**FORM      10-KSB/A**

**Amendment      No. 1**

| x | ANNUAL                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT                OF 1934 |
|---|------------------------------------------------------------------------------------------------------------------------|

| o | TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT                OF 1934 |
|---|----------------------------------------------------------------------------------------------------------------------------|

**PATRIOT      SCIENTIFIC CORPORATION**

| Delaware(State                or other jurisdiction ofincorporation                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) |
|----------------------------------------------------------------------------------------------------------------------------------|--------------------------------|

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** **

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**TABLE      OF CONTENTS**

**PART      II**

| **Item                7. Financial Statements**     | **4**  |
|-----------------------------------------------------|--------|
|                                                |   |
| **Item                8A. Controls and Procedures** | **4**  |

**PART      III**

| **Item                13. Exhibits** | **5** |
|--------------------------------------|-------|

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**PART      II **

**ITEM      7.**
**FINANCIAL      STATEMENTS**

**ITEM      8A.**
**CONTROLS      AND PROCEDURES**

***Evaluation      of Disclosure Controls and Procedures***

***Effect      of Restatement on Disclosure Controls***

** **

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***Changes      in Internal Control over Financial Reporting***

**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: |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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* |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                 |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                         |
| 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*                                                                                                       |
| 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*                                                                                                                                                    |
| 3.6                  | 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*                                                                                                                                                                                                                             |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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*                                                                                                                                                                    |
| 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*                                                                                      |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 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*                                                                                                                          |
| 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*                                                                                                                                   |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 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, incorporated by reference to                Exhibit 4.29 to Form 10-KSB filed October 13, 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*                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 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*                                                                                                                                                                                                                                                                                                                                       |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                                                            |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 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*                                                            |
| 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*                                                                                                        |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                  |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                          |
| 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*                        |
| 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*                           |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                        |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                |
| 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, incorporated by reference to Exhibit 10.38 to                Form 10-KSB filed October 13, 2006*                                                                                                                  |
| 10.39                | Patent                Portfolio License Agreement with Advanced Micro Devices, Inc., dated                February 21, 2005, incorporated by reference to Exhibit 10.39 to                Form 10-KSB filed October 13, 2006*                                                                                                        |
| 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*                                                                     |

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| **Exhibit No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                                                    |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 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*                                                                                                                                                                 |
| 14.1                 | Code                of Ethics for Senior Financial Officers incorporated by reference                to                Exhibit 14.1 to Form 10-K for the fiscal year ended May 31,                2003, filed August 29, 2003*                                                                                                                                                         |
| 21.1                 | Subsidiaries                of the small business issuer, incorporated by reference to                Exhibit 21.1 to Form 10-KSB filed October 13, 2006*                                                                                                                                                                                                                                             |
| 31.1                 | Certification                of David H. Pohl, CEO, pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002**                                                                                                                                                                                                                                                                        |
| 31.2                 | Certification                of Thomas J. Sweeney, CFO, pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002**                                                                                                                                                                                                                                                                    |
| 32.1                 | Certification                of David H. Pohl, CEO, pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002**                                                                                                                                                                                                                                                                        |
| 32.2                 | Certification                of Thomas J. Sweeney, CFO, pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002**                                                                                                                                                                                                                                                                    |
| 99.1                 | Form                of ISO Plan Option (Gaspar) dated May 29, 1992, incorporated by                reference to Exhibit 28.2 to registration statement on                Form SB-2, file no. 33-57858*                                                                                                                                                                                      |
| 99.2                 | Form                of NSO Plan Option (Berlin) dated May 29, 1992, incorporated by                reference to Exhibit 28.3 to registration statement on                Form SB-2, file no. 33-57858*                                                                                                                                                                                      |
| 99.3                 | Form                of Incentive Stock Option Agreement to the Company’s 1996 stock Option                Plan (individual agreements differ as to number of shares, dates,                prices                and vesting), incorporated by reference to Pre-Effective Amendment                No. 2 to Registration Statement on Form SB-2 filed May 23,                1996*         |
| 99.4                 | Form                of Non-Qualified Stock Option Agreement to the Company’s 1996 Stock Option                Plan (individual agreement differ as to number of shares, date, prices                and                vesting), incorporated by reference to Pre-Effective Amendment No. 2                to Registration Statement on Form SB-2 filed May 23,                1996*  |
| 99.5                 | Press                Release of the Company dated November 4, 1996 incorporated by                reference to Exhibit 99.5 to Form 8-K filed January 9,                1997*                                                                                                                                                                                                          |
| 99.6                 | Form                of Incentive Stock Option Agreement to the Company’s 2001 Stock Option                Plan incorporated by reference to Exhibit 99.6 to Registration                Statement on Form S-8 filed March 26, 2001*                                                                                                                                                        |
| 99.7                 | Form                of Non-Qualified Stock Option Agreement to the Company’s 2001 Stock Option                Plan incorporated by reference to Exhibit 99.7 to Registration                Statement on Form S-8 filed March 26, 2001*                                                                                                                                               |
| 99.8                 | Form                of Incentive Stock Option Agreement to the Company’s 2003 Stock Option                Plan incorporated by reference to Exhibit 99.8 to Registration                Statement on Form S-8 filed September 4, 2003*                                                                                                                                                     |
| 99.9                 | Form                of Non-Qualified Stock Option Agreement to the Company’s 2003 Stock Option                Plan incorporated by reference to Exhibit 99.9 to Registration                Statement on Form S-8 filed September 4,                2003*                                                                                                                                  |

|  | * | Previously                filed in indicated registration statement or                report. |
|--|---|-----------------------------------------------------------------------------------------------|

|  | ** | Exhibit filed                herewith this Annual Report on Form 10-KSB for the fiscal year ended                May 31, 2004 |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Patriot                Scientific Corporation                                                                                           |                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|
|   |                                                                                                                                    |                            |
|   | Index                to Consolidated Financial Statements                                                                               |                            |
|   |                                                                                                                                    |                            |
|   | Report                of Independent RegisteredPublic                Accounting Firm                                                    |  F-2                       |
|   |                                                                                                                                    |                            |
|   | Consolidated                Balance Sheets as of May 31, 2004, 2003 and 2002                                                       | F-3                             |
|   |                                                                                                                                    |                            |
|   | Consolidated                Statements of Operations for the Years Ended May 31,                2004, 2003 and 2002                |  F-4                       |
|   |                                                                                                                                    |                            |
|   | Consolidated                Statement of Stockholders’ Deficitfor                the Years Ended May 31, 2004, 2003 and 2002 |  F-5                       |
|   |                                                                                                                                    |                            |
|   | Consolidated                Statements of Cash Flows for the Years Ended May 31,                2004, 2003 and 2002                |  F-6                to F-7 |
|   |                                                                                                                                    |                            |
|   | Summary                of Accounting Policies                                                                                           | F-8                to F-12      |
|   |                                                                                                                                    |                            |
|   | Notes                to Consolidated Financial Statements                                                                               | F-13                to F-31     |

----

|   | CORBIN&COMPANY,                LLP |
|--------|----------------------------------------|

----

|                                                                                                                                                                                                                   |   | May                31,                   |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-------------|
| ASSETS                                                                                                                                                                                                                 |   | 2004                                     |        | 2003 |   | 2002 |   |
|                                                                                                                                                                                                                   |   | (As                restated, see NOTE 1) |        |
| Current                assets:                                                                                                                                                                                         |   |                                     |        |   |   |   |   |   |   |   |
| Cash                and cash equivalents                                                                                                                                                                               |   | $                                        | 355,940     |   | $ | 32,663 |   | $ | 88,108 |   |
| Marketable                securities                                                                                                                                                                                   |   |                                     | 22,646      |   |   | - |   |   | - |   |
| Accounts                receivable, net of allowance for doubtful accounts of $0, $10,000                and                $6,000                                                                                     |   |                                     | 1,225       |   |   | 3,866 |   |   | 4,797 |   |
| Prepaid                expenses                                                                                                                                                                                        |   |                                     | 322,068     |   |   | 93,030 |   |   | 35,749 |   |
| Total                current assets                                                                                                                                                                                    |   |                                     | 701,879     |   |   | 129,559 |   |   | 128,654 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| Property                and equipment, net                                                                                                                                                                             |   |                                     | 68,389      |   |   | 153,530 |   |   | 285,488 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| Other                assets, net                                                                                                                                                                                       |   |                                     | 41,221      |   |   | 53,220 |   |   | 330,863 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| Patents                and trademarks, net of accumulated amortization of                $501,235, $450,926 and $400,158                                                                                               |   |                                     | 114,739     |   |   | 128,925 |   |   | 189,521 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                   |   | $                                        | 926,228     |   | $ | 465,234 |   | $ | 934,526 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| LIABILITIES                AND STOCKHOLDERS’ DEFICIT                                                                                                                                                             |   |                                     |        |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| Current                liabilities:                                                                                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Secured                note payable, net of debt discount of $0, $0 and $464,273                                                                                                                                       |   | $                                        | -           |   | $ | 635,276 |   | $ | 171,003 |   |
| Current                portion of 8% convertible debentures, net of debt discount                of $27,180, $103,121 and $0                                                                                           |   |                                     | 145,320     |   |   | 121,879 |   |   | - |   |
| Secured                notes payable to stockholders                                                                                                                                                                   |   |                                     | 100,000     |   |   | 180,000 |   |   | - |   |
| Accounts                payable                                                                                                                                                                                        |   |                                     | 134,600     |   |   | 397,180 |   |   | 385,255 |   |
| Accrued                liabilities                                                                                                                                                                                     |   |                                     | 160,102     |   |   | 245,822 |   |   | 211,291 |   |
| Current                portion of capital lease obligations                                                                                                                                                            |   |                                     | 8,020       |   |   | 6,405 |   |   | 5,116 |   |
| Total                current liabilities                                                                                                                                                                               |   |                                     | 548,042     |   |   | 1,586,562 |   |   | 772,665 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| 8%                Convertible debentures, net of debt discount of $2,047,966, $709,890                and $216,617                                                                                                     |   |                                     | 227,701     |   |   | 280,110 |   |   | 291,383 |   |
| Warrant                and derivative liabilities                                                                                                                                                                      |   |                                     | 5,872,662   |   |   | 3,492,561 |   |   | 1,441,040 |   |
| Long-term                portion of capital lease obligation                                                                                                                                                           |   |                                     | 2,306       |   |   | 10,326 |   |   | 16,731 |   |
| Total                liabilities                                                                                                                                                                                       |   |                                     | 6,650,711   |   |   | 5,369,559 |   |   | 2,521,819 |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| Commitments                and contingencies                                                                                                                                                                           |   |                                     |        |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
| Stockholders’                deficit:                                                                                                                                                                            |   |                                     |        |   |   |   |   |   |   |   |
| Preferred                stock, $0.00001 par value; 5,000,000 shares authorized;                none outstanding                                                                                                       |   |                                     | -           |   |   | - |   |   | - |   |
| Common                stock, $0.00001 par value; 400,000,000, 200,000,000,                and 200,000,000 shares authorized; 171,156,363,                106,547,807 and 81,465,757 shares issued and outstanding |   |                                     | 1,712       |   |   | 1,066 |   |   | 815 |   |
| Additional                paid-in capital                                                                                                                                                                              |   |                                     | 46,457,543  |   |   | 41,517,464 |   |   | 39,594,926 |   |
| Accumulated                deficit                                                                                                                                                                                     |   |                                     | (52,183,738 | ) |   | (46,422,855 | ) |   | (41,103,034 | ) |
| Note                receivable                                                                                                                                                                                         |   |                                     | -           |   |   | - |   |   | (80,000 | ) |
| Total                stockholders’ deficit                                                                                                                                                                       |   |                                     | (5,724,483  | ) |   | (4,904,325 | ) |   | (1,587,293 | ) |
|                                                                                                                                                                                                                   |   |                                     |        |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                   |   | $                                        | 926,228     |   | $ | 465,234 |   | $ | 934,526 |   |

----

|                                                                                                                    |   | Years                Ended May 31,       |        |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-------------|
|                                                                                                                    |   | 2004                                     |        | 2003 |   | 2002 |   |
|                                                                                                                    |   | (As                restated, see NOTE 1) |        |
| Net                sales:                                                                                               |   |                                     |        |   |   |   |   |   |   |   |
| Product                                                                                                                 |   | $                                        | 74,017      |   | $ | 108,403 |   | $ | 358,809 |   |
| Licenses                and royalties                                                                                   |   |                                     | 2,400       |   |   | 15,500 |   |   | - |   |
| Net                sales                                                                                                |   |                                     | 76,417      |   |   | 123,903 |   |   | 358,809 |   |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Cost                of sales:                                                                                           |   |                                     |        |   |   |   |   |   |   |   |
| Product                costs                                                                                            |   |                                     | 10,472      |   |   | 18,660 |   |   | 244,547 |   |
| Inventory                obsolescence                                                                                   |   |                                     | -           |   |   | - |   |   | 149,433 |   |
| Cost                of sales                                                                                            |   |                                     | 10,472      |   |   | 18,660 |   |   | 393,980 |   |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Gross                profit (loss)                                                                                      |   |                                     | 65,945      |   |   | 105,243 |   |   | (35,171 | ) |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Operating                expenses:                                                                                      |   |                                     |        |   |   |   |   |   |   |   |
| Research                and development                                                                                 |   |                                     | 549,756     |   |   | 723,287 |   |   | 1,372,421 |   |
| Selling,                general and administrative                                                                      |   |                                     | 1,253,559   |   |   | 1,821,902 |   |   | 2,708,579 |   |
| Operating                expenses                                                                                       |   |                                     | 1,803,315   |   |   | 2,545,189 |   |   | 4,081,000 |   |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Operating                loss                                                                                           |   |                                     | (1,737,370  | ) |   | (2,439,946 | ) |   | (4,116,171 | ) |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Other                income (expense):                                                                                  |   |                                     |        |   |   |   |   |   |   |   |
| Gain                on sale of technology                                                                               |   |                                     | 75,500      |   |   | - |   |   | - |   |
| Loss                on marketable securities                                                                            |   |                                     | (45,354     | ) |   | - |   |   | - |   |
| Interest                income                                                                                          |   |                                     | 270         |   |   | 191 |   |   | 2,662 |   |
| Interest                expense                                                                                         |   |                                     | (4,218,452  | ) |   | (2,638,892 | ) |   | (875,555 | ) |
| Change                in fair value of warrant and derivative liabilities                                               |   |                                     | 164,523     |   |   | (241,174 | ) |   | 204,720 |   |
| Other                expense, net                                                                                       |   |                                     | (4,023,513  | ) |   | (2,879,875 | ) |   | (668,173 | ) |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Net                loss                                                                                                 |   | $                                        | (5,760,883  | ) | $ | (5,319,821 | ) | $ | (4,784,344 | ) |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Basic                and diluted loss per common share                                                                  |   | $                                        | (0.04       | ) | $ | (0.06 | ) | $ | (0.07 | ) |
|                                                                                                                    |   |                                     |        |   |   |   |   |   |   |   |
| Weighted                average number of common shares outstandingduring                the period - basic and diluted |   |                                     | 139,767,276 |   |   | 93,791,470 |   |   | 66,810,028 |   |

----

|                                                                                                                                                       |   | Common                Stock            |        | Additional |   | Accumulated                    |   | Stockholders’ |         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|------------|--------|--------------------------------|--------|---------------------|--------------|
|                                                                                                                                                       |   | Shares                                 |        | Amount     |   | Paid-in                Capital |   | Deficit             |         | Deficit |   |
| Years                Ended May 31, 2004, 2003 and 2002                                                                                                     |   | As                restated, see NOTE 1 |        |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |
| Balance,                June 1, 2001                                                                                                                       |   |                                   | 57,535,411  |       | $      | 575                            |   | $                   | 37,240,503(1 | ) | $ | (36,318,690 | ) | $ | 922,388 |   |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |   |   |   |   |   |
| Issuance                of common stock at $.07 to $.30 per share                                                                                          |   |                                   | 4,888,680   |       |   | 49                             |   |                | 879,556      |   |   | - |   |   | 879,605 |   |
| Exercise                of common stock warrants and options at $.25 to$.32                per share                                                       |   |                                   | 241,666     |       |   | 3                              |   |                | 73,830       |   |   | - |   |   | 73,833 |   |
| Issuance                of options for services                                                                                                            |   |                                   | -           |       |   | -                              |   |                | 106,926      |   |   | - |   |   | 106,926 |   |
| Issuance                of common stock for services at $.09 per share                                                                                     |   |                                   | 2,200,000   |       |   | 22                             |   |                | 197,978      |   |   | - |   |   | 198,000 |   |
| Exchange                of notes payable at $.07 to $.09 per share                                                                                         |   |                                   | 16,600,000  |       |   | 166                            |   |                | 1,552,885    |   |   | - |   |   | 1,553,051 |   |
| Value                of warrants issued                                                                                                                    |   |                                   | -           |       |   | -                              |   |                | 440,935      |   |   | - |   |   | 440,935 |   |
| Reclassification                of warrant and derivative liabilities                                                                                      |   |                                   | -           |       |   | -                              |   |                | (977,687     | ) |   | - |   |   | (977,687 | ) |
| Net                loss                                                                                                                                    |   |                                   | -           |       |   | -                              |   |                | -            |   |   | (4,784,344 | ) |   | (4,784,344 | ) |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |   |   |   |   |   |
| Balance,                May 31, 2002                                                                                                                       |   |                                   | 81,465,757  |       |   | 815                            |   |                | 39,514,926(1 | ) |   | (41,103,034 | ) |   | (1,587,293 | ) |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |   |   |   |   |   |
| Issuance                of common stock at $.03 to $.05 per share                                                                                          |   |                                   | 3,765,266   |       |   | 38                             |   |                | 120,312      |   |   | - |   |   | 120,350 |   |
| Collection                of note receivable                                                                                                               |   |                                   | -           |       |   | -                              |   |                | 80,000       |   |   | - |   |   | 80,000 |   |
| Issuance                of common stock for services at $.04 to $.06 per share                                                                             |   |                                   | 2,780,000   |       |   | 28                             |   |                | 148,772      |   |   | - |   |   | 148,800 |   |
| Conversion                of debentures plus accrued interest at$.04                to $.05 per share                                                      |   |                                   | 18,536,784  |       |   | 185                            |   |                | 836,375      |   |   | - |   |   | 836,560 |   |
| Reclassification                of warrant and derivative liabilities associated with debt conversions                and                warrant exercises |   |                                   | -           |       |   | -                              |   |                | 817,079      |   |   | - |   |   | 817,079 |   |
| Net                loss                                                                                                                                    |   |                                   | -           |       |   | -                              |   |                | -            |   |   | (5,319,821 | ) |   | (5,319,821 | ) |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |   |   |   |   |   |
| Balance,                May 31, 2003                                                                                                                       |   |                                   | 106,547,807 |       |   | 1,066                          |   |                | 41,517,464   |   |   | (46,422,855 | ) |   | (4,904,325 | ) |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |   |   |   |   |   |
| Issuance                of common stock at $.025 to $.034 per share                                                                                        |   |                                   | 1,800,752   |       |   | 18                             |   |                | 50,422       |   |   | - |   |   | 50,440 |   |
| Exercise                of warrants and options at $.0172 to $.04 per share                                                                                |   |                                   | 11,184,175  |       |   | 112                            |   |                | 331,995      |   |   | - |   |   | 332,107 |   |
| Issuance                of common stock for services at $.043 to $.117per                share                                                             |   |                                   | 1,126,496   |       |   | 11                             |   |                | 59,841       |   |   | - |   |   | 59,852 |   |
| Conversion                of debentures plus accrued interestat                $.017 to $.064 per share                                                    |   |                                   | 50,497,133  |       |   | 505                            |   |                | 1,757,123    |   |   | - |   |   | 1,757,628 |   |
| Reclassification                of warrant and derivative liabilities associated with debt conversions                and                warrant exercises |   |                                   | -           |       |   | -                              |   |                | 2,740,698    |   |   | - |   |   | 2,740,698 |   |
| Net                loss                                                                                                                                    |   |                                   | -           |       |   | -                              |   |                | -            |   |   | (5,760,883 | ) |   | (5,760,883 | ) |
|                                                                                                                                                       |   |                                   |        |       |   |                           |   |                |         |   |   |   |   |   |   |   |
| Balance,                May 31, 2004                                                                                                                       |   |                                   | 171,156,363 |       | $      | 1,712                          |   | $                   | 46,457,543   |   | $ | (52,183,738 | ) | $ | (5,724,483 | ) |

----

|                                                                                                                  |   | Years                Ended May 31,       |       |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|
|                                                                                                                  |   | 2004                                     |       | 2003 |   | 2002 |   |
|                                                                                                                  |   | (As                restated, see NOTE 1) |       |
| Cash                flows from operating activities:                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Net                loss                                                                                               |   | $                                        | (5,760,883 | ) | $ | (5,319,821 | ) | $ | (4,784,344 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities:             |   |                                     |       |   |   |   |   |   |   |   |
| Amortization                and depreciation                                                                          |   |                                     | 135,450    |   |   | 258,915 |   |   | 285,759 |   |
| Provision                for doubtful accounts                                                                        |   |                                     | -          |   |   | 24,000 |   |   | 76,000 |   |
| Provision                for inventory obsolescence                                                                   |   |                                     | -          |   |   | - |   |   | 149,433 |   |
| Non-cash                interest expense related to convertible debentures,                notes payable and warrants |   |                                     | 4,069,350  |   |   | 2,495,305 |   |   | 826,444 |   |
| Gain                on sale of technology                                                                             |   |                                     | (75,500    | ) |   | - |   |   | - |   |
| Unrealized                loss on marketable securities                                                               |   |                                     | 45,354     |   |   | - |   |   | - |   |
| Expense                related to common stock, options and warrants issued for                services               |   |                                     | 59,852     |   |   | 148,800 |   |   | 216,500 |   |
| Change                in fair value of warrant and derivative liabilities                                             |   |                                     | (164,523   | ) |   | 241,174 |   |   | (204,720 | ) |
| Changes                in operating assets and liabilities:                                                           |   |                                     |       |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                    |   |                                     | (18,639    | ) |   | (33,346 | ) |   | (45,973 | ) |
| Inventories                                                                                                           |   |                                     | -          |   |   | - |   |   | 73,960 |   |
| Prepaid                and other assets                                                                               |   |                                     | (217,039   | ) |   | 216,195 |   |   | (200,834 | ) |
| Accounts                payable and accrued expenses                                                                  |   |                                     | (149,394   | ) |   | 83,016 |   |   | (24,759 | ) |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Net                cash used in operating activities                                                                  |   |                                     | (2,075,972 | ) |   | (1,885,762 | ) |   | (3,632,534 | ) |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Collection                of note receivable                                                                          |   |                                     | -          |   |   | 60,000 |   |   | - |   |
| Proceeds                from sale of technology                                                                       |   |                                     | 7,500      |   |   | - |   |   | - |   |
| Purchase                of property, equipment and patents                                                            |   |                                     | (36,123    | ) |   | (62,194 | ) |   | (146,156 | ) |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Net                cash used in investing activities                                                                  |   |                                     | (28,623    | ) |   | (2,194 | ) |   | (146,156 | ) |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Proceeds                from issuance of secured notes payable                                                        |   |                                     | 12,320     |   |   | 180,000 |   |   | 1,790,000 |   |
| Payments                for capital lease obligations                                                                 |   |                                     | (6,405     | ) |   | (5,116 | ) |   | (3,148 | ) |
| Proceeds                from issuance of convertible debentures                                                       |   |                                     | 2,175,000  |   |   | 1,507,000 |   |   | 508,000 |   |
| Proceeds                from issuance of common stock                                                                 |   |                                     | 50,440     |   |   | 120,350 |   |   | 879,605 |   |
| Proceeds                from exercise of common stock warrants and options                                            |   |                                     | 175,237    |   |   | - |   |   | 73,833 |   |
| Proceeds                from sale of accounts receivable                                                              |   |                                     | 21,280     |   |   | 30,277 |   |   | 154,158 |   |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Net                cash provided by financing activities                                                              |   |                                     | 2,427,872  |   |   | 1,832,511 |   |   | 3,402,448 |   |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Net                change in cash and cash equivalents                                                                |   |                                     | 323,277    |   |   | (55,445 | ) |   | (376,242 | ) |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Cash                and cash equivalents, beginning of year                                                           |   |                                     | 32,663     |   |   | 88,108 |   |   | 464,350 |   |
|                                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |
| Cash                and cash equivalents, end of year                                                                 |   | $                                        | 355,940    |   | $ | 32,663 |   | $ | 88,108 |   |

----

|                                                                                                                                                       |   | Years                Ended May 31,       |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-----------|
| Supplemental                Disclosure of Cash Flow Information:                                                                                           |   | 2004                                     |      | 2003 |   | 2002 |   |
|                                                                                                                                                       |   | (As                restated, see NOTE 1) |      |
| Cash                paid during the year for:                                                                                                              |   |                                     |      |   |   |   |   |   |   |   |
| Interest                                                                                                                                                   |   | $                                        | 17,220    |   | $ | 15,083 |   | $ | 19,719 |   |
| Income                taxes                                                                                                                                |   | $                                        | -         |   | $ | - |   | $ | - |   |
|                                                                                                                                                       |   |                                     |      |   |   |   |   |   |   |   |
| Supplemental                Schedule of Non-Cash Investing Activities:                                                                                     |   |                                     |      |   |   |   |   |   |   |   |
|                                                                                                                                                       |   |                                     |      |   |   |   |   |   |   |   |
| Convertible                debentures, notes payable and accrued interest exchanged for common                stock                                        |   | $                                        | 1,757,628 |   | $ | 836,560 |   | $ | 1,154,725 |   |
| Common                stock issued for prepaid services                                                                                                    |   | $                                        | -         |   | $ | - |   | $ | 198,000 |   |
| Common                stock, warrants and options issued for prepaid services                                                                              |   | $                                        | -         |   | $ | - |   | $ | 106,296 |   |
| Capital                lease obligation incurred for purchase of property and                equipment                                                     |   | $                                        | -         |   | $ | - |   | $ | 24,996 |   |
| Debt                discount recorded on issuance of secured notes payable and convertible                debentures                                       |   | $                                        | 2,898,167 |   | $ | 1,740,000 |   | $ | 1,005,111 |   |
| Conversion                of secured notes payable to debenture                                                                                            |   | $                                        | 723,167   |   | $ | - |   | $ | - |   |
| Cancellation                of secured note payable and accrued interest for exercise of                warrants                                           |   | $                                        | 110,707   |   | $ | - |   | $ | - |   |
| Reclassification                of warrant and derivative liabilities                                                                                      |   | $                                        | -         |   | $ | - |   | $ | 977,687 |   |
| Reclassification                of warrant and derivative liabilities associated with debt conversions                and                warrant exercises |   | $                                        | 2,740,698 |   | $ | 817,079 |   | $ | - |   |

----

**ORGANIZATION      AND BUSINESS**

**BASIS      OF PRESENTATION AND CONSOLIDATION**

**RECLASSIFICATIONS**

**FINANCIAL      INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK**

**CASH      EQUIVALENTS**

**MARKETABLE      SECURITIES**

----

**PROPERTY,      EQUIPMENT AND DEPRECIATION**

**PATENTS      AND TRADEMARKS**

**REVENUE      RECOGNITION**

**RESEARCH      AND DEVELOPMENT COSTS**

**ADVERTISING**

**INCOME      TAXES**

----

**NET      LOSS PER SHARE**

**USE      OF ESTIMATES**

**SALE      OF ACCOUNTS RECEIVABLE**

**STOCK-BASED      COMPENSATION**

----

|                                                                                                                                          |   | Years                Ended May 31, |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                                                                                                          |   | 2004                               |       | 2003 |   | 2002 |   |
| Net                loss as reported                                                                                                           |   | $                                  | (5,760,883 | ) | $ | (5,319,821 | ) | $ | (4,784,344 | ) |
| Add:                                                                                                                                          |   |                               |       |   |   |   |   |   |   |   |
| Stock                based compensation expense included in reported net loss, net of                related                tax effects       |   |                               | -          |   |   | - |   |   | - |   |
| Deduct:                                                                                                                                       |   |                               |       |   |   |   |   |   |   |   |
| Total                stock based method under fair value based method for all awards net                of                related tax effects |   |                               | 152,074    |   |   | 289,023 |   |   | 576,010 |   |
| Pro                forma net loss                                                                                                             |   | $                                  | (5,912,957 | ) | $ | (5,608,844 | ) | $ | (5,360,354 | ) |
|                                                                                                                                          |   |                               |       |   |   |   |   |   |   |   |
| Net                loss per common share, as reported - basic and diluted                                                                     |   | $                                  | (0.04      | ) | $ | (0.06 | ) | $ | (0.07 | ) |
|                                                                                                                                          |   |                               |       |   |   |   |   |   |   |   |
| Net                loss per common share, pro forma - basic and diluted                                                                       |   | $                                  | (0.04      | ) | $ | (0.06 | ) | $ | (0.08 | ) |

**DERIVATIVE      FINANCIAL INSTRUMENTS**

----

|                                   |   | May                31, 2004         |   | May                31, 2003         |   | May                31, 2002         |
|----------------------------------------|--------|-------------------------------------|--------|-------------------------------------|--------|-------------------------------------|
| Estimated                dividends     |   | None                                |   | None                                |   | None                                |
| Expected                volatility     |   | 154                - 244%           |   | 146                - 252%           |   | 137                - 201%           |
| Risk-free                interest rate |   | 1.0                - 4.4%           |   | 1.1                - 4.3%           |   | 1.7                - 4.9%           |
| Expected                term (years)   |   | 2                -                7 |   | 2                -                7 |   | 2                -                7 |

**RECENT      ACCOUNTING PRONOUNCEMENTS**

----

**PATRIOT      SCIENTIFIC CORPORATION**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                     |   | **Consolidated                Balance Sheet** |        |
|----------------------------------------------------------|--------|-----------------------------------------------|-------------|
| **As                of May 31, 2004**                    |   | **As                Previously Reported**     |        | **Adjustments** |   | **As                Restated** |   |
| Warrant                and derivative liabilities        |   | $                                             | -           |   | $ | 5,872,662 |   | $ | 5,872,662 |   |
| Total                liabilities                         |   | $                                             | 778,049     |   | $ | 5,872,662 |   | $ | 6,650,711 |   |
| Additional                paid-in capital                |   | $                                             | 49,990,485  |   | $ | (3,532,942 | ) | $ | 46,457,543 |   |
| Accumulated                deficit                       |   | $                                             | (49,844,018 | ) | $ | (2,339,720 | ) | $ | (52,183,738 | ) |
| Total                stockholders’ equity(deficit) |   | $                                             | 148,179     |   | $ | (5,872,662 | ) | $ | (5,724,483 | ) |

|                                                                             |   | **Statement                of Operations** |       |
|----------------------------------------------------------------------------------|--------|--------------------------------------------|------------|
| **Year                ended May 31, 2004**                                       |   | **As                Previously Reported**  |       | **Adjustments** |   | **As                Restated** |   |
| Change                  in fair value of warrant and derivative liabilities |   | $                                          | -          |   | $ | 164,523 |   | $ | 164,523 |   |
| Interest                expense                                                  |   | $                                          | (2,443,024 | ) | $ | (1,775,428 | ) | $ | (4,218,452 | ) |
| Total                other expense                                               |   | $                                          | (2,412,608 | ) | $ | (1,610,905 | ) | $ | (4,023,513 | ) |
| Net                loss                                                          |   | $                                          | (4,149,978 | ) | $ | (1,610,905 | ) | $ | (5,760,883 | ) |
| LOSS                PER COMMON SHARE:                                            |   |                                       |       |   |   |   |   |   |   |   |
| Basic                                                                            |   | $                                          | (0.03      | ) | $ | (0.01 | ) | $ | (0.04 | ) |
| Diluted                                                                          |   | $                                          | (0.03      | ) | $ | (0.01 | ) | $ | (0.04 | ) |

|                                                                                                                                 |   | **Statement                of Cash Flows**     |       |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|------------|
| **Year                ended May 31, 2004**                                                                                           |   | **As                Previously Reported**                          |       | **Adjustments** |   | **As                Restated** |   |
| Net                loss                                                                                                              |   | $                                                                  | (4,149,978 | ) | $ | (1,610,905 | ) | $ | (5,760,883 | ) |
| Change                  in fair value of warrant and derivative liabilities                                                          |   | $                                                                  | -          |   | $ | (164,523 | ) | $ | (164,523 | ) |
| Non-cash                interest expense related to convertible debentures, notes payable                and                warrants |   | $                                                                  | 2,293,922  |   | $ | 1,775,428 |   | $ | 4,069,350 |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

|                                              |   | **Consolidated                Balance Sheet**     |        |
|---------------------------------------------------|--------|-----------------------------------------------------------------------|-------------|
| **As                of May 31, 2003**             |   | **As                Previously Reported**                             |        | **Adjustments** |   | **As                Restated** |   |
| Warrant                and derivative liabilities |   | $                                                                     | -           |   | $ | 3,492,561 |   | $ | 3,492,561 |   |
| Total                liabilities                  |   | $                                                                     | 1,876,998   |   | $ | 3,492,561 |   | $ | 5,369,559 |   |
| Additional                paid-in capital         |   | $                                                                     | 44,281,210  |   | $ | (2,763,746 | ) | $ | 41,517,464 |   |
| Accumulated                deficit                |   | $                                                                     | (45,694,040 | ) | $ | (728,815 | ) | $ | (46,422,855 | ) |
| Total                stockholders’ deficit  |   | $                                                                     | (1,411,764  | ) | $ | (3,492,561 | ) | $ | (4,904,325 | ) |

|                                                                        |   | **Statement                of Operations**     |       |
|-----------------------------------------------------------------------------|--------|--------------------------------------------------------------------|------------|
| **Year                ended May 31, 2003**                                  |   | **As                Previously Reported**                          |       | **Adjustments** |   | **As                Restated** |   |
| Change                  in fair value of warrant and derivative liabilities |   | $                                                                  | -          |   | $ | (241,174 | ) | $ | (241,174 | ) |
| Interest                expense                                             |   | $                                                                  | (1,448,544 | ) | $ | (1,190,348 | ) | $ | (2,638,892 | ) |
| Total                other expense                                          |   | $                                                                  | (1,448,353 | ) | $ | (1,431,522 | ) | $ | (2,879,875 | ) |
| Net                loss                                                     |   | $                                                                  | (3,888,299 | ) | $ | (1,431,522 | ) | $ | (5,319,821 | ) |
| LOSS                PER COMMON SHARE:                                       |   |                                                               |       |   |   |   |   |   |   |   |
| Basic                                                                       |   | $                                                                  | (0.04      | ) | $ | (0.02 | ) | $ | (0.06 | ) |
| Diluted                                                                     |   | $                                                                  | (0.04      | ) | $ | (0.02 | ) | $ | (0.06 | ) |

|                                                                                                                                 |   | **Statement                of Cash Flows** |       |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|
| **Year                ended May 31, 2003**                                                                                           |   | **As                Previously Reported**  |       | **Adjustments** |   | **As                Restated** |   |
| Net                loss                                                                                                              |   | $                                          | (3,888,299 | ) | $ | (1,431,522 | ) | $ | (5,319,821 | ) |
| Change                in fair value of warrant and derivative liabilities                                                            |   | $                                          | -          |   | $ | 241,174 |   | $ | 241,174 |   |
| Non-cash                interest expense related to convertible debentures, notes payable                and                warrants |   | $                                          | 1,304,957  |   | $ | 1,190,348 |   | $ | 2,495,305 |   |

|                                                      |   | **Consolidated                Balance Sheet**     |        |
|-----------------------------------------------------------|--------|-----------------------------------------------------------------------|-------------|
| **As                of May 31, 2002**                     |   | **As                Previously Reported**                             |        | **Adjustments** |   | **As                Restated** |   |
| Secured                note payable, net of debt discount |   | $                                                                     | 445,760     |   | $ | (274,757 | ) | $ | 171,003 |   |
| Total                current liabilities                  |   | $                                                                     | 1,047,422   |   | $ | (274,757 | ) | $ | 772,665 |   |
| Convertible                debentures                     |   | $                                                                     | 315,198     |   | $ | (23,815 | ) | $ | 291,383 |   |
| Warrant                and derivative liabilities         |   | $                                                                     | -           |   | $ | 1,441,040 |   | $ | 1,441,040 |   |
| Total                liabilities                          |   | $                                                                     | 1,379,351   |   | $ | 1,142,468 |   | $ | 2,521,819 |   |
| Additional                paid-in capital                 |   | $                                                                     | 41,440,101  |   | $ | (1,845,175 | ) | $ | 39,594,926 |   |
| Accumulated                deficit                        |   | $                                                                     | (41,805,741 | ) | $ | 702,707 |   | $ | (41,103,034 | ) |
| Total                stockholders’ deficit          |   | $                                                                     | (444,825    | ) | $ | (1,142,468 | ) | $ | (1,587,293 | ) |

----

**PATRIOT          SCIENTIFIC CORPORATION**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS          (CONTINUED)**

|                                                                        |   | **Statement                of Operations** |       |
|-----------------------------------------------------------------------------|--------|--------------------------------------------|------------|
| **Year                  ended May 31, 2002**                                |   | **As                Previously Reported**  |       | **Adjustments** |   | **As                Restated** |   |
| Change                  in fair value of warrant and derivative liabilities |   | $                                          | -          |   | $ | 204,720 |   | $ | 204,720 |   |
| Interest                expense                                             |   | $                                          | (1,373,542 | ) | $ | 497,987 |   | $ | (875,555 | ) |
| Total                other expense                                          |   | $                                          | (1,370,880 | ) | $ | 702,707 |   | $ | (668,173 | ) |
| Net                loss                                                     |   | $                                          | (5,487,051 | ) | $ | 702,707 |   | $ | (4,784,344 | ) |
| INCOME                (LOSS) PER COMMON SHARE:                              |   |                                       |       |   |   |   |   |   |   |   |
| Basic                                                                       |   | $                                          | (0.08      | ) | $ | 0.01 |   | $ | (0.07 | ) |
| Diluted                                                                     |   | $                                          | (0.08      | ) | $ | 0.01 |   | $ | (0.07 | ) |

|                                                                                                                                 |   | **Statement                of Cash Flows** |       |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|
| **Year                ended May 31, 2002**                                                                                           |   | **As                Previously Reported**  |       | **Adjustments** |   | **As                Restated** |   |
| Net                loss                                                                                                              |   | $                                          | (5,487,051 | ) | $ | 702,707 |   | $ | (4,784,344 | ) |
| Change                  in fair value of warrant and derivative liabilities                                                          |   | $                                          | -          |   | $ | (204,720 | ) | $ | (204,720 | ) |
| Non-cash                interest expense related to convertible debentures, notes payable                and                warrants |   | $                                          | 1,324,431  |   | $ | (497,987 | ) | $ | 826,444 |   |

|                                                          |   | 2004   |       | 2003   |   | 2002       |   |
|---------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                                          |   |   |       |   |   |       |   |
| Computer                equipment and software                |   | $      | 1,660,707  |   | $      | 1,660,707  |   | $ | 1,660,707 |   |
| Furniture                and fixtures                         |   |   | 499,274    |   |   | 499,274    |   |   | 499,274 |   |
|                                                          |   |   | 205,594    |   |   | 205,594    |   |   | 205,594 |   |
|                                                          |   |   | 2,365,575  |   |   | 2,365,575  |   |   | 2,365,575 |   |
|                                                          |   |   |       |   |   |       |   |   |   |   |
| Less                accumulated depreciation and amortization |   |   | (2,297,186 | )      |   | (2,212,045 | )      |   | (2,080,087 | ) |
|                                                          |   |   |       |   |   |       |   |   |   |   |
| Net                property and equipment                     |   | $      | 68,389     |   | $      | 153,530    |   | $ | 285,488 |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

*Overview*

*Number      of Shares Debentures May Be Converted Into*

*Resets      of Conversion Price and Conversion Shares*

*Warrants*

*Options      to Purchase Additional Debentures*

*Shareholder      Approval*

----

**PATRIOT      SCIENTIFIC CORPORATION**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

*Restrictive      Covenants*

*Right      of First Refusal*

*Registration      Rights*

*Security      Interest*

|   |   |                    |       |      |   | Principal                   |   |                             |      |         |   | Effective                   |   | Shares                      |     | Warrant |   |
|--------|--------|-------------------------|------------|-----------|--------|-----------------------------|--------|----------------------------------|-----------|--------------|--------|-----------------------------|--------|-----------------------------|----------|---------|--------|
|   |   | Dates                of |       | Aggregate |   | Balance                at   |   | Conversion                Prices |      | Registration |   | Converted                at |   | Shares                      |     |
| Series |   | Issuance                |       | Principal |   | May                31, 2004 |   | Initial                          |      | Reset        |   | Date                        |   | May                31, 2004 |     | Issued  |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |
| A      |   |                    | 4/23/2002- |      | $      | 1,000,000                   |   | $                                | 25,000    |         | $      | 0.08616-                    |   | $                           | 0.04190- |    |   | 10/29/2002 |   |   | 23,441,662 |   |   | 12,859,175 |   |
|   |   |                    | 6/10/2002  |      |   |                        |   |                             |      |         | $      | 0.10289                     |   | $                           | 0.04457  |    |   |   |   |   |   |   |   |   |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |   |   |   |   |   |   |   |   |
| B      |   |                    | 8/23/2002- |      |   | 605,000                     |   |                             | 107,500   |         | $      | 0.05126-                    |   | $                           | 0.04381- |    |   | 3/7/2003 |   |   | 11,620,528 |   |   | 11,234,835 |   |
|   |   |                    | 1/24/2003  |      |   |                        |   |                             |      |         | $      | 0.0727                      |   | $                           | 0.04722  |    |   |   |   |   |   |   |   |   |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |   |   |   |   |   |   |   |   |
| C      |   |                    | 3/24/2002- |      |   | 510,000                     |   |                             | 10,000    |         | $      | 0.041-                      |   | $                           | 0.041-   |    |   | 6/26/2003 |   |   | 10,179,007 |   |   | 9,377,943 |   |
|   |   |                    | 6/9/2003   |      |   |                        |   |                             |      |         | $      | 0.065                       |   | $                           | 0.065    |    |   |   |   |   |   |   |   |   |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |   |   |   |   |   |   |   |   |
| D      |   |                    | 8/1/2003-  |      |   | 547,500                     |   |                             | 55,000    |         | $      | 0.0172-                     |   | $                           | 0.0172-  |    |   | 11/18/2003 |   |   | 23,792,720 |   |   | 22,455,355 |   |
|   |   |                    | 10/21/2003 |      |   |                        |   |                             |      |         | $      | 0.048                       |   | $                           | 0.0477   |    |   |   |   |   |   |   |   |   |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |   |   |   |   |   |   |   |   |
| E      |   |                    | 12/1/2003- |      |   | 1,527,500                   |   |                             | 1,527,500 |         | $      | 0.0267-                     |   | $                           | 0.0267-  |    |   | 6/7/2004 |   |   | - |   |   | 30,395,392 |   |
|   |   |                    | 5/11/2004  |      |   |                        |   |                             |      |         | $      | 0.10                        |   | $                           | 0.10     |    |   |   |   |   |   |   |   |   |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |   |   |   |   |   |   |   |   |
| F      |   |                    | 3/23/2004  |      |   | 723,167                     |   |                             | 723,167   |         | $      | 0.09                        |   | $                           | 0.09     |    |   | Not                registered |   |   | - |   |   | 8,035,192 |   |
|   |   |                    |       |      |   |                        |   |                             |      |         |   |                        |   |                        |     |    |   |   |   |   |   |   |   |   |   |
| Totals |   |                    |       |      | $      | 4,913,167                   |   | $                                | 2,448,167 |         |   |                        |   |                        |     |    |   |   |   |   | 69,033,917 |   |   | 94,357,892 |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

|                                                  |   | 2004   |       | 2003   |   | 2002      |   |
|-------------------------------------------------------|--------|--------|------------|--------|--------|-----------|--------|
| Convertible                debentures issued          |   | $      | 4,913,167  |   | $      | 2,015,000 |   | $ | 508,000 |   |
| Less                amounts converted to common stock |   |   | (2,465,000 | )      |   | (800,000  | )      |   | - |   |
|                                                  |   |   | 2,448,167  |   |   | 1,215,000 |   |   | 508,000 |   |
|                                                  |   |   |       |   |   |      |   |   |   |   |
| Less                debt discount                     |   |   | (2,075,146 | )      |   | (813,011  | )      |   | (216,617 | ) |
|                                                  |   |   | 373,021    |   |   | 401,989   |   |   | 291,383 |   |
|                                                  |   |   |       |   |   |      |   |   |   |   |
| Less                current portion                   |   |   | (145,320   | )      |   | (121,879  | )      |   |   |   |
|                                                  |   |   |       |   |   |      |   |   |   |   |
| Long-term                portion                      |   | $      | 227,701    |   | $      | 280,110   |   | $ | 291,383 |   |

| Years                Ending May 31, |   |   |      |
|-------------------------------------|--------|--------|-----------|
| 2005                                |   | $      | 172,500   |   |
| 2006                                |   |   | 2,275,667 |   |
| Total                               |   | $      | 2,448,167 |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**$30      Million Equity Line of Credit Agreement**

**$25      Million Equity Line of Credit Agreement**

*Overview*

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

*Put      Rights*

*Limitations      and Conditions Precedent to Our Put Rights*

|   | · we                have issued shares of our common stock that have been paid for by                Swartz                and the amount of proceeds we have received is equal to the maximum                offering amount;                                                                                                                                                                          |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · the                registration statement covering the resale of the shares becomes                ineffective or unavailable for use;                                                                                                                                                                                                                                                                |
|   | · our                common stock is not actively trading on the OTC Bulletin Board, the                Nasdaq                Small Cap Market, the Nasdaq National Market, the American Stock                Exchange,                or the New York Stock Exchange, or is suspended or delisted with                respect                to the trading on such market or                exchange. |

|   | · we                have announced or implemented a stock split or combination of our                common                stock between the advanced put notice date and the end of the pricing                period;                                                                                                                                                                                                                                                                                      |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · we                have paid a common stock dividend or made any other distribution                of our                common stock between the advanced put notice date and the end of                the                pricing period;                                                                                                                                                                                                                                                                 |
|   | · we                have made a distribution to the holders of our common stock or of                all or                any portion of our assets or evidences of indebtedness between the                put                notice date and the end of the pricing period;                                                                                                                                                                                                                               |
|   | · we                have consummated a major transaction (including a transaction, which                constitutes a change of control) between the advance put notice date                and                the end of the pricing period, the registration statement covering                the                resale of the shares becomes ineffective or unavailable for use,                or our                stock becomes delisted for trading on our then primary exchange;                or |
|   | · we                discover the existence of facts that cause us to believe that the                registration statement contains an untrue statement or omits to state                a                material fact.                                                                                                                                                                                                                                                                                    |

*Short      Sales*

*Shareholder      Approval*

----

**PATRIOT      SCIENTIFIC CORPORATION**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

*Termination      of Investment Agreement*

*Restrictive      Covenants*

*Right      of First Refusal*

*Swartz's      Right of Indemnification*

*Waiver      and Agreement*

*Warrants*

----

**PATRIOT          SCIENTIFIC CORPORATION**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

      2004      through 2011. During fiscal 2004, the Company issued warrants to purchase      73,436,127 shares of common stock at exercise prices ranging from $0.0172 to      $0.10 per share and issued 11,079,175 shares of common stock on the exercise      of      warrants at exercise prices ranging from $0.0172 to $0.04 per share. In      connection with the exercise of 4,102,431 warrants, the Company agreed to lower      the exercise price for the warrants purchased. As a result, the Company recorded      additional interest expense of $46,163 related to the beneficial exercise      price.

|                                       |   | 2004   |        | 2003   |   | 2002       |   |
|--------------------------------------------|--------|--------|-------------|--------|--------|------------|--------|
|                                       |   |   |        |   |   |       |   |
| Issued                in conjunction with: |   |   |        |   |   |       |   |   |   |   |
| Convertible                debentures      |   |   | 83,278,716  |   |   | 31,164,260 |   |   | 2,514,809 |   |
| Anti-dilution                agreements    |   |   | 15,398,058  |   |   | 5,355,562  |   |   | - |   |
| Equity                line of credit       |   |   | 18,765,369  |   |   | 18,765,369 |   |   | 18,765,369 |   |
| Other                                      |   |   | 3,907,277   |   |   | 3,707,277  |   |   | 3,197,546 |   |
|                                       |   |   |        |   |   |       |   |   |   |   |
| Total                warrants outstanding  |   |   | 121,349,420 |   |   | 58,992,468 |   |   | 24,477,724 |   |

----

**PATRIOT          SCIENTIFIC CORPORATION**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

shares      of      the Company’s common stock. The 1996 Stock Option Plan provides, at the      discretion of the board of directors, for grants to either full or part time      employees, directors and consultants of the Company to purchase common stock      of      the Company at a price not less than the fair market value on the date of grant      for incentive stock options or not less than 85% of the fair market value on      the      date of grant for non-qualified stock options. In the case of a significant      stockholder, the option price of the share is not less than 110 percent of      the      fair market value of the shares on the date of grant. Any option granted under      the 1996 Stock Option Plan must be exercised within ten years of the date they      are granted (five years in the case of a significant stockholder). During the      fiscal years ended May 31, 2004, 2003 and 2002, the Company granted options      to      purchase none, 340,500 and 1,000,000 shares of stock at market value,      respectively.

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

      120% and      90%; risk-free interest rates of 2.1% to 3.9%, 2.3% to 4.3% and 3.5% to 4.8%;      and expected lives of 2 to 7 years for all years.

|                                                                                                                                      |   |         |       |                                           |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|------------------------------------------------|--------|
|                                                                                                                                      |   | Options      |       | Warrants                                       |   |
|                                                                                                                                      |   |  Shares |       | Weighted                Average Exercise Price |   |  Shares |   | Weighted                Average Exercise Price |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |
| Outstanding,                June 1, 2001                                                                                                  |   |         | 2,577,824  |                                           | $      | 0.92 |   |   | 4,961,463 |   | $ | 0.42 |   |
| Granted                                                                                                                                   |   |         | 4,145,000  |                                           |   | 0.21 |   |   | 23,197,201 |   |   | 0.09 |   |
| Cancelled                                                                                                                                 |   |         | (2,281,419 | )                                              |   | 0.67 |   |   | (3,630,940 | ) |   | 0.10 |   |
| Exercised                                                                                                                                 |   |         | (191,666   | )                                              |   | 0.32 |   |   | (50,000 | ) |   | 0.25 |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Outstanding,                May 31, 2002                                                                                                  |   |         | 4,249,739  |                                           |   | 0.39 |   |   | 24,477,724 |   |   | 0.11 |   |
| Granted                                                                                                                                   |   |         | 1,215,500  |                                           |   | 0.05 |   |   | 35,005,013 |   |   | 0.05 |   |
| Cancelled                                                                                                                                 |   |         | (411,239   | )                                              |   | 0.81 |   |   | (490,269 | ) |   | 0.30 |   |
| Exercised                                                                                                                                 |   |         | -          |                                           |   | - |   |   | - |   |   | - |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Outstanding,                May 31, 2003                                                                                                  |   |         | 5,054,000  |                                           |   | 0.28 |   |   | 58,992,468 |   |   | 0.06 |   |
| Granted                                                                                                                                   |   |         | 2,210,000  |                                           |   | 0.06 |   |   | 73,436,127 |   |   | 0.05 |   |
| Cancelled                                                                                                                                 |   |         | (156,000   | )                                              |   | 0.13 |   |   | - |   |   | - |   |
| Exercised                                                                                                                                 |   |         | (105,000   | )                                              |   | 0.05 |   |   | (11,079,175 | ) |   | 0.03 |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Outstanding,                May 31, 2004                                                                                                  |   |         | 7,003,000  |                                           | $      | 0.21 |   |   | 121,349,420 |   | $ | 0.05 |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Exercisable,                May 31, 2002                                                                                                  |   |         | 2,418,072  |                                           | $      | 0.48 |   |   | 24,477,724 |   | $ | 0.11 |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Exercisable,                May 31, 2003                                                                                                  |   |         | 4,138,633  |                                           | $      | 0.29 |   |   | 57,992,468 |   | $ | 0.06 |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Exercisable,                May 31, 2004                                                                                                  |   |         | 5,904,434  |                                           | $      | 0.24 |   |   | 120,149,420 |   | $ | 0.05 |   |
|                                                                                                                                      |   |         |       |                                           |   |   |   |   |   |   |   |   |   |
| Weighted                average fair value of optionsand                warrants granted during the yearended                May 31, 2002 |   |         |       |                                           | $      | 0.07 |   |   |   |   | $ | 0.11 |   |
| Weighted                average fair value of optionsand                warrants granted during the yearended                May 31, 2003 |   |         |       |                                           | $      | 0.04 |   |   |   |   | $ | 0.05 |   |
| Weighted                average fair value of optionsand                warrants granted during the yearended                May 31, 2004 |   |         |       |                                           | $      | 0.05 |   |   |   |   | $ | 0.06 |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

|   |                                                |          | Outstanding                   |   | Exercisable                                                |   |
|--------|-----------------------------------------------------|---------------|-------------------------------|--------|------------------------------------------------------------|--------|
|   |   Range                of Exercise Prices |          |   NumberOutstanding |   | Weighted                Average Remaining Contractual Life |   |  Weighted                Average Exercise Price |   |   NumberExercisable |   |  Weighted                Average Exercise Price |   |
|   | Options                                             |          |                          |   |                                                       |   |   |   |   |   |   |   |
|   | $                                                   | 0.0345-0.059  |                          |   | 2,380,000                                                  |   |   | 4.24 |   | $ | 0.04 |   |   | 1,370,000 |   | $ | 0.05 |   |
|   |                                                | 0.07-0.09     |                          |   | 1,365,500                                                  |   |   | 2.96 |   |   | 0.08 |   |   | 1,526,934 |   |   | 0.08 |   |
|   |                                                | 0.11-0.1325   |                          |   | 2,340,000                                                  |   |   | 2.93 |   |   | 0.11 |   |   | 2,090,000 |   |   | 0.11 |   |
|   |                                                | 0.61-1.18     |                          |   | 525,000                                                    |   |   | 1.02 |   |   | 0.93 |   |   | 525,000 |   |   | 0.93 |   |
|   |                                                | 1.325         |                          |   | 392,500                                                    |   |   | 1.00 |   |   | 1.33 |   |   | 392,500 |   |   | 1.33 |   |
|   | $                                                   | 0.03453-1.325 |                          |   | 7,003,000                                                  |   |   | 3.13 |   |   | 0.21 |   |   | 5,904,434 |   |   | 0.24 |   |
|   |                                                |          |                          |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   | Warrants                                            |          |                          |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|   | $                                                   | 0.0172-0.039  |                          |   | 29,634,938                                                 |   |   | 6.79 |   |   | 0.03 |   |   | 29,634,938 |   |   | 0.03 |   |
|   |                                                | 0.04-0.044    |                          |   | 39,156,429                                                 |   |   | 6.26 |   |   | 0.04 |   |   | 39,156,429 |   |   | 0.04 |   |
|   |                                                | 0.045-0.049   |                          |   | 21,057,218                                                 |   |   | 5.95 |   |   | 0.05 |   |   | 21,057,218 |   |   | 0.05 |   |
|   |                                                | 0.05-0.094    |                          |   | 27,793,558                                                 |   |   | 6.32 |   |   | 0.08 |   |   | 26,593,558 |   |   | 0.08 |   |
|   |                                                | 0.10-0.65     |                          |   | 3,707,277                                                  |   |   | 2.87 |   |   | 0.13 |   |   | 3,707,277 |   |   | 0.13 |   |
|   |                                                |          |                          |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   | $                                                   | 0.072-0.65    |                          |   | 121,349,420                                                |   |   | 6.25 |   | $ | 0.05 |   |   | 120,149,420 |   | $ | 0.05 |   |

|                                                                |   | May                31, |   |
|---------------------------------------------------------------------|--------|------------------------|--------|
|                                                                |   | 2004                   |   | 2003 |   | 2002 |   |
|                                                                |   |                   |   |   |   |   |   |
| Federal                income tax rate                              |   |                   | (34    | )% |   | 34 | % |   | (34 | )% |
| State                income tax rate, net of Federal effect         |   |                   | -      | % |   | - | % |   | - | % |
| Increase                (decrease) in valuation allowance and other |   |                   | 34     | % |   | (34 | )% |   | 34 | % |
|                                                                |   |                   |   |   |   |   |   |   |   |   |
| Effective                income tax rate                            |   |                   | -      | % |   | - | % |   | - | % |

----

**PATRIOT          SCIENTIFIC CORPORATION**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS          (CONTINUED)**

|                                            |   | May                31, |        |
|-------------------------------------------------|--------|------------------------|-------------|
|                                            |   | 2004                   |        | 2003 |   | 2002 |   |
| Deferred                tax assets:             |   |                   |        |   |   |   |   |   |   |   |
| Net                operating loss carryforwards |   | $                      | 13,609,659  |   | $ | 12,851,581 |   | $ | 10,392,811 |   |
| Accruals                                        |   |                   | 1,931,639   |   |   | 2,167,082 |   |   | 2,421,478 |   |
| Basis                difference in fixed assets |   |                   | 27,972      |   |   | 6,814 |   |   | 2,749,457 |   |
| Inventory                and other reserves     |   |                   | 41,446      |   |   | 164,240 |   |   | 162,527 |   |
| Credits                                         |   |                   | 251,142     |   |   | 196,467 |   |   | 116,735 |   |
| Less:                valuation allowance        |   |                   | (15,861,858 | ) |   | (15,386,184 | ) |   | (15,843,008 | ) |
|                                            |   |                   |        |   |   |   |   |   |   |   |
| Net                deferred tax assets          |   | $                      | -           |   | $ | - |   | $ | - |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

| Defendant                                  |   | U.S.                District Court             |   | Case                Number |
|--------------------------------------------|--------|------------------------------------------------|--------|----------------------------|
| Sony                Corporation of America |   | Southern                District of New York   |   | 03CV10142                  |
| Fujitsu                                    |   | Northern                District of California |   | C035787                    |
| Toshiba                America, Inc.       |   | Southern                District of New York   |   | 03CV10180                  |
| NEC                USA, Inc.               |   | Eastern                District of New York    |   | CV036432                   |
| Matsushita                                 |   | District                of New Jersey          |   | 03CV06210                  |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

| Years                Ending May 31,                    |   |   |   |
|--------------------------------------------------------|--------|--------|--------|
|                                                   |   |   |   |
| 2005                                                   |   | $      | 9,562  |   |
| 2006                                                   |   |   | 2,391  |   |
| Total                minimum lease payments            |   |   | 11,953 |   |
| Amount                representing interest            |   |   | 1,627  |   |
| Present                value of minimum lease payments |   | $      | 10,326 |   |
|                                                   |   |   |   |   |
| Total                obligation                        |   | $      | 10,326 |   |
| Less                current portion                    |   |   | (8,020 | ) |
|                                                   |   |   |   |   |
| Long-term                portion                       |   | $      | 2,306  |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

| Years                Ending May 31,         |   | Gross                Payments |    | Sublease                Income |   | Net                Payments |   |
|---------------------------------------------|--------|-------------------------------|---------|--------------------------------|--------|-----------------------------|--------|
|                                        |   |                          |    |                           |   |                        |   |
| 2005                                        |   | $                             | 135,454 |                           | $      | 70,470                      |   | $ | 64,984 |   |
| 2006                                        |   |                          | 141,658 |                           |   | 72,540                      |   |   | 69,118 |   |
| 2007                                        |   |                          | 23,782  |                           |   | 12,150                      |   |   | 11,632 |   |
|                                        |   |                          |    |                           |   |                        |   |   |   |   |
| Total                minimum lease payments |   | $                             | 300,894 |                           | $      | 155,160                     |   | $ | 145,734 |   |

|                               |   | 2004   |   | 2003   |   | 2002    |   |
|------------------------------------|--------|--------|--------|--------|--------|---------|--------|
|                               |   |   |   |   |   |    |   |
| Domestic                sales      |   | $      | 70,000 |   | $      | 113,000 |   | $ | 355,000 |   |
| Foreign                sales:      |   |   |   |   |   |    |   |   |   |   |
| Europe                             |   |   | 6,000  |   |   | 11,000  |   |   | 4,000 |   |
|                               |   |   |   |   |   |    |   |   |   |   |
| Total                foreign sales |   |   | 6,000  |   |   | 11,000  |   |   | 4,000 |   |
|                               |   |   |   |   |   |    |   |   |   |   |
| Total                sales         |   | $      | 76,000 |   | $      | 124,000 |   | $ | 359,000 |   |

----

**PATRIOT        SCIENTIFIC CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

|     |   |   |   |    |   |   |   |
|----------|--------|--------|--------|---------|--------|--------|--------|
|     |   | 2004   |   | 2003    |   | 2002   |   |
| Customer |   | Sales  |   | Percent |   | Sales  |   | Percent |   | Sales |   | Percent |   |
|     |   |   |   |    |   |   |   |   |   |   |   |   |   |
| A        |   | $      | 25,000 |    |   | 32.9   | %      | $ | 15,000 |   |   | 12.0 | % | $ | 151,000 |   |   | 42.0 | % |
| B        |   |   | 18,000 |    |   | 23.7   | %      |   | - |   |   | - |   |   | 59,000 |   |   | 16.4 | % |
| C        |   |   | 9,000  |    |   | 11.8   | %      |   | - |   |   | - |   |   | - |   |   | - |   |
| D        |   |   | -      |    |   | -      |   |   | 43,000 |   |   | 36.7 | % |   | - |   |   | - |   |
| E        |   |   | -      |    |   | -      |   |   | 23,000 |   |   | 18.5 | % |   | - |   |   | - |   |
| F        |   |   | -      |    |   | -      |   |   | 15,000 |   |   | 12.0 | % |   | - |   |   | - |   |

----

|                                        |                                          |                             |
|---------------------------------------------|-----------------------------------------------|----------------------------------|
| DATED:                October 16, 2006 | PATRIOT                SCIENTIFIC CORPORATION |
|                                   |                                     |                        |
|                                        |                                          | /S/                DAVID H. POHL |
|                                        | David                H. Pohl                  |
|                                        | Chief                Executive Officer        |

| Signature                                                              |   | Title                                                                         |   | Date                                       |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------|
|                                                                   |   |                                                                          |   |                                       |
| /S/                DAVID H. POHLDavid                H. Pohl           |   |  President,                Chief Executive Officer, and Director         |   |  October                16, 2006      |
|                                                                   |   |                                                                          |   |                                       |
| /S/                THOMAS J. SWEENEYThomas                J. Sweeney   |   |  Chief                Financial Officer and Principal Accounting Officer |   |  October 16,                2006 |
|                                                                   |   |                                                                          |   |                                       |
| /S/                CARLTON M. JOHNSONCarlton                M. Johnson |   |  Director                                                                |   |  October 16,                2006 |
|                                                                   |   |                                                                          |   |                                       |
| /S/                GLORIA FELCYNGloria                Felcyn           |   |  Director                                                                |   |  October 16,                2006 |
|                                                                   |   |                                                                          |   |                                       |
| /S/                HELMUT FALK, JR.Helmut                Falk, Jr.     |   |  Director                                                                |   |  October 16,                2006 |
|                                                                   |   |                                                                          |   |                                       |
| /S/                JAMES L. TURLEYJames                L. Turley       |   |  Director                                                                |   |  October                16, 2006      |

----