Monolithic System Technology, Inc. Announces Fourth Quarter and Fiscal Year 2005 Financial Results

SUNNYVALE, Calif. -- Feb 15, 2006 -- 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 fourth quarter and fiscal year ended December 31, 2005.

Fourth Quarter Results

Total net revenue in the fourth quarter was $2.4 million, as compared to $1.2 million in the fourth quarter of 2004 and $4.1 million in the third quarter of 2005. Total revenue for the quarter was in line with the Company's updated guidance of $2.3 million to $2.5 million, for which the forecast was adjusted due to the deferral of more than $1.0 million in revenue associated with fourth quarter licenses of the Company's new 1T-SRAM(R) CLASSIC Macros.

Total revenue for the fourth quarter included licensing revenue of $1.3 million and royalty revenue of $1.1 million. This compares to licensing revenue of $118,000 and royalty revenue of $1.1 million in the fourth quarter of 2004 and licensing revenue of $3.2 million and royalty revenue of $897,000 in the prior quarter. During the quarter, we recorded licensing revenue from 15 different chip development projects, compared to 16 projects in the previous quarter. We recorded royalty revenue from 17 different licensees as compared to 15 licensees in the previous quarter. The increased number of royalty payers comes as additional licensees have moved from the development phase to the production phase.

The gross margin percentage in the fourth quarter of 2005 was 90 percent, increasing from 55 percent in the fourth quarter of 2004 and 84 percent in the third quarter of 2005.

Total operating expenses for the fourth quarter were $4.1 million, which included approximately $340,000 of legal expenses related to the UniRam litigation.

Under generally accepted accounting principles (GAAP), the operating loss for the fourth quarter of 2005 was $1.9 million, as compared to an operating loss of $3.0 million in the same period in 2004 and an operating loss of $618,000 in the prior quarter. Fourth quarter net loss was $1.1 million, or ($0.04) per share, compared to a net loss of $2.4 million, or ($0.08) per share, in the same period last year and a net income of $50,000, or $0.00 per share, in the previous quarter.

Our cash, cash equivalents and both long and short-term investments totaled approximately $86.0 million as of December 31, 2005. With respect to our balance sheet, we had positive net cash flow from operating activities of approximately $1.0 million in the fourth quarter of 2005 due to higher cash collection.

Fiscal 2005 Results

For fiscal year 2005, net revenue was $12.3 million compared to $10.8 million in fiscal 2004. Net loss in 2005 was $3.0 million, or ($0.10) per share, as compared to the net loss of $1.9 million, or ($0.06) per share, reported in 2004. Included in 2004 results was the termination fee associated with the aborted acquisition and subsequent litigation with Synopsys, net of expenses and income tax, of $4.6 million.

"Although the revenue deferral impacted our actual results for the fourth quarter, we are pleased with the strength in overall bookings, the increase in new projects within the consumer multimedia and cellular handset market segments and the achievement of positive cash flow," commented Chet Silvestri, Chief Executive Officer of MoSys. "The majority of fourth quarter bookings were for our new family of CLASSIC Macros, which began initial shipments during the quarter."

The Company's CLASSIC memory macros are silicon-proven, off-the-shelf, high-density solutions offering customers rapid memory block integration into their SoC designs. These macros are pre-configured and for targeted applications require minimal additional customization. They are targeted for high volume consumer products that require larger embedded memory to support device enhancements, such as higher resolution cameras and high quality audio and video capabilities.

"The complexity of portable consumer devices continues to increase, which poses significant challenges for our customers in terms of density, speed, power consumption and performance," continued Silvestri. "As evidenced by the increased bookings experienced in the fourth quarter, our CLASSIC Macros offer superior embedded memory subsystems to address these challenges."

"Additionally, we are very pleased to close 2005 with a year-over-year growth rate of 14 percent. 2005 was a year of rebuilding for MoSys in the areas of sales and marketing organization, new product development and target markets expansion. We continue to have strong relationships with our established customers, such as NEC and Fujitsu, and are pleased to have secured new major customers, such as LG Electronics and YAMAHA, in the consumer electronics market. As we further benefit from our enhanced sales and marketing efforts, we expect to deepen our penetration into the high volume, high growth consumer applications market in the U.S., Asia and Europe. Furthermore, we continue to make strategic investments in research and development in order to develop macros for additional memory types such as dual port memories, which will broaden our CLASSIC Macro family. We look forward to making announcements of additional achievements in the coming quarters," concluded Mr. Silvestri.

Business Outlook

Chet Silvestri, Chief Executive Officer will update the business outlook and give guidance for the first quarter of 2006 during their financial results conference call at 2:15 p.m. PT on Wednesday, February 15, 2006.

Financial Tables

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Fourth Quarter 2005 Financial Results Webcast/ Conference Call

MoSys management will host a conference call and web cast with investors today, February 15, at 2:15 p.m. Central time (5:15 p.m. Eastern time) to discuss the fourth quarter financial results and the business outlook going forward for the first quarter of 2006. Investors and other interested parties may access the call by dialing 866-202-4683 in the U.S. (617-213-8846 outside of the U.S.), and entering the passcode 18742101 at least 10 minutes prior to the start of the call. In addition, an audio web cast will be available through the MoSys Web site at 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 13341841.

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.