SUNNYVALE, Calif., Oct 17, 2002 (BUSINESS WIRE) — Monolithic System
Technology, Inc. (MoSys), (Nasdaq:MOSY) today reported financial results for its
third quarter ended September 30, 2002.

Total net revenue in the quarter was $7.0 million, representing a 21% increase
from the $5.8 million of net revenue for the same period a year ago and a 7%
increase from revenues of $6.5 million in the second quarter of this year. Total
net revenue consisted of $2.8 million from licensing, $3.5 million in royalties
and approximately $784,000 in product revenue. Licensing revenue increased
sequentially 5% from the $2.6 million in the second quarter and by 44% from the
third quarter 2001 results. Royalty revenue in the third quarter increased by 6%
over the $3.3 million in the previous quarter and by 211% in the third quarter
of 2001. Product revenue was approximately one-third of the product revenue
earned in the same quarter last year, but represented an increase of 21% from
the $648,000 reported in the second quarter.

The gross margin percentage in the third quarter of 2002 was 87%, up from 74% in
the same quarter a year ago.

Net income for the quarter was $2.8 million representing 40% of total revenue,
or $0.09 per share, compared to $2.7 million, or $0.09 per share, in the second
quarter of this year and $2.1 million, or $0.07 per share in the same period
last year.

On August 30, 2002, MoSys announced the completion of the acquisition of ATMOS
Corporation. The total purchase price was $14 million and was paid with a
combination of cash, 61,729 shares of common stock to ATMOS employee
shareholders, and the assumption of liabilities. The purchase price has been
allocated principally to goodwill of $12 million and tangible assets, cash and
other assets of $2.0 million.

ATMOS, a Canada based company located in Kanata, Ontario, is a semiconductor
memory company that focuses on creating high-density, compiler-generated
embedded memory solutions for SoC applications. The acquisition will enable
MoSys to leverage the ATMOS team’s experience in compiler technology to enhance
the proliferation of MoSys’ 1T-SRAM technology and to facilitate the development
of additional 1T-SRAM(R) product offerings.

Consolidated operating results for the quarter include ATMOS’ operating expenses
of approximately $243,000 for the one month since the acquisition.

Commenting on the results of the third quarter, Dr. Fu-Chieh Hsu, CEO of MoSys
stated, “The continued strengthening of revenues from licensing activities is
reflective of the growing acceptance of 1T-SRAM technology and its value
proposition. 1T-SRAM continues to offer advantages to our growing customers base
by providing unparalleled solutions with high density, low power consumption,
high speed and low cost.”

Dr. Hsu further stated, “We are particularly pleased with the new licensing
agreement with National Semiconductor announced in September for the use of our
1T-SRAM-R(TM) technology that incorporates Transparent Error Correction(TM) into
future cellular baseband SoCs. Our customer base continues to expand as the
advantages of 1T-SRAM and the quality of our design services and support become
the industry benchmarks.”

Third Quarter Business Highlights

Most recently, MoSys announced a new licensing agreement with National
Semiconductor. National has entered into an agreement by which they will use
MoSys’ 1T-SRAM embedded memory technology in National’s future cellular baseband
SoCs to enable the incorporation of high performance, high density embedded
memory blocks.

MoSys also announced that NEC Corporation within the quarter has now shipped
more than 25 million units of 96-Mbit, high-density 1T-SRAM memory chips
licensed from MoSys. These chips provide the 192 Mbits of very high performance,
low-latency memory to the main system memory of the Nintendo GameCube(TM). The
companies also announced they have extended NEC’s licensing agreement for MoSys
1T-SRAM memory technologies for additional projects in embedded DRAM and logic
processes with geometries down to 90 nanometers.

Dr. Paul Russo, Chairman, President and CEO of Silicon Optix, Inc., has been
elected to the MoSys Board of Directors. Additionally, Dr. Denny Ko is leaving
the Board to devote more time to his duties as Managing General Partner of
DynaFund Ventures, a venture capital firm located in Torrance, CA after eight
years as a leading investor and Board member. Dr. Russo has also been appointed
to replace Dr. Ko as a member of the Board’s Compensation and Audit Committees.

Dr. Russo is the principal founder of Silicon Optix Inc., the leading supplier
of advanced digital imaging processing integrated circuits focused on the
capture, transmission, and display of digital visual information. Prior to Dr.
Russo’s involvement with Silicon Optix Inc., he was the principal founder of
Genesis Microchip Inc. (NASDAQ:GNSS) and served as CEO and Director from its
inception in 1987 through 2000, and as Chairman through April, 2001. Under his
leadership, Genesis grew from a startup to become a leading public fabless
semiconductor supplier of ICs for the projection and LCD monitor markets. Dr.
Russo is also a member of the Board of Director of ATI Technologies Inc.
(NASDAQ:ATYT) and was a former member of the Board of Directors of ATMOS
Corporation.

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 during their earnings conference call at 2:00 pm
PT on October 17, 2002.

Third Quarter 2002 Financial Results Webcast/Conference Call

The MoSys management team will host a live webcast and conference call to
discuss Q3 2002 financial results beginning at 2:00 P.M. (PT) on Thursday,
October 17, 2002. Investors and other interested parties may listen to the live
webcast by visiting the investor relations section of the MoSys website at
www.mosys.com. A replay of the conference call will be available for 48 hours
beginning at 4pm PT. The replay number is 1-800-633-8284 with a pass code of
20962358. A webcast replay will also be available on the company’s website.

About MoSys

Founded in 1991, MoSys develops, licenses and markets innovative memory
technology for semiconductors. The single transistor bit cell used in 1T-SRAM
technology 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 technology also offers the familiar,
refresh-free interface and high performance for random address access cycles
associated with traditional SRAMs. In addition, this technology can reduce
operating power consumption by a factor of four compared with traditional SRAM
technology, contributing to making it an ideal technology for embedding large
memories in System on Chip (SoC) designs. 1T-SRAM technology is in volume
production both in SoC products at MoSys’ licensees as well as in MoSys’
standalone memories. 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.

Note to Editors: 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
(unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Net Revenue
Product $ 784 $ 2,746 $ 2,325 $ 9,805
Licensing 2,756 1,919 7,260 4,387
Royalty 3,471 1,117 10,351 1,551
——— ——— ——— ———
Total 7,011 5,782 19,936 15,743
——— ——— ——— ———
Cost of Net Revenue
Product 465 1,273 1,295 4,239
Licensing 448 208 1,099 447
——— ——— ——— ———
Total 913 1,481 2,394 4,686
——— ——— ——— ———
Gross Profit 6,098 4,301 17,542 11,057
——— ——— ——— ———
Operating Expenses:
Research and
development 1,666 1,217 4,487 3,218
Selling, general
and administrative 1,258 1,236 3,437 3,553
Stock-based
compensation expense 121 324 485 1,173
——— ——— ——— ———
Total operating
expenses 3,045 2,777 8,409 7,944
——— ——— ——— ———
Income from operations 3,053 1,524 9,133 3,113
Interest and
other income 392 700 1,192 1,326
——— ——— ——— ———
Income before
income taxes 3,445 2,224 10,325 4,439
Provision for
income taxes (689) (111) (2,064) (221)
——— ——— ——— ———
Net Income $ 2,756 $ 2,113 $ 8,261 $ 4,218
========= ========= ========= =========
Net Income Per Share
Basic $ 0.09 $ 0.07 $ 0.28 $ 0.26
========= ========= ========= =========
Diluted $ 0.09 $ 0.07 $ 0.26 $ 0.15
========= ========= ========= =========
Shares Used in
Computing Net Income
Basic 30,090 28,590 29,783 16,486
Diluted 30,686 30,554 31,249 27,337
MONOLITHIC SYSTEM TECHNOLOGY, INC.
CONDENSED CONSOLIDATE BALANCE SHEETS
(in thousands)
September 30 December 31,
2002 2001
(Unaudited)
Assets
Current Assets
Cash, cash equivalents and
short-term investments $ 75,319 $ 84,293
Accounts receivable – net 922 208
Inventories 1,240 1,693
Prepaid expenses and other assets 3,523 1,506
——— ———
Total Current Assets 81,004 87,700
Property and Equipment 3,624 1,668
Goodwill 12,233 —
Other Assets 428 93
——— ———
Total Assets 97,289 89,461
========= =========
Liabilities and Shareholders’ Equity:
Current Liabilities:
Accounts payable $ 291 $ 254
Accrued expenses and other liabilities 1,956 1,820
Deferred revenue 500 3,283
——— ———
Total Current Liabilities 2,747 5,357
Long-term liabilities 324 —
Common stock and additional paid
in capital 96,777 94,924
Accumulated deficit (2,559) (10,820)
——— ———
Total Shareholders’ Equity 94,218 84,104
——— ———
Total Liability and
Shareholders’ Equity $ 97,289 $ 89,461
========= =========