To All Friends of Patriot Scientific Corporation,

August was a good month for Patriot, but more than that, it was a
record-breaking year! We released fantastic annual results, appointed
a new board member, and opened a new publicity channel.

We had terrific year-end results - the best in Patriot's 20-year
history. Our top-line "sales" for fiscal 2007 nearly doubled to $49
million. (Technically, our sales include only our microprocessor chips
and the products from Holocom. Most of our income is actually
recognized through our equity stake in the joint venture through which
we license our patents. It's just one of those funny accounting rules.
Thank you, Mr. Sarbanes and Mr. Oxley.) Our net profit was $23.7
million, or $0.06 per fully diluted share. Obviously, Patriot
Scientific is enormously profitable and we're growing rapidly.
Our cash position has also improved hugely over the previous fiscal
year, growing by a factor of nearly 5x. We now have over $21 million
in the bank, compared to just under $4 million this time last year.
That puts us in a much stronger position to acquire other companies,
technologies, rights, or equipment.
Regarding our cash, I met recently with the board of directors and we
decided not to pay out a dividend this period. We'll revisit this
issue regularly but for now I think we can put that cash to much
better use in growing the company, as I hope to show you later this
year.
With our patent licensing activity running at the rate of about one
new licensee every month, and with more than 300 potential licensees
officially notified, we've got every reason for optimism. We've got
many years of licensing deals and revenue ahead of us.
So why isn't the share price doing better? I get a lot of letters from
shareholders asking, "Why didn't you raise the share price this
morning?" If only it were that easy. You know, I sometimes wonder if
these people understand how free markets work. To borrow a phrase from
the 19th century scientist Charles Babbage, "I am not rightly able to
apprehend the kind of confusion of ideas that could provoke such a
question."  Share prices are controlled by supply and demand, not some
big red button in my office.
Nick Tredennick has joined our board of directors. As I hinted in our
last letter, I'm thrilled that Nick has found the time to join us.
I've known Nick for a number of years and I admire his balance of
technological know-how and business sense. He also has an eye for
spotting trends, which brought him together with George Gilder many
years ago to write Dynamic Silicon and the Gilder Technology Report
and to participate in the Telecosm tech-investor conferences. Nick's
going to review the acquisition candidates we're evaluating and
recommend some ideas of his own. His industry knowledge, corporate
experience, and nose for good (and bad) investments will really work
in our favor.
I'm now writing a regular monthly column for Electronic Business that
starts this month. This is a widely distributed electronic newsletter
published by Reed Elsevier alongside big industry magazines like
Electronic News and EDN (Electronic Design News). In addition to
spreading the word about Patriot Scientific I'll be writing about the
intellectual property business, industry climate, business models, and
related topics of the day.
You may be getting a tax refund. As you know, we paid two dividends
during calendar year 2006, and you will have received a Form 1099 that
declared those dividends as taxable income. They actually weren't
taxable, and we sent out corrected 1099s, but some of you didn't
receive them. We've sent out the corrected form yet again, but just in
case you still don't receive it we've posted more information here.
Mark your calendars for our next shareholders' meeting on Tuesday, the
23rd of October. As before, we'll hold the meeting at the La Costa
Resort & Spa here in Carlsbad. Everyone's welcome and you can find
information on travel and hotels on our Web site.
With best regards for a good and profitable summer;

-Jim Turley

President/CEO

Patriot Scientific Corporation