PROPOSAL NUMBER 1

APPROVAL OF THE PATRIOT SCIENTIFIC CORPORATION 2006 STOCK OPTION PLAN

On March 31, 2006, the Board adopted the Patriot Scientific Corporation 2006 Stock Option Plan (the “Plan”). The Plan is intended to promote the interests of the Company and its stockholders by: (i) attracting and retaining exceptional directors, employees and consultants (including prospective directors, employees and consultants), and (ii) enabling such individuals to participate in the long-term growth and financial success of the Company. The following description of the Plan is qualified by reference to the full text thereof, a copy of which is attached hereto as Appendix A .

Awards. The Plan provides for the grant of options intended to qualify as incentive stock options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s employees and non-statutory stock options (“NSOs,” and together with “ISOs,” collectively, “Options”) ) to the Company’s directors, employees and consultants. As of March 31, 2006, the number of directors, employees and consultants eligible to participate in the Plan were five, three and two, respectively.

Plan Administration. The Board, or one or more committees appointed by the Board, will administer the Plan (in either case, the “administrator”). In the case of awards intended to qualify as “performance based compensation” within the meaning of Section 162(m) of the Code, the committee will consist of two or more “outside directors” within the meaning of Section 162(m) of the Code. The administrator has the power to determine the terms of the awards, including the exercise price, the number of shares subject to each award, the exercisability of the awards and the form of consideration payable upon exercise. The administrator also has the power to implement an award exchange program (whereby awards may be exchanged or cancelled for awards with lower exercise prices or different terms), or a program through which participants may reduce cash compensation to purchase awards. The administrator may also create other stock based awards that are valued in whole or in part by reference to (or are otherwise based on) shares of the Common Stock.

Shares Available For Awards . Subject to adjustment as provided below, the aggregate number of shares of Common Stock that may be issued pursuant to Options granted under the Plan is 5,000,000; provided, however, that the maximum number of shares that may be delivered pursuant to ISOs granted under the Plan is 3,000,000.

If an Option expires or is terminated or canceled without having been exercised or settled in full, is forfeited back to or repurchased by the Company, the terminated portion of the Option (or forfeited or repurchased shares subject to the award) will become available for future grant or sale under the Plan (unless the Plan has terminated). Shares are not deemed to be issued under the Plan with respect to any portion of an Option that is settled in cash. If the exercise or purchase price of an Option is paid for through the tender of shares, or withholding obligations are met through the tender or withholding of shares, those shares tendered or withheld will again be available for issuance under the Plan.

Stock Options . An option is the right to purchase shares of Common Stock at a fixed exercise price for a fixed period of time. The administrator may grant both ISOs and NSOs under the Plan. Except as otherwise determined by the administrator in an award agreement with regard to NSOs, the exercise price for options cannot be less than the fair market value (as defined in the Plan) of the Common Stock on the date of grant. The administrator will determine the term of each option; provided that no ISO will be exercisable after the tenth anniversary of the date the option is granted. In the case of ISOs granted to an employee who, at the time of the grant of an option, owns stock representing more than 10% of the voting power of all classes or stock or the stock of any of our affiliates, the exercise price cannot be less than 110% of the fair market value of a share of Common Stock on the date of grant and its term will be five years or less from the date of grant. All options granted under the Plan will be NSOs unless the applicable award agreement expressly states that the option is intended to be an ISO.

Options shall vest and become exercisable as determined by the administrator. The exercise price will be payable with cash (or its equivalent) or by other methods as permitted by the administrator to the extent permitted by applicable law.

If a participant’s employment or relationship with the Company is terminated, the participant (or his or her designated beneficiary or estate representative in the case of death) may exercise his or her option within such period of time as is specified in the award agreement to the extent that the option is vested on the date of termination. In the absence of a specified time in the award agreement, the option will remain exercisable for three months following the date of termination, except in the case where termination is as a result of disability or death, in which case the option will remain exercisable for 12 months following the date of termination or death.

The administrator may at any time offer to purchase an option previously granted for a payment in cash or shares of Common Stock based on such terms and conditions as the administrator shall establish and communicate to the participant at the time that such offer is made.

Transferability of Awards. Generally, unless the administrator determines otherwise, the Plan does not allow for the transfer of awards other than by will or by the laws of descent and distribution, and only the participant may exercise an award during his or her lifetime.

Amendment and Termination of the Plan . The Plan will automatically terminate in 2016, unless it is terminated sooner. In addition, the Board has the authority to amend, suspend or terminate the Plan provided it does not adversely affect any award previously granted under the Plan.

Effectiveness . The Plan was effective as of March 31, 2006, subject to stockholder approval.

Liquidation or Dissolution of the Company . In the event of the proposed dissolution or liquidation of the Company, the administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. The administrator in its discretion may provide for a participant to have the right to exercise his or her award, to the extent applicable, until 10 days prior to such transaction as to all of the stock covered thereby, including shares of Common Stock as to which such award would not otherwise be exercisable. In addition, the administrator may provide that any Company repurchase option or forfeiture rights applicable to any award shall lapse 100%, and that any award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised or vested, an award will terminate immediately prior to the consummation of such proposed action.

Change in Control . Where applicable, upon a change in control, all awards shall be accelerated and fully exercisable as of the effective date (or such earlier date as the Board may determine) of the proposed transaction resulting in the change in control, and shall remain fully exercisable for a period of between three and six months after the change in control occurs, as determined by the Board.

Certain U.S. Federal Income Tax Information With Respect to Options

The following is a brief summary of certain U.S. federal income tax consequences related to options that may be awarded under the Plan. This summary is based on the Company’s understanding of current U.S. federal income tax law and regulations and reference is made to the Code and the regulations and interpretations issued thereunder for a complete statement of all relevant federal tax consequences. The summary does not purport to be complete or applicable to every specific situation. This summary is not intended to be exhaustive and does not describe state, local or foreign tax consequences of participation in the Plan.

Incentive Stock Options. ISOs are intended to be eligible for the favorable federal income tax treatment accorded “incentive stock options” under the Code. There generally are no federal income tax consequences to the optionee or the Company by reason of the grant or exercise of an ISO. However, the exercise of ISOs may increase the optionee’s alternative minimum tax liability, if any.

If an optionee holds stock acquired through exercise of an ISO for at least two years from the date on which the option is granted and at least one year from the date on which the shares are transferred to the optionee upon exercise of the option, any gain or loss on a disposition of such stock will be long-term capital gain or loss. Generally, if the optionee disposes of the stock before the expiration of either of these holding periods (a “disqualifying disposition”), at the time of disposition, the optionee will realize taxable ordinary income equal to the lesser of (a) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (b) the optionee’s actual gain, if any, on the purchase and sale. The optionee’s additional gain, or any loss, upon the disqualifying disposition will be a capital gain or loss. Capital gains currently are generally subject to lower tax rates than ordinary income. Slightly different rules may apply to optionees who acquire stock subject to certain repurchase options.

To the extent the optionee recognizes ordinary income by reason of a disqualifying disposition, the Company will generally be entitled (subject to the requirement of reasonableness and the satisfaction of a tax reporting obligation) to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs.