SUNNYVALE, Calif.–(BUSINESS WIRE)–Oct. 28, 2004–Monolithic
System Technology, Inc. (MoSys), (Nasdaq:MOSY) the industry’s leading
provider of high density SoC embedded memory solutions, today reported
financial results for its third quarter ended September 30, 2004.

Financial Results

Total net revenue in the quarter was $1.7 million, as compared to
$3.4 million in the second quarter of 2004 and $3.5 million in the
third quarter 2003.

License revenue in the quarter totaled $128,000, down from $1.3
million in the previous quarter and the $1.8 million in the third
quarter of 2003.

The company reported $1.5 million of royalty revenue in the
quarter, a slight increase over the previous quarter’s $1.4 million
and the $1.2 million reported for the third quarter of 2003.

Product revenue in the third quarter totaled $76,000. This
compares to $681,000 recognized in the previous quarter and $511,000
reported in the third quarter of 2003. Decreasing product revenue
reflects the company’s strategy to exit the discreet product business.

“Licensing revenue has been adversely affected by disruptions
triggered by the aborted Synopsys acquisition as well as some
challenging market conditions,” commented Dr. Fu-Chieh Hsu, President
and CEO of MoSys. “Over the past two quarters we have refocused the
company on strengthening our independent presence in the market in
order to capitalize on what we believe to be the growing need for
high-density embedded memory.”

Net income for the quarter under generally accepted accounting
principles was $5.1 million or $0.15 fully diluted earnings per share.
Net income includes $10.0 million of other income in the form of cash
received from Synopsys as a result of the termination of the merger
agreement. The results for the quarter compare to net loss of
$249,000, or ($0.01) diluted earnings per share, in the same period
last year. Third quarter 2004 earnings per share were computed using
33,350,000 shares.

Dr. Hsu further commented, “Although the third quarter results
were constrained, we did continue to take important steps to further
improve the company. To complement our exceptional engineering talent,
we further enhanced our leadership team with the addition of three new
seasoned board members and appointed a new vice president of sales and
marketing, who will focus on driving the proliferation of our
innovative memory technologies into SOC designs.”

Third Quarter Financial Results Web Cast/Conference Call

MoSys’ President and Chief Executive Officer, Dr. Fu-Chieh Hsu and
Chief Financial Officer, Mark Voll will discuss the third quarter
financial results during a live web cast and conference call beginning
at 2:15 p.m. (PT) on Thursday, Oct. 28, 2004. Investors and other
interested parties may listen to the live web cast by visiting the
investor relations’ section of the MoSys web site at
http://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
888-286-8010 with a pass code of 59585575. 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
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 technologies.

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 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 the termination of
our merger agreement with Synopsys, Inc. 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       Nine Months Ended
                            September 30,           September 30,
                          2004        2003        2004        2003
                       ----------- ----------- ----------- -----------
                       (unaudited) (unaudited) (unaudited) (unaudited)
Net Revenue
  Product                     $76        $511        $919      $1,570
  Licensing                   128       1,780       4,426       8,489
  Royalty                   1,488       1,208       4,256       5,823
                       ----------- ----------- ----------- -----------
    Total                   1,692       3,499       9,601      15,882
                       ----------- ----------------------- -----------

Cost of Net Revenue
  Product                      86         260         630         958
  Licensing                   236         588       1,094       1,544
                       ----------- ----------- ----------- -----------
    Total                     322         848       1,724       2,502
                       ----------- ----------------------- -----------
Gross Profit                1,370       2,651       7,877      13,380
                       ----------- ----------------------- -----------

Operating Expenses:
  Research and
   development              2,167       2,093       6,328       6,506
  Selling, general and
   administrative           3,948       1,396      11,956       4,658
  Stock-based
   compensation expense         8         190          60         421
                       ----------- ----------- ----------- -----------
    Total operating
     expenses               6,123       3,679      18,344      11,585
                       ----------- ----------------------- -----------

  Income (loss) from
   operations              (4,753)     (1,028)    (10,467)      1,795
  Interest and other
   income                  10,398         311      11,028       1,453
                       ----------- ----------- ----------- -----------

  Income (loss) before
   income taxes             5,645        (717)        561       3,248
  Benefit (provision)
   for income taxes          (565)        468         (57)       (325)
                       ----------- ----------- ----------- -----------

Net Income (Loss)          $5,080       $(249)       $504      $2,923
                       =========== ======================= ===========

Net Income (Loss) Per
 Share
  Basic                     $0.16      ($0.01)      $0.02       $0.10
                       =========== =========== =========== ===========
  Diluted                   $0.15      ($0.01)      $0.02       $0.09
                       =========== =========== =========== ===========

Shares Used in
 Computing Net Income
 (Loss) Per Share
    Basic                  31,074      30,614      30,902      30,437
    Diluted                33,350      30,614      32,184      30,934


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

                                         September 30,   December 31,
                                             2004           2003
                                        --------------- --------------
                                          (unaudited)     (audited)
Assets
Current Assets
  Cash, cash equivalents and short-term
   investments                                 $57,922        $41,365
  Accounts receivable -- net                       108          1,027
  Unbilled contract receivable                   1,186          1,106
  Inventories -- net                                --            474
  Prepaid expenses and other assets              3,932          3,822
                                        --------------- --------------
    Total Current Assets                        63,148         47,794

  Long-term investments                         32,552         44,462
  Property and equipment -- net                    864          1,796
  Goodwill                                      12,326         12,326
  Other Assets                                     515            514
                                        --------------- --------------
    Total Assets                               109,405        106,892
                                        =============== ==============


Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts payable                                $927           $116
  Accrued expenses and other liabilities         5,250          2,733
  Deferred revenue                                 283            506
  Current portion of capital lease
   obligations                                       9             13
                                        --------------- --------------
  Total Current Liabilities                      6,469          3,368

   Long term portion of capital lease
    obligations                                      7             13

  Common stock and additional paid in
   capital                                      98,370         99,456
  Retained earnings                              4,559          4,055
                                        --------------- --------------
Total Stockholders' Equity                     102,929        103,511
                                        --------------- --------------

  Total Liabilities and Stockholders'
   Equity                                     $109,405       $106,892
                                        =============== ==============

CONTACT: Monolithic System Technology, Inc., Sunnyvale
Mark Voll, 408-731-1800
or
Shelton Investor Relations
Beverly Twing, 972-239-5119 x126
btwing@sheltongroup.com

SOURCE: Monolithic System Technology, Inc.