MOSAID Reports Results for Fourth Quarter and Year-End Fiscal 2009 and Dividend

The Company implemented a Restricted Share Unit (RSU) Plan (RSU Plan) for certain employees in October 2008, and granted 10,000 RSUs under the RSU Plan during the quarter ended April 30, 2009. The RSUs vest over three years. Under the RSU Plan, units are settled using common shares of the Company at no additional cost to the employee. During fiscal year 2009, the Company funded an independent trustee to purchase the required shares and to provide custodial services. The Company recognizes compensation expense, as measured by the purchase price of the shares, over the vesting period.

9. Financial Instruments

The Company has exposure to the following risks from its use of financial instruments: credit risk, market and liquidity risk.

Credit Risk

Credit risk is the risk of financial loss to the Company if a licensee or counter-party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's accounts receivable and its foreign exchange contracts.

The Company provides credit to certain licensees in the normal course of its operations. The Company's credit risk review includes performing periodic credit evaluations of its most significant licensees. In certain circumstances, the Company may utilize letters of guarantee or credit insurance to mitigate certain credit risks. The Company's licensees are, for the most part, large national and international public companies. Due to the nature of the Company's operations, provisions for doubtful accounts are made on a licensee-by- licensee basis, based upon on-going review of licensee financial status.

Many of the Company's current licensees operations are focused in the semiconductor industry. The semiconductor industry, particularly in the DRAM memory segment has been suffering for some time from economical difficulties due to pricing pressure as a result of over supply of memory devices. During Q3 and Q4 fiscal 2009 Qimonda AG, a company representing more than 10% of the Company's consolidated revenues, defaulted on its payments due to the Company. The Company has in place a credit insurance policy which covers 90% of those payments and the following two quarterly payments. As a result, the Company has recorded as revenue 90% of the current amount due from Qimonda AG, which is expected to be recovered via insurance.

Also, during Q3 and Q4 fiscal 2009, two other licensees defaulted on payments due. The Company has recorded the amounts as accounts receivable but has deferred the related revenue due to the collectibility issues. At this time, management has not recorded an allowance for doubtful account.

Due to the long-term nature of the Company's licensing arrangements and the prolonged downturn in the semiconductor industry, in certain circumstances, the Company may not be able to obtain at reasonable cost credit insurance or other forms of credit risk migration instruments. A default of the remaining payments by one of the Company's major licensees could have a materially adverse impact on the Company's future revenues, earnings, cash flow and financial position.

The Company limits its exposure to credit risk from counter-parties to derivative instruments by dealing only with major financial institutions. Management does not expect any counter-parties to fail to meet their obligations.

The Company invests its excess cash in investment grade securities with a maturity date not exceeding 12 months. The Company relies upon the credit rating of the counter-party to limit its credit risk. The Company does not invest in asset-backed commercial paper.

The carrying amount of financial assets represents the maximum credit exposure. The maximum credit exposure to credit risk at the reporting date was:


                                 2009        2008
-------------------------------------------------
Cash and cash equivalents     $32,899     $22,133
Marketable securities          18,888      36,246
Accounts receivable            10,434      12,304
Other asset (liability)           446        (318)
-------------------------------------------------
-------------------------------------------------
                              $62,667     $70,365
-------------------------------------------------
-------------------------------------------------


The aging of accounts receivable at the reporting date was:

                                 2009        2008
-------------------------------------------------
Current                        $2,676     $12,101
Past due                        7,758         203
-------------------------------------------------
-------------------------------------------------
                              $10,434     $12,304
-------------------------------------------------
-------------------------------------------------


As previously noted, the Company believes there are minimal requirements
for an allowance for doubtful accounts.

Marketable securities comprise the following:

                                 2009        2008
-------------------------------------------------
Bonds & debentures            $13,099     $18,980
Discount notes                  5,789      17,266
-------------------------------------------------
-------------------------------------------------
                              $18,888     $36,246
-------------------------------------------------
-------------------------------------------------

The carrying values of bonds and debentures and discount notes include accrued interest and approximate market value. Investments in bonds and debentures and discount notes represent holdings in corporate and government short-term marketable securities as at April 30, 2009 and April 30, 2008 and have a maturity date of one year or less.

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company's income or the value of its holding of financial instruments.

Foreign Exchange Risk

The Company's revenues are denominated primarily in U.S. dollars, giving rise to exposure to market risks from changes in foreign exchange rates. The Company is exposed to foreign currency fluctuations on its accounts receivable and future cash flows related to licensing arrangements denominated in U.S. dollars, as well as certain operating expenses and its other long-term liabilities obligations.

The Company's foreign exchange risk management includes the use of foreign exchange forward contracts to fix the exchange rates on certain foreign currency exposures. The Company's objective is to manage and control exposures and secure the Company's profitability on existing contracts and anticipated future cash flows. The Company does not utilize derivative instruments for trading or speculative purposes. The Company formally documents all relationships between derivative instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific firm contractually related commitments or anticipated transactions.

The Company also formally assesses, both at the inception and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in off-setting changes in fair values or cash flows of hedged items. Hedge ineffectiveness is insignificant.

The forward foreign exchange contracts primarily require the Company to sell U.S. dollars for Canadian dollars at contractual rates. The Company had the following forward exchange contracts.


(In thousands of dollars)                                           2008

                                                Equivalent to
Type     Notional    Currency     Maturity       CDN dollars     Fair Value
---------------------------------------------------------------------------
Sell       $6,400       USD   less than 3 months        $6,222                $(141)
Sell            $18,700              USD            3-12  months                $18,656                $(123)
Buy                $4,000              USD            3-12  months                  $4,117                  $(54)
---------------------------------------------------------------------------
                                                                                                                                      $(318)
---------------------------------------------------------------------------


(In  thousands  of  dollars)                                                                                      2009

                                                                                                    Equivalent  to
Type          Notional        Currency            Maturity                  CDN  dollars    Fair  Value
---------------------------------------------------------------------------
Sell              $8,500              USD      less  than  3  months          $10,576                $289
Sell            $18,600              USD            3-12  months                  $23,099                $640
Buy                $5,000              USD      less  than  3  months          $(6,328)            $(240)
Buy                $5,000              USD            3-12  months                  $(6,114)            $(117)
Buy                $5,000              USD    greater  than  12  months    $(6,093)            $(126)
---------------------------------------------------------------------------
                                                                                                                                        $446
---------------------------------------------------------------------------

 
A one cent strengthening (weakening) of the U.S. dollar against the Canadian dollar would have decreased (increased) other comprehensive income by approximately $171,000; pro forma income would have increased (decreased) by approximately $104,000.
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