With PDS committing to pay fees to Agility NOT on a contingency basis, perhaps PDS is getting ready to make a capital call. If TPL doesn't come up with their 1/2, and Patriot has to cover for TPL, then Patriot may finally gain a larger % of PDS. Where would TPL get the money to cover a capital call unless DL is hiding money somewhere and might face worse consequences if he suddently came up with a lump some from ?????

p.7 http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001019687-14-001373.txt&FilePath=\2014\04\14\&CoName=PATRIOT+SCIENTIFIC+CORP&FormType=10-Q&RcvdDate=4%2F14%2F2014&pdf=

Liquidity and Management’s Plans

Cash shortfalls currently experienced by Phoenix Digital Solutions, LLC (“PDS”) will have an adverse effect on our liquidity. During the fiscal year ended May 31, 2013, we and Technology Properties Limited, Inc. (“TPL”) each contributed $1,097,809 in additional capital to fund the operations of PDS. We and TPL have made no such contributions for the nine months ended February 28, 2014. To date, we have determined that it is in the best interests of the Moore Microprocessor Patent (“MMP”) licensing program that we provide our 50% share of capital to provide for PDS expenses including legal retainers, and litigation related payments, as well as licensing and litigation support payments to Alliacense Limited, LLC (“Alliacense”, an affiliate of TPL), in the event license revenues received by PDS are insufficient to meet these needs. We believe it is likely that contributions to PDS to fund working capital will continue to be required.

PDS had been incurring significant third-party costs for expert testimony, depositions and other related litigation costs. We could be required to make capital contributions to PDS for any future litigation related costs in the event that PDS does not receive sufficient licensing revenues to pay these expenses.

Our current liquid cash resources as of February 28, 2014, are expected to provide the funds necessary to support our operations through at least the next twelve months. The cash flows from our interest in PDS represent our only significant source of cash generation. In the event of a continued decrease or interruption in MMP Portfolio licensing we will incur a significant reduction to our cash position. It is highly unlikely that we would be able to obtain any additional sources of financing to supplement our cash and cash equivalents and short-term investment position of $6,862,527 at February 28, 2014.

On March 20, 2013, TPL filed a petition under Chapter 11 of the United States Bankruptcy Code. We have been appointed to the creditors’ committee and have been closely monitoring the progress in this matter as it relates to our interest in PDS. If we provide funding to PDS that is not reciprocated by TPL, our ownership percentage in PDS will increase and we will have a controlling financial interest in PDS, in which case, we will consolidate PDS in our consolidated financial statements. If we determine that it is appropriate to consolidate PDS, we would measure the assets, liabilities and noncontrolling interests of PDS at their fair values at the date that we have the controlling financial interest.

p.21

PDS Management Committee Arbitration

In January 2014, our representative to the PDS management committee filed with the American Arbitration Association (“AAA”) a demand for arbitration pursuant to the terms of the LLC Agreement. The demand seeks the appointment of a third member, referred to as the independent manager member, to the PDS management committee. The AAA has appointed an arbitrator who will be responsible for selecting the independent manager from a listing of candidates supplied by each of the TPL and PTSC management committee members. We believe the appointment of the independent manager will facilitate decision-making in the best interests of PDS.

p.23-24 overview

On April 4, 2014, we were notified of the resignation of TPL's representative to the PDS management committee, and the concurrent appointment by TPL of its new representative to PDS. While we are hopeful that this may relieve some of the decision deadlock at PDS, the impact of this action has yet to be determined.

Further frustrating management’s plans for the continued operation of PDS, PDS has been notified by its current patent counsel that they are no longer able to work on a contingency basis. PDS and its current patent counsel are currently discussing alternative, hybrid hourly/contingency fee arrangements. While it is unclear whether PDS will come to an agreement with its current patent litigation counsel, it is reasonably likely that PDS’ legal fees will materially increase in the future. Additionally, a significant delay in revising the terms of PDS’ engagement of its current patent counsel or in engaging new counsel could result in material delays in the underlying litigation and delays in receiving any judgments resulting therefrom, if any.