RESULTS OF OPERATIONS

Comparison of fiscal 2008 and 2007

Our revenues increased from approximately $639,000 for the fiscal year ended May 31, 2007 to approximately $3,708,000 for the fiscal year ended May 31, 2008. Our revenue amounts do not include approximately $48,965,000 in income resulting from our investment in PDS for the fiscal year ended May 31, 2007 and approximately $19,918,000 in income resulting from our investments in PDS and Talis for the fiscal year ended May 31, 2008. During the 2008 fiscal year we recorded sales amounting to approximately $3,650,000 by our consolidated variable interest entity, SSDI, with cost of sales amounting to approximately $1,510,000 as compared to the fourth quarter of the 2007 fiscal year during which we recorded SSDI sales amounting to approximately $559,000 with cost of sales amounting to approximately $308,000. During the 2008 and the 2007 fiscal years we recognized maintenance fee revenues totaling approximately $25,000 per year in connection with an agreement with AMD Corporation during the 2005 fiscal year. The agreement called for maintenance fees totaling $100,000 connected with a license agreement for our Ignite technology; the license fee revenue is being recognized as revenue evenly over the four year period of the license. In addition during the 2008 fiscal year, we recorded sales of approximately $33,000 from the sale of microprocessor chips that we no longer market as compared to approximately $55,000 during the 2007 fiscal year. Inventory associated with the sales of these microprocessor chips is carried at zero value.

Selling, general and administrative expenses decreased from approximately $7,559,000 for the fiscal year ended May 31, 2007 to approximately $6,965,000 for the fiscal year ended May 31, 2008. Legal and accounting related expenses decreased by approximately $668,000 for the fiscal year ended May 31, 2008 compared with the fiscal year ended May 31, 2007 due to settlement of legal matters during fiscal year 2008 and reduced accounting expenses in fiscal year 2008. Fiscal year 2007 included fees related to legal and accounting matters in connection with the restatement of our financial statements for the fiscal years 2005, 2004, 2003 and 2002 as well as the quarterly reports for the periods ended August 31, 2005 and February 28, 2006 and our required compliance with Sarbanes-Oxley regulations. Salary costs and related expenses included non-cash expenses associated with the fair value of options granted during the fiscal years ended May 31, 2008 and 2007 in accordance with SFAS No. 123(R). Total non-cash compensation for the fiscal year ended 2008 was approximately $502,770 for PTSC as compared to approximately $2,359,036 for PTSC during the fiscal year ended 2007. The decrease is primarily due to the June 5, 2006 grant of 1,500,000 options to our former chief executive officer resulting in non-cash compensation expense amounting to approximately $1,527,000 during the fiscal year ended 2007. Other salary expenses for PTSC increased by approximately $292,000 for the fiscal year ended May 31, 2008 as compared with the fiscal year ended May 31, 2007. The increase is primarily due to the hire of an additional executive position and severance payments to our past chief executive officers. Salaries and related expenses for SSDI during the fiscal year ended 2008 were approximately $1,198,000 as compared to approximately $242,538 for the fourth quarter of the 2007 fiscal year. Public and investor relations expenses decreased by approximately $128,000 for the fiscal year ended May 31, 2008 as compared with the 2007 fiscal year primarily due to one-time contracts with investor relations firms in fiscal year 2007.

Settlement and license expenses amounting to approximately $7,525,000 were recorded during the fiscal year ended May 31, 2007, relating to the mediation agreement with Russell H. Fish III ("Fish"). During fiscal year 2008 we recorded approximately $836,000 relating to royalty payments due to the Fish parties. In January 2008, we made the final payment under the Fish settlement agreement.

Our other income and expenses for the fiscal years ended May 31, 2008 and 2007 include equity in the earnings of PDS. For the fiscal year ended May 31, 2008 our other income and expense also includes our share of loss in Talis. Our investments are accounted for in accordance with the equity method of accounting. Our investment in PDS for the fiscal year ended May 31, 2008 provided income after expenses in the amount of approximately $19,926,000 as compared to income after expenses in the amount of approximately $48,965,000 for the fiscal year ended May 31, 2007. For the fiscal year ended May 31, 2008 our investment in Talis generated a loss of approximately $8,000. Total other income and expense for the fiscal year ended May 31, 2008 amounted to net other income of approximately $21,533,000 compared with total other income and expense for the fiscal year ended May 31, 2007 of net other income amounting to approximately $49,210,000. Interest income and other income increased from approximately $715,000 for the fiscal year ended May 31, 2007 to approximately $1,470,000 for the fiscal year ended May 31, 2008. The increase is primarily due to the interest earned and accrued on our auction rate securities of approximately $363,000 and an increase in other income of approximately $382,000 relating to retainer refunds from legal firms, settlement of a legal matter and reimbursement items billed to PDS for prior fiscal year legal expenses we incurred. During the fiscal year ended May 31, 2007 we recorded an impairment charge on the value of our note receivable from Holocom Networks, Inc. of approximately $340,000. Also, we recorded an impairment charge of approximately $127,000 on the carrying value of SSDI, the successor company to Holocom Networks, Inc., prior to the March 27, 2007 consolidation of SSDI. There was no such impairment charges during the fiscal year ended May 31, 2008.