ptsc_def14a-103008.htm

Represents the compensation costs of stock options for financial reporting purposes for fiscal 2008, computed in accordance with SFAS 123R, rather than an amount paid to or realized by the director. See Note 2 to the financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2008 for the assumptions made in determining SFAS 123R values. There can be no assurance that the SFAS 123R amounts will ever be realized. The per-option SFAS 123R grant date value was $0.35 for options granted to Mr. Tredennick and $0.26 for options granted to Mr. Schrock in fiscal 2008.

2.	Consists of $36,000 board fee, $36,000 Phoenix Digital Solutions, LLC management committee fee, $36,000 Compensation Committee Chair fee and $36,000 Executive Committee Chair fee.

3.	Consists of $36,000 board fee and $78,000 Audit Committee Chair fee. In August 2007, the Audit Committee Chair fee was increased from $4,000 per month to $7,000 per month.

4.	Mr. Pohl retired as CEO on June 5, 2007. Mr. Pohl continued to serve on our board and the management committee of Phoenix Digital Solutions, LLC until February 2008. Consists of $45,000 chairman fee and $27,000 Phoenix Digital Solutions, LLC management committee fee.

5.	Mr. Tredennick joined our board in August 2007 and served as chair of the Technology Committee until March 2008. Consists of $30,000 board fee and $16,000 Technology Committee Chair fee.

6.	Mr. Schrock joined our board April 17, 2008 and serves as chair of the Corporate Development, M & A Committee. Consists of $3,000 board fee and $3,000 Corporate Development, M & A Committee Chair fee for the month of May 2008.

At May 31, 2008 the aggregate number of options outstanding was: Mr. Johnson - 1,400,000 shares, Ms. Felcyn - 950,000 shares, Mr. Falk - 1,000,000 shares, Mr. Tredennick – 100,000 shares and Mr. Schrock - 250,000 shares.

Mr. Tredennick’s options vest immediately upon grant, have a term of five years and are subject to the terms and conditions of our stock option plans.

Mr. Schrock’s options vest over a period of 18 months from the grant date of April 17, 2008, have a term of five years and are subject to the terms and conditions of our stock option plans.

Directors who are not our employees are compensated for their service as a director as shown in the table below:

Schedule of Director Fees

May 31, 2008

Compensation Item	Amount
Board	$	36,000
Chairman		45,000	(1)
Corporate Development, M & A Committee Chair		3,000	(2)
Audit Committee Chair		78,000	(3)
Compensation Committee Chair		36,000
Executive Committee Chair		36,000
Technology Committee Chair		16,000	(4)
Phoenix Digital Solutions, LLC Management Committee Board Member		36,000

1.	Effective from June 2007 until February 2008.

2.	Effective May 2008.

3.	Effective August 2007, the Audit Committee Chair fee was increased from $4,000 per month to $7,000 per month.

4.	Effective from August 2007 until March 2008. The Technology Committee was disbanded in March 2008.

All retainers are paid in monthly installments.

Other

We reimburse all directors for travel and other necessary business expenses incurred in the performance of their services for us.

Transactions With Directors, Executive Officers and Principal Shareholders

The Audit Committee, as part of its charter, reviews and approves all transactions between us and any related party.

There were no transactions, or series of transactions during the fiscal year ended May 31, 2008, nor are there any currently proposed transactions, or series of transactions, to which we are a party, in which the amount exceeds $120,000, and in which to its knowledge any director, executive officer, nominee, five percent or greater stockholder, or any member of the immediate family of any of the foregoing persons, has or will have any direct or indirect material interest other than as described below.

During the past five years, no director, executive officer or nominee for the Board has been involved in any legal proceedings that are material to an evaluation of their ability or integrity to become our director or executive officer.

Company Stock Price Performance

The stock price performance graph below is required by the SEC and will not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed soliciting material or filed under such Acts.

The following graph compares the five-year cumulative total return on our common stock to the total returns of 1) NASDAQ Composite Index and 2) Philadelphia Semiconductor Index. This comparison assumes in each case that $100 was invested on May 31, 2003 and all dividends were reinvested. Our fiscal year ends on May 31.

	2003		2004		2005		2006		2007		2008
Patriot Scientific Corporation	$	100	$	117	$	250	$	1,693	$	918	$	486
NASDAQ Composite Index		100		124		130		137		163		158
Philadelphia Semiconductor Index		100		128		112		122		128		109

INDEPENDENT PUBLIC ACCOUNTANTS

During our two most recent fiscal years ended May 31, 2008 and May 31, 2007, there were no disagreements between us and KMJ Corbin & Company, LLP (“Corbin”) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Corbin's satisfaction, as applicable, would have caused them to make reference to the subject matter of the disagreement in their respective reports on the financial statements for such years.

To help ensure the independence of our independent auditor, the Audit Committee has approved and adopted a Policy on Engagement of Independent Auditor, which is available on our web site at www.ptsc.com.

Pursuant to the Policy on Engagement of Independent Auditor, the Audit Committee is directly responsible for the appointment, compensation and oversight of the independent auditor. The Audit Committee pre-approves all audit services and non-audit services to be provided by the independent auditor and has approved 100% of the audit, audit-related and tax fees listed below. The Audit Committee may delegate to one or more of its members the authority to grant the required approvals, provided that any exercise of such authority is presented at the next Audit Committee meeting for ratification.

Each audit, non-audit and tax service that is approved by the Audit Committee will be reflected in a written engagement letter or writing specifying the services to be performed and the cost of such services, which will be signed by either a member of the Audit Committee or by one of our officers authorized by the Audit Committee to sign on our behalf.

The Audit Committee will not approve any prohibited non-audit service or any non-audit service that individually or in the aggregate may impair, in the Audit Committee's opinion, the independence of the independent auditor.

In addition, since January 1, 2003, our independent auditor may not provide any services to our officers or Audit Committee members, including financial counseling or tax services.

Audit Fees

During the fiscal years ended May 31, 2008 and 2007, the aggregate fees billed by our principal accountants for professional services rendered for the audit of our annual financial statements, audits of effectiveness of internal control over financial reporting, restatements of prior years financials and reviews of quarterly financial statements included in our reports on Form 10-Q, and audit services provided in connection with other statutory or regulatory filings were $219,681 and $828,098, respectively.

Audit-Related Fees

During the fiscal years ended May 31, 2008 and 2007, the aggregate fees billed by our principal accountants for assurance and related services reasonably related to the performance of the audit or review of our financial statements that are not reported under “Audit Fees” were $10,050 and $12,808, which were primarily for review of registration and proxy statements.

Tax Fees

During the fiscal years ended May 31, 2008 and 2007, the aggregate fees billed by our principal accountant for tax compliance, tax advice and tax planning rendered on our behalf were $22,840 and $13,080, respectively, which related to the preparation of federal and state income tax returns.

All Other Fees

Our principal accountant billed no other fees for the fiscal years ended May 31, 2008 and 2007, except as disclosed above.

SHAREHOLDER PROPOSALS AND COMMUNICATIONS

Under certain circumstances, stockholders are entitled to have us include stockholder proposals in our proxy statement for presentation at a meeting of stockholders. We intend to hold our next annual meeting of stockholders in October 2009. Stockholders who desire to have their proposal included on our proxy card and included in our proxy statement for the next annual meeting of stockholders must submit such proposals to us no later than June 1, 2009. Proposals received by us after such date will be considered untimely. Stockholder proposals should be directed to the attention of the Corporate Secretary, addressed as follows: Patriot Scientific Corporation, Mr. Clifford L. Flowers, Corporate Secretary, 6183 Paseo Del Norte, Suite 180, Carlsbad, CA 92011. The submission of a proposal does not guarantee that it will be included in the proxy statement or proxy. Shareholder proposals are subject to certain regulations and requirements under the federal securities laws.

Stockholders who intend to submit proposals to the stockholders at the next annual meeting of stockholders but intend to submit such proposals on their own, either from the floor or through their own proxy statement and proxy, must, in order for such matters to be voted upon by the stockholders, give notice of such to us by August 15, 2009. The persons named as proxies for the next annual meeting of stockholders will have discretionary authority to vote on any stockholder proposal not included in our proxy materials for the meeting, unless we receive notice of the proposal by August 15, 2009. If proper notice is received by that date, the proxy holders will not have discretionary voting authority except as provided in federal regulations governing stockholder proposals.

We encourage stockholders to communicate with members of the Board. Shareholders wishing to communicate with directors may send correspondence addressed as follows: Patriot Scientific Corporation, Mr. Clifford L. Flowers, Corporate Secretary, 6183 Paseo Del Norte, Suite 180, Carlsbad, CA 92011. All communications will be provided directly to the Board.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year we may be “householding” our Proxy Statement and Annual Report. A single proxy statement and annual report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. We will deliver promptly upon written or oral request a separate copy of the annual report or proxy statement to a security holder at a shared address to which a single copy of the document was delivered. If, at any time, a stockholder no longer wishes to participate in “householding” and would prefer to receive a separate proxy statement and annual report, the affected stockholder may contact Mr. Clifford L. Flowers, Corporate Secretary, Patriot Scientific Corporation, 6183 Paseo Del Norte, Suite 180, Carlsbad, CA 92011 or (760) 547-2700. Shareholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should also contact Mr. Flowers as indicated in the preceding sentence.

FINANCIAL AND OTHER AVAILABLE INFORMATION

We are subject to the informational and reporting requirements of Section 13 of the Exchange Act and in accordance with those requirements file reports and other information with the SEC. Such reports and other information filed with the SEC are available for inspection and copying at the Public Reference Branch of the SEC, located at Room 1024, 450 Fifth Street N.W., Washington, DC 20549, at prescribed rates. Our filings under the Exchange Act may also be accessed through the SEC's web site (http://www.sec.gov).

Our Annual Report on Form 10-K for the year ended May 31, 2008, including the annual statements, as filed with the SEC under the Exchange Act, constitutes the annual report to stockholders and is being mailed with this Proxy Statement. UPON REQUEST AND PAYMENT OF A REASONABLE FEE TO COVER OUR EXPENSES, WE WILL FURNISH ANY PERSON WHO WAS A STOCKHOLDER AS OF THE RECORD DATE, A COPY OF ANY EXHIBIT TO THE FORM 10-K FOR THE FISCAL YEAR ENDED MAY 31, 2008. ANY SUCH WRITTEN REQUEST MAY BE ADDRESSED TO CLIFFORD L. FLOWERS, SECRETARY, PATRIOT SCIENTIFIC CORPORATION, 6183 PASEO DEL NORTE, SUITE 180, CARLSBAD, CA 92011. THE WRITTEN REQUEST MUST CONTAIN A GOOD FAITH REPRESENTATION THAT, AS OF THE RECORD DATE, THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF OUR COMMON STOCK.

OTHER MATTERS

The Board knows of no other matters to be brought before the Annual Meeting. However, if any matters other than those referred to herein should properly come before the Annual Meeting, it is the intention of the proxy holders to vote such proxy in accordance with his or her best judgment.

APPENDIX A

Patriot Scientific Corporation

Audit Committee Charter

Organization

The Audit Committee is a standing committee of the Board of Directors. The Audit Committee will consist of at least two members of the Board of Directors, all of whom are “independent” as defined in applicable stock exchange rules and are otherwise free of any relationship that in the opinion of the Board of Directors would interfere with their exercise of independent judgment. All committee members must be able to read and understand fundamental financial statements, including the company's balance sheet, income statement and cash flow statement. At least one member must have past employment experience in finance or accounting, requisite professional certification in accounting or other comparable experience or background which results in the individual's financial sophistication, including a current or past position as a chief executive or financial officer or other senior officer with financial oversight responsibilities. The Board will designate committee members and the committee chair annually.

Statement of Policy

The primary objective of this committee is to assist the Board in fulfilling its fiduciary responsibilities relating to accounting, finance and reporting practices of the company, including its internal controls and the integrity of its financial reports. In meeting this objective, the committee is responsible for maintaining a free and open means of communication between the directors, the independent accountants, and the Company's management. The committee has the power to confer with and direct corporate officers of the corporation to the extent necessary to accomplish its charter. The independent accountants are ultimately accountable to the Board of Directors and the Audit Committee.

Responsibilities

To best carry out its responsibilities, the committee's policies and procedures should remain flexible in order to address changing conditions. Specific responsibilities of the committee include:

●

Appointment of the independent accountants.

●

Select and evaluate the independent accountants to be ratified by the shareholders to audit the Company's accounts, or where appropriate, the replacement of the independent accountants, and approve the compensation of the independent accountants for audit services.

●

Evaluate the independence of the independent accountant, including a review of non audit-related services provided by and related fees charged by the independent accountant.

●

Obtain a formal written statement, as required by the Independence Standards Board, from the independent accountant delineating relationships between the accountant and the company and actively engage in dialogue with the independent accountants regarding matters that might reasonably be expected to affect their independence.

●

Pre-approving all audit and non-audit services to be provided by the independent accountants. The Audit Committee may delegate the authority to grant such pre-approvals to one or more members of the committee, provided that the per-approval decision and related services are presented to the Audit Committee at its next regularly scheduled meeting.

●

Review and approve the audit activities at the Company.

●

Meet with the independent accountants and financial management of the Company to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and upon the completion thereof review such audit, including any comments or recommendations of the independent accountants.

●

Review financial results.

●

Prior to the release of the Company's unaudited quarterly financial results, review the results with management and the independent accountants, considering reports from senior finance management as to major accounting matters and any material deviations from prior practice, and consultations with the. Company's independent accountants.

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●

Ensure that the independent accountant conducts a SAS 100 (“Interim Financial Information”) review prior to the filing of the Company's Form 10-Q.

●

Prior to the release of the Company's fiscal year end operating results, review and discuss with Company management and the independent accountants the audited financial results for the fiscal year, including their judgment about the quality, not just the acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements.

●

At least annually discuss with the independent accountants the matters described in SAS 61(“Communications with Audit Committees”).

●

Review with management and the independent accountants the Company's critical accounting policies and the disclosure regarding those policies in the Company's periodic filings with the Securities and Exchange Commission.

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Systems and reports.

●

Review with Company senior management and the independent accountants the adequacy and effectiveness of the accounting and financial systems controls of the Company.

●

Review and discuss the audited financial statements with management and, if necessary, the independent accountants, prior to recommending the inclusion of the audited financial statements in the Company's Annual Report on Form 10-K.

●

Report annually in the Company's proxy statement such information as may be required by the rules and regulations of the Securities and Exchange Commission.

●

The committee will meet at least quarterly and more often as necessary.

●

Provide sufficient opportunity for the independent accountants to meet with the Audit Committee without members of management present. Among the items to be discussed in these meetings are the independent accountants' evaluation of the Company's financial, accounting and auditing personnel and the cooperation that the independent accountants received during the course of the audit and quarterly reviews.

●

Review corporate financial policies relating to compliance with laws and regulations, ethics, conflicts of interest and the investigation of misconduct and fraud.

●

Review the Company's treasury policy.

●

Review the Company's program of risk management, including insurance coverage.

●

Regularly prepare minutes of all meetings and report its activities to the general meeting of the Board of Directors.

●

Review and reassess the adequacy of the Audit Committee Charter on an annual basis.

●

Establish procedures to receive and process complaints regarding accounting, internal auditing controls or auditing matters and for employees to make confidential, anonymous complaints regarding questionable accounting or auditing matters.

●

Perform such other specific functions as the Board of Directors may from time to time direct, including reviewing and approving all transactions between the Company and any related party, and making such investigations and reviews of the Company and its operations as the Board of Directors may from time to time request.

Resources

The Company's Chief Financial Officer will be management's primary liaison to the committee. The committee will have access to financial information and resources it deems necessary for it to properly carry out its duties.

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APPENDIX B

Patriot Scientific Corporation

Compensation Committee Charter

The Compensation Committee is a standing committee of our board of directors whose primary objectives are to be the administrator of our Stock Option Plans and to oversee, review and approve compensation for our executive officers, evaluate the performance of our Chief Executive Officer, and nominate prospective members of the board of directors.

Executive Compensation Philosophy

As a high-level strategy guideline, we invest to grow our business in a manner consistent with increasing stockholder value. To that end, the Compensation Committee has designed our executive compensation program to align it with achievement of our financial goals and key business objectives.

Components of Executive Compensation at Patriot

Compensation for our executive officers generally consists of base salary, an annual bonus incentive and stock option awards. The Compensation Committee assesses the past performance and/or anticipated future contribution of each executive officer in establishing the total amount and mix of each element of compensation.

Base Salary

The Compensation Committee established the objective of positioning executive base salary and total cash compensation at a level similar to that offered by comparably sized companies in the high technology industry. The salaries of the executive officers, including the Chief Executive Officer, are evaluated annually by the Compensation Committee with reference to relevant surveys of compensation paid to executives with similar responsibilities at comparable companies. The Compensation Committee may retain outside compensation consultants to periodically review competitive compensation data

In addition to analyzing competitive data, the Compensation Committee evaluates performance to determine appropriate compensation amounts to reflect our philosophy of compensating for performance. The Compensation Committee considers there commendations of the Chief Executive Officer with respect to the compensation of the other executive officers. Awards of compensation, for the Chief Executive Officer and the other executive officers, are determined or recommended by the Compensation Committee so as to be consistent with stockholders' objectives.

Annual Bonus Incentive

The Compensation Committee may establish the goals and measurements for the bonus plan to align executive pay with achievement of critical strategies and operating goals. The targets for executive officers were set at 50% of base salary for the Chief Executive Officer and 40% of base salary for the other officers (unless different percentages are reflected in each individual's employment contract in which case the percentage in the employment contract shall prevail).

The Compensation Committee typically determines that one-half of the bonus shall be based on achievement of revenue and profit goals, and the other half on achievement of specific strategic objectives. The Compensation Committee determined that there would be no payout for the portion based on revenue and profit unless at least 90% of the revenue and profit goals were met

Long Term Incentives

Stock options are designed to align the interests of executives with the long-term interests of the stockholders. The Compensation Committee believes that stock options directly motivate our executive officers to maximize long-term stockholder value. The options also utilize vesting periods in order to encourage these key employees to continue in the employ of Patriot. The Compensation Committee determines the number of shares that will be subject to stock option grants based on our business plans, the executive's level of responsibility, individual performance, historical award data and competitive practice of comparable positions in similar high technology companies. All options are to be granted at not less than the fair market value of the underlying shares on the date of grant.

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APPENDIX C

PATRIOT SCIENTIFIC CORPORATION

2006 STOCK OPTION PLAN

AS AMENDED AND RESTATED

ARTICLE 1

PURPOSE OF THE PLAN

The purpose of this Patriot Scientific Corporation 2006 Stock Option Plan is to promote the interests of Patriot Scientific Corporation and its shareholders by: (i) attracting and retaining exceptional Directors, Employees and Consultants of the Company, and (ii) enabling such individuals to participate in the long-term growth and financial success of the Company.

Accordingly, the Plan provides for the granting of Incentive Stock Options and Non-Qualified Stock Options.

ARTICLE 2

DEFINITIONS

2.1 “Administrator” means the Board or any committee, Officer or Employee of the Company to whom the Board has delegated authority to administer the Plan.

2.2 “Affiliate” means a “parent” or “subsidiary” corporation as defined in Code §§ 424(e) and (f), or a corporation that the Board has designated as participating in the Plan.

2.3 “Applicable Laws” means the requirements relating to the administration of equity-based awards or equity compensation plans under U.S. federal and state laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

2.4 “Awarded Stock” means the Common Stock subject to an Option.

2.5 “Beneficially Owned” and “Beneficial Ownership” means as set forth in Rule 13d-3 of the Exchange Act, provided that the exercise of voting rights by a nominee or proxy holder of the Board in connection with a meeting or proposed action by shareholders of the Company shall not be deemed to constitute such ownership and any ownership or voting power of the trustee under an employee benefit plan of the Company shall not be deemed to constitute such ownership.

2.6 “Board” means the board of directors of the Company.

2.7 “Change in Control” means the occurrence of any of the following events:

(a) the shareholders of the Company approve a merger or consolidation of the Company with any other entity such that after the transaction more than fifty percent (50%) of the outstanding “Voting Securities” (defined as securities the holders of which are entitled to vote for the election of Directors) of the surviving entity would be Beneficially Owned by “Persons” (as such term is used in §§ 13(d) and 14(d) of the Exchange Act) who did not Beneficially Own “Voting Securities” of the Company prior to the transaction;

(b) Directors who were members of the Board immediately prior to a meeting of the shareholders of the Company which meeting involves a contest for the election of at least one directorship, do not constitute at least a majority of the Directors following such meeting or election;

(c) an acquisition, directly or indirectly, of more than fifty percent (50%) of the outstanding shares of any class of “Voting Securities” of the Company by any “Person;”

(d) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or the liquidation of the Company; or

(e) there is a change, during any period of two consecutive years or less of a majority of the Board as constituted as of the beginning of such period, unless the election of each Director who is not a Director at the beginning of such period was approved by a vote of at least two-thirds of the Directors then in office who were Directors at the beginning of the period.

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Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred in the event the Company forms a holding company as a result of which the holders of the Company’s “Voting Securities” immediately prior to the transaction, hold, in approximately the same relative proportions as they held prior to the transaction, substantially all of the “Voting Securities” of a holding company owning all of the Company’s “Voting Securities” after the completion of the transaction.

2.8 “Code” means the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

2.9 “Common Stock” means the common stock of the Company.

2.10 “Company” means Patriot Scientific Corporation, a Delaware corporation.

2.11 “Consultant” means any person, including an advisor, engaged by the Company or an Affiliate to render services to such entity.

2.12 “Director” means a member of the Board.

2.13 “Disability” means total and permanent disability as defined in Code § 22(e)(3), provided that in the case of Non-Qualified Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

2.14 “Effective Date” means, as of March 31, 2006, provided that the Plan is approved by the shareholders of the Company on or within twelve (12) months of such date.

2.15 “Employee” means any person, including Officers and Directors, employed by the Company or an Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.17 “Exchange Program” means a program under which: (i) outstanding Options are surrendered or cancelled in exchange for Options of the same type (which may have lower exercise prices and/or different terms), Options of a different type, and/or cash; or (ii) the exercise price of an outstanding Option is reduced. The terms and conditions of any Exchange Program will be determined by the Administrator in its sole discretion.

2.18 “Fair Market Value” means, as of any date and unless the Administrator determines otherwise, the value of Common Stock determined as follows:

(a) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market or the NASDAQ SmallCap Market of the NASDAQ Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(b) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock will be the mean between the high bid and low asked prices for the Common Stock for the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(c) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.

Notwithstanding the preceding, for federal, state, and local income tax reporting purposes and for such other purposes as the Administrator deems appropriate, the Fair Market Value shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time.

2.19 “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Code § 422 and the Treasury regulations promulgated thereunder.

2.20 “Non-Qualified Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

2.21 “Officer” means a person who is an officer of the Company within the meaning of § 16 of the Exchange Act and the rules and regulations promulgated thereunder.

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2.22 “Option” means an Incentive Stock Option or a Non-Qualified Stock Option or both, as the context requires.

2.23 “Option Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Option granted under the Plan. The Option Agreement is subject to the terms and conditions of the Plan.

2.24 “Participant” means the holder of an outstanding Option granted under the Plan.

2.25 “Plan” means this Patriot Scientific Corporation 2006 Stock Option Plan, as amended from time to time.

2.26 “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

2.27 “Section 16(b)” means Section 16(b) of the Exchange Act.

2.28 “Service Provider” means an Employee, Director or Consultant.

2.29 “Share” means a share of the Common Stock, as adjusted in accordance with Section 4.3 and Article 7 of the Plan.

ARTICLE 3

PLAN ADMINISTRATION

3.1 Procedure.

(a) Board’s Delegation. The Board may delegate administration of the Plan to a committee(s). If administration is delegated to a committee, the committee shall have, in connection with the administration of the Plan, the powers possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of this Plan, as may be adopted from time to time by the Board. The Board may abolish the committee at any time and revest in the Board the administration of the Plan. Different committees with respect to different groups of Service Providers may administer the Plan.

(b) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

(c) Delegation of Authority for Day-to-Day Administration. Except to the extent prohibited by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time.

3.2 Powers of the Administrator

. Subject to the provisions of the Plan, and in the case of a committee, subject to the specific duties delegated by the Board to such committee, the Administrator will have the authority, in its discretion:

(a) To determine the Fair Market Value.

(b) To select the Service Providers to whom Options may be granted hereunder.

(d) To approve forms of agreement for use under the Plan.

(e) To determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture or repurchase restrictions, and any restriction or limitation regarding any Option or the Shares relating thereto, based in each case on such factors as the Administrator will determine in its sole discretion.

(f) To reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted.

(g) To institute an Exchange Program.

(h) To construe and interpret the terms of the Plan and Options granted pursuant to the Plan, and to establish, amend and revoke rules and regulations for its administration.

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(i) To prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws.

(j) To modify or amend each Option (subject to Section 8.13(c) of the Plan), including the discretionary authority to extend the post-termination exercise period of Options longer than is otherwise provided for in the Plan.

(k) To allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Option that number of Shares or cash having a Fair Market Value equal to the minimum amount required to be withheld. The Fair Market Value of any Shares to be withheld will be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose will be made in such form and under such conditions as the Administrator may deem necessary or advisable.

(l) To authorize any person to execute on behalf of the Company any instrument required to affect the grant of an Option previously granted by the Administrator.

(m) To allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Option.

(n) To determine whether Options will be settled in Shares, cash or in any combination thereof.

(o) To establish a program whereby Service Providers designated by the Administrator can reduce compensation otherwise payable in cash in exchange for Options under the Plan.

(p) To impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Option, including without limitation, (i) restrictions under an insider trading policy, and (ii) restrictions as to the use of a specified brokerage firm for such resales or other transfers.

(q) To make all other determinations deemed necessary or advisable for administering the Plan.

3.3 Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Options.

ARTICLE 4

STOCK SUBJECT TO THE PLAN

4.1 Stock Subject to the Plan. Subject to the provisions of this Article 4 and Article 7 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is ten million (10,000,000), of which the maximum number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan shall be eight million (8,000,000). The Shares may be authorized and unissued, or reacquired Common Stock. Shares shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Option that is paid in cash. Upon payment in Shares pursuant to the exercise of an Option, the number of Shares available for issuance under the Plan shall be reduced only by the number of Shares actually issued in such payment. If a Participant pays the exercise price (or purchase price, if applicable) of an Option through the tender of Shares, or if Shares are tendered or withheld to satisfy any withholding obligations of the Company, the number of Shares so tendered or withheld shall again be available for issuance pursuant to future Options under the Plan.

4.2 Lapsed Option. If any outstanding Option expires or is terminated or canceled without having been exercised or settled in full, or if Shares acquired pursuant to an Option subject to forfeiture or repurchase are forfeited or repurchased by the Company, the Shares allocable to the terminated portion of such Option or such forfeited or repurchased Shares shall again be available for grant under the Plan.

4.3 Adjustments for Changes in Capitalization and Similar Events. In the event the Administrator determines that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Administrator in its discretion to be appropriate or desirable, then the Administrator shall:

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(a) in such manner as it may deem equitable or desirable, adjust any or all of (i) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Options may be granted, including (1) the aggregate number of Shares that may be delivered pursuant to Options granted under the Plan, as provided in Section 4.1 of the Plan, and (2) the maximum number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Options may be granted to any Participant in any fiscal year of the Company, and (ii) the terms of any outstanding Option, including (1) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Options or to which outstanding Options relate, and (2) the exercise price with respect to any Option; or

(b) if deemed appropriate or desirable, make provision for a cash payment to the holder of an outstanding Option in consideration for the cancellation of such Option, including, a cash payment to the holder of such Option in consideration for the cancellation of such Option in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Administrator) of the Shares subject to such Option over the aggregate exercise price of such Option (it being understood that, in such event, any Option having a per Share exercise price equal to, or in excess of, the Fair Market Value of a Share subject to such Option may be cancelled and terminated without any payment or consideration therefore).

Any such adjustments under this Section 4.3 shall be made by the Administrator in its absolute discretion, and the decision of the Administrator shall be final, binding and conclusive. Any Shares issuable as a result of any such adjustment shall be rounded to the next lower whole Share; no fractional Shares shall be issued. At all times the conversion of any convertible securities of the Company shall not be treated as a “transaction not involving the receipt of consideration by the Company.”

4.4 Substitute Options. Options may, in the discretion of the Administrator, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company and any Affiliate or a company acquired by the Company or with which the Company combines (“Substitute Awards”). The number of Shares underlying any Substitute Awards shall be counted against the aggregate number of Shares available for Options under the Plan; provided, however, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding Options previously granted by an entity that is acquired by the Company or its Affiliate through a merger or acquisition shall not be counted against the aggregate number of Shares available for Options under the Plan; provided further, however, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding stock options intended to qualify for special tax treatment under Code §§ 421 and 422 that were previously granted by an entity that is acquired by the Company or an Affiliate through a merger or acquisition shall be counted against the aggregate number of Shares available for Incentive Stock Options under the Plan.

ARTICLE 5

ELIGIBILITY

Any Director, Employee or Consultant of the Company and any Affiliate shall be eligible to be designated a Participant in the Plan for purposes of receiving Options. However, Incentive Stock Options may be granted only to Employees.

ARTICLE 6

STOCK OPTIONS

6.1 Option Grant. Subject to the provisions of the Plan, the Administrator shall have sole and plenary authority to determine the Participants to whom Options shall be granted, the number of Shares to be covered by each Option, whether the Option will be an Incentive Stock Option or a Non-Qualified Stock Option and the conditions and limitations applicable to the vesting and exercise of the Option. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Code § 422 and any regulations related thereto, as may be amended from time to time. All Options granted under the Plan shall be Non-Qualified Stock Options unless the applicable Option Agreement expressly states that the Option is intended to be an Incentive Stock Option. If an Option is intended to be an Incentive Stock Option, and if for any reason such Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such non-qualification, such Option (or portion thereof) shall be regarded as a Non-Qualified Stock Option appropriately granted under the Plan, provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to Non-Qualified Stock Options.

(a) Term of Option. The term of each Option will be stated in the Option Agreement. In the case of an Incentive Stock Option, the term will be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

(b) $100,000 Limitation for Incentive Stock Options. Each Option will be designated in the Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Affiliate) exceeds $100,000, such Options will be treated as Non-Qualified Stock Options. For purposes of this Section 6.1(b), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

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6.2 Exercise Price. Except as otherwise established by the Administrator at the time an Option is granted and set forth in the applicable Option Agreement, the exercise price of each Share covered by an Option shall be not less than one-hundred percent (100%) of the Fair Market Value of such Share (determined as of the date the Option is granted); provided, however, that in the case of an Incentive Stock Option granted to an Employee who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company and any Affiliate, the per Share exercise price shall be no less than one-hundred, ten percent (110%) of the Fair Market Value per Share on the date of the grant. Options are intended to qualify as “qualified performance-based compensation” under Code § 162(m).

Notwithstanding the foregoing, Options may be granted with an exercise price of less than one-hundred percent (100%) of the Fair Market Value per Share on the date of grant if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Code § 424(a) (involving a corporate reorganization).

6.3 Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

6.4 Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share.

An Option will be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Awarded Stock, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Articles 4 and 7 of the Plan or the applicable Option Agreement.

Exercising an Option in any manner will decrease the number of Shares thereafter available for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination of relationship as Service Provider.

(c) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination.

(d) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death.

(e) Buyout Provisions. The Administrator shall have the right to buy out for a payment in cash an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Participant at the time that such offer is made. Additionally, the Administrator shall have the right to buy out for a payment in cash Awarded Stock based on the terms and conditions set forth in the Option Agreement, if any.

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(f) Reversion to Plan. Unless otherwise provided by the Administrator, if on the date of termination, Disability or death as provided in Sections 6.4(b), (c), and (d) of the Plan, Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan following the Participant’s termination, Disability or death. As to the vested portion, if the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

6.5 Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. To the extent permitted by Applicable Laws, consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which meet the conditions established by the Administrator to avoid adverse accounting consequences (as determined by the Administrator); (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (vi) a reduction in the amount of any Company liability to the Participant, including any liability attributable to the Participant’s participation in any Company-sponsored deferred compensation program or arrangement; (vii) any combination of the foregoing methods of payment; or (viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

ARTICLE 7

DISSOLUTION OR LIQUIDATION; OR CHANGE IN CONTROL

7.1 Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the right to exercise his or her Option, to the extent applicable, until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Option shall lapse one-hundred percent (100%), and that any Option vesting shall accelerate one-hundred percent (100%), provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised or vested, an Award will terminate immediately prior to the consummation of such proposed action.

7.2 Change in Control. In the event of a Change in Control, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or Affiliate of the successor corporation. With respect to Options granted to an outside Director that are assumed or substituted for, if immediately prior to or after the Change in Control the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant, then the Participant shall fully vest in and have the right to exercise such Options as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. Unless otherwise determined by the Administrator, in the event that the successor corporation refuses to assume or substitute for the Option, the Participant shall fully vest in and have the right to exercise the Option as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option is not assumed or substituted in the event of a Change in Control, the Administrator shall notify the Participant in writing or electronically that the Option shall be exercisable for a period of up to fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the Change in Control, the option confers the right to purchase or receive, for each Share of Awarded Stock subject to the Option immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor corporation or its Affiliate, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Awarded Stock subject to the Option, to be solely common stock of the successor corporation or its Affiliate equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control. Notwithstanding anything herein to the contrary, an Option that vests, or is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Option assumption.

ARTICLE 8

MISCELLANEOUS PROVISIONS

8.1 No Uniform Rights to Options. The Company has no obligation to uniformly treat Participants or holders or beneficiaries of Options. The terms and conditions of Options and the Administrator’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated.

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8.2 Share Certificates. All certificates for Shares or other securities of the Company or Affiliate delivered under the Plan pursuant to any Option or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Administrator may deem advisable under the Plan, the applicable Option Agreement or the rules, regulations and other requirements of the SEC, the NYSE or any other stock exchange or quotation system upon which such Shares or other securities are then listed or reported and any applicable Federal or state laws, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

8.3 No Rights as a Service Provider. Neither the Plan nor any Option shall confer upon a Participant any right with respect to continuing his or her relationship as a Service Provider, nor shall they interfere in any way with the right of the Participant or the right of the Company or its Affiliate to terminate such relationship at any time, with or without cause.

8.4 No Rights as Shareholder. No Participant or holder or beneficiary of any Option shall have any rights as a shareholder with respect to any Shares to be distributed under the Plan until he or she has become the holder of such Shares. Except as otherwise provided in Section 4.3 or the applicable Option Agreement, no adjustments shall be made for dividends or distributions on (whether ordinary or extraordinary, and whether in cash, Shares, other securities or other property), or other events relating to, Shares subject to an Option for which the record date is prior to the date such Shares are delivered.

8.5 No Trust or Fund Created. Neither the Plan nor any Option shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or Affiliate, on one hand, and a Participant or any other person, on the other. To the extent that any person acquires a right to receive payments from the Company or Affiliate pursuant to an Option, such right shall be no greater than the right of any unsecured general creditor of the Company or Affiliate.

8.6 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Option, and the Administrator shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be cancelled, terminated or otherwise eliminated.

8.7 Requirement of Consent and Notification of Election Under Code § 83(b) or Similar Provision. No election under Code § 83(b) (to include in gross income in the year of transfer the amounts specified in Code § 83(b)) or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Option Agreement or by action of the Administrator in writing prior to the making of such election. If an Option recipient, in connection with the acquisition of Shares under the Plan or otherwise, is expressly permitted under the terms of the applicable Option Agreement or by such Administrator action to make such an election and the Participant makes the election, the Participant shall notify the Administrator of such election within ten (10) days of filing notice of the election with the IRS or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code § 83(b) or other applicable provision.

8.8 Requirement of Notification Upon Disqualifying Disposition Under Code § 421(b). If any Participant shall make any disposition of Shares delivered pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code § 421(b) (relating to certain disqualifying dispositions) or any successor provision of the Code, such Participant shall notify the Company of such disposition within ten (10) days of such disposition.

8.9 Leaves of Absence. Unless the Administrator provides otherwise, vesting of Options granted hereunder will be suspended during any unpaid leave of absence and will resume on the date the Participant returns to work on a regular schedule as determined by the Company; provided, however, that no vesting credit will be awarded for the time vesting has been suspended during such leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company or its Affiliate. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months from the first day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Non-Qualified Stock Option.

8.10 Notices. Any written notice to the Company required by any provisions of the Plan shall be addressed to the Secretary of the Company and shall be effective when received.

8.11 Non-Transferability of Options. Other than pursuant to a domestic relations order (within the meaning of Rule 16a-12 promulgated under the Exchange Act) and unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution, and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Option transferable, such Option will contain such additional terms and conditions as the Administrator deems appropriate.

8.12 Date of Grant. The date of grant of an Option will be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

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8.13 Amendment and Termination of Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. Unless sooner terminated, this Plan shall terminate on March 31, 2016, the date that is ten (10) years from the date the Plan was originally adopted by the Board or approved by the shareholders of the Company, whichever was earlier.

(b) Shareholder Approval. The Company will obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination. Subject to Section 8.15 of the Plan, no amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed upon between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

8.14 Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise or receipt of an Option, the Company may require the person exercising or receiving such Option to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

8.15 Severability. Notwithstanding any contrary provision of the Plan or an Option to the contrary, if any one or more of the provisions (or any part thereof) of this Plan or the Options shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan or Option, as applicable, shall not in any way be affected or impaired thereby.

8.16 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.

8.17 Shareholder Approval. The Plan will be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval will be obtained in the manner and to the degree required under Applicable Laws, and is effective as of the Effective Date.

8.18 Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Option Agreement shall be determined in accordance with the laws of the State of California, without giving effect to the conflict of laws provisions thereof.

Adopted by the Board of Directors: March 31, 2006

Approved by the Shareholders: April 28, 2006

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PROXY - PATRIOT SCIENTIFIC CORPORATION - PROXY

THIS PROXY RELATES TO AN ANNUAL MEETING OF THE SHAREHOLDERS

TO BE HELD OCTOBER 30, 2008

The undersigned hereby appoints Frederick C. Goerner and Clifford L. Flowers and each of them, with full power of substitution, as attorneys and proxies to vote all shares of common stock which the undersigned is entitled to vote, with all powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Patriot Scientific Corporation (“Company”) to be held at 10 a.m. (Pacific Time) at the Hilton Garden Inn Carlsbad Beach, 6450 Carlsbad Blvd, Carlsbad, California 92011 on October 30, 2008, and any postponements and adjournments thereof, as follows:

The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4

1. PROPOSAL TO AMEND OUR 2006 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE FROM 5,000,000 TO 10,000,000.

o FOR

o AGAINST

o ABSTAIN

2. PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 500,000,000 TO 600,000,000.

o FOR

o AGAINST

o ABSTAIN

3. PROPOSAL TO RATIFY KMJ CORBIN & COMPANY, LLP AS INDEPENDENT AUDITORS.

o FOR

o AGAINST

o ABSTAIN

4. ELECTION OF DIRECTORS. To elect the following named persons as directors of the Company to serve until the next annual meeting of stockholders and until their respective successors are elected and qualified: (i) Helmut Falk, Jr., (ii) Gloria H. Felcyn, (iii) Carlton M. Johnson Jr., (iv) Harry (Nick) L. Tredennick, III, (v) Donald E. Schrock.

o FOR all nominees listed above (except as marked to the contrary below)

o WITHHOLD AUTHORITY (do not vote for any of the nominees listed above)

(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name on the line)

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY

I understand that I may revoke this proxy only by, at any time before it is exercised, delivering a written notice of revocation to Mr. Clifford L. Flowers, Secretary of the Company, at the below address, or by submitting a duly executed proxy bearing a later date, or by attending the annual meeting and, having notified the Secretary in writing of revocation, voting in person.

Dated: , 2008

(Signature)

(Signature if jointly held)

(Printed name(s))

(Please date and sign exactly as name or names appear on your stock certificate(s). When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full the corporate name by President or other authorized officer. If a partnership, please sign in the partnership name by authorized person. IF THE STOCK IS HELD JOINTLY, BOTH OWNERS MUST SIGN.)

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS SPECIFIED THIS PROXY WILL BE VOTED FOR THE PROPOSALS NOTED AND, AS TO ANY OTHER BUSINESSCONSIDERED AT THE ANNUAL MEETING, IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES.

PATRIOT SCIENTIFIC CORPORATION, CARLSBAD CORPORATE PLAZA, 6183 PASEO DEL NORTE, SUITE 180, CARLSBAD, CALIFORNIA 92011 - (760) 547-2700


Check the appropriate box:
¨	Preliminary Proxy Statement
¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material under Rule 14a-12

Payment of Filing Fee (Check the appropriate box):
ý	No fee required.
¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
¨	Fee paid previously with preliminary materials.
¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)	Amount Previously Paid:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:

	BY ORDER OF THE BOARD OF DIRECTORS


September 22, 2008	/s/ Clifford L. Flowers
San Diego, California	Clifford L. Flowers
	Corporate Secretary

Name	Amount & Nature of Beneficial Ownership			Percent of Class
Gloria H. Felcyn, CPA		1,479,700	(1)		*
Helmut Falk, Jr.		3,593,231	(2)		*
Carlton M. Johnson, Jr.		1,675,000	(3)		*
Harry (Nick) L. Tredennick III		100,000	(4)		*
Donald E. Schrock		89,822	(5)		*
Frederick (Rick) C. Goerner		600,000	(6)		*
Clifford L. Flowers		168,750	(7)		*
Paul R. Bibeau		250,000	(8)		*
All directors & officers as a group (8 persons)		7,956,503	(9)		2.06%

NAME	AGE	POSITION, OFFICE and TERM
Carlton M. Johnson, Jr.	48	Director (since August 2001)
Helmut Falk, Jr.	52	Director (since December 1997)
Gloria H. Felcyn	61	Director (since October 2002)
Harry (Nick) L. Tredennick, III	62	Director (since August 2007)
Donald E. Schrock	63	Director (since April 2008)
Frederick (Rick) C. Goerner	60	President and Chief Executive Officer (since February 29, 2008)
Paul R. Bibeau	50	Vice President of Business Development (since March 17, 2008)
Clifford L. Flowers	50	Chief Financial Officer/Secretary (since September 17, 2007)


Filed by the Registrant	x
Filed by a Party other than the Registrant	o

	3.	To ratify the selection by our board of directors of KMJ Corbin & Company to serve as our independent auditors for the fiscal year ending May 31, 2009.

	4.	To elect our board of directors.

	5.	To transact such other business as may properly come before the meeting.

	●	Serve as an independent and objective party to monitor our financial reporting process and internal control system;

	●	Review and appraise the audit efforts of our independent accountants;

	●	Evaluate our quarterly financial performance as well as our compliance with laws and regulations;

	●	Oversee management's establishment and enforcement of financial policies and business practices; and

	●	Provide an open avenue of communication among the independent accountants, financial and senior management, counsel, and the Board.

	●	reward the achievement of desired corporate and individual performance goals;

	●	provide compensation that enables us to attract and retain key executives; and

	●	provide compensation opportunities that are linked to our performance and that directly link the interests of executives with the interests of stockholders.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)(1)		All Other Compensation ($) (2)		Total Compensation ($)
Frederick C. Goerner, CEO	2008	$	66,508	$	83,000	$	153,849	$	-	$	303,357

James L. Turley, CEO (a)	2008		174,145		-		144,157		118,782		437,084

David H. Pohl, CEO (b)	2008		5,668		-		-		104,893		110,561
David H. Pohl, CEO	2007		247,279		50,000		1,636,137		7,368		1,940,784

Clifford L. Flowers, CFO	2008		160,096		-		62,530		2,856		225,482

Thomas J. Sweeney, CFO (c)	2008		82,688		-		34,763		--		117,451
Thomas J. Sweeney, CFO	2007		223,875		15,000		123,763		--		362,638

Paul R. Bibeau,	2008		47,541		11,000		22,245		--		80,786
V.P. Business Development

Name and Principal Position	Year	Vacation Payout On Termination ($)		Relocation ($) (1)		401(k) Company Match ($)		Severance($) (2)		Total ($)
James L. Turley, CEO	2008	$	6,761	$	13,608	$	3,221	$	95,192	$	118,782

David H. Pohl, CEO	2008		4,723		-		170		100,000		104,893
David H. Pohl, CEO	2007		-		-		7,368		-		7,368

Clifford L. Flowers, CFO	2008		-		-		2,856		-		2,856

Name	Grant Date	Board Approval Date	All Other Option Awards: Number of Securities Underlying Options			Exercise Price of Option Awards		Closing Price on Grant Date		Grant Date Fair Value of Option Awards (4)
Frederick C. Goerner	2/29/08	2/29/08		300,000	(1)	$	0.40	$	0.40	$	86,818
	2/29/08	2/29/08		1,700,000	(2)		0.40		0.40		472,462
	2/29/08	2/29/08		1,000,000	(3)		0.40		0.40		274,972
James L. Turley	6/5/07	6/5/07		1,900,000			0.485		0.485		610,536
Clifford L. Flowers	9/17/07	9/17/07		750,000			0.45		0.45		220,899
Thomas J. Sweeney	8/16/07	8/16/07		100,000			0.47		0.47		34,692
Paul R. Bibeau	3/17/08	3/17/08		74,000	(1)		0.38		0.38		12,244
	3/17/08	3/17/08		123,000	(2)		0.38		0.38		20,352
	3/17/08	3/17/08		203,000	(3)		0.38		0.38		54,353

Name	Number of Securities Underlying Options (#)Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price($)		Option Expiration Date
Frederick C. Goerner		300,000	(1)		2,700,000	(2)	$	0.40	2/28/2013
Clifford L. Flowers		150,000	(1)		650,000	(3)	$	0.45	9/17/2012
Paul R. Bibeau		-			400,000	(4)		0.38	3/17/2013

1.	All of the options are fully vested at May 31, 2008 and have a term of five years.

2.	700,000 of the options vest upon completion of the CEO’s interim period on November 29, 2008. 1,000,000 and 1,000,000 options granted under the 2003 and 2006 Stock Option Plans, respectively, are performance grants which vest upon any one of the following: the successful closing of a merger or acquisition brought forth primarily due to the efforts of the optionee, the listing of the Company on the AMEX or NASDAQ stock exchanges, a sustained substantial increase in shareholder value directly resulting from an optionee action approved by the Board of Directors, or approval by the Board of Directors for the partial vesting of the option.

Name		Number of Shares Acquired on Exercise (#)				Value Realized On Exercise ($)
David H. Pohl			1,157,846			$	517,100

Plan Category	Number of securities to be issued upon exercise of outstanding options and warrants		Weighted-average exercise price of outstanding options and warrants		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders		8,195,000	$	0.44		3,352,404
Equity compensation plan not approved by security holders		300,000	$	0.57		—
Total		8,495,000				3,352,404

Name	Severance Pay ($)		Severance Payable Through
Frederick C. Goerner	$	187,500	2/28/09
Clifford L. Flowers		112,500	11/17/08

Name		Severance Pay ($)				Stock Options (Black-Scholes Value) ($)				Total ($)
Clifford L. Flowers		$	112,500			$	165,109			$	277,609

Name	Fees Earned or Paid in Cash ($)			Option Awards ($) (1)		All Other Compensation		Total Compensation ($)
Carlton M. Johnson, Jr.	$	144,000	(2)	$	-		--	$	144,000
Gloria H. Felcyn		114,000	(3)		-		--		114,000
Helmut Falk, Jr.		36,000			-		--		36,000
David H. Pohl		72,000	(4)		-		--		72,000
Harry L. Tredennick, III		46,000	(5)		34,763		--		80,763
Donald E. Schrock		6,000	(6)		7,008		--		13,008