1st Inning for Patriot One

After the horrific attack on the republican congressional baseball team, it should be painfully obvious that it’s far too easy for anyone to own a gun in this country. Now, I’m not here to speak about politics or what we should do about gun control. That’s a topic for another forum. Instead, as an investor, I’m more concerned about what will happen in terms of guns and violence, and how this might affect investments.

Now, call me jaded if you will, but it appears that our country will be doing nothing to prevent the further spread of guns with minimal oversight and, thus, the potential for abuse. There are many reasons for this, but, at the end of the day, it generally appears that the partisan bickering in DC leaves a void in which the lack of inertia will maintain the status quo. As I said, my opinion on the justness of this is irrelevant. It is, however, the situation in which we find ourselves now and things look to remain that way for quite a while.

Based on this lack of inertia to do anything legislative to reduce guns in the country, there will certainly be a further movement, on a location by location basis, to prevent the likelihood of attacks. Each time an act of terror occurs, there will be increased clamor for protection in public areas. This protection, since it won’t be accomplished legislatively, is achieved through additional security measures. This has historically entailed hiring more guards, installing metal detectors, and generally spending a lot of time and money to secure a building/area. These methods are certainly effective, but result in both inconvenience and delays for patrons as well as issues surrounding privacy concerns and personal intrusion. Typically, they also require compliance by patrons and are thus easily seen and avoided.

The classic example of all this is airport security which is tedious, intrusive and, yet, we all do it voluntarily despite hating the process. Can you imagine if every movie theater, mall, subway, etc. had similar security measures in place? We would be much safer, but, generally speaking, miserable about going anywhere and probably inclined to spend more time in our homes with cable TV.

Many companies are working on solving this issue of how to detect and prevent acts of terror without intruding into the lives of the general populace. Patriot One (PTOTF) is a company that we at Tailwinds have discovered that has a unique method for accomplishing the goal of detecting concealed weapons without requiring extreme costs on the owners of the system, nor without intruding into the lives of the public. As such, we believe Patriot One represents a disruptive technology in the security industry and is a stock we own as part of the Tailwinds Select Portfolio.

PATSCAN: How it Works

The cognitive microwave radar system used by Patriot One, under the tradename of PATSCAN, is the result of a 5-year research effort led by Dr. Natalia Nikolova and supported by the both Canadian Federal Government and NATO. The use of proven microwave technology represents a disruptive technology that addresses most of the drawbacks of millimeter wave scanners.

The PATSCAN system works by using microwaves to scan individuals as they walk past scanners. Importantly, line of sight is not required. The results of the scans are analyzed in real time, by comparing the results to a database of known weapons. The database also contains all known objects that are not an issue, such as cell phones, cameras, etc. By using cognitive intelligence, the system is constantly learning and adapting to new objects.

Patriot One has created several technological barriers that will prevent other players from entering this market using the same technology. Beyond the microwave technology, the learning ability of the devices allows the database to grow and refine itself over time, creating an increasing level of effectiveness relative to any potential competitors. The company also has several patents pending in various jurisdictions to protect process and technology.

Several Upcoming Catalysts Await PTOTF

With the PATSCAN system, we believe that Patriot One has created a disruptive, game-changing device that will revolutionize the security industry. With its non-intrusive screening, and reasonable cost, we expect to see adoption of the technology accelerate.

The Company is currently awaiting FCC approval to market the device in the US, yet is has already started taking pre-orders with deposits on its systems. As they recently announced, since introducing the product to the market three months ago, they have received orders for over $2.7MM in equipment sales. This is impressive for a product not yet on the market, and shows the broad demand that exists for a security offering like PATSCAN.

With regards to the FCC, the Company expects approval by the end of the summer. This should be the big upcoming catalyst for their shares, as, once approved, sales should really start to pick up. With the microwave scanners being low powered, Patriot One believes the product will be found compliant by FCC regulators without additional changes.

Now is a good time to look at shares in PTOTF. The stock has come down from highs hit late last year, as sellers from the previous financing have taken profits. Now, that appears to be coming to an end, and a recently announced financing with Canaccord leading the round should mark a line in the sand. We expect to see this deal closed rapidly and oversubscribed. Research coverage should, hopefully, follow. With shares near a recent low, business already strong and expected to pick up post FCC approval, and a product that might disrupt a multi-billion dollar industry, we are very optimistic on the shares of Patriot One.

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