Based on the following:

10QSB (Filed: 23-01-2006)

8

PATRIOT SCIENTIFIC CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company granted a warrant to the other member of the JV

LLC to acquire up to 3,500,000 shares of the Company's common stock at a per

share price of $0.125. The warrant has a term of seven years. At the date of

grant, the right to acquire 1,400,000 common shares vested. The right to acquire

the remaining 2,100,000 shares will vest in 700,000 increments only upon the

Company's common stock attaining a per share stock price of $0.50, $0.75 and

$1.00. As additional consideration to the warrant holders for providing approval

for the transaction, the Company agreed to reset the per share exercise price of

approximately 35,000,000 warrants to $0.015 for which the warrant holders also

conveyed other warrants to acquire 12,000,000 shares back to the Company.

Further, the Company issued additional warrants to acquire approximately 290,000

shares of the Company's common stock at a per share price of $0.03. The warrants

issued and repriced were valued using the Black Scholes method and the following

assumptions: volatility of 123%, no dividends, risk free interest rates of

approximately 4%, and contractual terms ranging from five to seven years.

1. If TPL hasn't acquired all of the 3,500,000 shares, why couldn't they just surrender them as a partial repayment of the loan?

2. If the warrants issued and repriced were valued based on the assumption : NO DIVIDENDs, what would the reset price have been if they even though that dividends would be issued less than a year later?