MOSAID Technologies Inc.
TSX : MSD

MOSAID Technologies Inc.

March 06, 2008 16:05 ET

MOSAID Announces Third Quarter Results for Fiscal 2008 and Dividend

Quarterly dividend of $0.25 per share payable on April 18, 2008

OTTAWA, ONTARIO--(Marketwire - March 6, 2008) - MOSAID Technologies Incorporated (TSX:MSD) today announced financial results for the third quarter of fiscal 2008, ended January 31, 2008.

- Q3 revenues of $14.0 million, compared to $13.8 million in Q3 fiscal 2007

- Q3 pro forma income of $5.4 million, or $0.50 per diluted share, compared to $5.5 million or $0.49 per diluted share in Q3 fiscal 2007

- Q3 GAAP net loss of $1.2 million or $0.11 per share includes a one-time, non-cash income tax expense of $3.2 million as a result of new "substantially enacted" lower federal income tax rates, compared to net income of $4.3 million or $0.38 per diluted share in Q3 fiscal 2007

"MOSAID delivered excellent third quarter financial results, exceeding both revenue and pro forma income guidance, and we are on track to meet our targets for the fiscal year," said John Lindgren, President and CEO, MOSAID. "Operationally, we had an eventful quarter as we continued to deliver on our objectives. MOSAID set an important benchmark by signing a seven year, royalty bearing license with Winbond Electronics. Winbond was the first company to sign a term license with us, and this was our first opportunity to re-sign a company to a new term license. This agreement, along with our new license with ProMOS, which has a six year term, demonstrates the growing strength and longevity of our semiconductor patent portfolio."

"MOSAID's success in settling the litigation against ProMOS and Mosel Vitelic, two of the four defendants in our patent infringement case in Texas, is another encouraging development," said Lindgren. "On the wireless licensing front, we are in substantive business and technical discussions with multiple companies."

MOSAID had cash and marketable securities of $50.8 million at the end of the third quarter of fiscal 2008, compared to $56.8 million at the end of the second quarter of fiscal 2008.

During the third quarter, the Company returned $2.7 million to shareholders in quarterly dividend payments; expended $4.2 million of cash to retire, on its due date, the mortgage on its Ottawa head office campus; and used $5.5 million to repurchase and cancel 315,000 shares under the normal course issuer bid (NCIB) announced September 10, 2007. MOSAID has now repurchased and cancelled 559,583 common shares, representing the full 5% of the 11,191,669 common shares issued and outstanding when the NCIB was announced.

On March 6, 2008, MOSAID declared a quarterly dividend of $0.25 per share. The dividend, which is an eligible dividend, is payable on April 18, 2008 to shareholders of record as of April 2, 2008.

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

Guidance

Management offers the following guidance for the fourth quarter of fiscal 2008:

- Q4 revenues of $16.0 million to $17.0 million

- Q4 pro forma income of $5.1 million to $5.8 million, or $0.45 to $0.53 per diluted share

MOSAID is maintaining revenue guidance and updating pro forma income guidance for fiscal 2008:

- Fiscal 2008 revenues in the range of $55 million, plus or minus

- Fiscal 2008 pro forma income of $19.0 million to $20.0 million, or $1.71 to $1.80 per diluted share

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.

Conference Call and Webcast

Management will hold a conference call and webcast on Thursday, March 6, 2008 at 5:00 p.m. EDT. The webcast will be live at www.mosaid.com and may also be accessed by dialing 1-800-215-2393. The webcast will be available on MOSAID's web site 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 wired and wireless communications systems. MOSAID counts many of the world's largest semiconductor companies among its customers. Founded in 1975, MOSAID is based in Ottawa, Ontario.

Pro forma 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 as well as 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.

For more information on the Company, visit www.mosaid.com.

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; 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.

FINANCIAL STATEMENTS AND NOTES TO FOLLOW

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

This discussion and analysis is dated March 6, 2008. It should be read in conjunction with the unaudited Consolidated Financial Statements of MOSAID Technologies Incorporated ("MOSAID" or "the Company") for the quarter ended January 31, 2008. It should also be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto for MOSAID for the quarter ended October 31, 2007, as well as with Management's Discussion and Analysis (MD&A) included in the Company's most recent Annual Report for the fiscal year ended April 30, 2007. Unless otherwise stated, all amounts are in Canadian dollars.

Management is responsible for establishing appropriate information systems, procedures and controls to ensure that all financial information disclosed externally, including this MD&A, and used internally by management, is complete and reliable. These procedures include the review and approval of the financial statements and associated information, including this MD&A, first by the Disclosure Committee, a committee of the management team, the Audit Committee of the Board of Directors and subsequently by the Board.

Forward-looking Information Statements

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," "could," "estimate," "expect," "intend," "may," "plan," "will," "would" and similar expressions. 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 current expectations. 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;

- semiconductor and wireless product vendors continuing to infringe MOSAID's patents;

- the timing and amount of MOSAID's litigation expenses;

- MOSAID's ability to sign new licensees;

- current assumptions as to the identification of products that are unlicensed to MOSAID's patents; and

- the timing and amount of MOSAID's Research and Development expenses.

Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following:

- MOSAID's ability to negotiate settlements with licensees;

- 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;

- 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.

Pro forma income, which is not a generally accepted accounting (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 other non-recurring items. The Company uses pro forma measures internally to evaluate and manage operating performance as well as 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.

It should also be noted that the Certification by MOSAID's CEO and CFO of Interim Filings, as prescribed by Form 52-109F2, is required in conjunction with the reporting of these quarterly results and is filed accordingly with SEDAR.

Overview

The Company reported revenues of $14.0 million for the quarter ended January 31, 2008 ("Q3 fiscal 2008"), representing an increase of 1% from revenues of $13.8 million for the quarter ended January 31, 2007 ("Q3 fiscal 2007"). Loss before discontinued operations for Q3 fiscal 2008 was $1.3 million or $0.12 per diluted share, compared to income of $5.0 million or $0.44 per diluted share for the same period in the prior year. GAAP net loss for Q3 fiscal 2008 was $1.2 million or $0.11 per diluted share, compared to net income of $4.3 million, or $0.38 per diluted share for the same quarter last year. Pro forma net income was $5.4 million or $0.50 per diluted share in Q3 fiscal 2008, as compared to $5.5 million or $0.49 per diluted share for Q3 fiscal 2007.

Comparison of Actual Quarterly Results to Guidance

The Company's reported revenues of $14.0 million for Q3 fiscal 2008 exceeded guidance for the quarter of $11.5 million to $12.5 million. Actual operating expenses and net interest income for Q3 fiscal 2008 were within the guidance ranges provided by management on November 27, 2007. As a result, actual pro forma net income of $5.4 million exceeded the guidance for Q3 fiscal 2008 of $3.5 million to $4.0 million.

Results of Operations

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




Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
% % % %
--------------------------------------------------------------------------
Revenues 100 100 100 100
--------------------------------------------------------------------------
Expenses
Patent portfolio management 9 9 9 6
Patent licensing and
litigation 23 14 22 12
Research and development 5 2 5 2
General and administration 8 12 9 11
Foreign exchange loss (gain) 14 - (10) -
Restructuring - - - -
Special committee - 6 - 4
Stock-based compensation 1 1 1 1
Patent amortization and
imputed interest 23 4 26 2
--------------------------------------------------------------------------
Operating expenses 83 48 62 38
--------------------------------------------------------------------------
Income from operations 17 52 38 62
Net interest income 4 4 4 4
Income tax expense 31 20 24 26
--------------------------------------------------------------------------
(Loss) income before
discontinued
operations (10) 36 18 40
Discontinued operations
(net of tax) 1 (5) 16 (7)
--------------------------------------------------------------------------
Net income (9) 31 34 33
--------------------------------------------------------------------------
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The following table shows the percentage of revenues represented by certain
items in the Company's pro forma consolidated statement of earnings for the
fiscal quarters indicated.


Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
% % % %
--------------------------------------------------------------------------
Revenues 100 100 100 100
--------------------------------------------------------------------------
Expenses
Patent portfolio management 9 9 9 6
Patent licensing and litigation 23 14 22 12
Research and development 5 2 5 2
General and administration 8 12 9 11
Foreign exchange (gain) loss (1) - 1 -
Special committee - 6 - 4
--------------------------------------------------------------------------
Operating expenses 44 43 46 35
--------------------------------------------------------------------------
Pro forma income from
operations 56 57 54 65
Net interest income 4 4 4 4
Income tax expense 21 21 21 24
--------------------------------------------------------------------------
Pro forma income 39 40 37 45
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Pro forma income is reconciled to GAAP net income as follows:


(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
$ $ $ $
--------------------------------------------------------------------------
GAAP net (loss) income (1,220) 4,294 13,049 15,666
Add (deduct):
Stock-based compensation 162 169 397 487
Patent amortization and

imputed interest 3,133 494 9,969 1,051
Restructuring - - 19 -
Foreign exchange loss (gain) 2,143 - (4,275) -
Income tax expense -
for the above items (1,876) (127) (2,075) 684
Future income tax revaluation 3,169 - 3,169 -
Discontinued operations
(net of tax) (71) 656 (6,107) 3,588
--------------------------------------------------------------------------
Pro forma income 5,440 5,486 14,146 21,476
--------------------------------------------------------------------------
--------------------------------------------------------------------------


MOSAID operates through one segment and division, the Intellectual Property
Division.

REVENUES

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Revenues $13,992 $13,830 $38,113 $47,777
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Revenues in Q3 fiscal 2008 increased by 1%, as compared to Q3 fiscal 2007. During Q3 fiscal 2008, a portion of the revenues were due to the Company settling its litigation against ProMOS Technologies Inc. (ProMos) and Mosel Vitelic, Inc. (Mosel). During the same period in the prior year, one of the Company's other licensees, per their agreement at that time, reported two quarters of royalty revenues. Revenues for the nine months ended January 31, 2008 decreased 20% as compared to the same period in the prior year. The decrease is primarily the result of the one-time fixed amount of approximately $8.9 million related to the patent sale and licensing arrangement with Portal Player, Inc. The majority of the Company's revenues are denominated in U.S. dollars.

Revenues can vary significantly from quarter to quarter depending upon contractually determined timing of royalty reporting by licensees, the cyclical nature of the semiconductor industry, and foreign currency fluctuations.

The approximate geographic breakdown of operating revenues is as follows:




Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
% % % %
--------------------------------------------------------------------------
Asia Pacific 81 79 78 64
North America - - - 18
Europe 19 21 22 18


The Company licenses its technology globally. Due to the nature of the patent licenses, the geographic distribution of revenues can significantly vary from quarter to quarter. The Company is economically dependent upon relatively few licensees. In Q3 fiscal 2008, one licensee accounted for 30% of revenues; other licensees accounted for 24%, 18% and 18% respectively. In Q3 fiscal 2007, one licensee accounted for 31%; other licensees accounted for 28%, 20% and 19% respectively.



EXPENSES

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Patent portfolio management $1,270 $1,191 $3,588 $3,107
As a percentage of total
revenues 9% 9% 9% 6%
Increase from same period
last year 7% 15%


Patent portfolio management expense represents the cost of patent administration, including filing and maintaining patents and patent applications worldwide, identifying and assessing potential patents for acquisition and assessment of partnership opportunities with third party patent holders.

The increase in patent portfolio management expenses in absolute dollar terms for the quarter and as percentage of revenues and in absolute dollar terms for the nine months ended January 31, 2008, as compared to the same period last year, is due to increased subcontract costs as a result of a higher number of first filings of patent applications, continuations and foreign filings in Europe and in Asia Pacific, as well as analysis, consultations and certain amendments of previously filed applications in anticipation of new U.S. rules. At the end of Q3 fiscal 2008, the Company had 897 patents and patent applications, as compared to 720 at the end of Q3 fiscal 2007.



Patent licensing and litigation

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Patent licensing and litigation $3,233 $1,990 $8,382 $5,697
As a percentage of total
revenues 23% 14% 22% 12%
Increase from same period
last year 62% 47%


Patent licensing and litigation expense represents the cost of managing and conducting litigation actions, all reverse engineering costs undertaken by or on behalf of the Company, and conducting licensing negotiations.

The increase in patent licensing and litigation expense for both Q3 fiscal 2008 and the nine months ended January 31, 2008, as a percentage of revenues and in absolute terms, as compared to the prior year, is due primarily to increased litigation costs as the litigation against Micron Technology, Inc. (Micron), Powerchip Semiconductor Corporation (Powerchip), ProMOS, and Mosel progressed, and increased licensing costs related to headcount.

Management expects that litigation expense for the last quarter in fiscal 2008 will exceed the level recorded during Q3 fiscal 2008 as the Company continues to prepare for the "Markman" hearings scheduled for April 2008 in its litigation against Micron and Powerchip. Due to the nature of the expense, these costs may vary significantly from quarter-to-quarter.



Research and Development (R&D)

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Research and development $657 $331 $1,748 $846
As a percentage of total revenues 5% 2% 5% 2%
Increase from same period
last year 98% 107%


R&D expense represents the cost, net of investment tax credits, of developing and promoting new technology or improving existing technology related to the business of the Company.

R&D, as a percentage of revenues and in absolute dollar terms, increased in Q3 fiscal 2008 and the nine months ended January 31, 2008 compared to Q3 fiscal 2007 due primarily to headcount, subcontract and EDA tool expenses as MOSAID provides more resources towards the development of its HyperLink NAND (HLNAND™) technology.

Investment tax credits reduced gross R&D expenses by $69,000 during Q3 fiscal 2008, compared to $19,000 for the same quarter in the prior year.



General and Administration (G&A)

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
General and administration $1,118 $1,669 $3,276 $5,152
As a percentage of total
revenues 8% 12% 9% 11%
(Decrease) from same period
last year (33%) (36%)


G&A expense represents the cost of corporate services, including executive management, finance, corporate legal, human resources, office administration, communications, public company cost and information technology.

The decrease in G&A expense in absolute dollars and as a percentage of revenues in Q3 fiscal 2008, as compared to the same period in the prior year, is due to restructuring activities undertaken by the Company in fiscal 2007. The decrease in G&A expense in absolute dollars and as a percentage of revenues for the nine months ended January 31, 2008, as compared to the same period in the prior year, is due to a one-time reversal of G&A costs of approximately $350,000 in Q2 fiscal 2008 and to the aforementioned restructuring activities.



Foreign exchange loss (gain) (FX)

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
FX loss (gain) $1,983 $(36) $(3,760) $(129)
As a percentage of total
revenues 14% - (10%) -


FX expense represents the cost, realized and unrealized, of unhedged transactions denominated in currencies other than the Company's reporting currency.

The FX loss of $2.0 million during Q3 fiscal 2008 and gain of $3.8 million during the nine months ended January 31, 2008 was due primarily to the revaluation of the Company's U.S. dollar denominated liabilities related to acquired patents. Without this revaluation, the Company incurred an FX gain of $160,000 or 1% of revenues during Q3 fiscal 2008 and an FX loss $515,000 or 1% of revenues during the first nine months ended January 31, 2008.



Patent amortization and imputed interest

(Dollar amounts in thousands) Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Patent amortization and
imputed interest $3,133 $494 $9,969 $1,051
As a percentage of total
revenues 23% 4% 26% 2%


Patent amortization and imputed interest expense represents the amortization charge related to acquired patents or patents where the Company has exclusive licensing rights as a result of partnerships or similar business models with third parties, and the cost of imputed interest expense which results from discounting, for the time value of money, liabilities incurred for the purpose of acquiring patents, either outright or through partnership models.

The increase in patent amortization and imputed interest cost for the quarter and nine months ended January 31, 2008, as a percentage of revenues and in absolute dollar terms, is due primarily to the acquisition of patents in Q4 fiscal 2007.

Net Interest Income

Interest income and interest expense amounted to $663,000 and $58,000, respectively in Q3 fiscal 2008, compared to $670,000 and $90,000 in Q3 fiscal 2007. Interest income and interest expense amounted to $1.8 million and $231,000 respectively for the nine months ended January 31, 2008, compared to $2.1 million and $273,000 for the same period in fiscal 2007. Interest income was lower due to lower average cash balances in the nine months ended January 31, 2007, as compared to the same period in the previous year.

Income Taxes

Income tax expense of $4.3 million was recorded for Q3 fiscal 2008, compared to $2.8 million for Q3 fiscal 2007. In Q3 fiscal 2008, as required under GAAP, the Company recorded a one-time future income tax revaluation expense of $3.2 million due to "substantially enacted" lower Canadian federal income tax rates. Excluding the revaluation of the future income tax asset, the effective tax rate in Q3 fiscal 2008 is 37.5% as compared to 36.2% in Q3 fiscal 2007. The Company expects the effective tax rate to be approximately 36% - 37% for the remainder of fiscal 2008.

Discontinued operations

Discontinued operations (net of tax) for Q3 fiscal 2008 generated a profit of $71,000, as compared to a loss of $656,000 for the same period in the prior year.

Discontinued operations (net of tax) for the nine months ended January 31, 2008 generated a profit of $6.1 million, as compared to a loss of $3.6 million for the same period in the prior year, due primarily to a pre-tax $9.3 million gain on the sale of Semiconductor IP product assets in Q1 fiscal 2008.

Liquidity and Capital Resources

In Q3 fiscal 2008, the Company generated a positive cashflow from operations of $3.1 million, as compared to a positive cashflow of $5.5 million in Q3 fiscal 2007. Changes in non-cash working capital reduced cashflow by $240,000 in Q3 fiscal 2008, primarily due to the reduction of accounts payable and accrued liabilities, compared to a decrease in cashflow of $8.2 million in Q3 fiscal 2007. In Q3 fiscal 2008 and Q3 fiscal 2007, the Company declared and paid a dividend of $0.25 per common share or $2.7 million. During Q3 fiscal 2008, the Company expended $5.5 million to repurchase and cancel 315,000 common shares of the Company through a normal course issuer bid program. No shares were repurchased in the same quarter for the prior year. As well, during Q3 fiscal 2008, the Company expended cash to extinguish the $4.2 million mortgage balance against its facility.

In terms of other cashflow items:

Cash and marketable securities

At the end of Q3 fiscal 2008, the Company had cash and marketable securities of $50.8 million, compared to $50.3 million at the end of fiscal 2007. Major factors contributing to the increase in cash and marketable securities were the sale of Semiconductor IP products discontinued operations to Synopsys, Inc. and cash flow from continuing operations, partially off set by the reduction of long-term debt and return of capital to shareholders through the payment of dividends and the purchase and cancellation of common shares. Working capital increased to $53.8 million at the end of Q3 fiscal 2008 from $47.6 million at the end of fiscal 2007. Management believes that the Company is well capitalized with sufficient working capital to fund current ongoing operations.

The Company continues to have a $10.0 million bank credit facility available to cover the fluctuations in cash requirements. The Company had no borrowings against this facility throughout the quarter. The available operating line within this credit facility is calculated using a formula based on accounts receivable.

Accounts receivable

Accounts receivable decreased by $5.1 million during the nine months ended January 31, 2008, from $12.6 million at the end of fiscal 2007 to $7.5 million at the end of Q3 fiscal 2008, mainly due to the collection of receivables related to final sales of memory test systems in Q4 fiscal 2007 and the collection of a portion of the escrow amount related to the sale of the Systems Division.

Acquired Intangibles

The net book value of acquired intangibles decreased by $4.3 million during the nine months ended January 31, 2008. The decrease is due to patent amortization of $7.0 million, partially offset by acquisitions in Q1 fiscal 2008 of $2.7 million.

Future income taxes recoverable

At the end of Q3 fiscal 2008, the balance for Future Income Taxes Recoverable was $29.7 million, compared with $34.7 million at the end of fiscal 2007. Adding to the balance during Q3 fiscal 2008 were $69,000 of investment tax credits recorded as an offset to R&D expense, $862,000 of withholding taxes on international royalty income and $1.8 million reclassified as income taxes payable. These amounts were more than offset by Canadian tax expense during Q3 fiscal 2008 of $1.4 million ($1.1 million to continuing operations and a $272,000 tax expense to discontinued operations) and a future income tax revaluation expense of $3.2 million.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities decreased by $10.3 million during the nine months ended January 31, 2008, to $5.7 million at the end of Q3 fiscal 2008 from $16.1 million at the end of fiscal 2007, primarily due to the timing of trade payables, payment of fiscal 2007 management performance incentives and settlement of amounts related to restructuring the Company's operations.

Mortgage payable

A mortgage of $6,000,000, at a fixed rate of 8.24% per annum and for a ten year term, was put in place to finance the Company's principal physical facility, which went into service in December 1997. During Q3 fiscal 2008 the mortgage balance of $4.2 million was repaid. The cost of the land and building is $8.0 million, less amortization of $2.8 million, at the end of Q3 fiscal 2008. As has been previously announced, the Company intends to divest itself of its land and building.

Other long-term liabilities

As a result of the purchase of patents from Infineon Technologies AG (Infineon), Agere Systems Inc. (Agere) and the exclusive sub-licensing arrangement with LSI Corporation (LSI), the Company has recorded a liability of $41.1 million. Of this amount, $7.3 million is due within 12 months.




Summary of Quarterly Results

The following table shows selected quarterly results for the Company for
the past two fiscal years.

(in thousands
of dollars,
except per
share
amounts) Q308 Q208 Q108 Q407 Q307 Q207 Q107 Q406

Net sales $13,992 $11,526 $12,595 $12,204 $13,830 $14,838 $19,109 $9,803

(Loss)
earnings
before
discon-
tinued
opera-
tions ($1,291) $4,498 $3,735 $1,271 $4,950 $5,826 $8,478 $2,972
Per share ($0.12) $0.40 $0.34 $0.12 $0.45 $0.53 $0.75 $0.26
Per dilu-
ted share ($0.12) $0.40 $0.33 $0.11 $0.44 $0.52 $0.74 $0.26

Net (loss)
earnings ($1,220) $4,734 $9,535 $9,034 $4,294 $4,715 $6,657 $3,135
Per share ($0.11) $0.43 $0.86 $0.82 $0.39 $0.43 $0.59 $0.28
Per dilu-
ted share ($0.11) $0.43 $0.85 $0.81 $0.38 $0.42 $0.58 $0.27

The following chart indicates the contractual obligations to which the
Company is bound over the following five years:



Payments Due by Period
(in thousands of dollars)

Less than After 5
Total 1 year 1-3 years 4-5 years years
--------------------------------------------------------------------------
Total contractual
obligations $54,620 $7,516 $14,532 $12,528 $20,044
---------------------------------------------------------------------------


The contractual obligations are other long term obligations representing the amounts due to Infineon, Agere and LSI as a result of patent purchases by the Company.

Off Balance Sheet Arrangements

Off balance sheet arrangements are described in the notes to the annual financial statements. Note 21 to the annual financial statements describes the Company's foreign exchange forward contract commitments, and Note 18 to the annual financial statements discloses the Company's guarantees and contingencies.

Critical Accounting Estimates

The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles, which require management estimates and assumptions that affect the amounts reported in the Company's consolidated financial statements. The policies described in the Company's fiscal 2007 annual MD&A are considered critical to the Company's business operations and the understanding of its results of operations. The application of these and other accounting policies are described in Note 1 to the annual consolidated financial statements. The preparation of these financial statements requires estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Initial Adoption of Accounting Policies

The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements, except as follows:

Comprehensive Income

The CICA issued section 1530 of the CICA Handbook, Comprehensive Income. The section is effective for fiscal years beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components.

Comprehensive income is the change in a company's net assets that results from transactions, events and circumstances from sources other than the company's shareholders. It includes items that would not normally be included in net earnings, such as:

- changes in the currency translation adjustment relating to self-sustaining foreign operations; and

- unrealized gains or losses on available-for-sale investments.

The CICA also made changes to section 3250 of the CICA Handbook, Surplus, and reissued it as section 3251, Equity. The section is also effective for fiscal years beginning on or after October 1, 2006. The changes in how to report and disclose equity and changes in equity are consistent with the new requirements of section 1530, Comprehensive Income.

Financial Instruments - Recognition and Measurement

The CICA issued section 3855 of the CICA Handbook, Financial Instruments - Recognition and Measurement. The section is effective for fiscal years beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that:

- all financial assets be measured at fair value, with some exceptions such as loans and investments that are classified as held to maturity;

- all financial liabilities be measured at fair value if they are derivatives or classified as held for trading purposes. Other financial liabilities are measured at their carrying value; and

- all derivative financial instruments be measured at fair value, even when they are part of a hedging relationship.

The CICA has also reissued section 3860 of the CICA Handbook as section 3861, Financial Instruments -- Disclosure and Presentation, which establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. These revisions come into effect for fiscal years beginning on or after October 1, 2006.

Hedges

The CICA issued section 3865 of the CICA Handbook, Hedges. The section is effective for fiscal years beginning on or after October 1, 2006, and describes when and how hedge accounting can be used.

Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between:

- changes in the fair value of a hedged item and a hedging item;

- changes in the cash flows attributable to a hedged item and a hedging item; or

- changes resulting from a risk exposure relating to a hedged item and a hedging item.

Hedge accounting makes sure that all gains, losses, revenues and expenses from the derivative and the item it hedges are recorded in the statement of operations in the same period.

As a result of implementing the above changes, the Company has:

- recorded its foreign exchange risk management derivatives at fair value as at the reporting date on the balance as "Other assets;"

- recorded the effective portion of its derivatives on the balance sheet as "Other Comprehensive income;"

- classified all of its cash equivalents and marketable securities as "Held-for-trading" and recorded those securities at their fair value as at the reporting date, with changes in fair value being recognized in income immediately; and

- classified its long-term liabilities as "Other liabilities," which are recorded at amortized cost using the effective interest method.

As a result of adoption of the above policies, there was no material impact on the Statement of Operations.

Financial Instruments

The Company's use of financial instruments is largely limited to foreign exchange contracts, as described in Note 18 to the annual consolidated financial statements, and investment grade marketable securities, as described in Note 2 to the annual financial statements. At the end of Q3 fiscal 2008, the Company had committed with various financial institutions to sell US$15.0 million at an average rate of 1.0101 by October 2008.

Outstanding Share Data

The Company has an unlimited authorized number of shares. At the end of Q3 fiscal 2008, the issued number of shares was 10,734,290. Under the Employee and Director Stock Option Plan, the Company may grant up to 817,418 options, of which 407,319 were outstanding at the end of Q3 fiscal 2008.

Updated Guidance

Updated guidance provided by Management may be found in the Company's press release entitled "MOSAID Announces Third Quarter Results for Fiscal 2008 and Dividend" dated March 6, 2008.

Other MD&A Requirements

Additional information relating to the Company, including its Annual Information Form, is filed with SEDAR (available for review at www.sedar.com).

Business Risks and Uncertainties

As described in the "Risk Management" section included in the Company's annual MD&A for the year ended April 30, 2007, numerous factors could cause the Company's results to differ materially from those in forward-looking statements. These factors did not change significantly in the third quarter of fiscal 2008.

Dated this 6th day of March 2008.



MOSAID Technologies Incorporated
Unaudited Consolidated Financial Statements
For the Quarter Ended January 31, 2008


Notice required under National Instrument 51-102, "Continuous Disclosure
Obligations" Part 3.3(3) (a).

The attached consolidated financial statements have been prepared by
Management of MOSAID Technologies Incorporated and have not been reviewed
by an auditor.



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

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

Revenues $13,992 $13,830 $38,113 $47,777

Operating expenses
Patent portfolio management 1,270 1,191 3,588 3,107
Patent licensing and
litigation 3,233 1,990 8,382 5,697
Research and development 657 331 1,748 846
General and administration 1,118 1,669 3,276 5,152
Foreign exchange (gain) loss (160) (36) 515 (129)
Special committee 35 840 147 1,964
--------------------------------------------------------------------------
6,153 5,985 17,656 16,637
--------------------------------------------------------------------------

Pro forma income from
operations 7,839 7,845 20,457 31,140
Net interest income 605 580 1,568 1,840
--------------------------------------------------------------------------
Pro forma income before
income tax 8,444 8,425 22,025 32,980
Income tax expense 3,004 2,939 7,879 11,504
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Pro forma income (Note 6) $5,440 $5,486 $14,146 $21,476
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Pro forma earnings per share
Basic $0.50 $0.50 $1.28 $1.93
Diluted $0.50 $0.49 $1.27 $1.90

Weighted average number
of shares
Basic 10,892,593 10,992,524 11,042,957 11,113,973
Diluted 10,963,060 11,204,923 11,154,782 11,329,671

See accompanying Notes to the Consolidated Financial Statements



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

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

Revenues $13,992 $13,830 $38,113 $47,777

Operating expenses
Patent portfolio management 1,270 1,191 3,588 3,107
Patent licensing and
litigation 3,233 1,990 8,382 5,697
Research and development 657 331 1,748 846
General and administration 1,118 1,669 3,276 5,152
Foreign exchange loss (gain) 1,983 (36) (3,760) (129)
Restructuring - - 19 -
Special committee 35 840 147 1,964
Stock-based compensation 162 169 397 487
Patent amortization and
imputed interest 3,133 494 9,969 1,051
--------------------------------------------------------------------------
11,591 6,648 23,766 18,175
--------------------------------------------------------------------------

Income from operations 2,401 7,182 14,347 29,602
Net interest income (Note 3) 605 580 1,568 1,840
--------------------------------------------------------------------------
Income before income tax expense
and discontinued operations 3,006 7,762 15,915 31,442
Income tax expense 4,297 2,812 8,973 12,188
--------------------------------------------------------------------------
(Loss) income before
discontinued operations (1,291) 4,950 6,942 19,254
Discontinued operations income
(loss) (net of tax) (Note 5) 71 (656) 6,107 (3,588)
--------------------------------------------------------------------------
Net (loss) income (1,220) 4,294 13,049 15,666
Dividends 2,720 2,748 8,278 8,345
Normal course issuer bid 2,529 - 4,947 6,582
Retained earnings,
beginning of period 23,194 9,069 16,901 9,876
--------------------------------------------------------------------------
Retained earnings,
end of period $16,725 $10,615 $16,725 $10,615
--------------------------------------------------------------------------

Earnings per share (Note 4)
Basic - before
discontinued operations ($0.12) $0.45 $0.63 $1.73
Diluted - before
discontinued operations ($0.12) $0.44 $0.62 $1.70

Basic - net earnings ($0.11) $0.39 $1.18 $1.41
Diluted - net earnings ($0.11) $0.38 $1.17 $1.38

Weighted average number
of shares
Basic 10,892,593 10,992,524 11,042,957 11,113,973
Diluted 10,963,060 11,204,923 11,154,782 11,329,671

See accompanying Notes to the Consolidated Financial Statements



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

As at As at
January 31, 2008 April 30, 2007
(unaudited) (audited)
------------------------------------------------------------------------

Current Assets
Cash and cash equivalents $17,412 $23,396
Marketable securities 33,417 26,876
Accounts receivable 7,477 12,626
Prepaid expenses 426 618
Future income taxes recoverable 10,278 10,278
Other asset 38 -
------------------------------------------------------------------------
69,048 73,794

Capital assets 1,093 1,067
Acquired intangibles 72,484 76,823
Long-term receivables 1,734 1,734
Goodwill - 1,786
Long-term assets held for sale 5,214 7,028
Future income taxes recoverable 19,416 24,468
------------------------------------------------------------------------
$168,989 $186,700
------------------------------------------------------------------------
------------------------------------------------------------------------

Current Liabilities
Accounts payable and accrued liabilities $5,741 $16,091
Income tax payable 1,817 -
Deferred revenue 355 542
Mortgage payable - 4,346
Current portion of other
long-term liabilities 7,295 5,239
------------------------------------------------------------------------
15,208 26,218
Other long-term liabilities 33,808 38,313
------------------------------------------------------------------------

49,016 64,531
------------------------------------------------------------------------

Shareholders' Equity (Note 2)
Share capital 100,502 102,276
Contributed surplus 2,708 2,992
Retained earnings 16,725 16,901
Accumulated other comprehensive income 38 -
------------------------------------------------------------------------
119,973 122,169
------------------------------------------------------------------------
$168,989 $186,700
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying Notes to the Consolidated Financial Statements



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

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

Operating
(Loss) income before
discontinued operations ($1,291) $4,950 $6,942 $19,254
Items not affecting cash
Amortization 2,431 527 7,181 1,253
Stock option expense 162 387 398 1,066
Loss on disposal of
capital assets - 142 - 142
Future income tax recoverable 1,785 (512) 5,052 4,129
--------------------------------------------------------------------------
--------------------------------------------------------------------------
3,087 5,494 19,573 25,844
Change in non-cash working
capital items from
continuing operations (240) (8,158) (6,259) (15,270)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2,847 (2,664) 13,314 10,574
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Investing
Acquisition of capital assets
and acquired intangibles (77) (3,649) (2,744) (17,199)
Acquisition of short-term
marketable securities (35,147) (31,832) (116,554) (77,982)
Proceeds on disposal/
maturity of short-term
marketable securities 39,458 18,925 110,013 81,674
--------------------------------------------------------------------------
4,234 (16,556) (9,285) (13,507)
--------------------------------------------------------------------------

Financing
Repayment of mortgage (4,216) (62) (4,346) (182)
Long-term liabilities 2,355 (555) (2,449) 11,678
Repurchase of shares (5,459) - (9,960) (9,997)
Dividends (2,720) (2,748) (8,278) (8,345)
Issue of common shares 713 379 2,639 1,170
--------------------------------------------------------------------------
(9,327) (2,986) (22,394) (5,676)
--------------------------------------------------------------------------

Net cash (outflow) from
continuing operations (2,246) (22,206) (18,365) (8,609)
Net cash inflow from
discontinued operations 608 5,658 12,381 4,538
--------------------------------------------------------------------------
Net cash (outflow) (1,638) (16,548) (5,984) (4,071)
Cash and cash equivalents,
beginning of period 19,050 28,019 23,396 15,542
--------------------------------------------------------------------------
Cash and cash equivalents,
end of period $17,412 $11,471 $17,412 $11,471
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See accompanying Notes to the Consolidated Financial Statements



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

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

Net (loss) income ($1,220) $4,294 $13,049 $15,666

Other Comprehensive income,
net of tax:

Gains and losses on
derivatives designated
as cash flow hedges (757) - 900 -
Gains and losses on
derivatives designated
as cash flow hedges in prior
periods transferred to net
income in the current period (420) - (862) -
--------------------------------------------------------------------------
Change in gains and losses on
derivatives as cash
flow hedges (1,177) - 38 -
--------------------------------------------------------------------------

Comprehensive (loss) income ($2,397) $4,294 $13,087 $15,666
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See accompanying Notes to the Consolidated Financial Statements


MOSAID TECHNOLOGIES INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Quarter ended January 31, 2008

(tabular dollar amounts in thousands of Canadian Dollars, except per share amounts)

1. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with Canadian generally accounting principles (GAAP) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP 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 30, 2008.

The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements, except as follows:

Comprehensive Income

The CICA issued section 1530 of the CICA Handbook, Comprehensive Income. The section is effective for fiscal years beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components.

Comprehensive income is the change in a company's net assets that results from transactions, events and circumstances from sources other than the company's shareholders. It includes items that would not normally be included in net earnings, such as:

- changes in the currency translation adjustment relating to self-sustaining foreign operations; and

- unrealized gains or losses on available-for-sale investments.

The CICA also made changes to section 3250 of the CICA Handbook, Surplus, and reissued it as section 3251, Equity. The section is also effective for fiscal years beginning on or after October 1, 2006. The changes in how to report and disclose equity and changes in equity are consistent with the new requirements of section 1530, Comprehensive Income.

Financial Instruments - Recognition and Measurement

The CICA issued section 3855 of the CICA Handbook, Financial Instruments - Recognition and Measurement. The section is effective for fiscal years beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that:

- all financial assets be measured at fair value, with some exceptions such as loans and investments that are classified as held to maturity;

- all financial liabilities be measured at fair value if they are derivatives or classified as held for trading purposes. Other financial liabilities are measured at their carrying value; and

- all derivative financial instruments be measured at fair value, even when they are part of a hedging relationship.

The CICA has also reissued section 3860 of the CICA Handbook as section 3861, Financial Instruments - Disclosure and Presentation, which establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. These revisions come into effect for fiscal years beginning on or after October 1, 2006.

Hedges

The CICA issued section 3865 of the CICA Handbook, Hedges. The section is effective for fiscal years beginning on or after October 1, 2006, and describes when and how hedge accounting can be used.

Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between:

- changes in the fair value of a hedged item and a hedging item;

- changes in the cash flows attributable to a hedged item and a hedging item; or

- changes resulting from a risk exposure relating to a hedged item and a hedging item.

Hedge accounting makes sure that all gains, losses, revenues and expenses from the derivative and the item it hedges are recorded in the statement of operations in the same period.

As a result of adopting the above, the Company has:

- recorded its foreign exchange risk management derivatives at fair value as at the reporting date on the balance sheet as "Other assets;"

- recorded the effective portion of its derivatives on the balance sheet in "Accumulated other comprehensive income;"

- classified all of its cash equivalents and marketable securities as "Held-for-trading" and recorded those securities at their fair value as at the reporting date, with changes in fair value being recognized in income immediately;

- classified its long-term liabilities as "Other liabilities," which are recorded at amortized cost using the effective interest method; and

- reported comprehensive income and its components and accumulated other comprehensive income and its components in the Notes to the consolidated financial statements.

As a result of adoption of the above policies, there was no material impact on the Statement of Operations.

2. Shareholders' equity and other comprehensive income



The following are the changes in shareholders' equity for the nine months
ended January 31, 2008:

--------------------------------------------------------------------------

Common Common Contri- Retained Accumu- Total
shares shares buted earnings lated ($)
(number) ($) surplus ($) other
($) compre-
hensive
income
($)
--------------------------------------------------------------------------
Balance at
April 30,
2007 11,055,376 $102,276 $2,992 $16,901 $- $122,169
--------------------------------------------------------------------------
Net income - - - 13,049 - 13,049
--------------------------------------------------------------------------
Dividends - - - (8,278) - (8,278)
--------------------------------------------------------------------------
Employee
Stock
Option
Program 213,183 3,195 (599) - - 2,596
--------------------------------------------------------------------------
Employee
Share
Purchase
Program 4,731 44 - - - 44
--------------------------------------------------------------------------
Stock-based
compensation - - 315 - - 315
--------------------------------------------------------------------------
Normal course
issuer bid (539,000) (5,013) (4,947) - (9,960)
--------------------------------------------------------------------------
Unrealized
derivative
gains on cash
flow hedges net - - - - 38 38
--------------------------------------------------------------------------
Balance at
January 31,
2008 10,734,290 $100,502 $2,708 $16,725 $38 $119,973
--------------------------------------------------------------------------


3. Net Interest Income

Net interest income comprises the following:

Quarter Ended January 31, Nine Months Ended January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

Interest income $663 $670 $1,799 $2,113
Interest expense 58 90 231 273
--------------------------------------------------------------------------
$605 $580 $1,568 $1,840
--------------------------------------------------------------------------
--------------------------------------------------------------------------


4. Earnings per Share

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

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

(Loss) income before
discontinued operations ($1,291) $4,950 $6,942 $19,254
Discontinued operations
(net of tax) 71 (656) 6,107 (3,588)
--------------------------------------------------------------------------
Net (loss) income ($1,220) $4,294 $13,049 $15,666
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Weighted average number of
common shares outstanding 10,892,593 10,992,524 11,042,957 11,113,973
Net effect of stock options 70,467 212,399 111,825 215,698
--------------------------------------------------------------------------
Weighted average diluted
number of common
shares outstanding 10,963,060 11,204,923 11,154,782 11,329,671
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Earnings per share
Basic - before
discontinued operations ($0.12) $0.45 $0.63 $1.73
Diluted - before
discontinued operations ($0.12) $0.44 $0.62 $1.70

Basic - net income ($0.11) $0.39 $1.18 $1.41
Diluted - net income ($0.11) $0.38 $1.17 $1.38


For the quarter ended January 31, 2008 and January 31, 2007, 267,031 and 11,000 options respectively were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company's common stock during this period and were therefore anti-dilutive.

For the nine months ended January 31, 2008 and January 31, 2007, 86,128 and 19,000 options respectively were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company's common stock during this period and were therefore anti-dilutive.

There were 407,319 and 620,673 options issued and outstanding as at January 31, 2008 and January 31, 2007 respectively.



5. Discontinued operations

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

Revenues $423 $4,905 $763 $13,531

Expenses
Labour and materials - 1,270 - 3,663
Research and development 87 3,368 1,487 10,391
Selling and marketing 24 1,701 1,030 5,031
Bad debts - - - 88
Restructuring - - 166 -
--------------------------------------------------------------------------
111 6,339 2,683 19,173
--------------------------------------------------------------------------

Gain (loss) from operations 312 (1,434) (1,920) (5,642)
Gain on sale of assets - - 9,295 -
--------------------------------------------------------------------------
Gain (loss) earnings before tax 312 (1,434) 7,375 (5,642)
Income tax expense (recovery) 241 (778) 1,268 (2,054)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Discontinued operations
(net of tax) $71 ($656) $6,107 ($3,588)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


6. Reconciliation of pro forma income with GAAP net income

Quarter Ended Nine Months Ended
January 31, January 31,
2008 2007 2008 2007
--------------------------------------------------------------------------

GAAP net (loss) income ($1,220) $4,294 $13,049 $15,666
Add (deduct):
Stock-based compensation 162 169 397 487
Patent amortization and
imputed interest 3,133 494 9,969 1,051
Restructuring - - 19 -
Foreign exchange loss (gain) 2,143 - (4,275) -
Income tax expense -
for the above items (1,876) (127) (2,075) 684
Future income tax revaluation 3,169 - 3,169 -
Discontinued operations
(net of tax) (71) 656 (6,107) 3,588
--------------------------------------------------------------------------
Pro forma income $5,440 $5,486 $14,146 $21,476
--------------------------------------------------------------------------
--------------------------------------------------------------------------


7. 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 Human Resources Committee.

The Company employs a fair value method of accounting for all options issued to employees or directors on or after April 27, 2002. The fair value of options issued in the quarter was calculated using the Black-Scholes option pricing model and the following assumptions:



Quarter Ended January 31,
2008 2007
-------------------------------------------------------------------------
Risk free interest rate 3.70% 4.05%
Expected life in years 5.5 5.5
Expected dividend yield 6.13% 3.6%
Volatility 57.25% 60.48%


For the quarter ended January 31, 2008, the Company did not issue deferred share units in lieu of options to directors and officers of the Company under its Deferred Share Unit Plan. Deferred share units vest evenly over a four year period. Deferred share units do not have an exercise price and can only be settled using cash consideration.

8. Business Segment Information

The Company operates in one business segment as a developer and licensor of semiconductor and communications technologies.

Contact Information

  • MOSAID Technologies Inc.
    Michael Salter
    Director, Investor Relations and Corporate Communications
    613-599-9539 x1205
    salter@mosaid.com