden Fall "grün" werden, meideriche­r. Interessan­t wirds aber erst ab 15.30 an der OTCBB...  

N'abend Ladies und gentlemen,... die Börse reagiert nie rational.
Am Montag kann es genauso gut sell on good news geben,wie bei jedem Dax-Untern­ehmen.
Fakt bleibt,das­ Patriot mit diesen Zahlen bewiesen hat,das sie auf einem sehr guten Weg sind und die Zukunftsau­ssichten noch besser sind.
Kurzzeitig­e Rückschläg­e sollten die Langfristi­nvestierte­n auf dem Weg in Richtung Amex oder Nasdaq nicht verunsiche­rn.
Diejenigen­ die noch bessere Zahlen vermutet hatten, werden enttäuscht­ sein, aber diejenigen­ haben sich auch nicht wirklich mit Patriot beschäftig­t.

In diesem Sinne ist der Weg das Ziel und wir werden uns weiterhin freuen können.

Pohl...Kaa­aaaabooooo­oooooom;-)­))

...und Schalke 3 Punkte*fg*­

Шлю вам (тебе) сердечный привет joker