2003 News Releases

"FOR IMMEDIATE RELEASE"

MOSAID Announces First Quarter Results for Fiscal Year 2004

OTTAWA, Ontario, Canada – August 21, 2003 – MOSAID Technologies Incorporated (TSX:MSD) today announced financial results for the first quarter of fiscal year 2004 ended July 25, 2003.

Revenues for the first quarter of fiscal year 2004 were $5,471,000, compared to $7,651,000 in the first quarter of fiscal year 2003. Net loss for the quarter was $3,677,000 or $0.36 per diluted share, compared to net loss of $5,367,000 or $0.52 per diluted share a year ago. The net loss for the quarter includes a restructuring expense reversal of $408,000, primarily related to the sublet of the Company’s premises in Austin, Texas.

The Company’s cash balance and short-term marketable securities at the end of the first quarter were $40.1 million compared to $42.3 million at the end of the fourth quarter of fiscal 2003.

"While the memory markets continued to be weak throughout our first quarter, pricing for faster memory devices such as DDR DRAM began to show improvement. This trend, in conjunction with more bullish expectations for DRAM revenue growth in the second half of 2003, are positive for the Company," said George Cwynar, President and Chief Executive Officer of MOSAID.

"In the content addressable memory (CAM) marketplace, our industry leading products have been sampling with customers and have achieved design wins. However, stiff competition and slow system design activity by networking OEMs have combined to make this a very challenging, oversupplied market for all competitors. We have continued to pursue customer design win opportunities, as well as the development of strategic relationships in order to leverage our products into the CAM marketplace. Further, we have expanded this exploration of relationships to include the possible sale of our CAM business," said Cwynar.

"On the expense side, we reduced our operating costs during the quarter, driven by the restructuring and headcount reduction implemented in April 2003. Margins continued to improve in the Systems Division reaching 60%, compared to 37% in the first quarter of fiscal year 2003. However, the Intellectual Property Division’s litigation costs, included in Sales and Marketing expenses, increased as a result of activities related to the advancement of the Samsung and Infineon cases," said Cwynar.

Operating Highlights

· Judicial Panel on Multidistrict Litigation Hearing

On July 24, 2003, the Judicial Panel on Multidistrict Litigation (MDL) held a hearing to review a petition by Infineon to consolidate the Samsung and Infineon cases in the District Court for the Northern District of California. The Order resulting from this hearing is still pending. However, MOSAID, Samsung and Infineon were advised on August 20, 2003 by Judge Martini, who presides over the Samsung case in New Jersey, that "The MDL panel has directed that the Infineon v. MOSAID matter be transferred from the Northern District of California to this Court promptly".

Judge Martini has ruled therefore that the Markman hearing, scheduled for September 15, 2003 "shall be temporarily adjourned". Judge Martini went on to state that "…my intention is not to significantly delay the Markman hearing. Instead I direct that counsel for all parties [in both] matters be present in my Court on September 15, 2003 for a status conference." On the same day, coincidentally, a status conference has been scheduled in the Infineon case in the Northern District of California. At this stage, it is unclear whether this conference will go ahead.

As previously announced, MOSAID added an eighth patent to the suit with Infineon in June 2003. MOSAID now claims that Infineon infringes of US Patent Number 6,067,272 covering a Delay Locked Loop (DLL) circuit for use in Synchronous DRAM.

At the end of the first quarter, the Intellectual Property Division had 512 patents issued or pending, representing an increase of 12 over the fourth quarter of fiscal 2003.

· MOSAID Class-IC® DC9000 Available for Sampling

During the quarter, the Semiconductor Division released the DC9000, a new 9Mbit network search engine which offers glueless interoperability with industry leading network processors. Announced last September 2002 as the third product in the family of MOSAID Class-IC® high performance network search engines, the DC9000 is now available for sampling with customers. The Division also began delivering its search engine development platform to customers in the first quarter. This evaluation platform enables designers to quickly and accurately simulate advanced classification applications accelerated by the DC9000 network search engine.

· Launched New Release of Test Control Software

At SEMICON/West in July 2003, the Systems Division introduced a new version of its Test Control Software (TCS) which has improved the patented Graphical Sequence Editor (GSE) and expanded the Bitmap Capture and Display capability to handle 2Gbit memory devices. TCS 5.2 is a worldwide update for customers of MOSAID's MS4205 product family, including the latest MS4205ex tester for DDR-II DRAM. GSE is a sophisticated software tool that vastly simplifies the process of designing and running the address and data sequences used to test the many memory devices supported by MOSAID testers.

Conference Call and Webcast
Management will hold a conference call and webcast on Thursday, August 21 at 5:00 p.m. (EST). Participants wishing to access the conference call should dial 1-800-814-4890. The conference call will also be webcast live at www.mosaid.com and www.newswire.ca, and subsequently archived on MOSAID’s web site. A rebroadcast of the conference call will be available until midnight on Thursday, August 28, 2003. To access the rebroadcast, please dial 1-877-289-8525 and enter the passcode 21014626#.

About MOSAID
MOSAID Technologies Incorporated is an independent semiconductor company operating through three divisions:

• Semiconductor – a fabless provider of networking chips
• Intellectual Property – a licensor of intellectual property to semiconductor manufacturers worldwide
• Systems – the leading supplier of engineering memory test and analysis systems to memory manufacturers, foundries and fabless chip companies.

Founded in 1975, MOSAID is based in Ottawa, Ontario, Canada, with offices in Santa Clara, California; Newcastle upon Tyne, U.K; and Tokyo, Japan. For more information, visit the Company’s web site at www.mosaid.com.

Forward Looking Information
This document may contain forward-looking statements relating to the Company’s operations or to the environment in which the Company operates. Such statements are based on current expectations that are subject to a variety of risks and uncertainties that are difficult to predict and/or beyond MOSAID’s control. Actual results may differ materially from those expressed in any forward-looking statements, due to factors such as customer demand and timing of purchasing decisions, product and business mix, competitive products, pricing pressures as well as general economic and industry conditions. MOSAID assumes no obligation to update these forward-looking statements, or to update the reasons why actual results could differ from those reflected in any forward-looking statements. Additional information identifying risks and uncertainties is contained in other public filings with the Ontario Securities Commission.

For more information, please contact:

Investor Inquiries Heidi Vincent Director, Investor Relations & Communications 613-599-9539 x1205 vincent@mosaid.com

Media Inquiries Sara Haskill Communications Specialist 613-599-9539 x1228 haskill@mosaid.com

MANAGEMENT’S DISCUSSION AND ANALYSIS, FINANCIAL STATEMENTS AND NOTES FOLLOW

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements of MOSAID Technologies Incorporated ("MOSAID" or "the Company") for the thirteen weeks ended July 25, 2003 appearing elsewhere in this report. It should also be read in conjunction with the audited annual Consolidated Financial Statements and the Management’s Discussion and Analysis (MD&A) included in the Company’s most recent Annual Report for the fiscal year ended April 25, 2003. All dollar amounts are in Canadian dollars, except where otherwise indicated.

Overview

The Company reported revenues of $5.5 million for the quarter ended July 25, 2003 ("Q1 fiscal 2004"), representing a decrease of 28% from revenues of $7.7 million for the quarter ended July 26, 2002 ("Q1 fiscal 2003"). The net loss for Q1 fiscal 2004 was $3.7 million or $0.36 per diluted share compared to a net loss of $5.4 million or $0.52 per diluted share for the same quarter last year.

For the quarter ended July 25, 2003, the Company’s cost structure reflected the results of the Q4 fiscal 2003 restructuring of its operations, and the recording of a charge of $5.7 million, principally related to the termination of 58 employees.

Results of Operations

The following table shows the percentage of revenues represented by certain items in the Company’s consolidated statement of earnings for the fiscal quarters indicated.

The Semiconductor Division showed a net loss of $2.8 million for the first quarter of fiscal 2004 compared to a net loss of $4.5 million for the same quarter last year. The net loss has decreased mainly due to the 41% decrease in headcount in the division since the prior year. As a result, there have been significant savings in salaries and benefits.

The IP Division’s net loss of $0.4 million for Q1 fiscal 2004 compares to a $3.2 million net profit for the same quarter in the previous year. This is mainly due to the decrease in revenues from Q1 fiscal 2003 to Q1 fiscal 2004 and the increase in legal expense associated with two litigation actions concerning the enforcement of its intellectual property rights.

A net loss of $628,000 for the Systems Division for the first quarter of fiscal 2004 compares to a net loss of $4.4 million for the same quarter last year. The reduced net loss is the result of a 43% decrease in headcount in the division since the prior year, a decrease in expenses quarter over quarter and better operating margins. Furthermore, in Q1 fiscal 2003 the Division recorded a $826,000 write-down in the value of the inventory and a restructuring charge of $783,000.

For Q1 fiscal 2004, the Semiconductor Division earned revenues of $21,000 compared to no revenues for Q1 fiscal 2003. While still in pre-production mode, revenues in this division will likely continue to be modest and may vary significantly from period to period, based on orders for samples, until production revenues commence from its customers.

In Q1 fiscal 2004, revenues for the IP Division decreased 42% from Q1 fiscal 2003. The decrease is due to declining payments from existing licensees. Revenues from the IP Division can vary significantly from period to period and depend on licensee revenues and contracted payment schedules.

Systems Division revenues for Q1 fiscal 2004 are 3% lower than revenues for the same quarter in the previous year reflecting continued poor overall memory market conditions and continued weakness in capital expenditures by memory manufacturers.

The split of revenues between divisions reflects little change in the state of the Semiconductor and Systems businesses, but a decline in the revenue contribution of the IP Division

Interest income in Q1 fiscal 2004 is 10% lower than Q1 fiscal 2003, primarily as a result of reduced cash balances.

The approximate geographic breakdown of operating revenues is as follows:

The Company markets its products and services globally. Revenues from the IP Division stem solely from Japan and Taiwan. Due to the low volume and high unit price of test equipment sales, revenues in any given country can be skewed from quarter to quarter, as is evident in the analysis above for Korea, China and Taiwan.

Labour and Materials

This category comprises the labour, materials and subcontract costs of assembling, integrating, testing and servicing the memory test systems as well as the labour, material and subcontract costs related to the sale of chips.

The decrease as a percentage of revenues is in part due to lower revenues quarter over quarter but also due to an improvement in the gross margin of the Systems Division. Labour and materials as a percentage of Systems Division revenues have fallen from 63% in Q1 fiscal 2003 to 45% in Q4 fiscal 2003. This fell again in Q1 fiscal 2004 to 40% (ie. a gross margin of 60%), but this was aided by the sale of a refurbished tester during the quarter. Without the sale of the refurbished unit, labour and materials are 48% of Systems Division revenues compared to 45% in Q4 fiscal 2003.

The decrease in labour and materials in absolute amounts from Q1 fiscal 2003 to Q1 fiscal 2004 is due to the decrease in headcount quarter over quarter, efforts to contain costs, and improved manufacturing efficiency and the absence of any inventory provision (such as the charge of $826,000 which occurred in Q1 fiscal 2003).

The decrease in R&D as a percentage of revenues reflects the major reduction in R&D expense.

The decrease in research and development in absolute amounts from Q1 fiscal 2003 to Q1 fiscal 2004 is mainly due to the decrease in the number of employees and R&D programs resulting from the restructuring in the fourth quarter of fiscal 2003 and further cost containment efforts. Additionally, ITC’s are not currently being recorded as an offset to R&D expense, whereas they represented an offset of $423,000 in Q1 fiscal 2003.

The increase in Selling and Marketing (S&M) expenses as a percentage of revenues from Q1 fiscal 2003 to Q1 fiscal 2004 is mainly due to lower revenues in the IP Division and the increased amount of selling & marketing expenses.

The increase in S&M expenses in absolute terms is primarily related to legal expenses incurred by the IP Division, associated with two litigation actions concerning the enforcement of intellectual property rights. S&M expenses in the Semiconductor and Systems Divisions were down quarter over quarter due to efforts to contain costs.

The modest increase in General and Administration (G&A) as a percentage of revenues is mainly due to the decrease in revenues this quarter as compared to the same quarter last year.

The decrease in G&A expenses in absolute amounts was driven by continuing initiatives to contain costs, particularly with respect to travel, professional fees and subcontract costs. The decrease was also caused by a $187,000 foreign exchange gain during Q1 fiscal 2004 compared to a $126,000 gain in the same quarter last year.

Income tax expense of $298,000 for Q1 fiscal 2004 represents the withholding tax on international royalty income. The Company has not recorded the future income benefit related to current year tax losses and earned investment tax credits. Income tax expense of $136,000 for Q1 fiscal 2003 represented an effective tax rate of 32%, applied to the ITC’s recorded in the quarter.

Restructuring

The reversal in Q1 fiscal 2004 of restructuring charges recorded in prior periods relates primarily to the subleasing of the Company’s rented facility in Austin, Texas.

In Q1 fiscal 2004, the Company generated a negative cashflow from operations of $1.8 million, as compared to a negative cashflow of $456,000 in Q1 fiscal 2003. The cash outflow in the current quarter is due to operations. In the prior year, the timing of the collection of receivables reduced the impact of the negative cashflow from operations in the period despite a higher loss.

As of July 25, 2003, the Company had cash and short-term marketable securities of $40.1 million, compared to $42.3 million as of the end of fiscal 2003. Working capital decreased to $37.9 million at the end of Q1 fiscal 2004 from $41.0 million at the end of fiscal 2003. The decrease is mainly due to the use of cash and reduced accounts receivable during the quarter, partially offset by a reduction in accounts payable and accrued liabilities. Management believes that the Company is well capitalized with sufficient working capital to fund ongoing operations.

A $10,000,000 bank credit facility is available to cover the fluctuations in cash requirements but was not utilized throughout the quarter. The available operating line is calculated using a formula based on accounts receivable.

Accounts receivable decreased to $3.3 million at the end of Q1 fiscal 2004 from $7.6 million at the end of fiscal 2003 mainly due to a reduction in revenues between the current quarter and the last quarter of fiscal 2003 and the collection of accounts receivable. The Company employs financial instruments (principally forward exchange contracts) in the management of its foreign currency exposures, and has a $5 million US commitment at the end of the current quarter.

Inventory increased to $3.6 million at the end of Q1 fiscal 2004, from $3.5 million at the end of fiscal 2003 primarily due to the purchase of certain specialty parts.

Capital assets

During the first quarter of fiscal 2004, the Company expended $534,000 (net) for capital purchases, compared to $269,000 (net) during the first quarter of fiscal 2003. The current quarter’s capital purchases related primarily to Semiconductor Division’s mask costs for the DC9000, which is now sampling.

The July 25, 2003 balance for Future Income Taxes Recoverable is $12.7 million, compared with $12.7 million at the end of fiscal 2003 reflecting the Company’s view that this amount is more likely than not to be realized through its operations. During the quarter, no investment tax credits were recorded as an offset to R&D expense, and withholding taxes on international royalty income were recorded as income tax expense. As previously mentioned, the Company has not recorded the future tax benefit of current year tax losses and earned investment tax credits.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities decreased to $8.7 million at July 25, 2003, from $12.4 million at April 25, 2003 primarily due to the reduction in the accrual related to the April 25, 2003 restructuring and the timing of trade payables.

A mortgage of $6,000,000, at a fixed rate of 8.24% per annum and for a ten year term, has been put in place to finance the Company’s principal physical facility, which went into service in December 1997. The remaining principal amount at the end of Q1 fiscal 2004 was $5.2 million, of which $195,000 is due within 12 months. The cost of the land and building was $7.9 million, less amortization of $1.5 million, at the end of the quarter.

The Company expects that its future operating results may be subject to quarterly and annual fluctuations resulting from a variety of factors, including market conditions, changes in customer and geographic distribution, potential schedule slippages, and the possibility that its patents might be declared invalid. Sales to a relatively small number of customers account for a substantial portion of the Company’s total revenues. In the IP Division, revenues are primarily derived from a small number of large contracts, principally related to patent licensing agreements, most with finite payment terms. In the Systems Division, a portion of revenues in any fiscal quarter may result from customer orders received in the same quarter. Delays in booking patent licensing agreements, Systems orders, and schedule slippages in one or more Semiconductor contracts or in networking chip product development projects, may lead to significant volatility in financial performance, particularly in terms of quarterly results. The semiconductor industry is characterized by rapid technological change and evolving industry and customer requirements, specifications and standards. The Company’s success will depend on its ability to enhance its existing designs, create new intellectual property, chips and test systems and to develop new designs, patent licensing agreements, chips and test systems on a timely and cost-effective basis. Furthermore, the Company’s current orientation to the semiconductor memory and networking equipment markets exposes its quarterly operating results to the influence of the business cycles in these markets.

MOSAID TECHNOLOGIES INCORPORATED
(Incorporated under the Ontario Business Corporations Act)
CONSOLIDATED BALANCE SHEETS
(In thousands)

See accompanying Notes to the Consolidated Financial Statements.

MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(In thousands, except per share amounts)
(Unaudited)

See accompanying Notes to the Consolidated Financial Statements.

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

See accompanying Notes to the Consolidated Financial Statements.

MOSAID TECHNOLOGIES INCORPORATED
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
13 weeks ended July 25, 2003
(tabular dollar amounts in thousands, except per share amounts)

1. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in Canada for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements.

In the opinion of management, all adjustments consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the full fiscal year ending April 23, 2004.

The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements.

These statements should be read in conjunction with the Company’s audited consolidated financial statements prepared for the fiscal year ended April 25, 2003.

2. Restructuring

During Q1 fiscal 2004, due primarily to the subleasing of the Company’s rented facility in Austin, Texas, the Company recorded a reversal of prior period restructuring charges.

3. Loss per Share

The following is a reconciliation of the numerator and denominator of the basic and fully diluted per share computations.

4. Stock-based Compensation

The Company has an employee stock purchase plan program whereby employees may elect to designate up to 5% of their annual salary to purchase shares of the Company at a 10% discount from the fair market value. The purchase price is deducted over a six month period via payroll.

Also, the Company has an Employee and Director Stock Option Plan. The exercise price is no lower than the market price on the date of grant. Options granted under the Plan expire within a period of six years of granting, with vesting periods determined by the Compensation Committee.

CICA 3870 requires proforma disclosure of the net loss and loss per share, as if the fair value based method as opposed to the intrinsic value based method of accounting had been applied. The disclosures in the following table show the Company’s net loss and loss per share on a proforma basis using the fair value method, on a straight line basis, as determined using the Black-Scholes option pricing model:

The weighted average fair value of options granted during the quarter was calculated as follows using the Black-Scholes option pricing model and the following assumptions:

5. Business Segment Information

Based upon the Company’s internal reporting structure, the following operating segments have been assigned:

The significant accounting policies of the above segments are the same as those described in Note 1. Intersegment sales are recorded at cost. General and administrative costs are allocated to the operating segments based upon estimates of usage. The Company has not included interest revenue, foreign exchange gains or losses, bad debts, unusual items, gains or losses of long-term assets or income tax expense in the determination of operating segment profit.