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 increase in net income. However, as a counter to these

strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

PTSC's very impressive revenue growth greatly exceeded the industry average of 15.0%. Since the same

quarter one year prior, revenues leaped by 4878.9%. This growth in revenue appears to have trickled down to

the company's bottom line, improving the earnings per share.

PTSC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a

relatively favorable sign. Along with this, the company maintains a quick ratio of 3.42, which clearly

demonstrates the ability to cover short-term cash needs.

PATRIOT SCIENTIFIC CORP has shown improvement in its earnings for its most recently reported quarter

when compared with the same quarter a year earlier. This company has not demonstrated a clear trend in

earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During

the past fiscal year, PATRIOT SCIENTIFIC CORP reported lower earnings of $0.05 versus $0.07 in the prior

year.

Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This

is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors &

Semiconductor Equipment industry and the overall market, PATRIOT SCIENTIFIC CORP's return on equity

significantly exceeds that of both the industry average and the S&P 500.

Net operating cash flow has significantly decreased to -$5.71 million or 359.40% when compared to the same

quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.