On June 7, 2005, we entered into a Master Agreement (the "Master Agreement") with Technology Properties Limited Inc., a California corporation ("TPL"), and Charles H. Moore, an individual ("Moore" and together with us and TPL, the "Parties"). We, TPL and Moore were parties to certain lawsuits filed by us alleging infringement (the "Infringement Litigation") of our Microprocessor Patents and a lawsuit also filed by us alleging claims for declaratory judgment for determination and correction of inventorship of the Microprocessor Patents (the "Inventorship Litigation"). The transactions described in the Master Agreement and related agreements (the "Transactions") included the settlement or dismissal of the Inventorship Litigation.

Pursuant to the Master Agreement we agreed with TPL and Moore as follows:

o We entered into a patent license agreement (the "Intel License") with Intel Corporation ("Intel") pursuant to which we licensed certain rights in the Microprocessor Patents to Intel.

o We entered into an Escrow Agreement along with TPL pursuant to which the proceeds arising from the Intel License were allocated for the benefit of us and TPL. Pursuant to the Escrow Agreement, our initial capitalization obligations and those of TPL with regard to the JV LLC (defined below) were satisfied, our payment obligations and those of TPL with regard to the Rights Holders (defined below) were made, we received $6,672,349, and the remaining proceeds were allocated to or for the benefit of TPL.

o We caused certain of our respective interests in the Microprocessor Patents to be licensed to a limited liability company owned 50% by us and 50% by TPL (the "JV LLC").

o The JV LLC engaged TPL to commercialize the Microprocessor Patents pursuant to a Commercialization Agreement among the JV LLC, TPL and us (the "Commercialization Agreement").

o We paid $1,327,651 and TPL paid $1,000,000 to certain holders of rights in the Microprocessor Patents ("Rights Holders") in exchange for the consent of such Rights Holders to the Transactions.

o We agreed with TPL and Moore to settle or cause to be dismissed all litigation among all of us pursuant to a stipulated final judgment, including the Inventorship Litigation.

o We issued warrants to TPL to acquire shares of our common stock. 1,400,000 warrants were exercisable upon issue; 700,000 warrants will become exercisable if our common stock trades at $0.50 per share; an additional 700,000 warrants will become exercisable if our common stock trades at $0.75 per share; and an additional 700,000 warrants will become exercisable if our common stock trades at $1.00 per share.

o We agreed with TPL and Moore to indemnify each other for, among other things, any inaccuracy or misrepresentation to any representation or warranty contained in the Master Agreement, any breach of the Master Agreement, certain liabilities relating to the respective interests of each of us in the Microprocessor Patents and the Transactions, and certain tax liabilities.

Pursuant to the Commercialization Agreement, the JV LLC granted to TPL the exclusive right to grant licenses and sub-licenses of the Microprocessor Patents and to pursue claims against violators of the Microprocessor Patents, in each case, on behalf of JV LLC, us, TPL and Moore, and TPL agreed to use reasonable best efforts to commercialize the Microprocessor Patents in accordance with a mutually agreed business plan. Pursuant to the Commercialization Agreement, the JV LLC agreed to reimburse TPL's expenses incurred in connection with the commercialization of the Microprocessor Patents. All proceeds generated by TPL in connection with the commercialization of the Microprocessor Patents will be paid directly to the JV LLC.

Pursuant to the Master Agreement, we and TPL have entered into the Limited Liability Company Operating Agreement of the JV LLC ("LLC Agreement"). We and TPL each own 50% of the membership interests of JV LLC, and each have the right to appoint one member of the three (3) member management committee. The two (2) appointees are required to select a mutually acceptable third member of the management committee. Pursuant to the LLC Agreement, we and TPL must each contribute to the working capital of the JV LLC (in addition to the Microprocessor Patent licenses described above), and are obligated to make future contributions in equal amounts in order to maintain a working capital fund. The LLC Agreement provides that the JV LLC shall indemnify its members, managers, officers and employees to the fullest extent permitted by applicable law, for any liabilities incurred as a result of their involvement with the JV LLC, if the person seeking indemnification acted in good faith and in a manner reasonably believed to be in the best interest of the JV LLC.

Payments totaling approximately $960,000 were made in the first quarter of fiscal 2006 to the co-inventors of the technology. Additionally, a legal advisor who had previously provided services to the Company may assert a success fee against the Company based upon proceeds received by the Company under the license agreement. See further discussion in Item 3.

We have a history of reported losses. For the fiscal years ended May 31, 2005 and 2004, we reported net losses of approximately $2,700,000 and $4,100,000. These losses have resulted primarily from significant costs associated with the development of our products, costs associated with the marketing of those products, and the interest charges and expenses related to equity and debt financings

COMPENSATION OF DIRECTORS

No direct or indirect remuneration was paid or is payable to the Company's directors during the fiscal years ended May 31, 2005 and May 31, 2004 other than the granting of stock options. In the first quarter of fiscal 2006 cash payments that aggregated $170,000 were made to certain of the Company's board members in connection with their efforts in the consummation of the TPL and Charles H. Moore Agreement. Expenses of the Company's directors in connection with the attendance of board or committee meetings and company related activities are reimbursed by the Company (My bolding)

http://www.pinksheets.com/edgar/GetFilingHtml?FilingID=3908294

PTSC had growing debts, litigation with a co-inventor, and unpaid directors. Subsequent to the Master Agreement, PTSC received $10,000,000 (corrections welcomed as I'm going from memory) via TPL/Moore from Intel, all litigation was was settled, and licensing commenced.

To now suggest that the BoD were somehow derelict in their fiduciary duty to shareholders and question the "bonus payments" is at best laughable. In my very humble opinion, this further attempt to discredit the BoD is yet another example of unfounded mudslinging, for whatever reason.

Be well