SUNNYVALE, Calif., May 02, 2006 (BUSINESS WIRE) — 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 first quarter ended March 31, 2006.

— Total revenue of $3.5 million as compared to $2.4 million for
the quarter ended December 31, 2005

— GAAP net loss of $974,000 or ($0.03) per share

— Non-GAAP net loss of $371,000 or ($0.01) per share as compared
to a non-GAAP net loss of $1,359,000 or ($0.04) per share for
the quarter ended December 31, 2005 (See table of
reconciliation to GAAP net loss in supplemental information)

First Quarter Results

Total net revenue for the first quarter increased to $3.5 million,
compared to $2.4 million in the fourth quarter of 2005 and $2.7
million recorded for the first quarter of 2005. Total revenue for the
quarter was in line with the Company’s previously announced guidance
range of $3.0 million to $4.0 million.

Total revenue for the first quarter included licensing revenue of
$2.3 million, compared to $1.3 million in the previous quarter and
$1.2 million in the same period a year ago. Royalty revenue for the
first quarter was $1.3 million, compared to $1.1 million in the fourth
quarter of 2005 and $1.5 million in the first quarter of 2005. The
Company recorded licensing revenue from 12 different chip development
projects compared to 15 in the fourth quarter and royalty revenue from
19 different licensees compared to 17 in the previous quarter.

“We expect the average dollar amount of our licensing contracts to
increase as our licensees look to us to provide larger memory size
macros at advanced geometries. The number of royalty paying licensees
is also trending upward as our licensees are more rapidly moving from
the development phase to the production phase by utilizing our
pre-configured macros to shorten their time-to-market,” commented Chet
Silvestri, Chief Executive Officer of MoSys.

The gross margin percentage was 90 percent in the first quarter of
2006 and the fourth quarter of 2005, and 83 percent in the first
quarter of 2005. The non-GAAP gross margin percentage for the first
quarter of 2006, which excludes stock-based compensation charges, was
92%.

Under generally accepted accounting principles (GAAP), total
operating expenses for the first quarter were $4.6 million, which
included approximately $190,000 of legal expenses related to the
UniRam litigation. On a non-GAAP basis, total operating expenses for
the first quarter of 2006 were $4.0 million.

Net loss for the quarter, on a GAAP basis, was $974,000 or a loss
of ($0.03) per diluted share, including stock-based compensation
expense under Statement of Financial Accounting Standard No. 123R (FAS
123R) of $603,000. This compares to a net loss of $1.1 million, or
($0.04) per diluted share, in the fourth quarter of 2005 and to a net
loss of $1.4 million, or ($0.04) per diluted share in the first
quarter of 2005.

The non-GAAP net loss for the first quarter, which excludes only
these stock-based compensation charges, was $371,000, or a loss of
($0.01) per share. Per share amounts were computed using 31,022,000
shares outstanding for the quarter. A reconciliation of GAAP results
to non-GAAP results has been provided in the financial statement
tables following the text of this press release.

Cash, cash equivalents and both long and short-term investments
totaled approximately $85.4 million as of March 31, 2006 compared to
approximately $86.0 million as of December 31, 2005.

“We are pleased with the strong customer interest in our 1T-SRAM
Technology and the progress we are making towards finalizing a number
of 65nm agreements,” commented Chet Silvestri. “The industry is moving
very quickly to implement new designs in 65nm. Our high density memory
technology is easily scalable to 65nm and is rapidly becoming the
memory of choice for high volume consumer electronics applications.”

Business Outlook for the Second Quarter of 2006

MoSys expects total revenue for the second quarter of 2006 to
range from $3.5 million to $4.5 million.

First Quarter 2006 Financial Results Webcast/Conference Call

MoSys management will host a conference call and webcast with
investors today, May 2, at 1:30 p.m. Pacific time (4:30 p.m. Eastern
time) to discuss the first quarter financial results and the business
outlook going forward. Investors and other interested parties may
access the call by dialing 866-362-4666 in the U.S. (617-597-5313
outside of the U.S.), and entering the passcode 39834270 at least 10
minutes prior to the start of the call. In addition, an audio webcast
will be available through the MoSys Web site at http://www.mosys.com.
A replay will be available for 48 hours following the call at
888-286-8010 in the U.S. (617-801-6888 outside of the U.S.), passcode
56604748.

Use of Non-GAAP Financial Measures

To supplement MoSys’ consolidated financial statements presented
in accordance with GAAP (Generally Accepted Accounting Principles),
MoSys uses non-GAAP financial measures that exclude from the income
statement the effects of stock-based compensation and the effects of
our adoption of SFAS 123R upon the number of diluted shares used in
calculating non-GAAP loss per share. MoSys’ management believes that
the presentation of these non-GAAP financial measures is useful to
investors and other interested persons because they are one of the
primary indicators MoSys’ management uses for planning and forecasting
future performance. In addition, MoSys believes that it is important
to provide investors and other interested persons with a consistent
basis for comparison between quarters, particularly in light of the
Company’s adoption of the modified prospective transition method under
SFAS 123R, which requires application of the accounting standard as of
January 1, 2006 but not for prior periods. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to the
comparable GAAP results, which is provided in a table immediately
below the Condensed Consolidated Statements of Operations. For
additional information regarding these non-GAAP financial measures,
and management’s explanation of why it considers such measures to be
useful, refer to the Form 8-K dated May 2, 2006 that we have submitted
to the Securities and Exchange Commission.

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 and embedded memory designs, 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 expenses and other
consequences of litigation, including intellectual property
infringement litigation, to which we may be or may become a party from
time to time, 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.

About MoSys, Inc.

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 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 100 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.

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
                                                    March 31,
                                                2006        2005
                                             ----------- ------------
                                             (unaudited) (unaudited)
Net Revenue
   Product                                           $-           $4
   Licensing                                      2,268        1,213
   Royalty                                        1,254        1,466
                                             ----------- ------------
        Total net revenue                         3,522        2,683

Cost of Net Revenue
   Product                                            -            -
   Licensing                                        353          466
                                             ----------- ------------
        Total cost of net revenue                   353          466

Gross Profit                                      3,169        2,217

Operating Expenses:
   Research and development                       1,952        1,603
   Selling, general and administrative            2,629        2,476
                                             ----------- ------------
        Total operating expenses                  4,581        4,079

   Loss from operations                          (1,412)      (1,862)

   Other Income/Expenses                            452          513
                                             ----------- ------------
        Loss before income taxes                   (960)      (1,349)

   Provision for income taxes                       (14)         (20)
                                             ----------- ------------

Net loss                                          $(974)     $(1,369)
                                             =========== ============

Net loss per share
   Basic                                         ($0.03)      ($0.04)
   Diluted                                       ($0.03)      ($0.04)

Shares used in computing net loss per share
   Basic                                         31,022       30,442
   Diluted                                       31,022       30,442

Supplemental Information:

Non-GAAP financial measures and
 reconciliation

   GAAP net loss                                  $(974)     $(1,369)
        Stock compensation expense
            - Cost of revenue                        52            -
            - Research and development              227            -
              Selling, general and
            -  administrative                       324           10
                                              ---------- ------------
              Total stock compensation expense      603           10

   Non-GAAP net loss                              $(371)     $(1,359)
                                              ========== ============

   GAAP net loss per share                       $(0.03)      $(0.04)
        Reconciling item:
            - Stock compensation expense           0.02            -
                                             ----------- ------------
   Non-GAAP net loss per share: Basic and
    Diluted                                      $(0.01)      $(0.04)
                                             =========== ============

   Shares used in computing non-GAAP net loss
    per share
        Basic                                    31,022       30,442
        Diluted                                  31,022       30,442



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

                                              March 31,  December 31,
                                                2006        2005 (a)
                                             ----------- ------------
                                             (unaudited)
Assets:
   Current assets:
        Cash, cash equivalents and short-term
         investments                            $74,295      $68,650
        Accounts receivable - net                   581          638
        Unbilled contract receivable              1,288          368
        Prepaid expenses and other assets         2,726        2,632
                                             ----------- ------------
              Total current assets               78,890       72,288

   Long-term investments                         11,117       17,339
   Property and equipment - net                   1,010        1,121
   Goodwill                                      12,326       12,326
   Other assets                                     565          563
                                             ----------- ------------
              Total assets                     $103,908     $103,637
                                             =========== ============


Liabilities and Stockholders' Equity:
   Current liabilities:
        Accounts payable                           $174         $236
        Accrued expenses and other
         liabilities                              2,636        2,564
        Deferred revenue                            516        1,309
                                             ----------- ------------
              Total current liabilities           3,326        4,109

    Long-term portion of restructuring
     liability                                      161          196

   Stockholders' equity:
        Common stock, additional paid-in
         capital and others                     102,229      100,166
        Accumulated deficit                      (1,808)        (834)
                                             ----------- ------------
              Total stockholders' equity        100,421       99,332

              Total liabilities and
               stockholders' equity            $103,908     $103,637
                                             =========== ============

(a) Derived from Audited Financial Statements

SOURCE: Monolithic System Technology, Inc.

MoSys, Sunnyvale
Jim Pekarsky, 408-731-1846

jimp@mosys.com

or
Shelton Investor Relations
Beverly Twing, 972-239-5119 x126
btwing@sheltongroup.com