SUNNYVALE, Calif.–(BUSINESS WIRE)–Aug. 3, 2005–Monolithic
System Technology, Inc. (MoSys), (Nasdaq:MOSY), the industry’s leading
provider of high-density system-on-chip (SoC) embedded memory, today
reported financial results for its second quarter ended June 30, 2005.

Highlights

  • Total net revenue increased 14 percent sequentially
  • Launched 1T-SRAM 0.13-micron CLASSIC memory macros, which will
    address the needs of a broader customer base and shorten the
    design to revenue cycle
  • Delivered 0.13-micron 1T-SRAM(R) Web-based memory compiler,
    which maximizes delivery of 1T-SRAM to new customers by
    equipping engineers with the ability to run what-if scenarios
    on new designs
  • Appointed new Chief Executive Officer, Chet Silvestri

Financial Results

Total net revenue for the second quarter of 2005 increased to $3.1
million, compared to $2.7 million reported in the previous quarter and
$3.4 million in second quarter of 2004.

Total net revenue consisted of $1.9 million from licensing, $1.1
million in royalties and approximately $6,000 in product revenue.
Licensing revenue for the second quarter increased 60 percent from the
$1.2 million reported in the previous quarter and 48 percent from the
$1.3 million reported in the same period a year ago. Second quarter
licensing revenue reflected the consummation of several licensing
contracts that were in negotiation during the past several quarters.
Royalty revenues decreased 24 percent sequentially, due to seasonality
in the consumer electronic business, and 21 percent year-over-year.

Total operating expenses for the quarter were $3.6 million, and
included an additional restructuring charge of $114,000 related to
closure of the Company’s Canadian research and development facility in
the fourth quarter of 2004. The facility-related restructuring charge
previously recorded in the fourth quarter of 2004 was $585,000.

The gross margin percentage in the second quarter of 2005 was 80
percent, decreasing slightly from 83 percent in the first quarter of
2005, but increasing from the 74 percent gross margin reported in the
second quarter of 2004. Net loss for the quarter was $579,000, or
($0.02) per share, compared to a net loss of $1.4 million, or ($0.04)
per share, in the previous quarter and a net loss of $4.1 million, or
($0.13) per share, in the same period last year.

“In the second quarter, we continued to build upon the momentum
from the first quarter of 2005,” commented Mark Voll, Chief Financial
Officer of MoSys. “We sequentially decreased our per share loss by
half and continued to see licensing revenue grow, both sequentially
and year-over-year. We believe this progress is a direct result of the
sales and marketing initiatives implemented over the last several
quarters. Concurrently, we have been successful in managing our
operating expenses, having a positive effect on our operating margin.”

Mr. Voll continued, “During the quarter, we enhanced our strategy
of providing solutions that will increase the integration of our
technology into our customers’ designs. We believe our CLASSIC macros
and the newly available 1T-SRAM memory compiler, announced during the
second quarter, will increase the use of 1T-SRAM technologies with
both existing and new customers and expand our penetration into the
robust embedded memory SoC market.”

As previously announced by the Company, Chet Silvestri has been
appointed as Chief Executive Officer. A 25-year veteran of the
semiconductor industry with deep knowledge of intellectual property
management, Mr. Silvestri has extensive experience in design
engineering, marketing, sales, research and development and executive
management. He most recently held the position of CEO at CEVA, a
leading provider of licensable digital signal processor (DSP) cores
and platform-level intellectual property (IP).

Business Outlook

MoSys’ Chief Financial Officer, Mark Voll will update the business
outlook and give guidance for the third quarter of 2005 during their
earnings conference call at 2:15 p.m. PT on Wednesday, August 3, 2005.
Mr. Chet Silvestri, MoSys’ new CEO will also participate on this call.

Second Quarter 2005 Financial Results Web Cast/ Conference Call

MoSys management will host a live conference call and Web cast
with investors today, August 3, 2005, at 2:15 p.m. Pacific time (5:15
p.m. Eastern time) to discuss the second quarter financial results and
the business outlook going forward. Investors and other interested
parties may listen to the live audio Web cast by visiting the investor
relation’s section of the MoSys Web site at http://www.mosys.com. A
replay of the conference call will be available for 48 hours beginning
at 5 p.m. Pacific time. The replay number is 1-888-286-8010 with a
pass code of 63878071. 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
90 million chips incorporating 1T-SRAM embedded memory technologies,
demonstrating excellent manufacturability in a wide range of silicon
processes and applications. MoSys is headquartered at 755 N. Mathilda
Avenue, 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 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 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)

                         Three Months Ended       Six Months Ended
                              June 30,                June 30,
                          2005        2004        2005        2004
                       ----------- ----------- ----------- -----------
                       (unaudited) (unaudited) (unaudited) (unaudited)
Net Revenue
  Product                      $6        $681         $10        $843
  Licensing                 1,940       1,310       3,153       4,298
  Royalty                   1,121       1,415       2,587       2,768
                       ----------- ----------- ----------- -----------
    Total                   3,067       3,406       5,750       7,909
                       ----------- ----------------------- -----------

Cost of Net Revenue
  Product                      --         394          --         544
  Licensing                   609         483       1,075         858
                       ----------- ----------- ----------- -----------
    Total                     609         877       1,075       1,402
                       ----------- ----------- ----------- -----------
Gross Profit                2,458       2,529       4,675       6,507
                       ----------- ----------- ----------- -----------

Operating Expenses
  Research and
   development              1,320       1,968       2,923       4,194
  Selling, general and
   administrative           2,206       5,263       4,682       8,027
  Restructuring
   expenses                   114          --         114          --
                       ----------- ----------- ----------- -----------
    Total operating
     expenses               3,640       7,231       7,719      12,221
                       ----------- ----------- ----------- -----------

  Loss from operations     (1,182)     (4,702)     (3,044)     (5,714)
  Interest and other
   income                     605         269       1,118         630
                       ----------- ----------- ----------- -----------

  Loss before income
   taxes                     (577)     (4,433)     (1,926)     (5,084)
  Benefit (provision)
   for income taxes            (2)        378         (22)        508
                       ----------- ----------- ----------- -----------

Net loss                    $(579)    $(4,055)    $(1,948)    $(4,576)
                       =========== =========== =========== ===========

Net loss per share
  Basic                    ($0.02)     ($0.13)     ($0.06)     ($0.15)
                       =========== =========== =========== ===========
  Diluted                  ($0.02)     ($0.13)     ($0.06)     ($0.15)
                       =========== =========== =========== ===========


Shares used in
 computing net loss
 per share
    Basic                  30,465      30,786      30,453      30,816
    Diluted                30,465      30,786      30,453      30,816


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

                                              June 30,   December 31,
                                               2005          2004
                                            ------------ -------------
                                            (unaudited)
Assets
Current Assets
  Cash, cash equivalents and short-term
   investments                                  $60,553       $62,349
  Accounts receivable - net                       1,224         1,996
  Unbilled contract receivable                      100            57
  Prepaid expenses and other assets               3,076         2,939
                                            ------------ -------------
    Total Current Assets                         64,953        67,341

  Long-term investments                          25,740        24,562
  Property and equipment - net                    1,051           685
  Goodwill                                       12,326        12,326
  Other Assets                                      593           539
                                            ------------ -------------
    Total Assets                               $104,663      $105,453
                                            ============ =============


Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts payable                                  $51          $120
  Accrued expenses and other liabilities          3,554         3,314
  Deferred revenue                                2,050         1,372
                                            ------------ -------------
  Total Current Liabilities                       5,655         4,806

   Long-term portion of restructuring
    liability                                       232           239

  Common stock and additional paid in
   capital                                       98,576        98,260
  Retained earnings                                 200         2,148
                                            ------------ -------------
Total Stockholders' Equity                       98,776       100,408
                                            ------------ -------------

  Total Liabilities and Stockholders'
   Equity                                      $104,663      $105,453
                                            ============ =============

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.