Licensing the Company’s intellectual property (IP) is Patriot Scientific’s

historical business, and is reported as Equity in Earnings of Affiliates, not as

revenues. IP earnings are dependent on the timing of closing licensing

agreements. Through the TPL Group, the Company offers a one-time licensing

fee or an ongoing fee. All licensees to date have agreed to a one-time fee. We

expect IP earnings in FY09 to contribute the majority of total earnings for the

Company and, as a revenue source, represent aproximately 50% of total revenues

in FY10. As the data sharing business grows, the percentage contribution from IP

licensing is expected to diminish.

The company has licensing agreements with 52 users of its technology. The TPL

Group is in discussions with several hundred potential licensees. We expect the

Company is likely to close on 5 to 20 new licensees each year. PTSC shares the

licensing revenues with the TPL Group according to the joint venture agreement,

resulting in an average net revenue (Earnings in Equity of Affiliates) per licensee

to-date to Patriot of approximately $2 million. The TPL Group maintains

communications with many non-licensed users of technology in the MMP™

portfolio with a strategy to offer lower licensing fees for first adopters in an

industry.