Mosaic ImmunoEngineering is a nanotechnology-based immunotherapy company developing therapeutics and vaccines to positively impact the lives of patients and their families.

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Message: Liquidity and Management’s Plans
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Liquidity and Management’s Plans
Cash shortfalls currently experienced by Phoenix Digital Solutions, LLC (“PDS”) and continued negative cash flows incurred by PDSG will have an adverse effect on our liquidity. Accordingly, we have and may continue to examine alternatives that could allow for the partnering or divestiture of PDSG. If successful, these measures may provide for a further reduction in expenses and cash use, or additionally in the event of divestiture, cash proceeds, although given the operational history of PDSG to date there can be no guarantee that a divestiture will result in the realization of material consideration. With respect to PDS, although we presently do not have any contractual commitments to fund any cash requirements (see Note 6), in December 2011 we did contribute $200,000 in additional capital to PDS, in order to fund a portion of a legal retainer discussed below. In addition, we do not have any intention of funding any cash requirements of our 50% partner in PDS, Technology Properties Limited, Inc. (“TPL”).
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Patriot Scientific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Liquidity and Management’s Plans (continued)
Our current liquid cash resources as of November 30, 2011, are expected to provide the funds necessary to support our operations through at least the next twelve months assuming we do not continue to fund the obligations of PDS. The cash flows from our interest in PDS represent our primary significant source of cash generation. In the event of a continued decrease or interruption in MMP Portfolio licensing we will incur a significant reduction to our cash position as the revenues from our PDSG subsidiary are insufficient to cover the costs of their operations and the costs of Patriot Scientific Corporation as a whole. It is highly unlikely that we would be able to obtain any additional sources of financing to supplement our cash and short-term investment position of $8,975,788 at November 30, 2011. In December 2011, TPL engaged new counsel on behalf of PDS, and committed PDS to paying an initial retainer in the amount of $2,400,000, payable in monthly installments from December 2011 through August 2012. The $200,000 that we contributed to PDS referred to above, was used to pay the first installment of such retainer. The remaining balance of the retainer is anticipated to be funded by PDS from licensing revenues. In the event that PDS does not have the funds to pay one or more installments of the retainer, we and TPL must decide whether to contribute additional capital to PDS to fund such installments. The newly retained counsel will continue the Northern California cases to trial after the claims construction hearing.
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