SUNNYVALE, Calif.–(BUSINESS WIRE)–Feb. 9, 2005–Monolithic
System Technology, Inc. (MoSys), (Nasdaq:MOSY) today reported
financial results for its fourth quarter and fiscal year ended Dec.
31, 2004.

Highlights

  • Signed license agreement for 1T-SRAM with K-Micro (Kawasaki
    Microelectronics)
  • Expanded sales presence in Israel, Taiwan and China through
    the appointment of independent sales representatives.

  • Strengthened board of directors and management team with four
    new independent board appointees and a new Vice President of
    Sales and Marketing

Fourth Quarter Results

Total net revenue in the fourth quarter was $1.2 million compared
to $3.4 million of net revenue for the same period a year ago. Total
net revenue for the quarter consisted of $118,000 from licensing, $1.1
million in royalties and approximately $33,000 in product revenue.
This compares to licensing revenue of $1.9 million, royalty revenue of
$1.1 million and product revenue of $334,000 in the fourth quarter of
2003.

Operating expenses for the quarter included a restructuring charge
of $585,000 for the closure of the Company’s Canadian research and
development facility.

The net loss for the quarter was $2.4 million, or ($0.08) per
share, compared to net loss of $415,000, or ($0.01) per share in the
same period last year. The fourth quarter 2004 loss per share was
computed using 30,296,000 shares.

Fiscal 2004 Results

For fiscal year 2004, net revenue was $10.8 million compared to
the $19.2 million reported in fiscal 2003. Net loss in 2004 was $1.9
million, compared to net income of $2.5 million reported in 2003. The
loss per share in the year was ($0.06) compared to earnings of $0.08
per share in the prior year. The loss per share was computed using
30,750,000 shares.

“Although 2004 was a year of unique and disruptive challenges for
MoSys, we have made significant progress with our restructuring
initiatives aimed at rebuilding MoSys,” commented Mark Voll, Interim
CEO and Chief Financial Officer of MoSys. “In the wake of the aborted
acquisition by Synopsys, we have successfully enhanced our sales and
marketing team, secured sales partnerships that will provide MoSys
with an expanded international presence and attracted additional
highly qualified members to our board of directors and management
team.”

Mr. Voll commented further, “Our confidence in our proprietary
1T-SRAM technologies remains strong with new projects from customers
escalating. We believe the embedded memory content in SOCs will
continue to grow, thus increasing the size of our addressable market.
There is a spirit of excitement and enthusiasm in the company as we
enter 2005.”

Sarbanes-Oxley Update

In connection with the company’s 2004 year-end financial statement
audit, the Company has been testing and evaluating its internal
controls over financial reporting to assess their effectiveness as
required under Section 404 of the Sarbanes-Oxley Act of 2002.

Based upon our testing and evaluation to date, we identified
post-closing adjustments and reclassifications relating to fixed
assets and accrued liabilities due to errors in our account
reconciliations, and a post-closing adjustment between fourth quarter
revenue and cost of sales. We have determined that the Company will
have one or more internal control deficiencies that constitute a
“material weakness,” as defined by the Public Company Accounting
Oversight Board’s Auditing Standard No. 2. As a result, management
will be unable to conclude that the company’s internal controls over
financial reporting are effective as of Dec. 31, 2004. Consequently,
the Company believes that its registered independent public accounting
firm will be unable to attest to the effectiveness of the Company’s
internal controls over financial reporting as of such date.

The Company expects to conclude its testing and evaluation of
internal controls over financial reporting and management’s assessment
of such internal controls prior to filing the Company’s annual report
on Form 10-K with the Securities and Exchange Commission in mid-March
2005.

Business Outlook

MoSys’ Interim Chief Executive Officer and Chief Financial
Officer, Mark Voll and Vice President of Sales and Marketing Karen
Lamar will host a conference call to further discuss the financial
results and business outlook at 2:15 p.m. PT on Feb. 9, 2005.

Fourth Quarter and FY 2004 Financial Results Web Cast/Conference
Call

The MoSys live audio web cast and conference call to discuss Q4
and FY 2004 financial results begins at 2:15 p.m. (PT) on Wednesday,
Feb. 9, 2005. Investors and other interested parties may listen to the
live audio web cast by visiting the investor relations section of the
MoSys Web site at www.mosys.com. A replay of the conference call will
be available for 48 hours beginning at 5 p.m. PT. The replay number is
1-888-286-8010 with a pass code of 11040432. A web cast replay will
also be available on the company’s website.

About MoSys

Founded in 1991, MoSys (Nasdaq:MOSY), develops, licenses and
markets innovative memory technologies for semiconductors. MoSys’
patented 1T-SRAM technologies offer a combination of high density, low
power consumption, high speed and low cost unmatched by other
available memory technologies. The single transistor bit cell used in
1T-SRAM memory results in the technology achieving much higher density
than traditional four or six transistor SRAMs while using the same
standard logic manufacturing processes. 1T-SRAM technologies also
offer the familiar, refresh-free interface and high performance for
random address access cycles associated with traditional SRAMs. In
addition, these technologies can reduce operating power consumption by
a factor of four compared with traditional SRAM technology,
contributing to making them ideal for embedding large memories in
System on Chip (SoC) designs. MoSys’ licensees have shipped more than
80 million chips incorporating 1T-SRAM embedded memory technologies,
demonstrating excellent manufacturability in a wide range of silicon
processes and applications. MoSys is headquartered at 1020 Stewart
Drive, Sunnyvale, California 94085. More information is available on
MoSys’ website at http://www.mosys.com.

Forward-Looking Statements

This press release may contain forward-looking statements about
the Company including, without limitation, benefits and performance
expected from use of the Company’s 1T-SRAM technology.

Forward-looking statements are based on certain assumptions and
expectations of future events that are subject to risks and
uncertainties. Actual results and trends may differ materially from
historical results or those projected in any such forward-looking
statements depending on a variety of factors. These factors include
but are not limited to, customer acceptance of our 1T-SRAM
technologies, the timing and nature of customer requests for our
services under existing license agreements, the timing of customer
acceptance of our work under such agreements, the level of commercial
success of licensees’ products such as the Nintendo GAMECUBE and cell
phone hand sets, ease of manufacturing and yields of devices
incorporating our 1T-SRAM, our ability to enhance the 1T-SRAM
technology or develop new technologies, the level of intellectual
property protection provided by our patents, the vigor and growth of
markets served by our licensees and customers and other risks
identified in the Company’s most recent annual report on Form 10-K
filed with the Securities and Exchange Commission, as well as other
reports that MoSys files from time to time with the Securities and
Exchange Commission. MoSys undertakes no obligation to update publicly
any forward-looking statement for any reason, except as required by
law, even as new information becomes available or other events occur
in the future.

We may also identify additional deficiencies or material
weaknesses in our internal controls, or may be unable to remediate
such deficiencies and weaknesses. Despite the significant expense,
time, and effort being expended on our efforts to remediate our
internal controls, there is no assurance that we will be able to
prevent additional errors, or that we will be able to successfully
remediate the significant deficiencies or material weaknesses in our
internal controls. Potential consequences of a failure to remediate
such significant deficiencies and material weaknesses could include,
among other things: enforcement action against us by the SEC or other
federal or state regulatory agency, lawsuits by private plaintiffs,
adverse reaction by investors and potential investors, and harm to our
reputation in the business and financial community. If any of our
internal control significant deficiencies or material weaknesses are
not adequately addressed, we could continue to experience accounting
errors that could result in misstatements of our results of
operations, restatements of our financial statements, loss of
confidence in us as a company, a decline in our stock price, or
otherwise adversely affect our business, reputation and results of
operations.

1T-SRAM(R) is a MoSys trademark registered in the U.S. Patent and
Trademark Office. All other trade, product, or service names
referenced in this release may be trademarks or registered trademarks
of their respective holders.


                 MONOLITHIC  SYSTEM TECHNOLOGY, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share amounts)

                            Three Months Ended    Twelve Months Ended
                               December 31,           December 31,
                             2004        2003       2004      2003
                          ----------- ----------- --------- ----------
                          (unaudited) (unaudited)
Net Revenue
  Product                        $33        $334      $952     $1,904
  Licensing                      118       1,929     4,544     10,418
  Royalty                      1,069       1,088     5,325      6,911
                          ----------- ----------- --------- ----------
    Total                      1,220       3,351    10,821     19,233
                          ----------- ----------- --------- ----------

Cost of Net Revenue
  Product                         25         259       655      1,217
  Licensing                      519         426     1,613      1,970
                          ----------- ----------- --------- ----------
    Total                        544         685     2,268      3,187
                          ----------- ----------- --------- ----------
Gross Profit                     676       2,666     8,553     16,046
                          ----------- ----------- --------- ----------

Operating Expenses:
  Research and
   development                 1,724       2,087     8,052      8,593
  Selling, general and
   administrative              1,348       1,463    13,307      6,121
  Restructuring charges          585          --       585         --
  Stock-based
   compensation expense            8          38        68        459
                          ----------- ----------- --------- ----------
    Total operating
     expenses                  3,665       3,588    22,012     15,173
                          ----------- ----------- --------- ----------

  Income (loss) from
   operations                 (2,989)       (922)  (13,459)       873
  Interest and other
   income                        548         461    11,578      1,914
                          ----------- ----------- --------- ----------

  Income (loss) before
   income taxes               (2,441)       (461)   (1,881)     2,787
  Benefit (provision) for
   income taxes                   30          46       (26)      (279)
                          ----------- ----------- --------- ----------

Net Income (Loss)            $(2,411)      $(415)  $(1,907)    $2,508
                          =========== =========== ========= ==========

Net Income (Loss) Per
 Share
  Basic                       ($0.08)     ($0.01)   ($0.06)     $0.08
                          =========== =========== ========= ==========
  Diluted                     ($0.08)     ($0.01)   ($0.06)     $0.08
                          =========== =========== ========= ==========


Shares Used in Computing
 Net Income (Loss) Per
 Share
    Basic                     30,296      30,704    30,750     30,504
    Diluted                   30,296      30,704    30,750     30,998


                  MONOLITHIC SYSTEM TECHNOLOGY, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)

                                          December 31,   December 31,
                                              2004          2003
                                          ------------- --------------

Assets
Current Assets
  Cash, cash equivalents and short-term
   investments                                 $62,349        $41,365
  Accounts receivable - net                      1,125          1,027
  Unbilled contract receivable                      57          1,106
  Inventories - net                                 --            474
  Prepaid expenses and other assets              2,939          3,822
                                          ------------- --------------
    Total Current Assets                        66,470         47,794

  Long-term investments                         24,562         44,462
  Property and equipment - net                     685          1,796
  Goodwill                                      12,326         12,326
  Other Assets                                     539            514
                                          ------------- --------------
    Total Assets                              $104,582       $106,892
                                          ============= ==============


Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts payable                                $120           $116
  Accrued expenses and other liabilities         3,314          2,733
  Deferred revenue                                 501            506
  Current portion of capital lease
   obligations                                      --             13
                                          ------------- --------------
  Total Current Liabilities                      3,935          3,368

  Long term portion of restructuring
   liability                                       239             --
  Long term portion of capital lease
   obligations                                      --             13

  Common stock and additional paid in
   capital                                      98,260         99,456
  Retained earnings                              2,148          4,055
                                          ------------- --------------
Total Stockholders' Equity                     100,408        103,511
                                          ------------- --------------

  Total Liabilities and Stockholders'
   Equity                                     $104,582       $106,892
                                          ============= ==============

CONTACT: Monolithic System Technology, Inc., Sunnyvale
Mark Voll, 408-731-1846
markv@mosys.com
or
Shelton IR
Beverly Twing, 972-239-5119 x126
btwing@sheltongroup.com

SOURCE: Monolithic System Technology, Inc.