SUNNYVALE, Calif.–(BUSINESS WIRE)–Oct. 16, 2003–Monolithic
System Technology, Inc. (MoSys), (Nasdaq:MOSY) today reported
financial results for its third quarter ended September 30, 2003.

Third Quarter Highlights

  • Validated silicon for 1T-SRAM(R)-Q(TM)(quad density) on
    0.13-micron logic process
  • Expanded relationship with UMC by porting the 1T-SRAM(R)-Q(TM)
    technology to UMC’s 0.13-micron and 90-nanometer logic
    processes
  • Silicon verified 1T-SRAM-R, including Transparent Error
    Correction(TM) (TEC(TM)), on Chartered Semiconductor
    Manufacturing’s 0.13-micron logic process
  • 1T-SRAM(R)technology incorporated in new and advanced
    networking chip by eSilicon, a MoSys Design Services Alliance
    member

Financial Results

Total net revenue in the third quarter was approximately $3.5
million compared to $7.0 million reported in the same period of 2002.
Total net revenue consisted of $1.8 million from licensing, $1.2
million in royalties and $511,000 in product revenue. Licensing
revenue for the current quarter decreased by approximately $1.0
million as compared to the same period last year, and royalty revenue
decreased by $2.3 million from the third quarter of 2002. Product
revenue decreased by $273,000 from $784,000 in the same period of
2002. The overall gross margin percentage in the third quarter was 76%
compared to 87% in the third quarter of 2002.

Other income during the period consisted of $311,000 in interest
income, compared to $392,000 in interest income recorded for the same
period last year.

The net loss for the quarter was $249,000, or $(0.01) diluted
earnings per share, included a reduction of the company’s tax
provision due to the use of available tax credits of approximately
$400,000. Net income for the same period last year was $2.8 million,
or $0.09 fully diluted earnings per share. The third quarter 2003
diluted earnings per share were computed using 30,614,000 shares.

Commenting on the results of the third quarter, Dr. Fu-Chieh Hsu,
President and CEO of MoSys, stated, “Although this quarter’s results
were disappointing, we closed several new licensing agreements at the
end of the period, or just after the close of the quarter, and expect
to recognize revenue from these projects in the fourth quarter. We are
pleased with the recent momentum in licensing activity and continue to
see broader acceptance of our quad density 1T-SRAM-Q technology.”

Dr. Hsu concluded by saying, “Based upon the increased prospective
licensing momentum recently experienced, we would anticipate a
stronger fourth quarter. Beyond the fourth quarter, visibility remains
limited due to the continuation of the challenging market environment.
However, we remain confident in our position as the leading provider
of high density embedded memory technologies for System on Chip (SoC)
designs.”

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 fourth quarter of 2003 during their earnings
conference call at 2:15 P.M. PT on October 16, 2003.

Third Quarter Financial Results Web Cast/Conference Call

The MoSys management team will host a live web cast and conference
call to discuss Q3 2003 financial results beginning at 2:15 P.M. (PT)
on Thursday, October 16, 2003. Investors and other interested parties
may listen to the live web cast by visiting the investor relations
section of the MoSys website 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 21162804. 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
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
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, 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  Nine Months Ended
                                   September 30,       September 30,
                                   2003     2002      2003     2002
                                 -------- ---------  ------- ---------

Net Revenue
  Product                           $511      $784   $1,570    $2,325
  Licensing                        1,780     2,756    8,489     7,260
  Royalty                          1,208     3,471    5,823    10,351
                                 -------- ---------  ------- ---------
    Total                          3,499     7,011   15,882    19,936
                                 -------- ------------------ ---------

Cost of Net Revenue
  Product                            260       465      958     1,295
  Licensing                          588       448    1,544     1,099
                                 -------- ---------  ------- ---------
    Total                            848       913    2,502     2,394
                                 -------- ------------------ ---------
Gross Profit                       2,651     6,098   13,380    17,542
                                 -------- ------------------ ---------

Operating Expenses:
  Research and  development        2,093     1,666    6,506     4,487
  Selling, general and
   administrative                  1,396     1,258    4,658     3,437
  Stock-based compensation
   expense                           190       121      421       485
                                 -------- ---------  ------- ---------
    Total operating expenses       3,679     3,045   11,585     8,409
                                 -------- ------------------ ---------

  Income (loss) from operations   (1,028)    3,053    1,795     9,133
  Interest and other income          311       392    1,453     1,192
                                 -------- ---------  ------- ---------

  Income (loss) before income
   taxes                            (717)    3,445    3,248    10,325
  Benefit (provision) for income
   taxes                             468      (689)    (325)   (2,064)
                                 -------- ---------  ------- ---------

Net Income (Loss)                  $(249)   $2,756   $2,923    $8,261
                                 ======== ================== =========

Net Income (Loss) Per Share
  Basic                           ($0.01)    $0.09    $0.10     $0.28
                                 ======== ================== =========
  Diluted                         ($0.01)    $0.09    $0.09     $0.26
                                 ======== ================== =========

Shares Used in Computing Net Income (Loss) Per
 Share
    Basic                         30,614    30,090   30,347    29,783
    Diluted                       30,614    30,686   30,934    31,249



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


                                            September 30, December 31,
                                                2003          2002
                                            ------------- ------------
                                             (unaudited)
Assets
Current Assets
  Cash, cash equivalents and short-term
   investments                                   $36,047      $68,433
  Accounts receivable -- net                         937          943
  Unbilled contract receivable                     1,204          693
  Inventories -- net                                 592        1,037
  Prepaid expenses and other assets                5,002        4,475
                                            ------------- ------------
    Total Current Assets                          43,782       75,581

  Long-term investments                           48,302       11,400
  Property and equipment -- net                    2,279        3,352
  Goodwill                                        12,326       12,326
  Other Assets                                       509          431
                                            ------------- ------------
    Total Assets                                 107,198      103,090
                                            ============= ============


Liabilities and Shareholders' Equity:
Current Liabilities:
  Accounts payable                                  $111          $82
  Accrued expenses and other liabilities           2,880        2,418
  Deferred revenue                                   326        1,779
  Current portion of capital lease
   obligations                                        14           89
                                            ------------- ------------
  Total Current Liabilities                        3,331        4,368

  Long term portion of capital lease
   obligations                                        16           25

  Common stock and additional paid in
   capital                                        99,381       97,150
  Retained earnings                                4,470        1,547
                                            ------------- ------------
Total Shareholders' Equity                       103,851       98,697
                                            ------------- ------------

  Total Liability and Shareholders' Equity      $107,198     $103,090
                                            ============= ============

SOURCE: MoSys