MOSAID Reports Results for First Quarter Fiscal 2010 and Dividend

OTTAWA, ONTARIO -- (MARKET WIRE) -- Aug 27, 2009 -- MOSAID Technologies Incorporated (TSX: MSD) today announced financial results for the first quarter of fiscal 2010, ended July 31, 2009.

- Q1 revenues of $16.2 million, up 28% from $12.7 million in Q1 fiscal 2009

- Q1 pro forma net income of $6.6 million up 65% from $4.0 million in Q1 fiscal 2009. Q1 pro forma EPS of $0.65 per diluted share up 76% from $0.37 in Q1 fiscal 2009

- Q1 GAAP net income of $6.4 million or $0.63 per diluted share, compared with $1.4 million or $0.13 per diluted share in Q1 fiscal 2009

"The substantial increase in Q1 revenues reflects the higher number of licensees contributing to quarterly revenues through both fixed payment and royalty based term licenses," said John Lindgren, President and CEO, MOSAID. "This quarter, a key operational highlight was the introduction of an HLNAND™ silicon chip and memory module, demonstrating the importance of targeted R&D investment to our business model as an intellectual property development and licensing company. MOSAID's objective is to drive market adoption of the HLNAND memory architecture and interface by licensing this innovative technology to third-party manufacturers."

"MOSAID also filed suit against IBM Corporation for patent infringement," said Lindgren. "While we prefer to reach negotiated settlements, the Company is determined to protect its intellectual property rights through the courts, when necessary."

MOSAID had cash and marketable securities of $52.4 million at the end of the first quarter of fiscal 2010, compared to $51.8 million at the end of the fourth quarter of fiscal 2009. In Q1 fiscal 2010, MOSAID returned $2.6 million to shareholders in quarterly dividend payments.

On August 27, 2009, MOSAID declared a quarterly dividend of $0.25 per share. The dividend, which is an eligible dividend, is payable on October 8, 2009 to shareholders of record as of September 25, 2009.

A reconciliation of pro forma net income to Canadian generally accepted accounting principles (GAAP) net income is included in the Notes to the Financial Statements accompanying this press release.

First Quarter Operational Highlights

Semiconductor memory patent licensing: During the quarter, MOSAID granted a six-year patent license agreement to an unnamed fabless semiconductor memory company. Under the cross-licensing agreement, this company's DRAM (Dynamic Random Access Memory) and embedded DRAM products are licensed for a six-year term commencing August 2009. A series of fixed payments is due to MOSAID during that period. The licensee also transferred to MOSAID ownership of five United States patent families related to DRAM technology.

Innovation: MOSAID began sampling a HyperLink NAND (HLNAND) semiconductor chip and memory module. The devices target the emerging market for SCM (Storage Class Memory) technology, which involves replacing or augmenting rotating magnetic disk storage with solid state storage devices and systems. MOSAID showcased its two new devices - a 64Gb (gigabit) semiconductor chip and a 64GB (gigabyte) memory module - at the 2009 Flash Memory Summit in early August in California.

Patent litigation: MOSAID initiated litigation against IBM Corporation of Armonk, New York, for infringement of six of MOSAID's United States patents. In a complaint filed in the United States District Court of the District of Delaware, MOSAID claims that IBM has infringed and is infringing MOSAID's patents by making and selling microprocessor and Application Specific Integrated Circuit (ASIC) products which practice MOSAID's patents.

Patent portfolio development: MOSAID's portfolio comprised 1,788 patents and applications at the end of the first quarter of fiscal 2010, up 96% from 912 patents and applications one year ago.

Q2 and Fiscal 2010 Guidance

Management offers the following guidance for the second quarter of fiscal 2010:

- Q2 revenues of $16.0 million to $17.0 million

- Q2 pro forma net income of $5.7 million to $6.4 million, or $0.55 to $0.62 per diluted share, based on 10.4 million diluted shares

The Company is maintaining its previously announced guidance for fiscal 2010:

- Fiscal 2010 revenues in the range of $65.0 million to $67.0 million

- Fiscal 2010 pro forma net income of $21.5 million to $22.5 million, or $2.07 to $2.17 per diluted share, based on 10.4 million diluted shares

MOSAID's revenues result primarily from intellectual property agreements, which by their nature may actually close on dates other than those projected. MOSAID's priority and focus is on obtaining the best terms possible under its agreements, rather than on the particular timing of agreement closure. MOSAID's revenues depend upon, among other items, the continued ability of its licensees to pay amounts as they become due. The Company takes steps, including monitoring the creditworthiness of its licensees, in order to manage this risk.

Conference Call and Webcast

Management will hold a conference call and webcast on Thursday, August 27, 2009 at 5:00 p.m. ET. The webcast will be live at www.mosaid.com and may also be accessed by dialing 1-800-447-0521. The webcast will be available on mosaid.com for 90 days following the event.

About MOSAID

MOSAID Technologies Inc. is one of the world's leading intellectual property companies. MOSAID develops semiconductor memory technology and licenses patented intellectual property in the areas of semiconductors and telecommunications systems. MOSAID counts many of the world's largest semiconductor companies among its licensees. Founded in 1975, MOSAID is based in Ottawa, Ontario.

Pro forma net income, a non-GAAP measure, is GAAP net income adjusted for stock-based compensation, patent amortization and imputed interest, foreign exchange gains and losses on "Other long-term liabilities," and any other non-recurring items. The Company uses pro forma measures internally to evaluate and manage operating performance, and to forecast and plan. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.

Forward Looking Information

This document and certain other public documents incorporated by reference in this document, contain forward-looking statements to the extent they relate to MOSAID or its management, including those identified by the expressions "anticipate," "believe," "foresee," "estimate," "expect," "intend," "could," "may," "plan," "will," "would" and similar expressions. Similarly, statements in this document that describe MOSAID's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts, but rather reflect MOSAID's current expectations regarding future events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in such forward-looking statements. Assumptions made in preparing forward-looking statements and financial guidance include, but are not limited to, the following: MOSAID's continued expansion of its patent portfolio and of its opportunities for future patent licensing revenue as a result of MOSAID's acquisition of patents from third parties and from development of new inventions; DRAM manufacturers continuing to infringe MOSAID's patents; the timing and amount of MOSAID's litigation expenses; MOSAID's ability to sign new patent licensees; current assumptions as to the identification of products that are unlicensed to MOSAID's wireless patents; and the timing and amount of MOSAID's Research & Development expenses.

Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following: the extent of embedded DRAM proliferation in the System-on-a-Chip markets; legal rulings and/or regulatory investigations or complaints having an adverse impact on the validity, enforceability, potential royalty rates, and strength or breadth of coverage of MOSAID's essential and/or nonessential patents (including, but not limited to, adverse results from litigation or proceedings in patent offices and government regulatory agencies in various countries around the world); judicial, legislative or regulatory changes that impair the ability of patent holders to earn licensing revenues; economic, social, and political conditions in the countries in which MOSAID or patent licensees operate, including security risks, health conditions, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; non-payment or delays in payment by, or insolvency of, licensees or other debtors; variability in patent licensees' sales of licensed products, failure to maintain and enforce MOSAID's existing patent portfolio, or failure to obtain valuable patents as a result of research and development activities, or failure to acquire valuable patents from third parties; MOSAID's ability to recruit and retain skilled personnel; change in MOSAID's financial position; consolidation of MOSAID's licensees; natural events, such as severe weather and earthquakes in the locations in which MOSAID or patent licensees operate; and changes in the tax rate applicable to MOSAID as the result of changes in the tax law in the jurisdictions in which profits are determined to be earned and taxed, the outcome of tax audits and the ability to realize deferred tax assets.

MOSAID assumes no obligation to update or revise any forward-looking statements. Additional information identifying risks and uncertainties affecting MOSAID's business and other factors that could cause MOSAID's financial results to fluctuate are contained in MOSAID's Annual Information Form, under the section entitled "Risk Factors," and in MOSAID's other public filings available online at www.sedar.com .

 

MOSAID  TECHNOLOGIES  INCORPORATED
(Subject  to  the  Canada  Business  Corporations  Act)
CONSOLIDATED  PRO  FORMA  STATEMENTS  OF  INCOME
(In  thousands  of  Canadian  Dollars,  except  per  share  amounts)
(Unaudited)

                                                                                  Quarter  ended              Quarter  ended
                                                                                  July  31,  2009              July  31,  2008
--------------------------------------------------------------------------

Revenues                                                                              $16,223                          $12,652

Operating  expenses
    Patent  portfolio  management                                        1,711                              1,123
    Patent  licensing  and  litigation                                1,944                              4,417
    Research  and  development                                                  811                                  567
    General  and  administration                                          1,549                              1,149
    Foreign  exchange  loss  (gain)                                          409                                  (61)
--------------------------------------------------------------------------
                                                                                                  6,424                              7,195
--------------------------------------------------------------------------

Pro  forma  income  from  operations                                  9,799                              5,457
Net  interest  income                                                                119                                  522
--------------------------------------------------------------------------
Pro  forma  income  before  income  tax                              9,918                              5,979
Income  tax  expense                                                              3,273                              1,973
--------------------------------------------------------------------------
Pro  forma  net  income  (Note  6)                                      $6,645                            $4,006
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Pro  forma  earnings  per  share
    Basic                                                                                    $0.65                              $0.37
    Diluted                                                                                $0.65                              $0.37

Weighted  average  number  of  shares
    Basic                                                                          10,215,130                    10,688,327
    Diluted                                                                      10,249,535                    10,725,212

See  accompanying  Notes  to  the  Consolidated  Financial  Statements



MOSAID  TECHNOLOGIES  INCORPORATED
CONSOLIDATED  STATEMENTS  OF  INCOME  AND  RETAINED  EARNINGS
(In  thousands  of  Canadian  Dollars,  except  per  share  amounts)
(Unaudited)

                                                                                  Quarter  ended              Quarter  ended
                                                                                  July  31,  2009              July  31,  2008
--------------------------------------------------------------------------

Revenues                                                                              $16,223                          $12,652

Operating  expenses
    Patent  portfolio  management                                        1,711                              1,123
    Patent  licensing  and  litigation                                1,944                              4,417
    Research  and  development                                                  811                                  567
    General  and  administration                                          1,549                              1,149
    Foreign  exchange  (gain)  loss                                    (2,469)                                518
    Other                                                                                        238                                  147
    Patent  amortization  and  imputed  interest              3,868                              3,260
--------------------------------------------------------------------------
                                                                                                  7,652                            11,181
--------------------------------------------------------------------------

Income  from  operations                                                      8,571                              1,471
Net  interest  income                                                                119                                  522
--------------------------------------------------------------------------
Income  before  income  tax  expense  and
  discontinued  operations                                                  8,690                              1,993
Income  tax  expense                                                              2,472                                  801
--------------------------------------------------------------------------
Income  before  discontinued  operations                        6,218                              1,192
Discontinued  operations  income
  (net  of  tax)  (Note  5)                                                          236                                  168
--------------------------------------------------------------------------
Net  income                                                                              6,454                              1,360
Dividends                                                                                2,561                              2,684
Normal  course  issuer  bid                                                          -                              1,378
Retained  earnings,  beginning  of  period                    11,607                            19,297
--------------------------------------------------------------------------
Retained  earnings,  end  of  period                              $15,500                          $16,595
--------------------------------------------------------------------------

Earnings  per  share  (Note  4)
    Basic  -  before  discontinued  operations                  $0.61                              $0.11
    Diluted  -  before  discontinued  operations              $0.61                              $0.11

    Basic  -  net  earnings                                                      $0.63                              $0.13
    Diluted  -  net  earnings                                                  $0.63                              $0.13

Weighted  average  number  of  shares
    Basic                                                                          10,215,130                    10,688,327
    Diluted                                                                      10,249,535                    10,725,212

See  accompanying  Notes  to  the  Consolidated  Financial  Statements



MOSAID  TECHNOLOGIES  INCORPORATED
CONSOLIDATED  BALANCE  SHEETS
(In  thousands  of  Canadian  Dollars)

                                                                                                  As  at                              As  at
                                                                                  July  31,  2009            April  30,  2009
                                                                                        (unaudited)                      (audited)
--------------------------------------------------------------------------

Current  Assets
    Cash  and  cash  equivalents                                        $51,702                          $32,899
    Marketable  securities                                                        708                            18,888
    Accounts  receivable                                                        4,884                            10,434
    Prepaid  expenses                                                                  826                                  759
    Other  asset                                                                        1,308                                  446
    Future  income  taxes  recoverable                              11,519                            11,519
--------------------------------------------------------------------------
                                                                                                70,947                            74,945

Capital  assets                                                                          577                                  563
Acquired  intangibles                                                        76,485                            79,402
Future  income  taxes  recoverable                                  17,492                            17,549
--------------------------------------------------------------------------
                                                                                            $165,501                        $172,459
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Current  Liabilities
    Accounts  payable  and  accrued  liabilities            $5,768                            $6,341
    Income  tax  payable                                                          1,432                              1,432
    Deferred  revenue                                                              2,843                              3,432
    Current  portion  of  other  long-term
      liabilities                                                                    10,139                            20,869
--------------------------------------------------------------------------
                                                                                                20,182                            32,074
Deferred  gain  on  sale-leaseback                                        986                              1,039
Other  long-term  liabilities                                          28,297                            28,799
--------------------------------------------------------------------------
                                                                                                49,465                            61,912
--------------------------------------------------------------------------

Shareholders'  Equity
    Share  capital  (Note  3)                                                95,577                            94,741
    Contributed  surplus                                                        3,651                              3,753
    Retained  earnings                                                          15,500                            11,607
    Accumulated  other  comprehensive  income                  1,308                                  446
--------------------------------------------------------------------------
                                                                                              116,036                          110,547
--------------------------------------------------------------------------
                                                                                            $165,501                        $172,459
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See  accompanying  Notes  to  the  Consolidated  Financial  Statements



MOSAID  TECHNOLOGIES  INCORPORATED
CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
(In  thousands  of  Canadian  Dollars)
(Unaudited)

                                                                                  Quarter  ended              Quarter  ended
                                                                                  July  31,  2009              July  31,  2008
--------------------------------------------------------------------------

Operating
Income  before  discontinued  operations                      $6,218                            $1,192
Items  not  affecting  cash
    Amortization                                                                      3,014                              2,457
    Stock-based  compensation                                                  238                                  147
    Unrealized  foreign  exchange  (loss)  gain
      on  other  long-term  liabilities                              (2,877)                                579
    Future  income  tax  recoverable                                          57                            (1,511)
--------------------------------------------------------------------------
                                                                                                  6,650                              2,864
Change  in  non-cash  working  capital  items
  from  continuing  operations                                            4,739                              6,123
--------------------------------------------------------------------------
                                                                                                11,389                              8,987
--------------------------------------------------------------------------

Investing
    Acquisition  of  capital  assets  and
      acquired  intangibles                                                      (112)                          (1,337)
    Acquisition  of  short-term  marketable      securities                                                                          (316)                        (32,706)
    Proceeds  on  disposal/maturity  of
      short-term  marketable  securities                          18,496                            27,138
--------------------------------------------------------------------------
                                                                                                18,068                            (6,905)
--------------------------------------------------------------------------

Financing
    Long-term  liabilities                                                  (8,356)                              (333)
    Repurchase  of  shares                                                              -                            (3,818)
    Dividends                                                                          (2,561)                          (2,684)
    Issue  of  common  shares                                                      503                                  143
--------------------------------------------------------------------------
                                                                                              (10,414)                          (6,692)
--------------------------------------------------------------------------

Net  cash  (outflow)  from  continuing
  operations                                                                          19,043                            (4,610)
Net  cash  (outflow)  inflow  from
  discontinued  operations                                                    (240)                              (308)
--------------------------------------------------------------------------
Net  cash  (outflow)  inflow                                              18,803                            (4,918)
Cash  and  cash  equivalents,  beginning  of
  period                                                                                  32,899                            22,133
--------------------------------------------------------------------------
Cash  and  cash  equivalents,  end  of  period              $51,702                          $17,215
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Supplementary  Information:

Cash  on  hand  and  bank  balances                                  $  9,966                          $14,368
Short-term  investments                                                    41,736                              2,847
--------------------------------------------------------------------------
Total  cash  and  cash  equivalents                                $51,702                          $17,215
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See  accompanying  Notes  to  the  Consolidated  Financial  Statements



MOSAID  TECHNOLOGIES  INCORPORATED
CONSOLIDATED  STATEMENTS  OF  COMPREHENSIVE  INCOME
(In  thousands  of  Canadian  Dollars)
(Unaudited)

                                                                                  Quarter  ended              Quarter  ended
                                                                                  July  31,  2009              July  31,  2008
--------------------------------------------------------------------------

Net  income                                                                            $6,454                            $1,360
--------------------------------------------------------------------------

Other  comprehensive  income,  net  of  tax:
    Gains  and  losses  on  derivatives
      designated  as  cash  flow  hedges                                1,248                                (175)
    Gains  and  losses  on  derivatives
      designated  as  cash  flow  hedges
      in  prior  periods  transferred  to
      revenue  in  the  current  period                                    (386)                                166
--------------------------------------------------------------------------
Other  comprehensive  loss                                                      862                                    (9)
--------------------------------------------------------------------------

Comprehensive  income                                                        $7,316                            $1,351
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See  accompanying  Notes  to  the  Consolidated  Financial  Statements


MOSAID  TECHNOLOGIES  INCORPORATED
NOTES  TO  THE  CONSOLIDATED  FINANCIAL  STATEMENTS
  Quarters  ended  July  31,  2009  and  2008
(tabular  dollar  amounts  in  thousands  of  Canadian  Dollars,
  except  per  share  amounts)

 
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