Monolithic System Technology, Inc. Announces Fourth Quarter and Fiscal Year 2002 Results; Achieves 77% Increase in Net Income Over Fiscal Year 2001

SUNNYVALE, Calif.--(BUSINESS WIRE)--Jan. 23, 2003--Monolithic System Technology, Inc. (MoSys) (Nasdaq:MOSY) today reported financial results for its fourth quarter and fiscal year ended December 31, 2002.

Fiscal Year 2002 Highlights

• Revenues from intellectual property increased 162% over last year
• Net income increased by 77% over fiscal year 2001
• Launched 1T-SRAM-Q(TM) technology with new Folded Area Capacitor(TM) (FAC(TM)) achieving four times the density of traditional SRAMs
• Completed the acquisition of ATMOS Corporation including its compiler technology and synergistic engineering talent
• Announced 1T-SRAM(R) memory compiler for the leading foundries
• Announced additional alliances and licensing agreements with Phillips, Motorola, National Semiconductor, Hitachi, UMC and NEC
• Announced 1T-SRAM-R(TM) technology with ultra high reliability and low manufacturing cost
• 1T-SRAM-R(TM) technology named among the "Top Products" of 2002 by EDN Magazine
• Over fifty million integrated circuits utilizing 1T-SRAM technologies have now been shipped by MoSys' licensees through 2002

Fourth Quarter Results

Total net revenue in the quarter was $7.9 million, representing a 18% increase from the $6.7 million of net revenue for the same period a year ago. Total net revenue consisted of $3.3 million from licensing, $4.0 million in royalties and approximately $600,000 in product revenue. Licensing revenue increased by 94% from $1.7 million in the fourth quarter 2001. Royalty revenue increased by 111% from $1.9 million in the fourth quarter of 2001. Product revenue, however, decreased 81% from the product revenue recorded in the same quarter last year.

The gross margin percentage in the fourth quarter of 2002 was 87%, up from 75% in the same quarter a year ago.

Net income for the quarter was $4.1 million representing 52% of total revenue, or $0.13 per share, compared to $2.8 million, or $0.09 fully diluted earnings per share in the same period last year. Net income for the quarter included a one-time benefit of approximately $1,300,000, or $0.04 fully diluted earnings per share, in reduction of the company's tax provision due to the use of available tax credits. Fourth quarter fully diluted earnings per share were computed using 31,309,000 shares.

Fiscal 2002 Results
For fiscal year 2002, net revenue increased to $27.8 million, which represents a 24% increase from the $22.5 million reported in fiscal 2001. The revenue growth was due to the strength of the company's licensing business, which saw revenues from licensing, and royalties increase 162% to $24.9 million from $9.5 million in 2001.

Net income in 2002 was $12.4 million, up 77% from net income of $7.0 million reported in 2001. Net income in the year was equal to 45% of net revenue. Fully diluted earnings per share in the year were $0.40 compared to $0.25 in the prior year. Fully diluted 2002 earnings per share were computed using 31,275,000 shares.

"Our strong financial performance in the quarter is a direct result of the value our customers realize from our technologies," said Dr. Fu-Chieh Hsu, CEO of MoSys. "Although the overall environment remains challenging, customers continue to license our technologies in order to bring leading edge products to market and maintain a competitive advantage in the marketplace."

Commenting on the results for 2002, Dr. Hsu further stated, "Our 77% increase in net income over last year, including a 162% increase in total licensing and royalty net revenue, reflects the strength of our technology and its increasing acceptance in the marketplace. Additionally, during the year we expanded our customer base, introduced 1T-SRAM-Q and new enhancements of our core technology, and completed our acquisition 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 first quarter of 2003 during their earnings conference call at 2:15 p.m. PT on January 23, 2003.

Fourth Quarter and FY 2002 Financial Results Web cast/Conference Call
The MoSys management team will host a live web cast and conference call to discuss Q4 and FY 2002 financial results beginning at 2:15 p.m. (PT) on Thursday, January 23, 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 48 hours beginning at 5 p.m. PT. The replay number is 1-800-633-8284 with a pass code of 21099138. A web cast replay will also be available on the company's website.

Click here for the Consolidated Statements of Operations and Consolidated Balance Sheet.

ABOUT MOSYS
Founded in 1991, MoSys 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 technology results in 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 technologies are 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.

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.