PATRIOT SCIENTIFIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following tables present the status and activity of the Company`s convertible debentures as of and through May 31, 2005:

Principal Shares

Balance Conversion Prices Converted Warrant

Dates of Aggregate at May ---------------------------- as of May Shares

Series Issuance Principal 31, 2005 Initial Reset 31, 2005 Issued

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A 4/23/02- $1,000,000 $ -- $ 0.08616- $ 0.04190- 24,099,548 12,859,175

6/10/02 0.10289 0.04457

B 8/23/02- 605,000 -- 0.05126- 0.04381- 14,777,350 11,234,835

1/24/03 0.0727 0.04722

C 3/24/02- 510,000 -- 0.041- 0.041- 10,470,554 9,377,943

6/9/03 0.065 0.065

D 8/1/03- 547,500 -- 0.0172- 0.0172- 25,178,803 22,455,355

10/21/03 0.048 0.0477

E 12/1/03- 1,527,500 -- 0.0267- 0.0267- 46,794,618 30,395,392

5/11/04 0.10 0.10

F 3/23/04 723,168 723,168 0.09 0.09 -- 8,035,192

G 9/28/04- 490,000 157,500 0.016710- 0.01670- 12,433,273 21,690,815

1/17/05 0.04 0.04

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$5,403,168 $ 880,668 133,754,146 116,048,707

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Convertible debentures issued since April 2002 $ 5,403,168

Less debentures converted to common stock (4,522,500)

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880,668

Less debt discount (412,879)

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Convertible debentures at May 31, 2005 467,789

Less current portion (421,847)

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Long term portion $ 45,942

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Maturity dates of outstanding convertible debentures

March 23, 2006 $ 723,168

November 17, 2006 157,500

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$ 880,668

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At May 31, 2005, the Company`s convertible debentures were convertible into approximately 27,556,000 shares of the Company`s common stock. Subsequent to May 31, 2005, holders of debentures having a principal balance of $132,500 converted their debentures, together with accrued interest thereon of approximately $6,000, into 8,295,789 shares of the Company`s common stock.

F-15

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PATRIOT SCIENTIFIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. STOCKHOLDERS` EQUITY

During fiscal 2004, the Company`s shareholders approved an increase in the authorized number of common shares from 200,000,000 to 400,000,000. During fiscal 2005, the authorized number of common shares was increased to 500,000,000.

Private Stock Offerings

During fiscal 2005, 4,625,000 restricted shares of common stock were issued to a group of individual investors in exchange for $453,250. Additionally, the Company issued 796,000 shares of common stock, valued at $58,800, to a vendor in exchange for services.

During fiscal 2004, 1,800,752 restricted shares of common stock were issued to a group of individual investors for $50,440 and 1,126,496 shares of common stock were issued to a vendor in satisfaction of $59,852 of trade accounts payable.

Warrants

At May 31, 2005, the Company had warrants outstanding to purchase 109,122,581 shares of common stock at exercise prices ranging from approximately $0.02 to $0.065 per share expiring at various dates through 2012. During fiscal 2005, the Company issued warrants to purchase 29,021,363 shares of common stock at exercise prices ranging from $0.02 to $0.08 per share and issued 38,358,511 shares of common stock on the exercise of warrants at exercise prices ranging from $0.02 to $0.04 per share.

At May 31, 2004, the Company had warrants outstanding to purchase 121,349,420 shares of common stock at exercise prices ranging from $0.02 to $0.6 per share expiring through 2011. During fiscal 2004, the Company issued warrants to purchase 73,436,127 shares of common stock at exercise prices ranging from $0.02 to $0.10 per share and issued 11,079,175 shares of common stock on the exercise of warrants at exercise prices ranging from $0.02 to $0.04 per share.

The following table presents outstanding warrants at May 31, 2005 and 2004:

2005 2004

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Issued in conjunction with

Convertible debentures 75,196,854 83,278,716

Anti-dilution agreements 20,813,081 15,398,058

Equity lines of credit 9,965,369 18,765,369

Other 3,147,277 3,907,277

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Total warrants outstanding 109,122,581 121,349,420

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PATRIOT SCIENTIFIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information about stock options and warrants outstanding at May 31, 2005:

Outstanding Exercisable

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Weighted

Average Weighted

Remaining Weighted Average

Range of Exercise Number Contractual Life Average Number Exercise

Prices Outstanding (Years) Exercise Price Exercisable Price

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Options $ 0.04-0.05 1,055,000 3.50 $ 0.04 1,055,000 $ 0.04

0.07-0.09 3,135,000 3.64 0.08 1,985,000 0.08

0.10-0.13 2,633,000 3.05 0.11 2,383,000 0.10

0.61-1.18 325,000 0.38 1.09 325,000 1.09

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$ 0.04-1.18 7,148,000 3.25 $ 0.13 5,748,000 $ 0.14

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Warrants $ 0.02-0.039 42,117,446 5.84 $ 0.03 42,117,446 $ 0.03

0.04-0.044 43,162,252 5.39 0.04 43,162,252 0.04

0.045-0.049 9,365,058 3.99 0.05 9,365,058 0.05

0.05-0.08 11,030,548 5.65 0.07 10,530,548 0.07

0.10-0.65 3,447,277 2.06 0.12 3,447,277 0.12

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$ 0.02-0.65 109,122,581 5.36 $ 0.04 108,622,581 $ 0.04

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