890394--3/16/2006--MONOLITHIC_SYSTEM_TECHNOLOGY

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{property, intellectual, protect}

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{condition, economic, financial}

{provision, law, control}

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Our success depends upon the semiconductor market s acceptance of our 1T-SRAM technologies. Our lengthy licensing cycle and our licensees lengthy product development cycles make the operating results of our licensing business difficult to predict. If the market for SoC integrated circuits does not expand, our business will suffer. The semiconductor industry is cyclical in nature and subject to periodic downturns, which can negatively affect our revenue. We might be unable to deliver our customized memory technology within an agreed technical specification in the time frame demanded by our licensees, which could damage our reputation, harm our ability to attract future licensees and adversely impact operating results. Our business model relies on royalties as a key component in the licensing of our technologies, and if we fail to realize expected royalties our operating results will suffer. We expect our revenue to be highly concentrated among a small number of licensees and customers, and our results of operations could be harmed if we lose and fail to replace this revenue. Our revenue concentration may also pose credit risks, which could negatively affect our cash flow and financial condition. Anything that negatively affects the businesses of our licensees could negatively impact our revenue. We rely on semiconductor foundries to assist us in attracting potential licensees, and a loss or failure of these relationships could inhibit our growth and reduce our revenue. Our embedded memory technology is unique and the occurrence of manufacturing difficulties or low production yields, if not corrected, could hinder market acceptance of our technology and reduce future revenue. Our failure to compete effectively in the market for embedded memory technology could reduce our revenue. Our failure to continue to enhance our technology or develop new technology on a timely basis could diminish our ability to attract and retain licensees and product customers. We may incur substantial litigation expense, which would adversely affect our profitability. Royalty amounts owed to us might be difficult to verify, and we might find it difficult, expensive and time-consuming to enforce our license agreements. We might not be able to protect and enforce our intellectual property rights, which could impair our ability to compete and reduce the value of our technology. Our existing patents might not provide us with sufficient protection of our intellectual property, and our patent applications might not result in the issuance of patents, either of which could reduce the value of our core technology and harm our business. Any claim that our products or technology infringe third-party intellectual property rights could increase our costs of operation and distract management and could result in expensive settlement costs or the discontinuance of our technology licensing or product offerings. The discovery of defects in our technology could expose us to liability for damages. Our failure to manage the growth of our business could reduce our potential revenue and threaten our future profitability. If we fail to retain key personnel, our business and growth could be negatively affected. Our failure to successfully address the potential difficulties associated with our international operations could increase our costs of operation and negatively impact our revenue. Provisions of our certificate of incorporation and bylaws or Delaware law might delay or prevent a change of control transaction and depress the market price of our stock. Our stockholder rights plan could prevent stockholders from receiving a premium over the market price for their shares from a potential acquirer. A limited number of stockholders have the ability to influence the outcome of director elections and other matters requiring stockholder approval. Potential volatility of the price of our common stock could negatively affect your investment. The price of our stock could decrease as a result of shares being sold in the market by directors, officers and other significant stockholders.

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890394--3/16/2006--MONOLITHIC_SYSTEM_TECHNOLOGY_INC