SUNNYVALE, Calif.–(BUSINESS WIRE)–July 17, 2003–Monolithic
System Technology, Inc. (MoSys), (NASDAQ:MOSY) today reported
financial results for its second quarter ended June 30, 2003.

Second Quarter Highlights

  • Expanded scope of license agreement with Sony
  • 1T-SRAM memory silicon-verified at Semiconductor Manufacturing
    International Corporation (SMIC)

  • LSI Logic adopts 1T-SRAM for its leading-edge DVD products
  • Licensed 1T-SRAM technology to Xyratex Technology, Ltd. for
    use in next generation data storage and network products

  • Shigeru Shimauchi named General Manager of expanded Tokyo
    office

Financial Results

Total net revenue in the second quarter was approximately $4.5
million compared to $6.5 million reported in the same period of 2002.
Total net revenue consisted of $2.2 million from licensing, $1.8
million in royalties and $515,000 in product revenue. Licensing
revenue for the current quarter decreased by approximately $400,000
from the same period last year, and royalty revenue decreased by $1.5
million from the second quarter of 2002. Product revenue decreased by
$133,000 compared to $648,000 in the same period of 2002. The gross
margin percentage in the second quarter of 2003 was 86%.

Other income during the period consist of a contract termination
fee of $288,000 and interest income of $329,000 compared to interest
income of $472,000 in the same period last year.

Net income for the quarter was $500,000 representing 11% of total
revenue, or $0.02 fully diluted earnings per share, compared to $2.7
million, or $0.09 fully diluted earnings per share, in the same period
last year. Second quarter 2003 diluted earnings per share were
computed using 30,848,000 shares.

Commenting on the results of the second quarter, Dr. Fu-Chieh Hsu,
CEO of MoSys stated, “We have experienced a very difficult economic
environment during the first half of 2003, and many of our customers
have delayed the start of their development projects as well as the
deployment of completed projects into production which has certainly
impacted current revenues. Despite these difficulties, we continue to
effectively focus on the further expansion and proliferation of our
technologies.”

Dr. Hsu further stated, “With respect to the long anticipated
market improvement, we remain cautious in predicting the pace of any
significant recovery. Visibility remains difficult even for the
short-term, however, we are confident that MoSys is well positioned to
take advantage of recovery momentum as it materializes.”

Business Outlook

MoSys’ President and Chief Executive Officer Dr. Fu-Chieh Hsu and
Chief Financial Officer, Mark Voll will update their business outlook
and give guidance for the second quarter of 2003 during their earnings
conference call at 2:15 P.M. PT on July 17, 2003.

Second Quarter Financial Results Web cast/Conference Call

The MoSys management team will host a live web cast and conference
call to discuss Q2 2003 financial results beginning at 2:15 P.M. (PT)
on Thursday, July 17, 2003. Investors and other interested parties may
listen to the live 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 24 hours beginning at 5 P.M. PT. The replay
number is 1-800-633-8284 with a pass code of 21153892. A web cast
replay will also be available on the company’s web site.

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
50 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 technology,
proving our technology in high-volume production of licensees’
integrated circuits, the level of commercial success of licensees’
products such as the Nintendo GAMECUBE and cell phone hand sets, ease
of integration of our 1T-SRAM with other semiconductor functions, 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,
the impact of the Company’s recent acquisition of ATMOS Corporation on
future operating results and operations of the Company 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.

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)
                              (unaudited)

                     Three Months Ended           Six Months Ended
                          June 30,                    June 30,
                       2003       2002             2003       2002
                     -------    -------           -------   -------

Net Revenue
 Product             $   515     $  648           $ 1,059   $ 1,541
 Licensing             2,196      2,620             6,709     4,504
 Royalty               1,759      3,262             4,615     6,880
                     -------    -------           -------   -------
     Total             4,470      6,530            12,383    12,925
                     -------    -------           -------   -------

Cost of Net Revenue
 Product                 291        383               698       830
 Licensing               341        339               956       651
                     -------    -------           -------   -------
     Total               632        722             1,654     1,481
                     -------    -------           -------   -------
Gross Profit           3,838      5,808            10,729    11,444
                     -------    -------           -------   -------

Operating Expenses:
 Research and
  development          2,168      1,490             4,413     2,821
 Selling,
  general and
  administrative       1,592      1,187             3,262     2,179
 Stock-based
  compensation
  expense                105        156               231       364
                     -------    -------           -------   -------
     Total operating
      expenses         3,865      2,833             7,906     5,364
                     -------    -------           -------   -------

 Income from (loss)
  operations             (27)     2,975             2,823     6,080
 Interest and
  other income           652        433             1,142       800
                     -------    -------           -------   -------

 Income before
  income taxes           625      3,408             3,965     6,880
 Provision for
  income taxes          (125)      (681)             (793)   (1,375)
                     -------    -------           -------   -------

Net Income           $   500    $ 2,727           $ 3,172   $ 5,505
                     =======    =======           =======   =======

Net Income Per Share
 Basic               $  0.02    $  0.09           $  0.10   $  0.19
                     =======    =======           =======   =======
 Diluted             $  0.02    $  0.09           $  0.10   $  0.17
                     =======    =======           =======   =======


Shares Used in Computing
 Net Income Per Share
  Basic               30,395     29,690            30,349    29,630
  Diluted             30,848     31,318            30,693    31,530



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

                                           June 30,       December 31,
                                             2003             2002
                                          -----------    -------------
                                          (unaudited)
Assets
Current Assets
  Cash, cash equivalents
   and short-term investments             $    53,936      $    68,433
  Accounts receivable - net                     1,078              943
  Unbilled contract receivable                    857              693
  Inventories - net                               794            1,037
  Prepaid expenses and other assets             3,497            4,475
                                          -----------    -------------
     Total Current Assets                      60,162           75,581

  Long-term investments                        30,756           11,400
  Property and equipment - net                  2,722            3,352
  Goodwill                                     12,326           12,326
  Other Assets                                    508              431
                                          -----------    -------------
     Total Assets                             106,474          103,090
                                          ===========    =============


Liabilities and Shareholders' Equity:
Current Liabilities:
  Accounts payable                        $       102      $        82
  Accrued expenses and other liabilities        2,835            2,418
  Deferred revenue                                281            1,779
  Current portion of capital lease
   obligations                                     21               89
                                          -----------    -------------
  Total Current Liabilities                     3,239            4,368

  Long term portion of capital lease
   obligations                                     18               25

  Common stock and additional paid in
   capital                                     98,498           97,150
  Retained earnings                             4,719            1,547
                                          -----------    -------------
Total Shareholders' Equity                    103,217           98,697
                                          -----------    -------------

  Total Liability and Shareholders'
   Equity                                 $   106,474      $   103,090
                                          ===========    =============