We rate PATRIOT SCIENTIFIC CORP (PTSC) a HOLD. The primary factors that have impacted our rating are

mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of

either a positive or negative performance for this stock relative to most other stocks. The company's

strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position

with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to

these strengths, we also find weaknesses including feeble growth in the company's earnings per share,

deteriorating net income and a generally disappointing performance in the stock itself.

PTSC's very impressive revenue growth greatly exceeded the industry average of 25.0%. Since the same

quarter one year prior, revenues leaped by 98.2%. This growth in revenue does not appear to have trickled

down to the company's bottom line, displayed by a decline in earnings per share.

Although PTSC's debt-to-equity ratio of 0.11 is very low, it is currently higher than that of the industry average.

Along with this, the company maintains a quick ratio of 2.62, which clearly demonstrates the ability to cover

short-term cash needs.

The gross profit margin for PATRIOT SCIENTIFIC CORP is rather high; currently it is at 54.90%. Regardless of

PTSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed

results of the gross profit margin, PTSC's net profit margin of -49.80% significantly underperformed when

compared to the industry average.

PATRIOT SCIENTIFIC CORP has exprienced a steep decline in earnings per share in the most recent quarter

in comparison to its performance from the same quarter a year ago. The company has suffered a declining

pattern earnings per share over the past two years. During the past fiscal year, PATRIOT SCIENTIFIC CORP

reported lower earnings of $0.03 versus $0.05 in the prior year.

The company, on the basis of change in net income from the same quarter one year ago, has significantly

underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment

industry. The net income has significantly decreased by 138.6% when compared to the same quarter one year

ago, falling from $2.42 million to -$0.93 million.