UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION





WASHINGTON,
D.C. 20549





FORM
10-K





/x/ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009.Or/
      /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.Commission
      File No. 0-25662ANADIGICS,
      Inc.(Exact
      name of registrant as specified in its charter)Delaware
            22-2582106(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)141
      Mt. Bethel Road, Warren, New Jersey
            07059(Address
      of principal executive offices)
            (Zip
      Code)(908)
      668-5000(Registrant's
      telephone number, including area
code)





Securities
registered pursuant to Section 12(b) of the Act: None





Securities
registered pursuant to Section 12(g) of the Act:


Common
Stock, $0.01 par value





The above
securities are registered on the NASDAQ Global Market





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes / / No /X/





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes / / No /X/





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes /X/ No / /





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes / / No /
/





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated in Part III of this Form 10-K or any amendment to this Form 10-K. /
/





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer, or a smaller reporting company.
See definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (check one): Large
accelerated filer / / Accelerated filer / X / Non-accelerated filer (Do not
check if a smaller reporting company) / /  Smaller reporting company /
/





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes / / No /X/





The
aggregate market value of the voting common equity held by non-affiliates of the
registrant as of July 4, 2009 was approximately $254 million, based upon the
closing sales price of the registrant’s common equity as quoted on the NASDAQ
Global Market on such date.





The
number of shares outstanding of the registrant's common stock as of February 28,
2010 was 65,156,283 (excluding 114,574 shares held in treasury).





Documents
incorporated by reference: Definitive proxy statement for the registrant’s 2010
annual meeting of shareholders (Part III).











TABLE OF
CONTENTS





PART
      IItem
      1:
            BusinessItem
      1A:
            Risk FactorsItem
      1B:
            Unresolved Staff CommentsItem
      2:
            PropertiesItem
      3:
            Legal ProceedingsItem
      4:
            Submission of Matters to a Vote of Security
      HoldersPART
      IIItem
      5:
            Market for Registrant’s Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity
      SecuritiesItem
      6:
            Selected Financial
  DataItem
      7:
            Management’s
      Discussion and Analysis of Financial Condition andResults
      of OperationsItem
      7A:
            Quantitative and Qualitative Disclosures About Market
      RiskItem
      8:
            Financial Statements and Supplementary
      DataItem
      9:
            Changes
      in and Disagreements with Accountants on Accounting andFinancial
      DisclosureItem
      9A:
            Controls and
  ProceduresItem
      9B:
            Other InformationPART
      IIIItem
      10:
            Directors, Executive Officers and
      Corporate GovernanceItem
      11:
            Executive
CompensationItem
      12:
            Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder MattersItem
      13:
            Certain Relationships and Related
      Transactions and Director IndependenceItem
      14:
            Principal Accounting Fees and
      ServicesPART
      IVItem
      15:
            Exhibits, Financial Statement
    Schedules








PART
I





ITEM 1. BUSINESS.





Overview





ANADIGICS,
Inc. (“we” or the “Company”) is a leading provider of semiconductor solutions in
the growing broadband wireless and wireline communications
markets.  Our products include power amplifiers (PAs), tuner
integrated circuits, active splitters, line amplifiers and other components,
which can be sold individually or packaged as integrated radio frequency (RF)
and front end modules.  We believe that we are well-positioned to
capitalize on the high growth voice, data and video segments of the broadband
wireless and wireline communications markets.  We offer third
generation (3G) products that use the Wideband Code-Division Multiple Access
(W-CDMA) and Enhanced Data Rates for Global System for Mobile Communication
Evolution (EDGE) standards and combinations of W-CDMA and EDGE platforms
(WEDGE), beyond third generation (3.5G) products that use the High Speed Packet
Access (HSPA, inclusive of downlink and uplink) and Evolution Data Optimized
(EVDO) standards, fourth generation (4G) products for Worldwide Interoperability
for Microwave Access (WiMAX) and Long Term Evolution (LTE), Wireless Fidelity
(WiFi) products that use the 802.11 a/b/g and 802.11 n (Multiple Input Multiple
Output (MIMO)) standards, cable television (CATV) cable modem and set-top box
products, CATV infrastructure products and Fiber-To-The-Premises (FTTP)
products.





Our
business strategy focuses on developing RF front end solutions for our customers
and partnering with industry-leading wireless and wireline chipset providers to
incorporate our solutions into their reference designs.  Our
integrated solutions enable our customers to improve RF performance, power
efficiency, reliability, time-to-market and the integration of chip components
into single packages, while reducing the size, weight and cost of their
products.




We were
incorporated in Delaware in 1984. Our corporate headquarters are located at 141
Mt. Bethel Road, Warren, New Jersey 07059, and our telephone number at that
address is 908-668-5000.





We
believe our business will benefit in the long-term from two key factors: (1)
fast growth in the markets for 3G, 3.5G, 4G, WiFi and CATV products and (2) an
increased dollar content of our solutions within the products in these end
markets. We believe that the combination of these factors will enable us to
outpace the overall end product unit growth in these broadband wireless and
wireline communications markets.  For example, additional PAs with
higher performance levels and integration are required in 3G and 3.5G wireless
handsets as compared to prior standards.  The complexity of 3G, 3.5G
and 4G designs coupled with our selection in several leading reference designs
allows us to capitalize on the growth in the 3G, 3.5G and 4G markets. In the
WiFi market, our business will benefit from both increasing shipments of
WiFi-enabled handheld devices as well as the growing adoption of dual-band
802.11 a/b/g solutions and the 802.11 n MIMO standard, which commonly use
multiple PAs with each chipset.  We are positioning our CATV set-top
box business to capitalize on the growth of home gateway products, which provide
multi-function capabilities such as digital video recording (DVR), high
definition television (HDTV) reception, multi-room access and Internet
connectivity, by expanding our offering of active splitter
products.  In addition, we believe that the new generation of cable
modems based on the Data Over Cable Service Interface Specification 3.0
(DOCSIS-3.0) standard will increase the addressable market for our upstream
amplifiers.  We anticipate that our new hybrid line amplifier products
will expand our addressable share of the CATV infrastructure market and we
further believe that our infrastructure business will continue to benefit from
the adoption of 1 GHz CATV systems worldwide and from RF amplifiers being used
in FTTP optical networks such as Verizon Communication Inc.’s (Verizon)
FiOS.





We
continue to focus on leveraging our technological advantages to remain a leading
supplier of innovative semiconductor solutions for broadband wireless and
wireline communications.  We believe our patented InGaP-plus technology, which
combines the bipolar technology of a PA (HBT PA) with the surface device
technology of an RF active switch (pHEMT) on the same die, provides us with a
competitive advantage in the marketplace.  Additionally, we believe
technologies such as High Efficiency at Low Power (HELP-TM, HELP2-TM and
HELP3-TM, collectively HELP) power amplifiers provide our customers a
competitive advantage by enabling their 3G, 3.5G and 4G devices to consume less
battery power and deliver longer talk time than comparable products in their
markets.





Our
six-inch diameter Gallium Arsenide (GaAs) wafer fabrication facility (fab)
located at our corporate headquarters in Warren, New Jersey, has been
operational since 1999.  During 2009, we announced a hybrid
manufacturing strategy whereby we entered into a strategic foundry agreement
with WIN Semiconductors to supplement our existing wafer fabrication capability
and allows for additional and flexible capacity without the requisite capital
investment.





Industry
Background





Wireless
3 and 3.5 G Market


The
number of wireless handsets designed for 3G and 4G standards like CDMA/EVDO,
WCDMA/HSPA and LTE is expected to grow faster than the overall market as these
standards become dominant over the next several years.  According to
Allied Business Intelligence (ABI), annual shipments of 3G and 4G handsets
forecast to grow from 503 million units in 2009 to 883 million units by 2013, a
75% increase in four years.  Shipments of 3G and 4G wireless modems
and other mobile broadband data devices are forecast to grow even more rapidly,
from 60 million units in 2009 to 239 million units in 2013, a four-fold increase
in four years.  As a qualified PA supplier to top-tier handset
manufacturers such as Research in Motion (“RIM”), LG Electronics (“LGE”) and
Samsung Electronics Co., Ltd we believe we are well positioned to benefit from
the continuing transition to 3G and 4G technologies.





Traditionally,
the chipset in a wireless handset required one or two power
amplifiers.  As wireless operators gained additional frequency
licenses to deploy 3G and 4G networks, requirements for mobile devices that can
operate in multiple bands has increased demand for power amplifiers in handsets,
datacards and wireless modems.  These wireless devices also require
PAs with higher power and better linearity to meet more demanding performance
specifications.





The key
drivers of growth in the wireless handset market are:





·
            Deployment
      of 3G and 4G networks and services.


·
            New
      subscriber additions in emerging
markets.


·
            New
      features and applications to drive replacements in established
      markets.


·
            Convergence
      of voice, data and video services.





Wireless
handsets and mobile data devices utilize a semiconductor chipset to enable
communication with the network.  Key components of a wireless
semiconductor chipset include a baseband, transceiver and one or more power
amplifiers (PAs).  Each PA boosts the transmitter RF output to deliver
enough signal power to enable connection with the radio access network for voice
and data throughput.  As additional features and functionality are
incorporated into wireless handsets to leverage the higher network data rates to
enable applications such as high speed data and streaming video services,
increasing demands are placed on the handset battery, thereby reducing battery
life.  The high-performance PA is a critical component in the handset
because it directly affects battery life and, consequently, available talk
time.  We believe our differentiated InGaP-plus process and design
technologies such as HELPTM provide a competitive advantage by enabling us to
provide PAs that consume less battery power and extend talk time.





In
addition to wireless handsets and data cards, 3G and 3.5G capabilities are
increasingly being embedded in notebook computers.  We are a leading
participant in this market through the use of our power amplifiers in Qualcomm
reference designs, and in embedded wireless modules manufactured by leading
providers to this growing market.





Wireless
4G


As a
fourth-generation wireless standard, WiMAX continues to gain momentum worldwide,
as commercial mobile broadband wireless services that use this technology
continue to be introduced and gain subscribers. Clearwire Corporation is well on
its way to providing nationwide service in the United States; UQ Communications
Inc. plans to support service over all of Japan within three years; and
successful service launches in Korea, Russia, Malaysia and Taiwan all indicate
the growth potential of this technology. We currently ship WiMAX PAs to several
customers, and believe that our relationships with leading WiMAX equipment and
chipset vendors have positioned us to be one of the market-leading providers of
WiMAX PAs in the world.





Long Term
Evolution (LTE) is the 4G standard developed by the 3GPP consortium and
supported by the Global mobile Suppliers Association (GSA), one of the largest
wireless industry groups. A survey by the GSA in February 2010 identified 59 LTE
network commitments in 28 countries, with 20 networks planning to begin
commercial LTE service in 2010. The GSA expects additional operators to announce
their LTE plans during 2010. According to the GSA, LTE is needed to accommodate
the dramatic traffic growth anticipated for data, and to fully address the mass
market. LTE will significantly boost network throughputs, reduce latency,
improve spectrum and deliver operational efficiencies and performance; the next
step in the user experience. ANADIGICS long-standing business relationships with
key players in the LTE ecosystem makes us well-positioned to benefit from the
developing demand for LTE-capable power amplifiers as more LTE networks are
deployed.





Wireless
Fidelity (WiFi)


The
market for electronic devices with WiFi, or wireless LAN, networking
capabilities continues to grow.  ABI Research forecasts that shipments
of WiFi-enabled devices will grow from 600 million units in 2009 to over 1.5
billion units in 2013, representing a 26% compounded annual growth rate over
that period of time. WiFi functionality in notebook and netbook computers has
become standard, and WiFi is now being embedded in other consumer electronic
devices such as cameras, printers, audio devices, mobile phones, mobile internet
devices and gaming consoles. Our WiFi power amplifier, front end module (FEM)
and front end integrated circuit (FEIC) business stands to benefit from the
following two market trends, in particular:


(i) With
the advent of the 802.11n standard in 2007, WiFi products for mobile computing
have expanded into MIMO architectures, which require multiple PAs per product.
ABI estimates that in 2009 about 46% of all WiFi integrated circuits shipped
conformed to the 802.11n standard, and forecasts that market share to reach 85%
by 2013. This trend suggests that the growth rate of PA demand may significantly
outpace that of WiFi products in general.  We believe that in addition
to an increase in demand for PAs, there will also be an increase in demand for
FEMs or FEICs that include multiple PAs.


(ii)
Annual shipments of WiFi-enabled cellular handsets and mobile internet devices
are expected to grow from 142 million units in 2009 to 559 million units in
2013, according to ABI.  We believe that a growing share of these
devices will require dual-band operation, representing a significant opportunity
for our new dual-band FEMs and FEICs.  These products offer high
levels of functional integration in small form factors which are necessary for
handheld applications.





We
continue to secure new RF front end sockets in next-generation reference designs
from leading WiFi chipset providers for a wide range of applications. Taking
into account the multiple-PA MIMO technology supported by the 802.11n standard
and the demand for small, integrated products for handheld applications, we
believe that our portfolio of differentiated products in these high-growth
market areas will allow us to benefit from the prevailing WiFi market
trends.





Cable
Set-Top Box and Cable Modem Markets


The
markets for CATV set-top boxes and cable modems are being shaped by several key
trends.  Set-top boxes are incorporating advanced functionality, to
leverage the convergence of voice, data and video services over the broadband
network, such as DVR, HDTV, wireless internet access, interactive services, home
networking and gaming.  These new features are driving demand for both
new and replacement set-top boxes, including high-end multi-function boxes
called gateways.  As a long-term supplier to Cisco Systems Inc.
(Cisco) and Motorola, Inc., we believe that we are well positioned to benefit
from these trends and we are offering new products with features tailored for
gateway boxes.  We also believe that the rollouts of DTV in China and
parts of Europe, and Verizon’s FiOS in the U.S., are contributing to sustained
demand for digital set-top boxes.





As the
cable modem market transitions to the new DOCSIS 3.0 standard, we believe it
will provide additional opportunity for our upstream amplifier
products.  The DOCSIS 3.0 standard uses multiple channels
simultaneously to provide wider bandwidth and higher data throughput than
previous technologies, and we believe that we are well positioned to support
this market opportunity.





CATV
Infrastructure and FTTP


We are a
leading supplier of 12V and 24V line amplifier radio frequency integrated
circuit (RFIC) amplifiers and drop amplifiers to the CATV infrastructure
market.  This market shows continuing demand for equipment upgrades as
a result of increasing CATV infrastructure bandwidth requirements, the need of
cable service providers to offer converged voice, data and video services over
their broadband networks, and the increased deployment of CATV fiber
nodes.  We are participating in these upgrades through our
collaboration with industry leaders, and as a result of the rollout of digital
cable in China and parts of Europe.  We are also offering new line
amplifier products in industry-standard packages that we believe will expand our
addressable market. Historically, we have enjoyed long product life cycles in
these markets.  Additionally, we are providing optical network RF
amplifiers in the FTTP market for use in systems such as Verizon’s FiOS, for
which deployments continue throughout the U.S.





Our
Strategy





Our
objective is creating value through innovative RF and Mixed Signal solutions
that enable instantaneous connectivity anytime, anywhere.  The key
elements of our strategy include:





·
            Focus on
      the high-growth end markets of broadband wireless and wireline.We
      target the fastest-growing and most sophisticated segments of the wireless
      and wireline communications markets. These segments offer the largest
      growth opportunity and the greatest opportunity for semiconductor
      manufacturers to extract value.





·
            Create
      innovative RF patented technology resulting in industry-leading products.Our longstanding reputation of innovation in process technology and
      design has resulted in best-in-class RF products. We consistently provide
      performance advantages that help our customers deliver differentiated
      products to market.





·
            Work
      closely with industry-leading customers and partners.We strive to
      develop close working relationships with industry leaders in the wireless
      and broadband markets. These relationships give us insight into the most
      important specifications for next-generation
  products.





·
            Build
      market share to improve economies of scale.Establishing our
      business as a leading technology enabler for the long-term involves
      responsible investment for future technologies supported by appropriate
      long-term return. Increased volumes are critical to semiconductor
      companies and consistent with long-term viability for our business.




·
            Provide
      additional and flexible capacity through foundries. Leveraging
      third-party foundry capabilities to supplement our existing wafer fab, and
      expand our ability to grow scale while limiting costly further capital
      investment in manufacturing.




·
            Focus on
      improving our financial model.We seek to increase our
      gross margins and profitability by focusing on those products and markets
      where we can achieve a strong market position by deploying our
      technological leadership.  We intend to focus on supplying
      products in the following markets for this purpose:  (1) 3G
      standards CDMA/EVDO, W-CDMA/HSPA and UMTS, (2) 4G standards LTE and WiMAX,
      (3) WiFi standards 802.11 a/b/g and 802.11 n, (4) CATV set-top boxes and
      cable modems, and (5) CATV and FTTP infrastructure
    amplifiers.





Products





We
classify our revenues based upon the end application of the product in which our
integrated circuits are used.  For the years ended December 31, 2007,
2008 and 2009, wireless accounted for approximately 56%, 60% and 68%
respectively, of our total net sales, while broadband accounted for
approximately 44%, 40% and 32%, respectively, of our total net
sales.





Wireless




Our
Wireless product line includes power amplifier modules for CDMA/EVDO, GSM/EDGE,
WCDMA/HSPA, LTE and other wireless technologies for mobile handsets and data
devices. The following table describes our principal products for these
applications:





Product
            ApplicationPower
      Amplifier (PA)
            Used
      in RF transmit chain of wireless handset, modem, datacard or embedded
      module to amplify uplink signal to base station.HELPTM
      PA Module   (multiple versions)
            ANADIGICS
      proprietary High Efficiency at Low Power PA design reduces average PA
      power consumption as much as 75% in CDMA/EVDO and W-CDMA/HSPA
      devices.ZeroICTM
      PA Module
            Unique
      InGaP PA design for specific Qualcomm CDMA/EVDO platforms includes
      switched RF path with zero current consumption to conserve battery life at
      lower power levels.Multi-band
      PA Modules
            Two
      or more PA’s in a single package enables device operation in multiple
      frequency bands at lower cost and with less board area compared to
      multiple single-band PA designs.




Broadband




Our
Broadband product line encompasses video and data telecommunications systems,
primarily consisting of CATV, WiFi and WiMAX applications.





The
following table outlines our principal CATV products and their
applications:





Product
            ApplicationCATV
      Set-Top Box and Cable Modem ProductsTuner
      Upconverters and
              Downconverters
            Used
      to perform signal amplification and frequency conversion in
      double-conversion video and data tuners.Active
      Splitters
            Used
      to split an incoming signal to feed multiple tuners.Integrated
      Tuners
            Used
      to integrate tuner upconverters, downconverters and synthesizers in a
      single package.Upstream
      Amplifiers
            Used
      to amplify and control the level of signals in the return
      path.





Product
            ApplicationCATV
      Infrastructure and FTTP ProductsLine
      Amplifiers
            Used
      to distribute RF signals from headends to subscribers.Drop
      Amplifiers
            Used
      to amplify RF signals at individual subscriber
  locations.Optical
      Network RF Amplifiers
            Used
      to amplify RF signals for FTTP and
FiOS.





The
following table sets forth information regarding our principal products in the
WiFi market:





Product
            ApplicationWiFi
      Products2.4
      GHz (802.11 b/g) PAs and Front-End ICs
            Used
      in wireless network interface cards (NIC), embedded notebook computers
      (mini-PCI) and access point (AP) applications to boost the transmit signal
      for increased range and data throughput.5
      GHz (802.11 a) PAs and Front-End ICs
            Used
      in wireless rich-media applications, such as streaming audio/video, to
      boost the transmit signal for increased range and data
      throughput.Dual
      Band (802.11 a/b/g) PAs and Front-End ICs
            Used
      in wireless network systems that require seamless transition between
      frequencies to mitigate interference and congestion.MIMO
      (802.11n) PAs and Front-End ICs
            Used
      in multimedia applications for higher data throughput and greater WiFi
      coverage.





The
following table sets forth information regarding our principal products in the
WiMAX market:





Product
            ApplicationWiMAX
      ProductsMobile
      WiMAX PAs
            PA
      modules used for mobility applications.Fixed
      Point WiMAX PAs
            PA
      modules used for point-to-point Central Premises Equipment (CPE)
      applications.





Marketing,
Sales, Distribution and Customer Support





We sell
our products primarily to our direct customers worldwide and have developed
close working relationships with leading companies in the broadband wireless and
wireline communications markets.  Additionally, we selectively use
independent manufacturers’ representatives and distributors to complement our
direct sales and customer support efforts.  Our relationships with our
distributors enable them to maintain local practices regarding inventories and
payment terms while supporting our growth in Asian wireless and global broadband
markets.  Working with distributors like World Peace Group and
Richardson Electronics, who have extensive sales networks, provides us access to
tier-one customers in these markets.  We believe this is critical to
our objective of expanding our customer base, especially as we expand our
product portfolio.





We
believe that the technical nature of our products and markets demands an
unwavering commitment to building and maintaining close relationships with our
customers.  Our sales and marketing staff, which is assisted by our
technical staff and senior management, visit prospective and existing customers
worldwide on a regular basis.  Our design and applications engineering
staff actively communicate with customers during all phases of design and
production.  We have highly specialized field application engineering
teams near our customers in Korea, Taiwan and China, as well as a system
application team in Denmark, which is located near key European handset original
equipment manufacturers (OEM’s) and chipset providers.  We believe
that these contacts are vital to the development of close, long-term working
relationships with our customers, and in obtaining regular forecasts, market
updates and information regarding technical and market trends.





We
believe that reference-design manufacturers in the broadband wireless and
wireline communications markets will continue to play an important role in the
future of these markets.  Therefore, we believe it is essential that
we maintain strong relationships in partnering with these companies to further
penetrate these market opportunities.





Process
Technology, Manufacturing, Assembly and Testing




We
design, develop and manufacture RFICs primarily using GaAs compound
semiconductor substrates with various process technologies, Metal Semiconductor
Field Effect Transistors (MESFET), Pseudomorphic High Electron Mobility
Transistors (pHEMT), and Heterojunction Bipolar Transistors
(HBT).  Our patented technology, which utilizes InGaP-plus, combines InGaP HBT and
pHEMT processes on a single substrate, enabling us to integrate the PA function
and the RF active switch function on the same die.





Manufacturing




We
fabricate substantially all of our ICs in our six-inch diameter GaAs wafer fab
in Warren, New Jersey. The Warren fab was first certified as ISO 9001 compliant
in December 1993.  Since that time, we have updated our compliance to
the ISO 9001:2000 upgrade of this standard.  In 2004, we also received
ISO 14001 certification and remain certified.





During
2009, we announced a hybrid manufacturing strategy whereby we entered into a
strategic foundry agreement with WIN Semiconductors to supplement our existing
wafer fabrication capability and allow for additional and flexible capacity
without the requisite capital investment. We have begun developing certain new
products that will use this additional production and process
capability.





Assembly




Fabricated
GaAs wafers are shipped to contractors in Asia for packaging. Certain processes
cannot be easily or economically integrated onto a single die, and consequently
multi-chip modules that combine multiple die within a single package are now
required, enabling the selection of the optimal process technology for each IC
within the package.  This provides enhanced integration at the
sub-system level and these solutions generate significant size reductions in
wireless handset component circuitry.





Modules
allow our customers to get their product to market more rapidly at a lower
overall end product cost due largely to the reduced parts count and reduction in
required engineering effort.  We believe we are well positioned to
address the shift toward more complex multi-chip modules because we possess both
extensive process breadth (a key advantage, as modules typically incorporate
numerous process technologies) and a large portfolio of RF expertise (e.g., PAs, switches,
transceivers, filters, and discretes).





Final
Test




After
assembly, packaged ICs are tested prior to shipment to our
customers.  We outsource the majority of our production RF testing
operations, which are performed near our module assembly contractors in
Asia.  This adds considerable efficiencies to the device manufacturing
process in reducing product cycle times and manufacturing costs and supports our
initiative to reduce manufacturing costs.





Raw
Materials




GaAs
wafers, HBT/pHEMT epitaxial wafers, passive components, other raw materials, and
equipment used in the production of our ICs are available from a limited number
of sources.  See “Risk Factors—Sources for certain components,
materials and equipment are limited, which could result in delays or reductions
in product shipments.”





Research
and Development




We have
made significant investments in our proprietary processes, including product
design, packaging and wafer fabrication, which we believe gives us a competitive
advantage.  Research and development expenses were $46.5 million,
$54.5 million and $46.0 million in 2007, 2008 and 2009, respectively. We
continue to focus our research and development on advanced PAs and front end
modules for 3, 3.5 and 4 G wireless markets, and on active splitters, WiFi PAs
and Front-End ICs, WiMAX PAs, CATV infrastructure amplifiers and FTTP amplifiers
in the broadband market.





Further,
we develop other components, for example silicon CMOS components, to support our
PA module and other products.  We do not intend to manufacture this
technology in-house, as we believe there will be adequate external foundry
capacity available.  See “Risk Factors—Sources for certain components,
materials and equipment are limited, which could result in delays or reductions
in product shipments.”





Customers




Sales to
LGE and RIM accounted for 15% and 14%, respectively, of total net sales during
2009. No other customer accounted for 10% or more of total net sales during
2009.  See “Risk Factors—We depend on a small number of customers; a
loss of or a decrease in purchases and/or change in purchasing patterns by one
of these customers could materially and adversely affect our revenues and our
ability to forecast revenue.”





Employees




As of
December 31, 2009, we had 564 employees.





Competition




We
compete with U.S. and international semiconductor and integrated circuit
manufacturers of all sizes.  Our key competitors are Avago
Technologies Limited, Microtune, Inc., RF Micro Devices, Inc., SiGe
Semiconductor, Inc., Skyworks Solutions, Inc. and TriQuint Semiconductor,
Inc.





Many of
our competitors have significantly greater financial, technical, manufacturing
and marketing resources than we do.  Increased competition could
adversely affect our revenue and profitability through price reductions or
reduced demand for our products.  See “Risk Factors—We face intense
competition, which could result in a decrease in our products’ prices and
sales.”







Patents,
Licenses and Proprietary Rights




It is our
practice to seek U.S. patent and copyright protection on our products and
developments where appropriate and to protect our valuable technology under U.S.
laws affording protection for trade secrets and for semiconductor chip
designs.  We own 70 U.S. patents and have 9 pending U.S. patent
applications.  The U.S. patents were issued between 1991 and 2009 and
will expire between 2010 and 2027.





We rely
primarily upon trade secrets, technical know-how and other unpatented
proprietary information relating to our product development and manufacturing
activities. To protect our trade secrets, technical know-how and other
proprietary information, our employees are required to enter into agreements
providing for maintenance of confidentiality and the assignment of rights to
inventions made by them while in our employ.  We have also entered
into non-disclosure agreements to protect our confidential information delivered
to third parties in conjunction with possible corporate collaborations and for
other purposes.  See “Risk Factors—We may not be successful in
protecting our intellectual property rights or in avoiding claims that we
infringe on the intellectual property rights of others.”





Environmental
Matters




Our
operations are subject to federal, state and local environmental laws,
regulations and ordinances that govern activities or operations that may have
adverse effects on human health or the environment.  These laws,
regulations or ordinances may impose liability for the cost of remediating, and
for certain damages resulting from, sites of past releases of hazardous
materials.  We believe that we currently conduct, and have conducted,
our activities and operations in substantial compliance with applicable
environmental laws and regulations, and that costs arising from existing
environmental laws and regulations will not have a material adverse effect on
our results of operations.  We cannot assure you, however, that such
environmental laws and regulations will not become more stringent in the future
or that we will not incur significant costs in the future in order to comply
with these laws and regulations.  See “Risk Factors—We are subject to
stringent environmental laws and regulations both domestically and
abroad.”





Available
Information





Copies of
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free
of charge through our website (www.anadigics.com) as
soon as reasonably practicable after we electronically file the material with,
or furnish it to, the Securities and Exchange Commission.  All SEC
filings are also available at the SEC’s Web site at www.sec.gov





************************************************************************





ITEM 1A. RISK FACTORS





CERTAIN
STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS
DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) THAT INVOLVE RISKS
AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS CAN GENERALLY BE IDENTIFIED
AS SUCH BECAUSE THE CONTEXT OF THE STATEMENT WILL INCLUDE WORDS SUCH AS WE
"BELIEVE", "ANTICIPATE", "EXPECT" OR WORDS OF SIMILAR IMPORT. SIMILARLY,
STATEMENTS THAT DESCRIBE OUR FUTURE PLANS, OBJECTIVES, ESTIMATES OR GOALS ARE
FORWARD-LOOKING STATEMENTS. THE CAUTIONARY STATEMENTS MADE IN THIS REPORT SHOULD
BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER
THEY APPEAR IN THIS REPORT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
AND DEVELOPMENTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY
THE FORWARD-LOOKING STATEMENTS PRESENTED HEREIN INCLUDE THE RISK FACTORS
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.





IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REPORT, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE
COMPANY AND IN ANALYZING OUR FORWARD-LOOKING STATEMENTS.





Risks
Related to ANADIGICS





We
have experienced losses in the past, and expect to continue to incur
losses.





We have
incurred substantial operating and net losses in the past.  While we
had positive operating results during calendar year 2007, we had a net loss in
calendar years 2008 and 2009 as a result of the general economic downturn,
market factors beyond our control and a loss in market share, and we expect to
continue to incur losses in 2010. Additionally, we compete in an industry with
limited visibility into customers’ forecasts beyond just a few quarters. If
economic conditions worsen or there is an abrupt change in our customers’
businesses or markets, our business, financial condition and results of
operations will likely be materially and adversely affected.





Unfavorable
general economic conditions in individual or world markets could negatively
impact our financial performance.





Unfavorable
general economic conditions, such as a recession or economic slowdown in the
United States or in one or more of our other major markets, could negatively
affect the demand for some of our products. Our customer base includes OEMs that
are reliant on consumer demand. Consumers may seek to reduce discretionary
spending, which can soften demand for our customers’ products and can negatively
affect our financial performance.





Our
results of operations can vary significantly due to the cyclical nature of the
semiconductor industry and our end markets.





The
semiconductor industry and our end markets have been cyclical, seasonal and
subject to significant downturns.  In past years, the industry has
experienced periods marked by market weaknesses that created lower order demand,
production overcapacity, high inventory levels, and accelerated declines in
average selling prices for our products.  These factors negatively
affected our financial condition and results of operations during these periods
and may negatively affect our financial condition and results of operations in
the future.





Our
results of operations also may be subject to significant quarterly and annual
fluctuations.  These fluctuations are due to a number of factors, many
of which are beyond our control, including, among others: (i) changes in
end-user demand for the products manufactured and sold by our customers; (ii)
the effects of competitive pricing pressures, including decreases in average
selling prices of our products; (iii) industry production capacity levels and
fluctuations in industry manufacturing yields; (iv) levels of inventory in our
end markets; (v) availability and cost of products from our suppliers; (vi) the
gain or loss of significant customers; (vii) our ability to develop, introduce
and market new products and technologies on a timely basis; (viii) new product
and technology introductions by competitors; (ix) changes in the mix of products
produced and sold; (x) market acceptance of our products and our customers; and
(xi) intellectual property disputes.





As a
result, we may experience substantial period-to-period fluctuations in future
operating results.  Investors should not rely on our results of
operations for any previous period as an indicator of what results may be for
any future period.  Failure of our operating results to meet the
expectations of analysts or investors could materially and adversely affect the
price of our common stock.







If
we fail to sell a high volume of products, our operating results may be
harmed.




In
calendar years 2007 and 2008 we increased capacity in our manufacturing facility
in order to attempt to meet customer demands. At present, we are underutilizing
this facility, resulting in excess capacity.  This excess capacity
means we incur higher fixed costs for our products relative to the revenues we
generate.  Because large portions of our manufacturing costs are
relatively fixed, our manufacturing volumes are critical to our operating
results.  If we fail to achieve acceptable manufacturing volumes or
experience product shipment delays, our results of operations could be
harmed.  During periods of decreased demand, our high fixed
manufacturing costs negatively affect our results of operations.  We
base our expense levels in part on our expectations of future orders and these
expense levels are predominantly fixed.  If we receive fewer customer
orders than expected or if our customers delay or cancel orders, we may not be
able to reduce our manufacturing costs, which would have an adverse effect on
our results of operations. If we are unable to improve utilization levels and
correctly manage capacity, the increased expense levels relative to revenue will
have an adverse effect on our business, financial condition and results of
operations.





We
depend on a small number of customers; a loss of or a decrease in purchases
and/or change in purchasing patterns by one of these customers could materially
and adversely affect our revenues and our ability to forecast
revenue.





We
receive a significant portion of our revenues from a few significant customers
and their subcontractors.  Sales to LGE and RIM accounted for 15% and
14%, respectively, of total net sales during 2009.  Sales to our
greater than 10% customers have approximated or exceeded 30% of total net sales
in each of the last three fiscal years.  Our financial condition and
results of operations have been materially and adversely affected in the past by
the failure of anticipated orders to be realized and by deferrals or
cancellations of orders as a result of changes in customer
requirements.  If we were to lose any of our major customers, or if
sales to these customers were to decrease materially, our financial condition
and results of operations could be materially and adversely
affected.





We
face intense competition, which could result in a decrease in our products’
prices and sales.





The
markets for our products are intensely competitive and are characterized by
rapid technological change.  We compete with U.S. and international
semiconductor and integrated circuit (IC) manufacturers of all sizes, some of
whom have significantly greater financial, technical, manufacturing and
marketing resources than we do.  We currently face significant
competition in our markets and expect that intense price and product competition
will continue.  This competition has resulted in, and is expected to
continue to result in, declining average selling prices for our products and
increased challenges in maintaining or increasing market share.  We
believe that the principal competitive factors for suppliers in our markets
include, among others: (i) time-to-market; (ii) timely new product innovation;
(iii) product quality, reliability and performance; (iv) product price; (v)
features available in products; (vi) compliance with industry standards; (vii)
strategic relationships with leading reference design providers and customers;
and (viii) access to and protection of intellectual property.





Certain
of our competitors may be able to adapt more quickly than we can to new or
emerging technologies and changes in customer requirements or may be able to
devote greater resources to the development, promotion and sale of their
products than we can.





Current
and potential competitors have established, or may in the future establish,
financial or strategic relationships among themselves or with customers,
distributors, reference design providers or other third parties with whom we
have or may in the future have relationships.  If our competitors are
able to strengthen existing, or establish new, relationships with these third
parties they may rapidly acquire market share at our expense, which occurred to
some extent in 2008 when we were unable to fully meet customer demand due to
capacity constraints.  We cannot assure you that we will be able to
compete successfully against current and potential
competitors.  Increased competition could result in pricing pressures,
decreased gross margins and loss of market share and may materially and
adversely affect our financial condition and results of operations.





We
have implemented restructuring programs in the past and may need to in
future.





We implemented cost restructuring
programs in late 2008 and early 2009, and have implemented other restructuring
programs in our history. Such restructuring programs are costly to implement and
may inadequately address the operating environment. No assurance can be given
that the implementation of cost reduction programs will generate the anticipated
cost savings and other benefits or that future or additional measures may be
required. We could incorrectly anticipate the extent and term of the market
decline and weakness for our products and services and we may be forced to
restructure further or may incur future operating charges due to poor business
conditions.





We
face risks from failures in our manufacturing processes and the processes of our
vendors.





The
fabrication of integrated circuits, particularly those made of GaAs, is a highly
complex and precise process. Our integrated circuits are primarily manufactured
on wafers made of GaAs requiring multiple process steps.  It requires
production in a highly controlled, clean environment.  Minor
impurities, contamination of the clean room environment, errors in any step of
the fabrication process, defects in the masks used to print circuits on a wafer,
defects in equipment or materials, downtime on equipment, human error,
interruptions in electrical supply or a number of other factors can cause a
substantial interruption in our manufacturing processes.  Moreover,
our manufacturing process is subject to fluctuations in our demand and fab
utilization. In an environment of increasing manufacturing output and personnel
to satisfy increasing demand, we may incur manufacturing disruptions limiting
supply to customers.





Additionally,
our operations may be affected by lengthy or recurring disruptions of operations
at our production facility or those of our subcontractors.  These
disruptions may include electrical power outages, fire, earthquakes, flooding,
international conflicts, war, acts of terrorism, or other natural or man-made
disasters.  Disruptions of our manufacturing operations could cause
significant delays in our shipments unless and until we are able to shift the
manufacturing of such products from an affected facility to another facility or
the disruption is remedied.  Furthermore, many of our customers
require that they qualify a new manufacturing source before they will accept
products from such source.  This qualification process may be
expensive and time consuming.  In the event of such delays, we cannot
assure you that the required alternative capacity, particularly wafer production
capacity, would be available on a timely basis or at all.  Even if
alternative manufacturing capacity or assembly and test capacity is available,
we may not be able to obtain it on favorable terms, which could result in higher
costs and/or a loss of customers.  We may be unable to obtain
sufficient manufacturing capacity to meet demand, either at our own facilities
or through external manufacturing.





Due to
the highly specialized nature of the gallium arsenide integrated circuit
manufacturing process, in the event of a disruption at the Warren, New Jersey
semiconductor wafer fab, alternative gallium arsenide production capacity would
not be readily available from third-party sources.  Any disruptions
could have a material adverse effect on our business, financial condition and
results of operations.







We also
depend on certain vendors for components, equipment and services. We maintain
stringent policies regarding qualification of these vendors. However, if these
vendors’ processes vary in reliability or quality, they could negatively affect
our products, and thereby, our results of operations.





Our
dependence on foreign semiconductor component suppliers, assembly and test
operations contractors could lead to delays in or reductions of product
shipments.





We do not
assemble or test all of our integrated circuits or multi-chip
modules.  Instead, we provide the integrated circuit die and, in some
cases, packaging and other components to assembly and test vendors located
primarily in Asia.  Our products contain numerous component parts,
substrates and silicon-based products, obtained from external suppliers. The use
of external suppliers involves a number of risks, including the possibility of
material disruptions in the supply of key components and the lack of control
over delivery schedules, capacity constraints, manufacturing yields, quality,
fabrication costs, warranty issues and protection of intellectual property.
Further, we are dependent upon a few foreign semiconductor assembly and test
subcontractors.  If these vendors’ processes vary in reliability or
quality, they could negatively affect our products and, therefore, our results
of operations. If we are unable to obtain sufficient high quality and timely
component parts, assembly or test service, if we experience delays in
transferring or requalifying our production between suppliers, assembly or test
locations or if means of transportation to or from these locations are
interrupted, we would experience increased costs, delays or reductions in
product shipment, and/or reduced product yields, which could materially and
adversely affect our financial condition and results of operations.





Sources
for certain components, materials and equipment are limited, which could result
in delays or reductions in product shipments.





We do not
manufacture any of the starting wafers, packaging or passive components used in
the production of our gallium arsenide integrated circuits.  While we
do not typically rely on a single source of supply for our raw materials, we are
currently dependent on a sole-source supplier for certain epitaxial wafers used
in the gallium arsenide semiconductor manufacturing processes at our
manufacturing facility. If we were to lose this sole source of supply, for any
reason, a material adverse effect on our business could result until an
alternate source is obtained. Packaging and passive components are available
from a limited number of sources. To the extent that we are unable to obtain
these packaging or passive components in the required quantities, as has
occurred from time to time in the past, we could experience delays or reductions
in product shipments, which could materially and adversely affect our financial
condition and results of operations.





We depend
on a limited number of vendors to supply the equipment used in our manufacturing
processes.  When demand for semiconductor manufacturing equipment is
high, lead times for delivery of such equipment can be
substantial.  We cannot assure you that we would not lose potential
sales if required manufacturing equipment is unavailable and, as a result, we
are unable to maintain or increase our production levels.  A delay for
any reason in increasing capacity would limit our ability to increase sales
volumes, which could harm our relationships with customers.





The
variability of our manufacturing yields may affect our gross
margins.





Our
manufacturing yields vary significantly among products, depending on the
complexity of a particular integrated circuit’s design and our experience in
manufacturing that type of integrated circuit.  We have experienced
difficulties in achieving planned yields in the past, particularly in
pre-production and upon initial commencement of full production volumes, which
have adversely affected our gross margins.





Regardless
of the process technology used, the fabrication of integrated circuits is a
highly complex and precise process.  Problems in the fabrication
process can cause a substantial percentage of wafers to be rejected or numerous
integrated circuits on each wafer to be nonfunctional, thereby reducing
yields.  These difficulties can include: (i) defects in masks, which
are used to transfer circuit patterns onto our wafers; (ii) impurities in the
materials used; (iii) operator errors; (iv) contamination of the manufacturing
environment; (v) equipment failure; and (vi) interruptions in electrical
supply.





Many of
our manufacturing costs are fixed and average selling prices for our products
tend to decline over time.  Therefore, it is critical for us to
increase the number of shippable integrated circuits per wafer and increase the
production volume of wafers in order to maintain or improve our results of
operations.  Yield decreases can result in substantially higher unit
costs, which could materially and adversely affect our financial condition and
results of operations and have done so in the past.  We cannot assure
you that we will not suffer periodic yield problems, particularly during the
early production of new products or introduction of new process
technologies.  If any new yield problems were to arise or any existing
yield problems were to continue, our financial condition and results of
operations could be materially and adversely affected.





Our
products may experience significant declines in unit prices.





In each
of the markets where we compete, prices of established products tend to decline
significantly over time and in some cases rapidly.  Accordingly, in
order to remain competitive, we believe that we must continue to develop product
enhancements and new technologies that will either slow the price declines of
our products or reduce the cost of producing and delivering our
products.  If we fail to do so, our financial condition and results of
operations could be materially and adversely affected.





The
short life cycles of some of our products may leave us with obsolete or excess
inventories.





The life
cycles of some of our products depend heavily upon the life cycles of the end
products into which our products are designed.  For example, we
estimate that current life cycles for wireless handsets, and in turn our
wireless products, are approximately 9 to 12 months.  Products with
short life cycles require us to manage production and inventory levels
closely.  We cannot assure you that obsolete or excess inventories,
which may result from unanticipated changes in the estimated total demand for
our products and/or the estimated life cycles of the end products into which our
products are designed, will not result in significant charges that will
negatively affect our operating profit and net income.





We
will need to keep pace with rapid product and process development and
technological changes as well as product cost reductions to be
competitive.





The
markets for our products are characterized by rapid changes in both product and
process technologies based on the continuous demand for product enhancements,
higher levels of integration, decreased size and reduced power
consumption.  Because the continuous evolution of these technologies
and frequent introduction of new products and enhancements have generally
resulted in short product life cycles for our products, we believe that our
future success will depend, in part, upon our ability to continue to improve the
efficiency of our products and process technologies and rapidly develop new
products and process technologies.  The successful development of our
products is highly complex and depends on numerous factors, including our
ability to anticipate customer and market requirements and changes in technology
and industry standards, our ability to differentiate our products from offerings
of our competitors, and our ability to protect, develop or otherwise obtain
adequate intellectual property for our new products.  If a competing
technology emerges that is, or is perceived to be, superior to our existing
technology and we are unable to develop and/or implement the new technology
successfully or to develop and implement a competitive and economically
acceptable alternative technology, our financial condition and results of
operations could be materially and adversely affected.  This
implementation may require us to modify the manufacturing process for our
products, design new products to more stringent standards, and redesign some
existing products, which may prove difficult for us and result in sub-optimal
manufacturing yields, delays in product deliveries and increased expenses. We
will need to make substantial investments to develop these enhancements and
technologies, and we cannot assure investors that we will have funds available
for these investments or that these enhancements and technologies will be
successful.





If
our products fail to perform or meet customer requirements, we could incur
significant additional costs.




The
fabrication of integrated circuits from substrate materials and the modules
containing these components is a highly complex and precise process. Our
customers specify quality, performance and reliability standards that we must
meet. If our products do not meet these standards, we may be required to rework
or replace the products. Our products may contain undetected defects or failures
that only become evident after we commence volume shipments, which we may
experience from time to time. Other defects or failures may also occur in the
future. If such failures or defects occur, we could: (i) lose revenues; (ii)
incur increased costs such as warranty expense and costs associated with
customer support; (iii) experience delays, cancellations or rescheduling of
orders for our products; or (iv) experience increased product returns or
discounts.




Our
gallium arsenide semiconductors may cease to be competitive with silicon
alternatives.





Among our
product portfolio, we manufacture and sell gallium arsenide semiconductor
devices and components, principally PAs and switches, which tend to be more
expensive than their silicon counterparts.  The cost differential is
due to higher costs of raw materials for gallium arsenide and higher unit costs
associated with smaller sized wafers and lower production volumes.  We
expect the cost of producing gallium arsenide devices will continue for the
foreseeable future to exceed the costs of producing their silicon
counterparts.  In addition, silicon semiconductor technologies are
widely-used process technologies for certain integrated circuits and these
technologies continue to improve in performance.  Therefore, to remain
competitive, we must offer gallium arsenide products that provide superior
performance over their silicon-based counterparts.  If we do not
continue to offer products that provide sufficiently superior performance to
justify their higher cost, our financial condition and results of operations
could be materially and adversely affected.  We cannot assure you that
there will continue to be products and markets that require the performance
attributes of gallium arsenide solutions.





We
face a risk that capital needed for our business will not be available when we
need it.





In the
future, we may need to access sources of financing to fund our
growth.  Taking into consideration our cash balance as of December 31,
2009, including marketable securities, of $92.5 million, we believe that our
existing sources of liquidity will be sufficient to fund our research and
development, capital expenditures, working capital requirements, interest and
other financing requirements for at least the next twelve months.





However,
there is no assurance that the capital required to fund these expenditures will
be available in the future.  Conditions existing in the U.S. capital
markets, as well as the then current condition of our company, will affect our
ability to raise capital, as well as the terms of any financing.  We
may not be able to raise enough capital to meet our capital needs on a timely
basis or at all.  Failure to obtain capital when required could have a
material adverse affect on us.





In
addition, any strategic investments and acquisitions that we may make to help us
grow our business may require additional capital.  We cannot assure
you that the capital required to fund these investments and acquisitions will be
available in the future.





Our
marketable securities’ liquidity and valuation could be affected by disruption
in financial markets.





We
maintain investments in financial instruments including corporate debt
obligations, auction rate securities, certificates of deposit and
government-related obligations, which included $6.6 million carrying value of
auction rate securities at December 31, 2009. These investments must be
supported by actively trading financial markets in order to be liquid
investments. Financial markets can temporarily or permanently have an imbalance
of buyers and sellers that can impact valuations and liquidity. Auction rate
markets have experienced imbalances since late 2007 and may continue to be
imbalanced. Such imbalances could negatively impact the fair value of our
investments, requiring a charge against income as occurred in 2007, 2008 and
2009, our access to cash and the liquidity of our marketable securities. We can
not assure you that our marketable securities could be sold for their carrying
value or in our required time frame to support our intermediate term cashflow
and liquidity needs.





Our
success depends on our ability to attract and retain qualified
personnel.





A small
number of key executive officers manage our business.  Their departure
could have a material adverse effect on our operations.  We believe
that our future success will also depend in large part on our continued ability
to attract and retain highly qualified manufacturing personnel, technical sales
and marketing personnel, design and application engineers, as well as senior
management.  We believe that there is, and will continue to be,
intense competition for qualified personnel in the semiconductor industry as the
emerging broadband wireless and wireline communications markets develop, and we
cannot assure you that we will be successful in retaining our key personnel or
in attracting and retaining highly qualified manufacturing personnel, technical
sales and marketing personnel, design and application engineers, as well as
senior management.  The loss of the services of one or more of our key
employees or our inability to attract, retain and motivate qualified personnel
could have a material effect on our ability to operate our business. We do not
presently maintain key-man life insurance for any of our key executive
officers.





We
are subject to risks due to our international customer base and our
subcontracting operations.





Sales to
customers located outside the United States (based on shipping addresses and not
on the locations of ultimate end users) accounted for 95%, 94% and 93% of our
net sales for the years ended December 31, 2007, 2008 and 2009,
respectively.  We expect that international sales will continue to
represent a significant portion of our net sales.  In addition,
independent third parties located in Asia supply a substantial portion of the
starting wafers and packaging components that we use in the production of
gallium arsenide integrated circuits, and assemble and test nearly all of our
products.





Due to
our reliance on international sales and on foreign suppliers, assemblers and
test houses, we are subject to risks of conducting business outside of the
United States, including primarily those arising from local economic and
political conditions, fluctuations in exchange rates, international health
epidemics, natural disasters, restrictive governmental actions (e.g., exchange controls,
duties, etc.), limitation of protecting intellectual property rights in foreign
jurisdictions and potential acts of terrorism.





We
are subject to stringent environmental laws and regulations both domestically
and abroad.





We are
subject to a variety of federal, state, local and foreign laws and regulations
governing the protection of the environment.  These environmental laws
and regulations include those related to the use, storage, handling, discharge
and disposal of toxic or otherwise hazardous materials used in or resulting from
our manufacturing processes.  Failure to comply with environmental
laws and regulations could subject us to substantial liability or force us to
significantly change our manufacturing operations.  In addition, under
some of these laws and regulations, we could be held financially responsible for
remedial measures if our properties are contaminated, even if we did not cause
the contamination.  Although we are aware of contamination resulting
from historical third-party operations at one of our facilities, a prior owner
of such facility has been performing, and paying for the costs associated with,
remediation of this property pursuant to an agreement with the state
environmental regulatory authority.  However, we cannot assure you
that such prior owner will continue to do so or that we will not incur any
material costs or liabilities associated with compliance with environmental laws
in the future.





We
may not be successful in protecting our intellectual property rights or in
avoiding claims that we infringe on the intellectual property rights of
others.





Our
success depends in part on our ability to obtain patents and
copyrights.  Despite our efforts to protect our intellectual property,
unauthorized third parties may violate our patents or copyrights.  In
addition to intellectual property that we have patented and copyrighted, we also
rely on trade secrets, technical know-how and other non-patented proprietary
information relating to our product development and manufacturing activities,
which we seek to protect, in part, by entering into confidentiality agreements
with our collaborators and employees.  We cannot assure you that these
agreements will not be breached, that we would have adequate remedies for any
breach or that our trade secrets and proprietary know-how will not otherwise
become known or independently discovered by others.





We seek
to operate without infringing on the intellectual property rights of third
parties.  As is typical in the semiconductor industry, we have been
notified, and may be notified in the future, that we may be infringing on
certain patents and/or other intellectual property rights of other
parties.  We cannot assure you that we will not be subject to
litigation to defend our products or processes against claims of patent
infringement or other intellectual property claims.  Any such
litigation could result in substantial costs and diversion of our
resources.  If we infringe on the intellectual property rights of
others, we cannot assure investors that we would be able to obtain any required
licenses on commercially reasonable terms and we may be required to pay
substantial damages, including treble damages, and cease production of our work
product or use of one or more manufacturing processes.  Even if we are
ultimately successful, patent litigation can be time consuming, disruptive to
management and expensive.  If any of the foregoing were to occur, our
financial condition and results of operations could be materially adversely
affected.





We
may pursue selective acquisitions and alliances and the management and
integration of additional operations could be expensive and could divert
management time and acquisitions may dilute the ownership of our
stockholders.





Our
ability to complete acquisitions or alliances is dependent upon, and may be
limited to, the availability of suitable candidates and capital.  In
addition, acquisitions and alliances involve risks that could materially
adversely affect our financial condition and results of operations, including
the management time that may be diverted from operations in order to pursue and
complete such transactions and difficulties in integrating and managing the
additional operations and personnel of acquired companies.  We cannot
assure you that we will be able to obtain the capital necessary to consummate
acquisitions or alliances on satisfactory terms, if at all.  Further,
any businesses that we acquire will likely have their own capital needs, which
may be significant, which we could be called upon to satisfy independent of the
acquisition price.  Future acquisitions or alliances could result in
additional debt, costs and contingent liabilities, all of which could materially
adversely affect our financial condition and results of
operations.  Any additional debt could subject us to substantial and
burdensome covenants.  The growth that may result from future
acquisitions or alliances may place significant strains on our resources,
systems and management.  If we are unable to effectively manage such
growth by implementing systems, expanding our infrastructure and hiring,
training and managing employees, our financial condition and results of
operations could be materially adversely affected.  In addition, if we
issue additional shares of our common stock in order to acquire another
business, our stockholders’ interest in us, or the combined company, could be
materially diluted.





We
have had significant volatility in our stock price and it may fluctuate in the
future.  Therefore, you may be unable to sell shares of our common
stock at or above the price you paid for such shares.





The
trading price of our common stock has and may continue to fluctuate
significantly.  Such fluctuations may be influenced by many factors,
including: (i) our operating results and prospects; (ii) the operating results
and prospects of our major customers; (iii) announcements by our competitors;
(iv) the depth and liquidity of the market for our common stock; (v) investor
perception of us and the industry in which we operate; (vi) changes in our
earnings estimates or buy/sell recommendations by analysts covering our stock;
(vii) general financial and other market conditions; and (viii) domestic and
international economic conditions.





Public
stock markets have experienced extreme price and trading volume volatility,
particularly in the technology sectors of the market.  This volatility
significantly affected and may in the future affect the market prices of
securities of many technology companies for reasons frequently unrelated to or
disproportionately impacted by the operating performance of these
companies.  These broad market fluctuations may materially and
adversely affect the market price of our common stock.





In
addition, fluctuations in our stock price and our price-to-earnings multiple may
have made our stock attractive to momentum, hedge or day-trading investors who
often shift funds into and out of stocks rapidly, exacerbating price
fluctuations in either direction, particularly when viewed on a quarterly
basis.





Certain
provisions in our amended and restated certificate of incorporation, our amended
and restated bylaws and our stockholders’ rights agreement and of Delaware law
could deter, delay or prevent a third party from acquiring us and that could
deprive you of an opportunity to obtain a takeover premium for our common
stock.





Our
amended and restated certificate of incorporation, our amended and restated
bylaws and Delaware law contain provisions that could have the effect of making
it more difficult for a third party to acquire us, or of discouraging a third
party from attempting to acquire control of us.  In addition, we have
a stockholders’ rights agreement that under certain circumstances would
significantly impair the ability of third parties to acquire control of us
without prior approval of our board of directors.





Together,
our amended and restated certificate of incorporation, our amended and restated
by-laws, certain provisions of Delaware law and our stockholders’ rights
agreement may discourage transactions that otherwise could provide for the
payment of a premium over prevailing market prices for our common stock and
could also limit the price that investors may be willing to pay in the future
for our common stock.




We
and certain of our officers and directors are defendants in litigation and the
outcome of these lawsuits may, to the extent not covered by insurance,
negatively affect our financial condition, results of operations and cash
flows.




Since
late 2008, the Company and certain of its former and current officers and/or
directors have been parties to a now consolidated putative securities class
action lawsuitpending in the United States District Court
for the District of New Jersey. This lawsuit alleges federal securities fraud
claims and seeks unspecified damages arising out of the alleged non-disclosure
of information concerning, among other things, manufacturing inefficiencies and
customer demand.  The alleged class period runs from July 24, 2007
through August 7, 2008.  In early 2009, two shareholders’ derivative
lawsuits were filed in New Jersey Superior Court against the Company, as a
nominal defendant, and certain of its current and former directors, alleging
state law claims and seeking unspecified damages arising out of the same events
at issue in the putative class action lawsuits.  Neither the putative
class action lawsuits nor the shareholders’ derivative lawsuits have yet
advanced beyond the preliminary procedural stages.  (See “Item 3.
Legal Proceedings” for additional details on these cases and related
matters.)




At this
time, we cannot predict the probable outcome of these lawsuits.  The
pendency of these lawsuits, and any others that might subsequently be filed
against us, could divert the attention of management from our business, harm our
reputation and otherwise have a negative effect on our financial condition,
results of operations and cash flows.  Any adverse outcome in any one
of these lawsuits may, to the extent not reimbursed by insurance, have a
negative effect on our financial condition, results of operations and cash
flows.








ITEM 1B. UNRESOLVED STAFF COMMENTS


Not
applicable.





ITEM 2. PROPERTIES.




Our executive
offices and primary fabrication facility are located at 141 Mt. Bethel Road,
Warren, New Jersey 07059. We currently lease space in several buildings in
Warren, New Jersey, located within the industrial complex. Approximately 150,000
square feet of manufacturing and office space is occupied in a building located
at 141 Mt. Bethel Road in Warren, New Jersey under a twenty-year lease expiring
on December 31, 2016.  We occupy another 25,000 square feet of office
space in a nearby building under a three-year lease expiring on October 31,
2010.





We also lease
approximately 40,800 square feet in aggregate of office space in the following
locations: Atlanta, Georgia; Tyngsboro, Massachusetts; Richardson, Texas;
Taipei, Taiwan; Aalborg, Denmark; China; South Korea; and Japan under lease
agreements with remaining terms ranging from four to thirty six months that can
be extended, at our option.





ITEM 3. LEGAL PROCEEDINGS.





On or about
November 11, 2008, plaintiff Charlie Attias filed a putative securities class
action lawsuit in the United States District Court for the District of New
Jersey, captioned Charlie
Attias v. Anadigics, Inc., et al., No. 3:08-cv-05572, and, on or about
November 21, 2008, plaintiff Paul Kuznetz filed a related class action lawsuit
in the same court, captioned Paul J. Kuznetz v. Anadigics,
Inc., et al., No. 3:08-cv-05750 (jointly, the "Class
Actions").  The Complaints in the Class Actions, which were
consolidated under the caption In re Anadigics, Inc. Securities
Litigation, No. 3:08-cv-05572, by an Order of the District Court dated
November 24, 2008, seek unspecified damages for alleged violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10b-5
promulgated thereunder, in connection with alleged misrepresentations and
omissions in connection with, among other things, Anadigics's manufacturing
capabilities and the demand for its products.  On October 23, 2009,
plaintiffs filed a Consolidated Amended Class Action Complaint, which names the
Company, a current officer and a former officer-director, and alleges a proposed
class period that runs from July 24, 2007 through August 7, 2008.  On
December 23, 2009, defendants filed a motion to dismiss the Amended
Complaint.  The motion is scheduled to be fully briefed by the parties
on or before March 30, 2010.




On or about
January 14, 2009, a shareholder's derivative lawsuit, captioned Sicari v. Anadigics, Inc., et
al., No. SOM-L-88-09, was filed in the Superior Court of New Jersey, and,
on or about February 2, 2009, a related shareholder's derivative lawsuit,
captioned Moradzadeh v.
Anadigics, Inc., et al., No. SOM-L-198-09, was filed in the same court
(jointly, the "Derivative Lawsuits").  The Derivative Lawsuits seek
unspecified damages for alleged state law claims against certain of the
Company's current and former directors arising out of the matters at issue in
the Class Actions.  By Order dated March 6, 2009, the New Jersey
Superior Court consolidated the Derivative Lawsuits under the caption In re Anadigics, Inc. Derivative
Litigation, No. SOM-L-88-09.  By Order dated March 27, 2009,
the court stayed the Derivative Lawsuits pending disposition of the defendants'
motion to dismiss the Amended Complaint in the Class Actions.




Because the
Class Actions and the Derivative Lawsuits, which are in a preliminary stage, do
not specify alleged monetary damages, we are unable to reasonably estimate a
possible range of loss, if any, to the Company in connection
therewith.




We are also a
party to ordinary course litigation arising out of the operation of our
business. We believe that the ultimate resolution of such ordinary course
litigation should not have a material adverse effect on our consolidated
financial condition or results of operations.




ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS.





No
matters were submitted to a vote of the Company’s security holders during the
fourth quarter of 2009.





PART
II





ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.





Our $0.01 par
value Common Stock, (“Common Stock”) has been quoted on the NASDAQ Global Market
under the symbol "ANAD" since the commencement of trading on April 21, 1995
following our initial public offering of our Common Stock. The following table
sets forth for the periods indicated the high and low sale prices for our Common
Stock.





High
            
            
            LowCalendar
      2009Fourth
      Quarter
            
            $
            4.93
            
            
            $
            2.86Third
      Quarter
            
            
            5.21
            
            
            
            3.38Second
      Quarter
            
            
            4.59
            
            
            
            1.98First
      Quarter
            
            
            2.51
            
            
            
            1.43Calendar
      2008Fourth
      Quarter
            
            $
            2.96
            
            
            $
            1.13Third
      Quarter
            
            
            10.53
            
            
            
            2.88Second
      Quarter
            
            
            13.95
            
            
            
            6.52First
      Quarter
            
            
            11.59
            
            
            
            5.85





As of
December 31, 2009, there were 64,398,029 shares of Common Stock outstanding
(excluding shares held in Treasury) and 685 holders of record of the Common
Stock.





We have never
paid cash dividends on our capital stock. We currently anticipate that we will
retain available funds for use in the operation and expansion of our business,
and do not anticipate paying any cash dividends in the foreseeable
future.





See also “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters” under Part
III, Item 12 of this report.





ITEM 6. SELECTED FINANCIAL DATA.





The selected
financial data set forth below should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and our financial statements, related notes and other financial
information included herein. The selected consolidated financial data set forth
below as of December 31, 2008 and 2009 and for the years ended December 31,
2007, 2008 and 2009 have been derived from our audited financial statements
included herein. The selected consolidated financial data set forth below as of
December 31, 2005, 2006 and 2007 and for the years ended December 31, 2005 and
2006 have been derived from our audited financial statements, as adjusted for
discontinued operations, that are not included herein or incorporated by
reference herein. Our historical results are not necessarily indicative of the
results that may be expected for any future period.





(amounts
      in thousands, except for per share amounts)
            
            2005
            
            
            2006
            
            
            2007
            
            
            2008
            
            
            2009RESULTS
      OF OPERATIONSNet
      sales
            
            $
            103,871
            
            
            $
            166,442
            
            
            $
            230,556
            
            
            $
            258,170
            
            
            $
            140,484Gross
      profit
            
            
            21,736
            
            
            
            50,231
            
            
            
            78,788
            
            
            
            78,587
            
            
            
            20,158Operating
      (loss) income from continuing operations
            
            
            (27,950
            )
            
            
            (8,483
            )
            
            
            2,078
            
            
            
            (38,267
            )
            
            
            (55,323
            )(Loss)
      income before income taxes
            
            
            (30,466
            )
            
            
            (7,870
            )
            
            
            6,916
            
            
            
            (41,872
            )
            
            
            (57,404
            )Benefit
      from income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (321
            )Net
      (loss) income from continuing operations
            
            
            (30,466
            )
            
            
            (7,870
            )
            
            
            6,916
            
            
            
            (41,872
            )
            
            
            (57,083
            )(Loss)
      earnings per share from continuing operations:Basic
            
            $
            (0.90
            )
            
            $
            (0.18
            )
            
            $
            0.13
            
            
            $
            (0.70
            )
            
            $
            (0.92
            )Diluted
            
            $
            (0.90
            )
            
            $
            (0.18
            )
            
            $
            0.12
            
            
            $
            (0.70
            )
            
            $
            (0.92
            )BALANCE
      SHEET DATA:Total
      cash and marketable securities
            
            $
            86,357
            
            
            $
            83,482
            
            
            $
            176,812
            
            
            $
            145,724
            
            
            $
            92,526Total
      assets
            
            
            168,273
            
            
            
            182,602
            
            
            
            333,461
            
            
            
            303,777
            
            
            
            214,452Total
      capital lease obligations
            
            
            2,032
            
            
            
            1,775
            
            
            
            -
            
            
            
            -
            
            
            
            -Current
      portion of long-term debt
            
            
            46,700
            
            
            
            -
            
            
            
            -
            
            
            
            38,000
            
            
            
            -Long-term
      debt
            
            
            38,000
            
            
            
            38,000
            
            
            
            38,000
            
            
            
            -
            
            
            
            -Total
      stockholders’ equity
            
            
            58,135
            
            
            
            115,760
            
            
            
            250,106
            
            
            
            230,008
            
            
            
            189,058





ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





OVERVIEW





We are a
leading provider of semiconductor solutions in the growing broadband wireless
and wireline communications markets.  Our products include power
amplifiers, tuner integrated circuits, active splitters, line amplifiers and
other components, which can be sold individually or packaged as integrated radio
frequency and front end modules.  We believe that we are
well-positioned to capitalize on the high growth voice, data and video segments
of the broadband wireless and wireline communications markets.  We
offer 3G products that use the W-CDMA, EDGE and WEDGE standards, 3.5G products
that use HSPA and EVDO standards, 4G products for WIMAX and LTE, WiFi products
that use the 802.11 a/b/g and 802.11 n MIMO standards, CATV cable modem and
set-top box products, CATV infrastructure products and FTTP
products.




Our business
strategy focuses on developing RF front end solutions for our customers and
partnering with industry-leading wireless and wireline chipset providers to
incorporate our solutions into their reference designs.  Our
integrated solutions enable our customers to improve RF performance, power
efficiency, reliability, time-to-market and the integration of chip components
into single packages, while reducing the size, weight and cost of their
products.




We continue
to focus on leveraging our technological advantages to remain a leading supplier
of innovative semiconductor solutions for broadband wireless and wireline
communications.  We believe our patented InGaP-plus technology, which
combines the bipolar technology of a PA (HBT PA) with the surface device
technology of an RF active switch (pHEMT) on the same die, provides us with a
competitive advantage in the marketplace.  Additionally, we believe
technologies such as HELP provide our customers a competitive advantage by
enabling their 3G, 3.5G and 4G devices to consume less battery power and deliver
longer talk time than comparable products in their markets.




Our six-inch
diameter GaAs fab located at our corporate headquarters in Warren, New Jersey,
has been operational since 1999.  During 2009, we announced a hybrid
manufacturing strategy whereby we entered into a strategic foundry agreement
with WIN Semiconductors to supplement our existing wafer fabrication capability
and allow for additional and flexible capacity without the requisite capital
investment.




Our annual
revenues declined from 2008, as a result of a combination of a reduction in
market share with certain customers and an industry slowdown due to the current
macroeconomic environment. Although our annual revenue declined in 2009, we
experienced sequential growth in quarterly revenue commencing with the second
quarter of 2009.




We believe
our markets are, and will continue to remain, competitive which could result in
continued quarterly volatility in our net sales. This competition has resulted
in, and is expected over the long-term to continue to result in competitive or
declining average selling prices for our products and increased challenges in
maintaining or increasing market share.





We have only
one reportable segment. For financial information related to such segment and
certain geographic areas, see Note 4 to the accompanying consolidated financial
statements.





CRITICAL
ACCOUNTING POLICIES & SIGNIFICANT ESTIMATES





GENERAL





We believe
the following accounting policies are critical to our business operations and
the understanding of our results of operations. Such accounting policies may
require management to exercise a higher degree of judgment and make estimates
used in the preparation of our consolidated financial statements.





REVENUE
RECOGNITION





Revenue from
product sales is recognized when title to the products is transferred to the
customer, which occurs upon shipment or delivery, depending upon the terms of
the sales order. We sell to certain distributors who are granted limited
contractual rights of return and exchange and certain pre-negotiated individual
product-customer price protection. Revenue from sales of our products to
distributors is recognized, net of allowances, upon shipment of the products to
the distributors. At the time of shipment, title transfers to the distributors
and payment from the distributors is due on our standard commercial terms;
payment terms are not contingent upon resale of the products. Revenue is
appropriately reduced for the portion of shipments subject to return, exchange
or price protection. Allowances for the distributors are recorded upon shipment
and calculated based on the distributors’ indicated intent, historical data,
current economic conditions and contractual terms.  We believe we can
reasonably and reliably estimate allowances for credits to distributors in a
timely manner. We charge customers for the costs of certain
contractually-committed inventories that remain at the end of a product's life.
Such amounts are recognized as cancellation revenue when cash is received. The
value of the inventory related to cancellation revenue may, in some instances,
have been reserved during prior periods in accordance with our inventory
obsolescence policy.





ALLOWANCE
FOR DOUBTFUL ACCOUNTS





We maintain
an allowance for doubtful accounts for estimated losses resulting from our
customers' failure to make payments. If the financial condition of our customers
were to erode, making them unable to make payments, additional allowances may be
required.





WARRANTY
COSTS





We provide
for potential warranty claims by recording a current charge to income. We
estimate potential claims by examining historical returns and other information
deemed critical and provide for an amount which we believe will cover future
warranty obligations for products sold. The liability for warranty costs is
included in accrued liabilities in the consolidated balance sheets.





STOCK-BASED
COMPENSATION





We account
for stock-based compensation costs in accordance with Accounting Standards
Codification (ASC) 718 “Stock Compensation”, which requires the measurement and
recognition of compensation expense for all stock-based payment awards made to
our employees and directors. Under the fair value recognition provisions of ASC
718, stock-based compensation cost is measured at the grant date based on the
fair value of the award and is recognized as expense over the requisite service
period which in most cases is the vesting period. Determining the fair value of
certain awards at the grant date requires considerable judgment, including
estimating expected volatility, expected term and risk-free interest rate. Our
expected volatility is based on historical and implied volatility. The expected
term of the stock options is based on several factors including historical
observations of employee exercise patterns and expectations of employee exercise
behavior in the future giving consideration to the contractual terms of the
stock-based awards. The risk free interest rate assumption is based on the yield
at the time of grant of a U.S. Treasury security with an equivalent remaining
term. If factors change and we employ different assumptions, stock-based
compensation expense may differ significantly from what we have recorded in the
past.





MARKETABLE
SECURITIES




Available-for-sale securities are stated
at fair value, as determined by quoted market prices or, as needed, independent
valuation models, with unrealized gains and losses reported in other accumulated
comprehensive income or loss. Independent valuations developed to estimate the
fair value of illiquid auction rate securities (ARS) were determined using a
combination of two calculations: (1) a discounted cash flow model, where the
expected cash flows of the ARS are discounted to the present value using a yield
that incorporates compensation for illiquidity, and (2) a market comparables
method, where the ARS are valued based on indications, from the secondary
market, of what discounts buyers demand when purchasing similar ARS. The
valuations include numerous assumptions such as assessments of the underlying
structure of each security, expected cash flows, discount rates, credit ratings,
workout periods and overall capital market liquidity. We review our investments
on an ongoing basis for indications of possible impairment, and if an impairment
is identified, we determine whether the impairment is temporary or
other-than-temporary, in which case it is recorded as a charge to income.
Determination of whether the impairment is temporary or other-than-temporary
requires significant judgment. Unrealized losses are recognized in our
consolidated statement of operations when a decline in fair value is determined
to be other than temporary. The primary factors we consider in classifying the
impairment are the extent to which and period of time that the fair value of
each investment has declined below its cost basis.





INVENTORY





Inventories
are valued at the lower of cost or market ("LCM"), using the first-in, first-out
method. We capitalize production overhead costs to inventory on the basis of
normal capacity of the production facility and in periods of abnormally low
utilization we charge the related expenses as a period cost in the statement of
operations.  In addition to LCM limitations, we reserve against
inventory items for estimated obsolescence or unmarketable inventory. The
reserve for excess and obsolete inventory is primarily based upon forecasted
short-term demand for the product. Once established, these write-downs are
considered permanent adjustments to the cost basis of the excess inventory. If
actual demand and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.  In the
event we sell inventory that had been covered by a specific inventory reserve,
the sale is recorded at the actual selling price and the related cost of goods
sold at the full inventory cost, net of the reserve.





LONG-LIVED
ASSETS





Long-lived
assets is primarily comprised of fixed assets. We regularly review these assets
for indicators of impairment and assess the carrying value of the assets against
market values. When an impairment exists, we record an expense to the extent
that the carrying value exceeds fair market value.




We assess
the impairment of long-lived assets, including intangible assets, whenever
events or changes in circumstances indicate that their carrying value may not be
recoverable. Factors which could trigger an impairment review include the
following: significant changes in the manner of use of the assets; significant
underperformance relative to historical or projected future operating results;
or significant negative industry or economic trends. An impairment occurs when
the future undiscounted cash flows estimated to be generated by those assets are
less than the carrying amount of such assets. Cash flow estimates are based on
historical results adjusted to reflect management’s best estimate of future
market and operating conditions. The net carrying values of assets not
recoverable through future cash flows are reduced to fair value. Estimates of
fair value represent management’s best estimates based on industry trends, and
market rates and transactions. In connection with completing step two of our
goodwill impairment analysis during the fourth quarter of 2008, we assessed the
fair values of our related intangible assets, consisting principally of
assembled workforce related to the WiFi reporting unit and expensed such value
as an impairment charge in the statement of operations.




During
the fourth quarter of 2008, we evaluated our future options with regard to our
investment in constructing a wafer fabrication facility in Kunshan China and
subsequently estimated and evaluated future cashflows associated with this
investment. Such estimates included significant assumptions on possible
recoveries through a sale of the facility, further investment, and a return in
demand for production capacity and discount rate. After evaluating the
discounted cash flows, we fully impaired the investment and charged such amounts
within restructuring and impairment charges in our statement of
operations.




Long-lived
assets held for sale are reported at the lower of cost or fair value less costs
to sell. Management considers sensitivities to capacity, utilization and
technological developments in making its assumptions of fair value.





DEFERRED
TAXES





We record a
valuation allowance to reduce deferred tax assets when it is more likely than
not that some portion of the amount may not be realized. During 2001, we
determined that it was no longer more likely than not that we would be able to
realize all or part of our net deferred tax asset in the future, and an
adjustment to provide a valuation allowance against the deferred tax asset was
charged to income. We continue to maintain a full valuation allowance on our
deferred tax assets.





While we have
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event we
were to determine that we would be able to realize our deferred tax assets in
the future, an adjustment to the deferred tax asset would increase income in the
period such determination was made.





RESULTS
OF OPERATIONS





The following
table sets forth statements of operations data as a percentage of net sales for
the periods indicated:





2007
            
            
            2008
            
            
            2009Net
      sales
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of sales
            
            
            65.8
            
            
            
            69.6
            
            
            
            85.7Gross
      profit
            
            
            34.2
            
            
            
            30.4
            
            
            
            14.3Research
      and development expense
            
            
            20.2
            
            
            
            21.1
            
            
            
            32.7Selling
      and administrative expenses
            
            
            13.1
            
            
            
            15.9
            
            
            
            19.2Restructuring
      and impairment charges
            
            
            -
            
            
            
            8.2
            
            
            
            1.8Operating
      (loss) income
            
            
            0.9
            %
            
            
            (14.8
            %)
            
            
            (39.4
            %)Interest
      income
            
            
            3.5
            
            
            
            2.0
            
            
            
            0.8Interest
      expense
            
            
            (1.1
            )
            
            
            (0.9
            )
            
            
            (1.3
            )Other
      expense
            
            
            (0.3
            )
            
            
            (2.5
            )
            
            
            (0.9
            )Income
      (loss) from continuing operations before income taxes
            
            
            3.0
            %
            
            
            (16.2
            %)
            
            
            (40.8
            %)Benefit
      from income taxes
            
            
            -
            
            
            
            -
            
            
            
            (0.2
            )Income
      (loss) from continuing operations
            
            
            3.0
            %
            
            
            (16.2
            %)
            
            
            (40.6
            %)Loss
      from discontinued operations
            
            
            (0.4
            %)
            
            
            -
            
            
            
            -Net
      income (loss)
            
            
            2.6
            %
            
            
            (16.2
            %)
            
            
            (40.6
            %)





2009
COMPARED TO 2008





NET SALES.
Net sales for the year ended December 31, 2009 decreased 45.6% to $140.5
million, compared to net sales for the year ended December 31, 2008 of $258.2
million. The net sales decline resulted from a combination of a reduction in
market share with certain customers and an industry slowdown due to the
unfavorable macroeconomic environment.




Net sales for
the year ended December 31, 2009 of the Company’s wireless products decreased
38.0% to $96.0 million compared to net sales for the year ended December 31,
2008 of $154.7 million.  The decrease in sales was primarily due to
decreased demand in both the CDMA and EDGE/WEDGE cellular device markets
resulting from a reduction in market share with certain customers and an
industry slowdown due to the unfavorable macroeconomic environment.




Net sales
for the year ended December 31, 2009 of the Company’s broadband products
decreased 57.0% to $44.5 million compared to net sales for the year ended
December 31, 2008 of $103.5 million. The decrease in sales was primarily due to
decreased demand for WLAN PAs shipped into the PC Notebook market resulting from
the combination of a reduction in market share with one of our key customers and
general softness in demand for WLAN PAs that has occurred due to the unfavorable
macroeconomic environment. To a lesser degree, decreased demand in the set top
box and cable infrastructure markets contributed to the lower sales for the year
ended December 31, 2009.




GROSS MARGIN.
Gross margin for 2009 declined to 14.3% of net sales, compared with 30.4% of net
sales in the prior year. Gross margin for 2009 included charges of $5.3 million,
representing 3.8% of revenue, arising from a settlement of a commercial dispute
with a customer and certain inventory reserve charges. Gross margin for 2008
included charges of $7.1 million, representing 2.7% of revenue, associated with
production equipment purchase cancelation charges, equipment impairment charges
and inventory reserve charges, which the Company considered an anomaly of the
period. After considering the charges outlined above, the decrease in gross
margin were primarily due to lower product shipments and wafer production, and
fixed production costs increasing as a percent of lower revenues. Fixed
production costs include, but are not limited to depreciation, maintenance and
operations’ support functions.





RESEARCH
& DEVELOPMENT. Company-sponsored research and development (R&D) expenses
decreased 15.6% during 2009 to $46.0 million from $54.5 million during 2008. The
decrease was primarily due to decreased headcount and related materials used in
our R&D product and process development following workforce reductions in
late 2008 and early 2009.




SELLING AND
ADMINISTRATIVE. Selling and administrative expenses decreased 34.5% during 2009
to $26.9 million from $41.1 million in 2008. In 2008, selling and administrative
expenses included $5.7 million associated with the departure of our former Chief
Executive Officer, including $2.2 million of stock-based compensation upon
accelerated vesting of certain equity awards.  The remaining decrease
in 2009 was primarily driven by lower headcount and operating expenses following
workforce reductions in late 2008 and early 2009.




RESTRUCTURING
AND IMPAIRMENT CHARGES. During the first quarter of 2009 we implemented
workforce reductions, which eliminated approximately 110 positions, resulting in
a restructuring charge of $2.6 million principally for severance and related
benefits.  During the fourth quarter of 2008, we implemented workforce
reductions which eliminated approximately 100 positions resulting in a
restructuring charge of $2.1 million, principally for severance and related
benefits.




During the
fourth quarter of 2008, we evaluated alternatives with regard to our investment
in the construction of a wafer fabrication facility in Kunshan China in light of
surplus industry production capacity, reduced demand experienced by the Company,
as well as the broader macroeconomic environment. We determined that the
carrying amount of the China fabrication building was not recoverable as the
carrying amount was greater than the sum of the undiscounted cash flows expected
from the use and disposition of these assets. As a result of this impairment
analysis, we recorded a full $13.0 million impairment charge in the fourth
quarter of 2008.




In 2008, our
annual goodwill impairment test determined that the fair value of the WiFi
reporting unit was less than the carrying value of the net assets of the
reporting unit, and thus we performed step two of the impairment test. Our step
two analysis resulted in no implied fair value of goodwill and therefore, we
recognized an impairment charge of $5.9 million in the fourth quarter of 2008,
representing a write off of the entire amount of our previously recorded
goodwill. In connection with our goodwill impairment analysis, we also assessed
the fair values of our related intangible assets, which carried an unamortized
value of $0.3 million consisting principally of assembled workforce related to
the WiFi reporting unit noting it was similarly impaired and charged the
remaining unamortized carrying value to restructuring and impairment
charges.




INTEREST
INCOME. Interest income decreased 78.4% to $1.1 million during 2009 from $5.3
million in 2008. The decrease was primarily due to lower interest rates, as we
maintained liquidity in Government-backed investments, and were compounded by
lower average funds invested.




INTEREST
EXPENSE. Interest expense decreased 19.8% to $1.9 million in 2009 compared to
$2.4 million in 2008. The interest expense principally arose from obligations
under our 5% Convertible Senior Notes due in October 2009 (“2009 Notes”) which
matured on October 15, 2009.




OTHER INCOME
(EXPENSE).  Other income (expense) primarily results from valuation
activity in marketable securities we hold. Other expense is primarily comprised
of other-than-temporary declines in value on certain auction rate securities and
a corporate debt security held by the Company of $1.5 million and $6.8 million
in 2009 and 2008, respectively. The aforementioned other-than-temporary declines
were net of $0.2 million and $0.4 million of income recorded on par value
redemption recoveries in 2009 and 2008, respectively.




BENEFIT FROM
INCOME TAXES.   The Housing and Economic Recovery Act of 2008
included the partial refund of certain carried-forward Research and Experimental
(R&E) tax credits. During the third quarter of 2009, the Company finalized
and filed the R&E claim as part of its 2008 Federal tax return and
subsequently received cash of $0.3 million for the R&E credits. Such refund
was recorded as a benefit from income taxes.





2008
COMPARED TO 2007





NET SALES.
Net sales for the year ended December 31, 2008 increased 12.0% to $258.2
million, compared to net sales for the year ended December 31, 2007 of $230.6
million. The net sales improvement was primarily due to increased demand for
wireless third generation technologies (or 3G), most significantly
WCDMA.




Net sales for
the year ended December 31, 2008 for the Company’s wireless products increased
19.9% to $154.7 million compared to net sales for the year ended December 31,
2007 of $129.0 million.  The net sales improvement was primarily due
to increased demand for power amplifiers for 3G applications of $34.7 million or
29.1%, most significantly in WCDMA applications. The growth in 3G was partially
offset by lower net sales in power amplifiers for GSM of $9.1 million or 91.5%,
which resulted from the Company’s shift in market focus to 3G
technologies.





Net sales for
the year ended December 31, 2008 for the Company’s broadband products increased
to $103.5 million or 2.0% compared to net sales for the year ended December 31,
2007 of $101.5 million.   The net sales improvement was due to
increased demand for integrated circuits used in cable set-top boxes of $10.2
million or 55.4% partly offset by a decline in cable infrastructure and WiFi
applications of $8.2 million or 9.9%.




GROSS
MARGIN. Gross margin for 2008 declined to 30.4% of net sales, compared with
34.2% of net sales in the prior year. The decline in gross margin was impacted
by $7.1 million in charges principally comprised of production equipment
purchase cancelation charges of $1.9 million, impairment charges on equipment
held for sale of $1.5 million and $3.5 million of inventory reserve charges on
dedicated inventory which was surplus to reduced customer demand. In addition,
depreciation expense increased by $5.4 million, which was partially offset by
improvements in product mix.




RESEARCH
& DEVELOPMENT. Company sponsored research and development expenses increased
17.0% during 2008 to $54.5 million from $46.5 million during 2007. The increase
was primarily due to an expansion and focus in research and development efforts
on new product development, requiring increased staffing and support costs,
including automated design tools. In addition, our purchase of the RF group from
Fairchild Semiconductor on September 5, 2007 which further added to our new
product development capability, impacted the year on year comparison in the
amount of $2.9 million, such amount was primarily comprised of staffing-related
costs.




SELLING AND
ADMINISTRATIVE. Selling and administrative expenses increased 36.2% during 2008
to $41.1 million from $30.2 million in 2007. The increase included $5.7 million
associated with the departure of our former Chief Executive Officer, including
$2.2 million of stock-based compensation upon accelerated vesting of certain
equity awards. The remaining increase was primarily driven by increased staff
and outside advisors costs.




RESTRUCTURING
AND IMPAIRMENT CHARGES. During the fourth quarter of 2008, we implemented a
workforce reduction which eliminated approximately 100 positions resulting in a
restructuring charge of $2.1 million, principally for severance and related
benefits.




During the
fourth quarter of 2008, we evaluated alternatives with regard to our investment
in the construction of a wafer fabrication facility in Kunshan China in light of
surplus industry production capacity, reduced demand experienced by the Company,
as well as the broader macroeconomic environment. We determined that the
carrying amount of the China fabrication building was not recoverable as the
carrying amount was greater than the sum of the undiscounted cash flows expected
from the use and disposition of these assets. As a result of this impairment
analysis, we recorded a full $13.0 million impairment charge in the fourth
quarter of 2008.




Our annual
goodwill impairment test determined that the fair value of the WiFi reporting
unit was less than the carrying value of the net assets of the reporting unit,
and thus we performed step two of the impairment test. Our step two analysis
resulted in no implied fair value of goodwill and therefore, we recognized an
impairment charge of $5.9 million in the fourth quarter of 2008, representing a
write off of the entire amount of our previously recorded goodwill. In
connection with our goodwill impairment analysis, we also assessed the fair
values of our related intangible assets, which carried an unamortized value of
$0.3 million consisting principally of assembled workforce related to the WiFi
reporting unit noting it was similarly impaired and charged the remaining
unamortized carrying value to restructuring and impairment charges.




INTEREST
INCOME. Interest income decreased 34.6% to $5.3 million during 2008 from $8.0
million in 2007. The decrease was primarily due to lower interest rates globally
as we reinvested funds and concentrated our investments in shorter-term vehicles
which carried federal deposit insurance.




INTEREST
EXPENSE. Interest expense was essentially flat at $2.4 million in 2008 compared
to $2.5 million in 2007. The interest expense arises from obligations under our
5% Convertible Senior Notes due in October 2009 (“2009 Notes”).




OTHER
EXPENSE.  Other expense was $6.5 million in 2008 compared to $0.7
million in 2007 and included charges for other than temporary declines in value
on certain auction rate securities (ARS) held by the Company of $6.8 million and
$1.0 million respectively. While interest continues to be paid currently by all
the issuers of these ARS, due to the severity of the decline in fair
value and the duration of time for which these ARS have been in a loss position,
the Company concluded that ARS held at December 31, 2008 experienced an
other-than-temporary decline in fair value and recorded impairment charges of
$4.7 million for the year ended December 31, 2008.  The aforementioned
other-than-temporary impairment charge was net of $0.4 million of income
recorded on par value redemption recoveries.Additionally
during 2008, a corporate debt ARS position was exchanged for the underlying 30
year notes. This debt trades in the market with a value of $1.9 million against
its face value of $4.0 million. Due to the severity and duration of the decline,
the Company has recorded an impairment of $2.1 million related to this
security.




LOSS FROM
DISCONTINUED OPERATIONS. Loss from discontinued operations was $1.0 million
in 2007 and included $0.5 million loss on the sale of the majority of the
operating assets of Telcom Devices Inc. upon its sale at the close of the first
quarter of 2007.





LIQUIDITY
AND SOURCES OF CAPITAL





At December
31, 2009 we had $83.2 million of cash and cash equivalents and $9.3 million in
marketable securities. In October 2009, we repaid $38.0 million aggregate
principal amount of our 2009 Notes upon maturity.





Operations
used $8.5 million in cash during 2009, primarily as a result of our operating
results adjusted for non-cash expenses which was partly offset by $16.0 million
generated by reducing working capital.   Investing activities
provided $5.0 million of cash during 2009, consisting of net sales of marketable
securities of $14.0 million and $1.3 million of proceeds on sales of fixed
assets, which were partly offset by purchases of equipment of $10.3 million.
Financing activities required $36.9 million of cash during 2009, which
principally consisted of repayment of our $38.0 million 5% Convertible notes,
partly offset by proceeds received from the employee stock purchase plan and
stock option exercises.





At December
31, 2009, the Company had unconditional purchase obligations of approximately
$0.9 million.




We believe that our existing sources of
capital, including our existing cash and marketable securities, will be adequate
to satisfy operational needs and anticipated capital needs for at least the next
twelve months. Our anticipated capital needs may include acquisitions of
complimentary businesses or technologies, investments in other companies or
repurchases of our equity. Subject to liquidity considerations of our auction
rate securities as discussed more fully in Item 7A, we may elect to finance all
or part of our future capital requirements through additional equity or debt
financing. There can be no assurance that such additional financing would be
available on satisfactory terms.




The table
below summarizes required cash payments as of December 31, 2009:





CONTRACTUAL
      OBLIGATIONS
            
            PAYMENTS
      DUE BY PERIOD (in thousands)Total
            
            
            Less
      than 1 year
            
            
            1 –
      3 years
            
            
            4 -
      5 years
            
            
            After
      5 yearsOperating
      leases
            
            
            15,493
            
            
            
            2,750
            
            
            
            4,348
            
            
            
            4,084
            
            
            
            4,311Unconditional
      purchase obligations
            
            
            913
            
            
            
            913
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      contractual cash obligations
            
            $
            16,406
            
            
            $
            3,663
            
            
            $
            4,348
            
            
            $
            4,084
            
            
            $
            4,311





IMPACT OF
RECENTLY ISSUED ACCOUNTING STANDARDS





In June 2009,
the Financial Accounting Standards Board (FASB) issued FAS 168, "The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles", which was primarily codified into Accounting Standards
Codification (ASC) 105 "Generally Accepted Accounting Standards". This standard
will become the single source of authoritative nongovernmental U.S. generally
accepted accounting principles.  All existing accounting standard
documents will be superseded and all other accounting literature not included in
the FASB Codification will be considered non-authoritative. This guidance is
effective for interim and annual periods ending after September 15, 2009. For
clarity, we have chosen to include the available Codification references in this
annual report in addition to pre-Codification accounting standard
references.  As the Codification is not intended to change the
existing accounting guidance, its adoption did not have an impact on our
consolidated financial statements.




In September
2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (ASC
820) which defined fair value, established a framework for measuring fair value
in generally accepted accounting principles and expanded disclosures about fair
value measurements. ASC 820 was effective for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. In February
2008, the FASB issued FSP FAS 157-2 “Partial Deferral of the Effective Date of
Statement 157” (ASC 820-10-65-2), which delayed the effective date for
non-financial assets and liabilities that are not measured or disclosed on a
recurring basis to fiscal years beginning after November 15, 2008. The adoption
of ASC 820-10-65-2 as of January 1, 2009 did not have a material effect on our
consolidated financial statements for non-financial assets and liabilities and
any other assets and liabilities carried at fair value.




In April
2009, the FASB issued FSP 157-4, “Determining Whether a Market Is Not Active and
a Transaction Is Not Distressed” (ASC 820-10-65-4), which provides additional
guidance on factors to consider in estimating fair value when there has been a
significant decrease in market activity for a financial asset. ASC 820-10-65-4
was effective for interim and annual periods ending after June 15, 2009. This
standard was effective beginning with our second quarter of 2009 financial
reporting and did not have a material impact on our consolidated financial
statements.




In August
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, “Measuring
Liabilities at Fair Value.” This ASU clarifies the application of certain
valuation techniques in circumstances in which a quoted price in an active
market for the identical liability is not available and clarifies that when
estimating the fair value of a liability, the fair value is not adjusted to
reflect the impact of contractual restrictions that prevent its transfer. This
standard was effective beginning with our third quarter of 2009 financial
reporting and did not have a material impact on our consolidated financial
statements.




In December
2007, the FASB issued FASB Statement No. 141R, “Business Combinations” (ASC
805), which changes how business acquisitions are accounted.  ASC 805
requires the acquiring entity in a business combination to recognize all (and
only) the assets acquired and liabilities assumed in the transaction and
establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed in a business
combination.  Certain provisions of this standard will, among other
things, impact the determination of acquisition-date fair value of consideration
paid in a business combination (including contingent consideration); exclude
transaction costs from acquisition accounting; and change accounting practices
for acquired contingencies, acquisition-related restructuring costs, in-process
research and development, indemnification assets, and tax
benefits.  ASC 805 was effective for financial statements issued for
fiscal years beginning after December 15, 2008 and upon adoption did not have a
material impact on our consolidated financial statements. However it is expected
to change our accounting prospectively for future business combinations
consummated subsequently.




In December
2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of ARB No. 51” (ASC 810), which
changes the accounting for and reporting of noncontrolling interests (formerly
known as minority interests) in consolidated financial statements. It was
effective for financial statements issued for fiscal years and interim periods
beginning after December 15, 2008, with early adoption prohibited. Upon
implementation, prior periods will be recast for the changes required by ASC
810. The adoption of this standard effective January 1, 2009 did not have a
material impact on our consolidated financial statements.




In March
2008, the FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (ASC
815), which applies to all derivative instruments and related hedged items
accounted for under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities".  ASC 815 requires that objectives
for using derivative instruments be disclosed in terms of underlying risk and
accounting designation. The fair value of derivative instruments and their gains
and losses will need to be presented in tabular format in order to present a
more complete picture of the effects of using derivative instruments. ASC 815
was effective for financial statements issued for fiscal years beginning after
November 15, 2008. The adoption of this standard effective January 1, 2009 did
not have a material impact on our consolidated financial
statements.




In May 2008,
the FASB issued FSP Accounting Principles Board 14-1 "Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)" (ASC 470-20), which requires the issuer of certain convertible
debt instruments that may be settled in cash (or other assets) on conversion to
separately account for the liability (debt) and equity (conversion option)
components of the instrument in a manner that reflects the issuer's
non-convertible debt borrowing rate. ASC 470-20 was effective for fiscal years
beginning after December 15, 2008 on a retroactive basis. The adoption of this
standard effective January 1, 2009 did not have a material impact on our
consolidated financial statements.




In June 2008,
the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities” (primarily
covered within ASC 260-10), which clarifies that all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders. Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied. ASC 260-10 was
effective for fiscal years beginning after December 15, 2008. The adoption of
this standard effective January 1, 2009 did not have a material impact on our
consolidated financial statements.




In April
2009, the FASB issued FSP 115-2 and FSP 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (ASC 320-10-65-1), which changes the method
for determining whether an other-than-temporary impairment exists for debt
securities and the amount of the impairment to be recorded in earnings. ASC
320-10-65-1 was effective for interim and annual periods ending after June 15,
2009 and apply based upon the Company’s ability and intent to hold the security
to maturity or a recovery in valuation. The adoption of this standard did not
have an impact on our consolidated financial statements, as it is more likely
than not that we will sell the impaired debt securities prior to a recovery in
valuation.




In April
2009, the FASB issued FSP 107-1, APB 28-1, “Interim Disclosures About Fair Value
of Financial Instruments” (ASC 825-10-65-1), which requires fair value
disclosures in both interim as well as annual financial statements in order to
provide more timely information about the effects of current market conditions
on financial instruments. ASC 825-10-65-1 was effective for interim and annual
periods ending after June 15, 2009. This standard was effective beginning with
our second quarter of 2009 financial reporting and the additional financial
reporting disclosures are included herein.




In May 2009,
the FASB issued FASB Statement No. 165, “Subsequent Events” (ASC 855-10), which
establishes general standards of accounting and disclosure for events that occur
after the balance sheet date but before the financial statements are issued. ASC
855-10 was effective for interim and annual periods ending after June 15,
2009.  This standard was effective beginning with our second quarter
of 2009 financial reporting and did not have an impact on our consolidated
financial statements.





ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Our cash and
available-for-sale securities are exposed to changes in short-term interest
rates. Our available-for-sale securities consist of a corporate bond security
and certain auction rate securities discussed more specifically below. We
continually monitor our exposure to changes in interest rates and the credit
ratings of issuers with respect to our available-for-sale securities.
Accordingly, we believe that the effects of changes in interest rates and the
credit ratings of these issuers are limited and would not have a material impact
on our financial condition or results of operations. However, it is possible
that we would be at risk if interest rates or the credit ratings of these
issuers were to change in an unfavorable direction. The magnitude of any gain or
loss would be a function of the difference between the fixed rate of the
financial instrument and the market rate and our financial condition and results
of operations could be materially affected.




At December
31, 2009, we held marketable securities with an estimated fair value of $9.3
million. Our primary interest rate exposure results from changes in short-term
interest rates. We do not purchase financial instruments for trading or
speculative purposes. All of our marketable securities are classified as
available-for-sale securities. The following table provides information about
our marketable securities at December 31, 2009:




Estimated
      Principal Amount and Weighted Average Stated Interest Rate by Expected
      Maturity Value
                
                
                Fair
      Value($’s
      000)
                
                2010
                
                
                >
      10 years
                
                
                Total
                
                
                ($’s
      000)Principal
                
                $
                0
                
                
                $
                15,900
                
                
                $
                15,900
                
                
                $
                9,354Weighted
      Average Stated Interest Rates
                
                
                0
                %
                
                
                1.47
                %
                
                
                1.47
                %
                
                
                -
 The stated
rates of interest expressed in the above table may not approximate the actual
yield of the securities which we currently hold since we have valued some of our
marketable securities at other than face value. Additionally, some of the
securities represented in the above table may be called or redeemed, at the
option of the issuer, prior to their expected due dates. If such early
redemptions occur, we may reinvest the proceeds realized on such calls or
redemptions in marketable securities with stated rates of interest or yields
that are lower than those of our current holdings, which would affect both
future cash interest streams and future earnings. We invest our cash in money
market funds in order to maintain liquidity and as well as fund operations and
hold cash pending investments in marketable securities. Fluctuations in short
term interest rates will affect the yield on monies invested in such money
market funds. Such fluctuations can have an impact on our future cash interest
streams and future earnings, but the impact of such fluctuations are not
expected to be material.




All of our
investment securities are classified as available-for-sale and therefore
reported on our balance sheet at market value.Within our $9.3 million in
marketable securities at December 31, 2009, we held a total of $6.6 million of
auction rate securities (ARS) and $2.7 million as a corporate debt security,
which was originally purchased as an ARS prior to its exchange for the
underlying 30 year notes due 2037. ARS are generally financial instruments of
long-term duration with interest rates that are reset in short intervals through
auctions. During the second half of 2007, certain auction rate debt and
preferred securities failed to auction due to sell orders exceeding buy orders.
In February 2008, liquidity issues in the global credit markets resulted in
failures of the auction process for a broader range of ARS, including
substantially all of the auction rate corporate, state and municipal debt and
preferred equity securities we hold. When there is insufficient demand for the
securities at the time of an auction and the auction is not completed, the
interest rates reset to predetermined higher rates (default rates). While
certain issuers redeemed certain of their ARS during 2008, the market remained
constrained by illiquidity and the lack of free trading. The funds associated
with the remaining failed auctions will not be accessible until a successful
auction occurs, a buyer is found outside of the auction process or an issuer
redeems its security. If the credit ratings of the security issuers deteriorate
and any decline in market value is determined to be other-than-temporary, we
would be required to adjust the carrying value of the investment through an
additional impairment charge. To date, we have not realized any losses on ARS
held by the Company or the notes received in exchange for an ARS, but have
recognized other-than-temporary impairments of $9.3 million. During 2009, fair
market values of certain of our ARS, when combined with the fair market values
of our corporate debt security, increased by $2.7 million, which was recorded to
other comprehensive income.




We anticipate
selling these impaired debt securities prior to a recovery in valuation. We will
continue to monitor and evaluate these investments for impairment and for short
term classification purposes. We may not be able to access cash by selling the
aforementioned debt or preferred securities without the loss of principal until
a buyer is located, a future auction for these investments is successful, they
are redeemed by their issuers or they mature. If we are unable to sell these
securities in the market or they are not redeemed, then we may be required to
hold them to maturity or in perpetuity for the preferred ARS.  Based on our ability to
access our cash, our expected operating cash flows, and our other sources of
cash, we do not anticipate that the potential illiquidity of these investments
will affect our ability to execute our current business
plan.




Our 2009 Notes were convertible with a
fixed rate of interest of 5% and were repaid on the October 15, 2009 maturity
date.





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.








Report
of Independent Registered Public Accounting Firm








The Board
of Directors and Stockholders


ANADIGICS,
Inc.








We have
audited the accompanying consolidated balance sheets of ANADIGICS, Inc. as of
December 31, 2009 and 2008, and the related consolidated statements of
operations, comprehensive income (loss), stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2009. Our audit
also included the financial statement schedule listed in the Index at Item
15(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ANADIGICS, Inc. at
December 31, 2009 and 2008, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
2009, in conformity with U.S. generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), ANADIGICS, Inc.’s internal control over
financial reporting as of December 31, 2009, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 12, 2010
expressed an unqualified opinion thereon.








/s/ Ernst & Young
LLP








MetroPark,
New Jersey


March 12,
2010














ANADIGICS,
INC.


CONSOLIDATED
BALANCE SHEETS


(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





December
      31,2008
            
            
            2009ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            123,552
            
            
            $
            83,172Marketable
      securities
            
            
            13,340
            
            
            
            -Accounts
      receivable, net of allowance for doubtful accounts of $739 at December 31,
      2008 and 2009
            
            
            25,384
            
            
            
            20,013Inventories
            
            
            33,578
            
            
            
            18,250Prepaid
      expenses and other current assets
            
            
            3,121
            
            
            
            2,503Total
      current assets
            
            
            198,975
            
            
            
            123,938Marketable
      securities
            
            
            8,832
            
            
            
            9,354Plant
      and equipmentEquipment
      and furniture
            
            
            201,217
            
            
            
            208,735Leasehold
      improvements
            
            
            40,589
            
            
            
            44,705Projects
      in process
            
            
            18,940
            
            
            
            5,978260,746
            
            
            
            259,418Less
      accumulated depreciation and amortization
            
            
            165,075
            
            
            
            178,53495,671
            
            
            
            80,884Other
      assets
            
            
            299
            
            
            
            276$
            303,777
            
            
            $
            214,452LIABILITIES
      AND STOCKHOLDERS EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            18,267
            
            
            $
            11,287Accrued
      liabilities
            
            
            13,203
            
            
            
            10,208Accrued
      restructuring costs
            
            
            1,165
            
            
            
            55Convertible
      notes
            
            
            38,000
            
            
            
            -Total
      current liabilities
            
            
            70,635
            
            
            
            21,550Other
      long-term liabilities
            
            
            3,134
            
            
            
            3,844Commitments
      and contingenciesStockholders’
      equityPreferred
      stock, $0.01 par value, 5,000 shares authorized, none issued or
      outstandingCommon
      stock, convertible, non-voting, $0.01 par value, 1,000 shares authorized,
      none issued or outstandingCommon
      stock, $0.01 par value, 144,000 shares authorized at December 31, 2008 and
      2009, and 63,424 and 64,517 issued at December 31, 2008 and 2009,
      respectively
            
            
            634
            
            
            
            645Additional
      paid-in capital
            
            
            563,468
            
            
            
            576,975Accumulated
      deficit
            
            
            (333,967
            )
            
            
            (391,050
            )Accumulated
      other comprehensive income
            
            
            131
            
            
            
            2,747Treasury
      stock at cost:
              114  and
      115 shares at December 31, 2008 and 2009, respectively
            
            
            (258
            )
            
            
            (259
            )Total
      stockholders’ equity
            
            
            230,008
            
            
            
            189,058$
            303,777
            
            
            $
            214,452








See
accompanying notes.











ANADIGICS,
INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





YEAR ENDED DECEMBER
      31,2007
            
            
            2008
            
            
            2009Net
      sales
            
            $
            230,556
            
            
            $
            258,170
            
            
            $
            140,484Cost
      of sales
            
            
            151,768
            
            
            
            179,583
            
            
            
            120,326Gross
      profit
            
            
            78,788
            
            
            
            78,587
            
            
            
            20,158Research
      and development expenses
            
            
            46,539
            
            
            
            54,452
            
            
            
            45,969Selling
      and administrative expenses
            
            
            30,171
            
            
            
            41,098
            
            
            
            26,914Restructuring
      and impairment charges
            
            
            -
            
            
            
            21,304
            
            
            
            2,59876,710
            
            
            
            116,854
            
            
            
            75,481Operating
      income (loss)
            
            
            2,078
            
            
            
            (38,267
            )
            
            
            (55,323
            )Interest
      income
            
            
            8,035
            
            
            
            5,254
            
            
            
            1,134Interest
      expense
            
            
            (2,463
            )
            
            
            (2,365
            )
            
            
            (1,897
            )Other
      expense
            
            
            (734
            )
            
            
            (6,494
            )
            
            
            (1,318
            )Income
      (loss) from continuing operations before income taxes
            
            $
            6,916
            
            
            $
            (41,872
            )
            
            $
            (57,404
            )Benefit
      from income taxes
            
            
            -
            
            
            
            -
            
            
            
            (321
            )Income
      (loss) from continuing operations
            
            $
            6,916
            
            
            $
            (41,872
            )
            
            $
            (57,083
            )Loss
      from discontinued operations
            
            
            (965
            )
            
            
            -
            
            
            
            -Net
      income (loss)
            
            $
            5,951
            
            
            $
            (41,872
            )
            
            $
            (57,083
            )Basic
      earnings (loss) per share:Income
      (loss) from continuing operations
            
            $
            0.13
            
            
            $
            (0.70
            )
            
            $
            (0.92
            )Loss
      from discontinued operations
            
            
            (0.02
            )
            
            
            -
            
            
            
            -Net
      income (loss)
            
            $
            0.11
            
            
            $
            (0.70
            )
            
            $
            (0.92
            )Diluted
      earnings (loss) per share:Income
      (loss) from continuing operations
            
            $
            0.12
            
            
            $
            (0.70
            )
            
            $
            (0.92
            )Loss
      from discontinued operations
            
            
            (0.02
            )
            
            
            -
            
            
            
            -Net
      income (loss)
            
            $
            0.10
            
            
            $
            (0.70
            )
            
            $
            (0.92
            )Weighted
      average common shares outstanding used in computing earnings (loss) per
      share:Basic
            
            
            55,189
            
            
            
            60,183
            
            
            
            62,372Diluted
            
            
            58,621
            
            
            
            60,183
            
            
            
            62,372





CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)


(AMOUNTS
IN THOUSANDS)





Year Ended December
      31,2007
            
            
            2008
            
            
            2009Net
      income (loss)
            
            $
            5,951
            
            
            $
            (41,872
            )
            
            $
            (57,083
            )Other
      comprehensive income (loss):Unrealized
      (loss) gain on marketable securities
            
            
            (948
            )
            
            
            (1,373
            )
            
            
            2,701Foreign
      currency translation adjustment
            
            
            (8
            )
            
            
            164
            
            
            
            (85
            )Reclassification
      adjustment:Net
      recognized loss on marketable securities previously included in other
      comprehensive income (loss)
            
            
            962
            
            
            
            1,434
            
            
            
            -Comprehensive
      income (loss)
            
            $
            5,957
            
            
            $
            (41,647
            )
            
            $
            (54,467
            )








See
accompanying notes.








ANADIGICS,
INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


(AMOUNTS
IN THOUSANDS)





Common
      Stock Shares
            
            
            Common
      Stock Amount
            
            
            Treasury
      Stock Shares
            
            
            Treasury
      Stock Amount
            
            
            Additional
      Paid-In Capital
            
            
            Accumulated
      Deficit
            
            
            Accumulated
      Other Comprehensive Income (loss )
            
            
            Total
      Stockholders’ EquityBalance,
      December 31, 2006
            
            
            49,200
            
            
            $
            492
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            413,672
            
            
            $
            (298,046
            )
            
            $
            (100
            )
            
            $
            115,760Stock
      options exercised
            
            
            2,135
            
            
            
            22
            
            
            
            
            
            
            
            
            
            
            
            12,217
            
            
            
            
            
            
            
            
            
            
            
            12,239Shares
      issued under employee stock purchase plan
            
            
            236
            
            
            
            2
            
            
            
            
            
            
            
            
            
            
            
            1,872
            
            
            
            
            
            
            
            
            
            
            
            1,874Issuance
      of common stock in public offering, net of costs
            
            
            8,625
            
            
            
            86
            
            
            
            
            
            
            
            
            
            
            
            98,869
            
            
            
            
            
            
            
            
            
            
            
            98,955Restricted
      stock grant, net of forfeitures
            
            
            1,096
            
            
            
            11
            
            
            
            
            
            
            
            
            
            
            
            (11
            )
            
            
            
            
            
            
            
            
            
            
            -Amortization
      of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            15,321
            
            
            
            
            
            
            
            
            
            
            
            15,321Other
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6
            
            
            
            6Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,951
            
            
            
            
            
            
            
            5,951Balance,
      December 31, 2007
            
            
            61,292
            
            
            $
            613
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            541,940
            
            
            $
            (292,095
            )
            
            $
            (94
            )
            
            $
            250,106Stock
      options exercised
            
            
            384
            
            
            
            4
            
            
            
            
            
            
            
            
            
            
            
            2,596
            
            
            
            
            
            
            
            
            
            
            
            2,600Shares
      issued under employee stock purchase plan
            
            
            183
            
            
            
            2
            
            
            
            
            
            
            
            
            
            
            
            234
            
            
            
            
            
            
            
            
            
            
            
            236Restricted
      stock grant, net of forfeitures
            
            
            1,565
            
            
            
            15
            
            
            
            
            
            
            
            
            
            
            
            (15
            )
            
            
            
            
            
            
            
            
            
            
            -Amortization
      of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            18,713
            
            
            
            
            
            
            
            
            
            
            
            18,713Other
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            225
            
            
            
            225Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (41,872
            )
            
            
            
            
            
            
            (41,872
            )Balance,
      December 31, 2008
            
            
            63,424
            
            
            $
            634
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            563,468
            
            
            $
            (333,967
            )
            
            $
            131
            
            
            $
            230,008Stock
      options exercised
            
            
            49
            
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            101
            
            
            
            
            
            
            
            
            
            
            
            102Shares
      issued under employee stock purchase plan
            
            
            729
            
            
            
            7
            
            
            
            
            
            
            
            
            
            
            
            1,006
            
            
            
            
            
            
            
            
            
            
            
            1,013Treasury
      share purchase
            
            
            
            
            
            
            
            
            
            
            (1
            )
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1
            )Restricted
      stock activity, net of forfeitures
            
            
            315
            
            
            
            3
            
            
            
            
            
            
            
            
            
            
            
            (3
            )
            
            
            
            
            
            
            
            
            
            
            -Amortization
      of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,403
            
            
            
            
            
            
            
            
            
            
            
            12,403Other
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,616
            
            
            
            2,616Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (57,083
            )
            
            
            
            
            
            
            (57,083
            )Balance,
      December 31, 2009
            
            
            64,517
            
            
            $
            645
            
            
            
            (115
            )
            
            $
            (259
            )
            
            $
            576,975
            
            
            $
            (391,050
            )
            
            $
            2,747
            
            
            $
            189,058





See
accompanying notes.


















ANADIGICS,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(AMOUNTS
IN THOUSANDS)





YEAR ENDED DECEMBER
      31,2007
            
            
            2008
            
            
            2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss)
            
            $
            5,951
            
            
            $
            (41,872
            )
            
            $
            (57,083
            )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Loss
      from discontinued operations
            
            
            965
            
            
            
            -
            
            
            
            -Depreciation
            
            
            9,547
            
            
            
            15,984
            
            
            
            18,463Amortization
            
            
            738
            
            
            
            718
            
            
            
            341Stock
      based compensation
            
            
            15,276
            
            
            
            18,713
            
            
            
            12,403Amortization
      of (discount) premium on marketable securities
            
            
            (550
            )
            
            
            (90
            )
            
            
            12Recognized
      marketable securities impairment and other
            
            
            962
            
            
            
            6,807
            
            
            
            1,492Gain
      on disposal of equipment
            
            
            (9
            )
            
            
            (295
            )
            
            
            (167
            )Asset
      impairment charges
            
            
            -
            
            
            
            20,634
            
            
            
            -Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (18,957
            )
            
            
            20,280
            
            
            
            5,371Inventory
            
            
            (3,770
            )
            
            
            (9,589
            )
            
            
            15,328Prepaid
      expenses and other assets
            
            
            (1,233
            )
            
            
            523
            
            
            
            300Accounts
      payable
            
            
            5,922
            
            
            
            (11,187
            )
            
            
            (1,489
            )Accrued
      and other liabilities
            
            
            1,984
            
            
            
            6,438
            
            
            
            (3,480
            )Net
      cash provided by (used in) operating activities
            
            
            16,826
            
            
            
            27,064
            
            
            
            (8,509
            )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of plant and equipment
            
            
            (32,506
            )
            
            
            (54,541
            )
            
            
            (10,346
            )Purchases
      of marketable securities
            
            
            (267,357
            )
            
            
            (20,410
            )
            
            
            (15,201
            )Proceeds
      from sales and redemptions of marketable securities
            
            
            217,709
            
            
            
            110,608
            
            
            
            29,216Purchase
      of RF group assets
            
            
            (2,415
            )
            
            
            -
            
            
            
            -Proceeds
      from sale of equipment
            
            
            30
            
            
            
            209
            
            
            
            1,346Proceeds
      from sale of discontinued operations
            
            
            500
            
            
            
            -
            
            
            
            -Net
      cash (used in) provided by investing activities
            
            
            (84,039
            )
            
            
            35,866
            
            
            
            5,015CASH
      FLOWS FROM FINANCING ACTIVITIESPayment
      of obligations under capital leases
            
            
            (1,775
            )
            
            
            -
            
            
            
            -Repayment
      of Convertible notes
            
            
            -
            
            
            
            -
            
            
            
            (38,000
            )Issuances
      of common stock, net of related costs
            
            
            113,068
            
            
            
            2,836
            
            
            
            1,115Repurchase
      of common stock into treasury
            
            
            -
            
            
            
            -
            
            
            
            (1
            )Net
      cash provided by (used in) financing activities
            
            
            111,293
            
            
            
            2,836
            
            
            
            (36,886
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            44,080
            
            
            
            65,766
            
            
            
            (40,380
            )Cash
      and cash equivalents at beginning of period
            
            
            13,706
            
            
            
            57,786
            
            
            
            123,552Cash
      and cash equivalents at end of period
            
            $
            57,786
            
            
            $
            123,552
            
            
            $
            83,172Supplemental
      disclosures of cash flow information:Interest
      paid
            
            $
            1,997
            
            
            $
            1,900
            
            
            $
            1,900Net
      taxes paid (refunded)
            
            
            28
            
            
            
            52
            
            
            
            (311
            )








See
accompanying notes.

















ANADIGICS,
INC.





NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)








1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





NATURE OF
OPERATIONS AND BASIS OF PRESENTATION





ANADIGICS,
Inc (the Company) is a leading provider of semiconductor solutions in the
growing broadband wireless and wireline communications markets.  The
Company’s products include power amplifiers (PAs), tuner integrated circuits,
active splitters, line amplifiers and other components, which can be sold
individually or packaged as integrated radio frequency (RF) and front end
modules.  The Company offers third generation (3G) products that use
the Wideband Code-Division Multiple Access (W-CDMA) and Enhanced Data Rates for
Global System for Mobile Communication Evolution (EDGE) standards, and
combinations of W-CDMA and EDGE platforms (WEDGE), beyond third generation
(3.5G) products that use the High Speed Packet Access (HSPA, inclusive of
downlink and uplink) and Evolution Data Optimized (EVDO) standards, fourth
generation (4G) products for Worldwide Interoperability for Microwave Access
(WiMAX) and Long Term Evolution (LTE), Wireless Fidelity (WiFi) products that
use the 802.11 a/b/g and 802.11 n (Multiple Input Multiple Output (MIMO))
standards, cable television (CATV) cable modem and set-top box products, CATV
infrastructure products and Fiber-To-The-Premises (FTTP)
products.  The Company’s integrated solutions enable its customers to
improve RF performance, power efficiency, reliability, time-to-market and the
integration of chip components into single packages, while reducing the size,
weight and cost of their products.




The Company
designs, develops and manufactures RF integrated circuits (RFICs) primarily
using Gallium Arsenide (GaAs) compound semiconductor substrates with various
process technologies, Metal Semiconductor Field Effect Transistors (MESFET),
Pseudomorphic High Electron Mobility Transistors (pHEMT), and Heterojunction
Bipolar Transistors (HBT). The Company’s proprietary technology, which utilizes
InGaP-plusTM,
combines InGaP HBT and pHEMT processes on a single substrate, enabling it to
integrate the PA function and the RF active switch function on the same die. The
Company fabricates substantially all of its ICs in its six-inch diameter GaAs
wafer fabrication facility.




The
consolidated financial statements include the accounts of ANADIGICS, Inc. and
its wholly owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation.




As more fully
discussed in Note 15, the Company sold the majority of the operating assets of
Telcom Devices Inc, (Telcom, a wholly-owned subsidiary of the Company) on April
2, 2007 and effectively ceased Telcom’s operations. Accordingly, the financial
results, position and cashflow of Telcom have been classified as discontinued
operations in the accompanying financial statements for the applicable
periods.




The Company
has evaluated subsequent events and determined that there were no subsequent
events to recognize or disclose in these consolidated financial
statements.





USE OF
ESTIMATES




The
preparation of financial statements in conformity with US generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the consolidated financial statements and the
accompanying notes. Actual results could differ from those estimates.
Significant estimates that affect the financial statements include, but are not
limited to: allowance for doubtful accounts, recoverability and valuation of
inventories, warranty reserve, valuation of stock-based compensation, reserves
for distributor arrangements and returns, valuation of certain marketable
securities, useful lives and amortization periods and recoverability of
long-lived assets.





CONCENTRATION
OF CREDIT RISK





The Company
grants trade credit to its customers, who are primarily foreign manufacturers of
wireless communication devices, cable and broadcast television receivers and
fiber optic communication devices. The Company performs periodic credit
evaluations of its customers and generally does not require collateral. Sales
and accounts receivable from customers are denominated in U.S. dollars. The
Company has not experienced significant losses related to receivables from these
individual customers.




Net sales to
individual customers and their affiliates who accounted for 10% or more of the
Company’s total net sales and corresponding end application information are as
follows:





YEAR ENDED DECEMBER
      312007
            
            
            2008
            
            
            2009Customer
      (application)
            
            $
            
            
            
            
            %
            
            $
            
            
            
            
            %
            
            $
            
            
            
            
            %LG
      Electronics, Inc. (Wireless)
            
            
            22,188
            
            
            
            10
            %
            
            <10
      %
            
            
            <10
      %
            
            
            
            20,359
            
            
            
            15
            %Research
      In Motion Limited (Wireless)
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %
            
            
            
            19,824
            
            
            
            14
            %Intel
      (Broadband)
            
            
            49,862
            
            
            
            22
            %
            
            
            45,273
            
            
            
            18
            %
            
            <10
      %
            
            
            <10
      %Samsung
      Electronics (Wireless)
            
            
            30,471
            
            
            
            13
            %
            
            
            41,486
            
            
            
            16
            %
            
            <10
      %
            
            
            <10
      %Shenzhen
      Huawei Mobile Comm. Tech. (Wireless)
            
            
            23,953
            
            
            
            10
            %
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %Cisco
      (Broadband)
            
            
            23,378
            
            
            
            10
            %
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %World
      Peace Group (Wireless & Broadband)
            
            
            22,855
            
            
            
            10
            %
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %
            
            
            <10
      %




Accounts
receivable at December 31, 2008 and 2009 from the greater than 10% customers
accounted for 17% and 34% of total accounts receivable,
respectively.





REVENUE
RECOGNITION




Revenue from
product sales is recognized when title to the products is transferred to the
customer, which occurs upon shipment or delivery, depending upon the terms of
the sales order. The Company sells to certain distributors who are granted
limited contractual rights of return and exchange and certain pre-negotiated
individual product-customer price protection. Revenue from sales of products to
distributors is recognized, net of allowances, upon shipment of the products to
the distributors. At the time of shipment, title transfers to the distributors
and payment from the distributors is due on our standard commercial terms;
payment terms are not contingent upon resale of the products. Revenue is
appropriately reduced for the portion of shipments subject to return, exchange
or price protection. Allowances for the distributors are recorded upon shipment
and calculated based on the distributors’ indicated intent, historical data,
current economic conditions and contractual terms.  The Company
believes it can reasonably and reliably estimate allowances for credits to
distributors in a timely manner. The Company charges customers for the costs of
certain contractually-committed inventories that remain at the end of a
product's life. Such amounts are recognized as cancellation revenue when cash is
received. The value of the inventory related to cancellation revenue may, in
some instances, have been reserved during prior periods in accordance with the
Company’s inventory obsolescence policy. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from customers' failure to make
payments.





ALLOWANCE
FOR DOUBTFUL ACCOUNTS




The Company
establishes an allowance for doubtful accounts for estimated losses resulting
from customers' failure to make payments, based upon historical
experience.





WARRANTY
COSTS




The Company
provides, by a current charge to income, an amount it estimates, by examining
historical returns and other information it deems critical, will be needed to
cover future warranty obligations for products sold during the year. The
liability for warranty costs is included in accrued liabilities in the
consolidated balance sheets.





PLANT AND
EQUIPMENT





Plant and
equipment are stated at cost. Depreciation of plant, furniture and equipment has
been provided on the straight-line method over 3-7 years. Leasehold improvements
are amortized and included in depreciation over the useful life of the leasehold
or the life of the lease, whichever is shorter.





GOODWILL
AND OTHER INTANGIBLES




Goodwill,
intellectual property, customer list, covenant-not-to-compete and assembled
workforce were recorded as part of the Company's acquisitions and asset
purchases. Goodwill is not subject to amortization but is reviewed for potential
impairment annually or upon the occurrence of an impairment indicator using a
two-step process. The first step of the two-step impairment test compares the
carrying value of the reporting unit to its fair value calculated using the
income approach based on the present value of estimated future cash flows. If
the fair value of the unit is less than the carrying value of its net assets,
the Company performs step two of the impairment test. In step two, the Company
allocates the fair value of the reporting unit to its underlying assets and
liabilities as if the reporting unit had been acquired in a business combination
and the fair value of the unit was the price paid to acquire the reporting unit.
Any excess of the fair value of the reporting unit over the amounts assigned to
its assets and liabilities is the implied fair value of goodwill. Intellectual
property, customer list, covenant and the assembled workforce have been
amortized using the straight-line method over two to four year lives. The
carrying amount of the Company’s intangibles are reviewed on a regular basis for
indicators of an impairment. The Company determines if the carrying amount is
impaired based on anticipated cash flows. In the event of impairment, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
value of the asset. For each of the reporting units, fair value is determined
primarily using the anticipated cash flows, discounted at a rate commensurate
with the associated risk. The Company’s goodwill and other intangibles were
fully impaired during the year ended December 31, 2008. See Note 2 for further
discussion.





IMPAIRMENT
OF LONG-LIVED ASSETS




Long-lived
assets used in operations are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the assets might not be
recoverable. For long-lived assets to be held and used, the Company recognizes
an impairment loss if its carrying amount is not recoverable through its
undiscounted cash flows and measures the impairment loss based on the difference
between the carrying amount and fair value. Long-lived assets held for sale are
reported at the lower of cost or fair value less costs to sell. See Note 2 for
further discussion.





INCOME
TAXES





Deferred
income taxes reflect the net effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the income tax basis of such assets and liabilities. The Company maintains a
full valuation allowance on its deferred tax assets. Accordingly, the Company
has not recorded a benefit or provision for income taxes other than for the
refund of certain research and experimental tax credits during 2009. The Company
recognizes interest and penalties related to the underpayment of income taxes in
income tax expense. Upon adoption of ASC 740-10, the Company had no unrecognized
tax benefits. No unrecognized tax benefits, interest or penalties were accrued
at December 31, 2008 and 2009. The Company’s U.S. federal net operating losses
have occurred since 1998 and as such, tax years subject to potential tax
examination could apply from that date because carrying-back net operating loss
opens the relevant year to audit.





RESEARCH
AND DEVELOPMENT COSTS





The Company
charges all research and development costs associated with the development of
new products to expense when incurred.





CASH
EQUIVALENTS





The Company
considers all highly liquid marketable securities with a maturity of three
months or less when purchased as cash equivalents.





MARKETABLE
SECURITIES





Available for
sale securities are stated at fair value, as determined by quoted market prices
or as needed, independent valuation models, with unrealized gains and losses
reported in other accumulated comprehensive income or loss. Unrealized losses
are reviewed by management and those considered other than temporary are
recorded as a charge to income. The cost of securities sold is based upon the
specific identification method. The amortized cost of debt securities is
adjusted for amortization of premium and accretion of discounts to maturity.
Such amortization, realized gains and losses, interest and dividends are
included in interest income. See Note 5 for a summary of marketable
securities.





INVENTORY





Inventories
are valued at the lower of cost or market ("LCM"), using the first-in, first-out
method. The Company capitalizes production overhead costs to inventory on the
basis of normal capacity of its production facility and in periods of abnormally
low utilization charges the related expenses as a period cost in the statement
of operations.  In addition to LCM limitations, the Company reserves
against inventory items for estimated obsolescence or unmarketable inventory.
The reserve for excess and obsolete inventory is primarily based upon forecasted
short-term demand for the product. Once established, these write-downs are
considered permanent adjustments to the cost basis of the excess inventory. If
actual demand and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.  In the
event the Company sells inventory that had been covered by a specific inventory
reserve, the sale is recorded at the actual selling price and the related cost
of goods sold at the full inventory cost, net of the reserve.





DEFERRED
RENT




Aggregate
rental expense is recognized on a straight-line basis over the lease terms of
operating leases that contain predetermined increases in rentals payable during
the lease term.





FOREIGN
CURRENCY TRANSLATION




The financial
statements of subsidiaries outside of the United States are measured using the
local currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at the rates of exchange at the balance sheet dates.
The resultant translation adjustments are included in other accumulated
comprehensive income or loss. Income and expense items are translated at the
average monthly rates of exchange. Gains and losses from foreign currency
transactions of these subsidiaries are included in the determination of net
income or loss.





EARNINGS
PER SHARE





Basic and
diluted earnings per share are calculated in accordance with ASC 260, “Earnings
Per Share”. Basic earnings per share is computed by dividing income (loss) from
continuing operations and net income (loss) by the weighted average number of
common shares outstanding during the period. Diluted earnings per share reflects
the potential dilution that could occur if stock options and other commitments
to issue common stock were exercised resulting in the issuance of common stock
of the Company. Any dilution arising from the Company's outstanding stock awards
or shares potentially issuable upon conversion of the convertible notes will not
be included where their effect is anti-dilutive.





FAIR
VALUE OF FINANCIAL INSTRUMENTS




The fair
value of a financial instrument is the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants. The fair value of each of the following instruments approximates
their carrying value because of the short maturity of these instruments: cash
and cash equivalents, accounts receivable, accounts payable and accrued
liabilities. See Note 5 for additional fair value
disclosures.





STOCK-BASED
COMPENSATION




The Company
has various stock-based compensation plans for employees and directors, which
are described more fully in Note 12.  The Company accounts for these
plans under ASC 718 Stock Compensation, which requires the measurement and
recognition of compensation expense for all stock-based payment awards made to
its employees and directors. Under the fair value recognition provisions of ASC
718, stock-based compensation cost is measured at the grant date based on the
fair value of the award and is recognized as expense over the requisite service
period which in most cases is the vesting period.





IMPACT OF
RECENTLY ISSUED ACCOUNTING STANDARDS




In June 2009,
the Financial Accounting Standards Board (FASB) issued FAS 168, "The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles", which was primarily codified into Accounting Standards
Codification (ASC) 105 "Generally Accepted Accounting Standards". This standard
will become the single source of authoritative nongovernmental U.S. generally
accepted accounting principles.  All existing accounting standard
documents will be superseded and all other accounting literature not included in
the FASB Codification will be considered non-authoritative. This guidance is
effective for interim and annual periods ending after September 15, 2009. For
clarity, we have chosen to include the available Codification references in this
annual report in addition to pre-Codification accounting standard
references.  As the Codification is not intended to change the
existing accounting guidance, its adoption did not have an impact on the
Company’s consolidated financial statements.




In September
2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements and
Disclosures” (ASC 820), which defined fair value, established a framework for
measuring fair value in generally accepted accounting principles and expanded
disclosures about fair value measurements. ASC 820 was effective for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal
years. In February 2008, the FASB issued FSP FAS 157-2 “Partial Deferral of the
Effective Date of Statement 157” (ASC 820-10-65-2), which delayed the effective
date for non-financial assets and liabilities that are not measured or disclosed
on a recurring basis to fiscal years beginning after November 15, 2008. The
adoption of ASC 820-10-65-2 as of January 1, 2009 did not have a material effect
on the Company’s consolidated financial statements for non-financial assets and
liabilities and any other assets and liabilities carried at fair
value.




In April
2009, the FASB issued FSP 157-4, “Determining Whether a Market Is Not Active and
a Transaction Is Not Distressed” (ASC 820-10-65-4), which provides additional
guidance on factors to consider in estimating fair value when there has been a
significant decrease in market activity for a financial asset. ASC 820-10-65-4
was effective for interim and annual periods ending after June 15, 2009. This
standard was effective beginning with the Company’s second quarter of 2009
financial reporting and did not have a material impact on its consolidated
financial statements.




In August
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, “Measuring
Liabilities at Fair Value.” This ASU clarifies the application of certain
valuation techniques in circumstances in which a quoted price in an active
market for the identical liability is not available and clarifies that when
estimating the fair value of a liability, the fair value is not adjusted to
reflect the impact of contractual restrictions that prevent its transfer. This
standard was effective beginning with the Company’s third quarter of 2009
financial reporting and did not have a material impact on the its consolidated
financial statements.




In December
2007, the FASB issued FASB Statement No. 141R, “Business Combinations” (ASC
805), which changes how business acquisitions are accounted.  ASC 805
requires the acquiring entity in a business combination to recognize all (and
only) the assets acquired and liabilities assumed in the transaction and
establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed in a business
combination.  Certain provisions of this standard will, among other
things, impact the determination of acquisition-date fair value of consideration
paid in a business combination (including contingent consideration); exclude
transaction costs from acquisition accounting; and change accounting practices
for acquired contingencies, acquisition-related restructuring costs, in-process
research and development, indemnification assets, and tax
benefits.  ASC 805 was effective for financial statements issued for
fiscal years beginning after December 15, 2008 and upon adoption did not have a
material impact on the Company’s consolidated financial statements. However it
is expected to change the Company’s accounting prospectively for future business
combinations consummated subsequently.




In
December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an Amendment of ARB No. 51” (ASC 810),
which changes the accounting for and reporting of noncontrolling interests
(formerly known as minority interests) in consolidated financial statements. It
was effective for financial statements issued for fiscal years and interim
periods beginning after December 15, 2008, with early adoption prohibited. Upon
implementation, prior periods will be recast for the changes required by ASC
810. The adoption of this standard effective January 1, 2009 did not have a
material impact on the Company’s consolidated financial statements.




In March
2008, the FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (ASC
815), which applies to all derivative instruments and related hedged items
accounted for under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities".  ASC 815 requires that objectives
for using derivative instruments be disclosed in terms of underlying risk and
accounting designation. The fair value of derivative instruments and their gains
and losses will need to be presented in tabular format in order to present a
more complete picture of the effects of using derivative instruments. ASC 815
was effective for financial statements issued for fiscal years beginning after
November 15, 2008. The adoption of this standard effective January 1, 2009 did
not have a material impact on the Company’s consolidated financial
statements.




In May 2008,
the FASB issued FSP Accounting Principles Board 14-1 "Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)" (ASC 470-20), which requires the issuer of certain convertible
debt instruments that may be settled in cash (or other assets) on conversion to
separately account for the liability (debt) and equity (conversion option)
components of the instrument in a manner that reflects the issuer's
non-convertible debt borrowing rate. ASC 470-20 was effective for fiscal years
beginning after December 15, 2008 on a retroactive basis. The adoption of this
standard effective January 1, 2009 did not have a material impact on the
Company’s consolidated financial statements.




In June 2008,
the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities” (primarily
covered within ASC 260-10), which clarifies that all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders. Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied. ASC 260-10 was
effective for fiscal years beginning after December 15, 2008. The adoption of
this standard effective January 1, 2009 did not have a material impact on the
Company’s consolidated financial statements.




In April
2009, the FASB issued FSP 115-2 and FSP 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (ASC 320-10-65-1), which changes the method
for determining whether an other-than-temporary impairment exists for debt
securities and the amount of the impairment to be recorded in earnings. ASC
320-10-65-1 was effective for interim and annual periods ending after June 15,
2009 and apply based upon the Company’s ability and intent to hold the security
to maturity or a recovery in valuation. The adoption of this standard did not
have an impact on the Company’s consolidated financial statements, as it is more
likely than not that the Company will sell the impaired debt securities prior to
a recovery in valuation.




In April
2009, the FASB issued FSP 107-1, APB 28-1, “Interim Disclosures About Fair Value
of Financial Instruments” (ASC 825-10-65-1), which requires fair value
disclosures in both interim as well as annual financial statements in order to
provide more timely information about the effects of current market conditions
on financial instruments. ASC 825-10-65-1 was effective for interim and annual
periods ending after June 15, 2009. This standard was effective beginning with
the Company’s second quarter of 2009 financial reporting and the additional
financial reporting disclosures are included herein.




In May
2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (ASC 855-10),
which establishes general standards of accounting and disclosure for events that
occur after the balance sheet date but before the financial statements are
issued. ASC 855-10 was effective for interim and annual periods ending after
June 15, 2009.  This standard was effective beginning with the
Company’s second quarter of 2009 financial reporting and did not have an impact
on its consolidated financial statements.





2.
RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES





RESTRUCTURING


During the
fourth quarter of 2008, the Company recorded restructuring charges of $2,140
pertaining to severance and related benefits of workforce reductions undertaken
in that quarter.  The workforce reductions eliminated approximately
100 positions throughout the Company.




In the first
quarter of 2009, the Company implemented further workforce reductions, which
eliminated approximately 110 positions throughout the Company, resulting in a
charge of $2,598 for severance and related benefits.





Activity
and liability balances related to the restructuring were as
follows:





Workforce-related
            
            
            Other
            
            
            TotalYear
      ended December 31, 2008
              Restructuring
      expense
            
            $
            2,040
            
            
            $
            100
            
            
            $
            2,140Deductions
            
            
            (975
            )
            
            
            -
            
            
            
            (975
            )December
      31, 2008 balance
            
            $
            1,065
            
            
            $
            100
            
            
            $
            1,165Restructuring
      expense
            
            
            2,598
            
            
            
            -
            
            
            
            2,598Deductions
            
            
            (3,608
            )
            
            
            (100
            )
            
            
            (3,708
            )December
      31, 2009 balance
            
            $
            55
            
            
            $
            -
            
            
            $
            55





IMPAIRMENT


China
wafer fabrication facility




During the
fourth quarter of 2008, the Company evaluated alternatives with regard to its
investment in the construction of a wafer fabrication facility in Kunshan China
in light of surplus industry production capacity, reduced demand experienced by
the Company as well as the broader macroeconomic environment. The Company
subsequently estimated and evaluated future cashflows associated with this
investment which included significant assumptions on possible recoveries through
a sale of the facility, further investment and a return in demand for production
capacity and in the event of an impairment, a reasonable discount rate. The
Company determined that the carrying amount of the China fabrication building
was not recoverable as the carrying amount was greater than the sum of the
undiscounted cash flows expected from the use and disposition of these assets.
As a result of this impairment analysis, we recorded a full $12,957 impairment
charge in the fourth quarter of 2008 related to the China fabrication
facility.





Goodwill
and other intangibles


In 2008, the
Company performed an evaluation and estimation of future cash flows associated
with our goodwill and intangible assets of its WiFi reporting unit. The
impairment test assessed the fair value of the WiFi reporting unit using the
income approach based on the present value of estimated future cash flows. The
Company determined that the fair value of the WiFi reporting unit was less than
the carrying value of the net assets of the reporting unit due to a loss in
market share with a certain customer and the significant deterioration in the
macroeconomic environment and thus performed step two of the impairment test.
The Company allocated the fair value of the reporting unit to its underlying
assets and liabilities as if the reporting unit had been acquired in a business
combination and the fair value of the WiFi reporting unit was the price paid to
acquire the reporting unit. This step two analysis resulted in no implied fair
value of goodwill and therefore, the Company recognized an impairment charge of
$5,918 in the fourth quarter of 2008, representing a write off of the entire
amount of its previously recorded goodwill. In connection with completing step
two of its goodwill impairment analysis, the Company also assessed the fair
values of the related intangible assets, which carried an unamortized carrying
value of $289 consisting principally of assembled workforce related to the WiFi
reporting unit noting that it was similarly impaired. These impairment charges
were included in restructuring and impairment charges in the statement of
operations.





OTHER
CHARGES


In the third
quarter of 2009, the Company recorded a charge within Cost of goods sold in the
amount of $3,879 in settlement of a commercial dispute with a
customer.  The settlement required an initial payment of $1,110 which
was paid in the fourth quarter of 2009, and six quarterly payments of $500
commencing March 2010.




In the fourth
quarter of 2009, the Company recorded a management separation charge of
$2,125.  Of this amount, $1,755 was included in Research and
development and $370 was included in Selling and administrative
expenses.




In the second
half of 2008, the Company recorded charges to cost of sales for equipment
purchase cancellations, equipment impairment charges and inventory reserve
charges on dedicated inventory which was determined to be surplus due to reduced
customer demand in the amounts of $1,860, $1,470 and $3,508, respectively. In
addition, the Company recorded charges for certain management separations in the
amount of $6,026. Of the total $12,864 aforementioned charges, $7,135 was
included in cost of sales and $5,729 was included in Selling and administrative
expenses. The management separation charge primarily arose from the resignation
of our former Chief Executive Officer in the third quarter of 2008 and included
separation pay, accelerated vesting of equity awards and certain other costs.
The equipment cancellation charges were incurred in the third quarter of 2008,
when the Company cancelled certain manufacturing equipment purchase
obligations.





3.
INTANGIBLES AND GOODWILL





During the
fourth quarter of 2008, the Company recorded an impairment charge associated
with its goodwill and other intangibles. See Note 2 for further
discussion.




Annual
amortization expense related to intangible assets was calculated over their
estimated useful lives of two to four years and was $97 and $253 in the years
ended December 31, 2007 and 2008, respectively.





4.
SEGMENTS




The Company
operates in one segment. Its integrated circuits are primarily manufactured
using common manufacturing facilities located in the same domestic geographic
area. All operating expenses and assets of the Company are combined and reviewed
by the chief operating decision maker on an enterprise-wide basis, resulting in
no additional discrete financial information or reportable segment
information.




The Company
classifies its revenues based upon the end application of the product in which
its integrated circuits are used. Net sales by end application are regularly
reviewed by the chief operating decision maker and are as follows:





Year Ended
      December 31,2007
            
            
            2008
            
            
            2009Wireless
            
            $
            129,044
            
            
            $
            154,678
            
            
            $
            95,951Broadband
            
            
            101,512
            
            
            
            103,492
            
            
            
            44,533Total
            
            $
            230,556
            
            
            $
            258,170
            
            
            $
            140,484




The Company
primarily sells to four geographic regions: Asia, Latin America, USA and Other.
The geographic region is determined by the destination of the shipped
product.  During 2009, the Company identified certain prior period
sales that were classified by invoicing location rather than the destination of
the shipped product.  Certain prior period information presented below
has been recast to properly classify these sales based on their shipped product
destination.





Year
      Ended December 31,2007
            
            
            2008
            
            
            2009Asia
            
            $
            187,900
            
            
            $
            213,128
            
            
            $
            101,064Latin
      America
            
            
            23,478
            
            
            
            19,143
            
            
            
            20,647USA
            
            
            11,112
            
            
            
            11,297
            
            
            
            7,498Other
            
            
            8,066
            
            
            
            14,602
            
            
            
            11,275Total
            
            $
            230,556
            
            
            $
            258,170
            
            
            $
            140,484





5. FAIR
VALUE AND MARKETABLE SECURITIES





FAIR
VALUE OF FINANCIAL INSTRUMENTS




Fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date (exit price). Inputs used to measure fair value are classified
in the following hierarchy:





Level
      1
            Unadjusted
      quoted prices in active markets for identical assets or
      liabilitiesLevel
      2
            Unadjusted
      quoted prices in active markets for similar assets or liabilities, or
      unadjusted quoted prices for identical or similar assets or liabilities in
      markets that are not active, or inputs other than quoted prices that are
      observable for the asset or liabilityLevel
      3
            Unobservable
      inputs for the asset or liability




The Company
endeavors to utilize the best available information in measuring fair value.
Financial assets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement. The
following table presents a summary of fair value information for
available-for-sale securities in accordance with ASC 820:





Fair
      Value Measurements at Reporting Date UsingSecurity
      Type
            
            Amortized
              Cost
      Basis
              (1)
            
            
            Fair
      Value
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Government-Sponsored
      Enterprises Debt Security
            
            $
            3,000
            
            
            $
            3,006
            
            
            $
            3,006
            
            
            $
            -
            
            
            $
            -Certificates
      of Deposit
            
            
            5,000
            
            
            
            5,000
            
            
            
            5,000
            
            
            
            -
            
            
            
            -Non-auction
      Corporate Debt securities
            
            
            7,210
            
            
            
            7,217
            
            
            
            7,210
            
            
            
            -
            
            
            
            -Auction
      Rate SecuritiesCorporate
      Debt
            
            
            662
            
            
            
            662
            
            
            
            -
            
            
            
            -
            
            
            
            662Preferred
      Equity
            
            
            4,340
            
            
            
            4,340
            
            
            
            -
            
            
            
            -
            
            
            
            4,340State
      and Municipal Debt
            
            
            1,947
            
            
            
            1,947
            
            
            
            -
            
            
            
            -
            
            
            
            1,947Total
      at December 31, 2008
            
            $
            22,159
            
            
            $
            22,172
            
            
            $
            15,216
            
            
            $
            -
            
            
            $
            6,949Non-auction
      Corporate Debt security (2)
            
            $
            1,530
            
            
            $
            2,740
            
            
            $
            2,740
            
            
            $
            -
            
            
            $
            -Auction
      Rate SecuritiesCorporate
      Debt (2)
            
            
            600
            
            
            
            1,106
            
            
            
            -
            
            
            
            -
            
            
            
            1,106Preferred
      Equity
            
            
            3,013
            
            
            
            3,703
            
            
            
            -
            
            
            
            -
            
            
            
            3,703State
      and Municipal Debt(2)
            
            
            1,497
            
            
            
            1,805
            
            
            
            -
            
            
            
            -
            
            
            
            1,805Total
      at December 31, 2009
            
            $
            6,640
            
            
            $
            9,354
            
            
            $
            2,740
            
            
            $
            -
            
            
            $
            6,614





(1)
Difference between amortized cost basis and fair value represents gross
unrealized gains.


(2) These
available for sale debt securities have contractual maturities in excess of 10
years.





AUCTION
RATE SECURITIES




Auction rate
securities (ARS) are generally long-term financial instruments that provided
liquidity through a Dutch auction process that resets the applicable interest
rate at pre-determined calendar intervals, generally every 28 days. The
mechanism generally allowed existing investors to rollover their holdings while
continuing to own their respective securities or liquidating their holdings by
selling their securities at par value. The Company generally invested in these
securities for short periods of time as part of its cash management program.
During the second half of 2007, certain auction rate debt and preferred
securities failed to auction due to sell orders exceeding buy orders. In
February 2008, liquidity issues in the global credit markets resulted in
failures of the auction process for a broader range of ARS, including
substantially all of the auction rate corporate, state and municipal debt and
preferred equity securities the Company holds. The funds associated with the
failed auctions will not be accessible until a successful auction occurs, a
buyer is found outside of the auction process or an issuer redeems its
security.




During the
years ended December 31, 2007, 2008 and 2009, there was insufficient observable
ARS market information available to determine the fair value of the Company’s
investments in ARS. Given the complexity of ARS investments, the Company
obtained the assistance of an independent valuation firm to assist management in
assessing the Level 3 fair value of its ARS portfolio. The third party
valuations developed to estimate the ARS fair value were determined using a
combination of two calculations (1) a discounted cash flow model, where the
expected cash flows of the ARS are discounted to the present using a yield that
incorporates compensation for illiquidity, and (2) a market comparables method,
where the ARS are valued based on indications, from the secondary market, of
what discounts buyers demand when purchasing similar ARS. The valuations include
numerous assumptions such as assessments of the underlying structure of each
security, expected cash flows, discount rates, credit ratings, workout periods,
and overall capital market liquidity. While interest at default rates continues
to be paid currently by the issuers of these ARS, due to the severity of the
decline in fair value and the duration of time for which these ARS have been in
a loss position, the Company concluded that its ARS experienced an
other-than-temporary decline in fair value and in total recorded gross
impairment charges of  $957, $5,119 and $1,377 for the years ended
December 31, 2007, 2008 and 2009, respectively and was reported in Other income
(expense) and partly offset by recoveries upon par value
redemptions.




During 2008,
a corporate debt ARS position with a face value of $4,000 was exchanged for the
underlying 30 year notes due 2037. Due to the severity and duration of the
decline, the Company recorded an impairment of $2,117 and $354 related to this
security during the years ended December 31, 2008 and 2009, respectively, which
in combination with the ARS impairment discussed above, was reported in Other
income (expense).




The table
below provides a summary of securities valued using Level 3 including a
reconciliation of the beginning and ending balances by security
type.





($
      in 000’s)
            
            Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)
              Years
      ended December 31, 2008 and 2009State
      & Municipal Security (a)
            
            
            Corporate
      Debt Security (b)
            
            
            Preferred
      Equity Securities
            
            
            TotalClosed-end
      Funds (c )
            
            
            Monoline
      insurers (d)Beginning
      balance December 31, 2007
            
            $
            -
            
            
            $
            2,324
            
            
            $
            -
            
            
            $
            2,344
            
            
            $
            4,668Transfers into Level
    3
            
            
            2,600
            
            
            
            -
            
            
            
            9,475
            
            
            
            -
            
            
            
            12,075Total gains or losses
      realized/unrealizedIncluded in net
    loss
            
            
            (653
            )
            
            
            (1,662
            )
            
            
            (644
            )
            
            
            (1,735
            )
            
            
            (4,694
            )Included in other comprehensive
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Redemptions
            
            
            -
            
            
            
            -
            
            
            
            (5,100
            )
            
            
            -
            
            
            
            (5,100
            )Balance
      at December 31, 2008
            
            $
            1,947
            
            
            $
            662
            
            
            $
            3,731
            
            
            $
            609
            
            
            $
            6,949Transfers into Level
    3
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total gains or losses
      realized/unrealizedIncluded in net
    loss
            
            
            (250
            )
            
            
            (62
            )
            
            
            (596
            )
            
            
            (231
            )
            
            
            (1,139
            )Included in other comprehensive
      income
            
            
            308
            
            
            
            506
            
            
            
            546
            
            
            
            144
            
            
            
            1,504Redemptions
            
            
            (200
            )
            
            
            -
            
            
            
            (500
            )
            
            
            -
            
            
            
            (700
            )Ending
      Balance December 31, 2009
            
            $
            1,805
            
            
            $
            1,106
            
            
            $
            3,181
            
            
            $
            522
            
            
            $
            6,614The
      amount of total gains or losses for the period included in (loss) earnings
      attributable to the change in unrealized gains or losses relating to
      assets still held at the reporting date
            
            $
            (300
            )
            
            $
            (62
            )
            
            $
            (662
            )
            
            $
            (231
            )
            
            $
            (1,255
            )Securities
      held at December 31,2009Face
      value
            
            $
            2,400
            
            
            $
            2,500
            
            
            $
            3,875
            
            
            $
            3,125
            
            
            $
            11,900Financial
      rating of the issues
            
            
            A3
            
            
            
            A
            
            
            AAA
            
            
            NR
      / CWeighted
      average interest rates *
            
            
            0.64
            %
            
            
            2.09
            %
            
            
            1.35
            %
            
            
            2.07
            %
            
            
            1.55
            %Maturity
      date
            
            
            2045
            
            
            
            2036
            
            
            
            N/A
            
            
            
            N/A


*
Interest rates are reset every one to three months based on a premium to AA
Commercial Paper, LIBOR or Treasury Bill rates.


(a)
Security represents an interest in pooled student loans that are guaranteed by
the Federal Family Education Loan Program.


(b)
Security issued by a publicly-held insurance company trust, which holds
investments in  U.S. Government obligations, highly rated commercial
paper and money market funds and other investments approved by two credit rating
agencies. The trust is funded by life insurance residuals. If the residuals are
insufficient, the security becomes an obligation of the publicly-held insurance
company.


(c)
Preferred securities issued by three diversified closed-end management
investment companies which are governed by the Investment Company Act of 1940
with regard to operating standards, antifraud rules, diversification
requirements and an asset coverage requirement for asset backing of 200% of the
par value of the preferred stock issued.


(d)
Preferred securities issued by subsidiaries of two publicly-held debt default
insurers.





CLASSIFICATION




Classification of marketable securities
as current or non-current is dependent upon management’s intended holding
period, the security’s maturity date and liquidity considerations based on
market conditions. If management intends to hold the securities for longer than
one year as of the balance sheet date, they are classified as non-current. The
Company considers it more likely than not that it will sell their marketable
debt securities prior to a recovery in valuation. Since these marketable
securities are classified as available-for-sale securities, changes in fair
value will flow through other comprehensive income, with amounts reclassified
out of other comprehensive income into earnings upon sale or
other-than-temporary impairment. Expected
maturities could differ from contractual maturities because the issuers of the
securities may have the right to prepay obligations without prepayment
penalties.





6.
INVENTORIES





Inventories
consist of the following:





December
      31,2008
            
            
            2009Raw
      materials
            
            $
            9,537
            
            
            $
            6,582Work
      in progress
            
            
            18,062
            
            
            
            9,845Finished
      goods
            
            
            15,007
            
            
            
            11,70242,606
            
            
            
            28,129Reserves
            
            
            (9,028
            )
            
            
            (9,879
            )Total
            
            $
            33,578
            
            
            $
            18,250





7.
ACCRUED LIABILITIES





Accrued
liabilities consist of the following:





December
      31,2008
            
            
            2009Accrued
      compensation
            
            $
            3,670
            
            
            $
            2,066Warranty
      reserve
            
            
            645
            
            
            
            994Unpaid
      management separation charges
            
            
            3,222
            
            
            
            1,720Unpaid
      equipment cancellation charges
            
            
            1,200
            
            
            
            -Liability
      for customer dispute (short-term portion)
            
            
            -
            
            
            
            1,929Other
            
            
            4,466
            
            
            
            3,499$
            13,203
            
            
            $
            10,208




Warranty
reserve movements in the years ended December 31, 2007, 2008 and 2009 for
returns were $541, $831 and $1,728, respectively. The periodic charges for
estimated warranty costs were $521, $1,149 and $2,077 in the years ended
December 31, 2007, 2008 and 2009, respectively.





8.
CONVERTIBLE NOTES





On September
24, 2004, the Company issued $38,000 aggregate principal amount of 5%
Convertible Senior Notes (2009 Notes) due October 15, 2009. The 2009 Notes were
convertible into shares of the Company’s common stock at any time prior to their
maturity, at an initial conversion rate, subject to adjustment, of 200 shares
for each $1,000 principal amount, which was equivalent to a conversion price of
$5.00 per share (7,600 shares contingently issuable).  Interest on the
2009 Notes was payable semi-annually in arrears on April 15 and October 15 of
each year.   The 2009 Notes were repaid on the October 15, 2009
maturity date.




Unamortized
debt issuance costs of $341 at December 31, 2008 consisting principally of
underwriters' fees were included in other assets and other current assets and
amortized over the life of the notes.  The debt issuance costs were
fully amortized by the October 15, 2009 maturity date.





9.
COMMITMENTS AND CONTINGENCIES





The Company
leases manufacturing, warehousing and office space and manufacturing equipment
under noncancelable operating leases that expire through 2016. Rent expense was
$2,411, $2,717 and $2,742 in 2007, 2008 and 2009, respectively. At December 31,
2008 and 2009, there were no capital lease obligations
outstanding.  The future minimum lease payments under the
noncancelable operating leases are as follows:





YEAR
            
            Operating
      Leases2010
            
            $
            2,7502011
            
            
            2,1592012
            
            
            2,1892013
            
            
            2,0072014
            
            
            2,077Thereafter
            
            
            4,311Total
      minimum lease payments
            
            $
            15,493




In addition
to the above, at December 31, 2009, the Company had unconditional purchase
obligations of approximately $913.





10.
INCOME TAXES





For the year
ended December 31, 2009, the current Federal component of income taxes was a
$321 benefit resulting from a refund of research and experimental credits
received under the Housing and Economic Recovery Act of 2008. The current and
deferred components of income taxes for the year ended December 31, 2008 were
zero. For the year ended December 31, 2007, the current Federal and state
component of income taxes were $2,083 and $190, respectively which were fully
offset by deferred tax movements including the valuation allowance.




Deferred tax
assets require a valuation allowance when, in the opinion of management, it is
more likely than not that some portion of the deferred tax assets may not be
realized. Whereas realization of the deferred tax assets is dependent upon the
timing and magnitude of future taxable income prior to the expiration of the
deferred tax attributes, management began recording a full valuation allowance
in 2001. The amount of the deferred tax assets considered realizable, however,
could change if estimates of future taxable income during the carry-forward
period are changed.




Significant
components of the Company’s net deferred taxes as of December 31, 2008 and 2009
are as follows:





December
      31,2008
            
            
            2009Deferred
      tax balancesAccruals/reserves
            
            $
            14,688
            
            
            $
            16,149Net
      operating loss carryforwards
            
            
            113,393
            
            
            
            134,930Research
      and experimentation credits
            
            
            14,242
            
            
            
            14,129Deferred
      rent expense
            
            
            1,199
            
            
            
            1,130Difference
      in basis of plant and equipment
            
            
            7,020
            
            
            
            7,778Valuation
      allowance
            
            
            (150,542
            )
            
            
            (174,115
            )Net
      deferred tax assets
            
            
            -
            
            
            
            -




As of
December 31, 2009, the Company had net operating loss carryforwards of
approximately $392,645 for both federal and state tax reporting purposes. The
federal carryforward will begin to expire in 2019, and the state carryforwards
have begun to expire. A portion of net operating loss carryforwards and tax
credit carryforwards may be subject to an annual limitation regarding their
utilization against taxable income in future periods due to the “change of
ownership” provisions of the Internal Revenue Code and similar state provisions.
A portion of these carryforwards may expire before becoming available to reduce
future income tax liabilities.




At December
31, 2009, $25,149 of the deferred tax asset related to net operating loss
carryforwards and an equivalent amount of deferred tax asset valuation allowance
represented tax benefits associated with the exercise of non-qualified stock
options and restricted stock deduction over book. Such benefit, when realized,
will be credited to additional paid-in capital. Included within the Company’s
net operating loss tax carryforwards at December 31, 2009, the Company has
excess tax benefits, related to stock-based compensation that arose subsequent
to the adoption of FAS 123R of $25,732 which are not recorded as a deferred tax
asset as the amounts would not have resulted in a reduction in current taxes
payable until all other tax attributes currently available to the Company were
utilized. The benefit of these deductions will be recorded to additional paid-in
capital at the time the tax deduction results in a reduction of current taxes
payable.




The earnings
associated with the Company’s investment in its foreign subsidiaries is
considered to be permanently invested and no provision for U.S. federal and
state income taxes on those earnings or translation adjustments have been
provided.




The
reconciliation of income tax expense computed at the U.S. federal statutory rate
to the benefit from income taxes is as follows:





Year
      Ended December 31,2007
            2008
            2009Tax
      at US statutory rate
            
            $
            2,083
            
            35.0
            %
            $
            (14,655
            )
            (35.0
            )%
            $
            (20,091
            )
            (35.0
            )%Effect
      of permanent items
            
            
            (28
            )
            (0.5
            )
            
            (4,141
            )
            (9.9
            )
            
            (1,636
            )
            (2.8
            )State
      and foreign tax (benefit), net of federal tax effect
            
            
            190
            
            3.2
            
            
            (1,745
            )
            (4.2
            )
            
            (2,018
            )
            (3.5
            )Research
      and experimentation tax credits, net
            
            
            (2,513
            )
            (42.2
            )
            
            (1,043
            )
            (2.5
            )
            
            113
            
            0.2Valuation
      allowance
            
            
            (198
            )
            (3.3
            )
            
            22,235
            
            53.1
            
            
            23,573
            
            41.1Other
            
            
            466
            
            7.8
            
            
            (651
            )
            (1.5
            )
            
            (262
            )
            (0.5
            )(Benefit
      from) provision for  income taxes
            
            $
            -
            
            0.0
            %
            $
            -
            
            0.0
            %
            $
            (321
            )
            (0.5
            )%




11.
STOCKHOLDERS' EQUITY





In March
2007, the Company completed an underwritten public offering of 8,625 shares of
common stock at a price of $12.25 which generated net proceeds to the Company of
$98,955.




On December
17, 1998, the Company adopted a Shareholders’ Rights Agreement (the Agreement).
Pursuant to the Agreement, as amended on November 30, 2000, and October 2, 2008,
rights were distributed as a dividend at the rate of one right for each share of
ANADIGICS, Inc. common stock, par value $0.01 per share, held by stockholders of
record as of the close of business on December 31, 1998. The rights will expire
on December 17, 2018, unless earlier redeemed or exchanged. Under the Agreement,
each right will entitle the registered holder to buy one one-thousandth of a
share of Series A Junior Participating Preferred Stock at a price of $75.00 per
one one-thousandth of a share, subject to adjustment in accordance with the
Agreement. The rights will become exercisable only if a person or group of
affiliated or associated persons acquires, or obtains the right to acquire,
beneficial ownership of ANADIGICS, Inc. common stock or other voting securities
that have 18% or more of the voting power of the outstanding shares of voting
stock, or upon the commencement or announcement of an intention to make a tender
offer or exchange offer, the consummation of which would result in such person
or group acquiring, or obtaining the right to acquire, beneficial ownership of
18% or more of the voting power of ANADIGICS, Inc. common stock or other voting
securities.





12.
EMPLOYEE BENEFIT PLANS




The Company
accounts for stock-based compensation costs in accordance with ASC 718, which
requires the measurement and recognition of compensation expense for all
stock-based payment awards made to our employees and directors. Under the fair
value recognition provisions of ASC 718-10, stock-based compensation cost is
measured at the grant date based on the fair value of the award and is
recognized as expense over the requisite service period which in most cases is
the vesting period. The Company adopted ASC 718 using the
modified-prospective transition method, which requires the recognition of
compensation expense over the remaining award vest periods. The Company adopted
the alternative transition method for calculating the tax effects of stock-based
compensation. The alternative transition method includes simplified methods to
establish the beginning balance of the additional paid-in-capital pool (APIC
pool) related to the tax effects of employee stock-based compensation, and to
determine the subsequent impact on the APIC pool and consolidated statements of
cash flows of the tax effects of employee stock-based compensation awards that
are outstanding upon adoption of ASC 718.





Equity
Compensation Plans





The
Company had 4 equity compensation plans under which equity securities are
authorized for issuance to employees and/or directors:


§
            The
      1995 Long-Term Incentive and Share Award Plan for Officers and Directors
      (terminated February 28, 2005)  (1995
  Plan);


§
            The
      1997 Long Term Incentive and Share Award Plan (1997
  Plan);


§
            The
      2005 Long Term Incentive and Share Award Plan (2005 Plan, collectively
      with the 1995 Plan and the 1997 Plan, the Plans);
  and


§
            The
      Employee Stock Purchase Plan (ESP
Plan).




Employees and
outside directors have been granted restricted stock shares or units
(collectively, restricted stock) and options to purchase shares of common stock
under stock option plans adopted in 1995, 1997 and 2005. An aggregate of 4,913,
5,100 and 11,550 shares of common stock were reserved for issuance under the
1995 Plan, the 1997 Plan and the 2005 Plan, respectively. The Plans provide for
the granting of stock options, stock appreciation rights, restricted stock and
other share based awards to eligible employees and directors, as defined in the
Plans. Option grants have terms of ten years and become exercisable in varying
amounts over periods of up to three years. To date, no stock appreciation rights
have been granted under the Plans.  In connection with the hiring of
the Company’s new President and Chief Executive Officer on February 1, 2009, an
inducement award of 700 stock options was granted to him outside of the
Plans.




In 1995, the
Company adopted the ESP Plan under Section 423 of the Internal Revenue Code. All
full-time employees of ANADIGICS, Inc. and part-time employees, as defined in
the ESP Plan, are eligible to participate in the ESP Plan. An aggregate of 4,194
shares of common stock were reserved for offering under the ESP Plan. Offerings
are made at the commencement of each calendar year and must be purchased by the
end of that calendar year. Pursuant to the terms of the ESP Plan, shares
purchased and the applicable per share price were 236 ($7.95), 183 ($1.28) and
729 ($1.39) respectively for the years ended December 31, 2007, 2008 and 2009,
respectively.




Stock-based
compensation expense arises from the amortization of restricted stock grants,
unamortized stock option grants and from the ESP Plan. The Company uses the
straight-line basis in calculating stock-based compensation
expense.




The table
below summarizes stock-based compensation by source and by financial statement
line item:





For
      years ended December 31,2007
            
            
            2008
            
            
            2009Amortization
      of restricted stock awards
            
            $
            12,319
            
            
            $
            16,613
            
            
            $
            8,242Amortization
      of ESP Plan
            
            
            705
            
            
            
            136
            
            
            
            461Amortization
      of stock option awards
            
            
            2,297
            
            
            
            1,964
            
            
            
            3,700Total
      stock-based compensation
            
            $
            15,321
            
            
            $
            18,713
            
            
            $
            12,403By
      Financial Statement line itemCost
      of sales
            
            $
            3,409
            
            
            $
            3,074
            
            
            $
            2,441Research
      and development expenses
            
            
            5,855
            
            
            
            6,665
            
            
            
            5,088Selling
      and administrative expenses
            
            
            6,012
            
            
            
            9,005
            
            
            
            5,065Loss
      from discontinued operations
            
            
            45
            
            
            
            -
            
            
            
            -Restructuring
      and impairment charges
            
            
            -
            
            
            
            (31
            )
            
            
            (191
            )





No tax
benefits have been recorded due to the Company’s full valuation allowance
position.





Restricted
Stock Awards




Commencing in
August 2004, the Company began granting restricted stock shares under the Plans
and in July 2008 began granting restricted stock units (collectively restricted
stock). The value of the restricted stock grants are fixed upon the date of
grant and amortized over the related vesting period of one to three
years.  Restricted stock is subject to forfeiture if employment
terminates prior to vesting. The Company estimates that approximately 2.5% of
its restricted stock grants are forfeited annually (exclusive of LTI’s, as
described below).  The restricted stock shares carry voting and
certain forfeitable dividend rights commencing upon grant, whereas restricted
stock units do not.  Neither restricted stock shares nor restricted
stock units may be traded or transferred prior to vesting.  Grant,
vest and forfeit activity and related weighted average (WA) price per share for
restricted stock and for stock options during the period from January 1, 2007 to
December 31, 2009 is presented in tabular form below:





Restricted
      Stock Shares
            
            
            Restricted
      Stock Units
            
            
            Stock
      OptionsShares
            
            
            WA
      price per share
            
            
            Units
            
            
            WA
      price per unit
            
            
            Issuable
      upon exercise
            
            
            WA
      exercise priceShares
      outstanding at December 31, 2006
            
            
            3,138
            
            
            $
            6.23
            
            
            
            -
            
            
            
            -
            
            
            
            5,669
            
            
            $
            8.36Granted
            
            
            1,185
            
            
            
            12.40
            
            
            
            -
            
            
            
            -
            
            
            
            182
            
            
            
            11.48Shares
      vested/options exercised
            
            
            (1,916
            )
            
            
            6.07
            
            
            
            -
            
            
            
            -
            
            
            
            (2,135
            )
            
            
            5.73Forfeited/expired
            
            
            (195
            )
            
            
            7.21
            
            
            
            -
            
            
            
            -
            
            
            
            (225
            )
            
            
            15.29Balance
      at December 31, 2007
            
            
            2,212
            
            
            $
            9.61
            
            
            
            -
            
            
            
            -
            
            
            
            3,491
            
            
            $
            9.68Granted
            
            
            1,802
            
            
            
            9.26
            
            
            
            678
            
            
            $
            5.04
            
            
            
            -
            
            
            
            -Shares
      vested/options exercised
            
            
            (1,722
            )
            
            
            9.16
            
            
            
            (31
            )
            
            
            5.88
            
            
            
            (384
            )
            
            
            6.78Forfeited/expired
            
            
            (318
            )
            
            
            12.17
            
            
            
            (36
            )
            
            
            5.89
            
            
            
            (288
            )
            
            
            10.36Balance
      at December 31, 2008
            
            
            1,974
            
            
            $
            9.27
            
            
            
            611
            
            
            $
            4.94
            
            
            
            2,819
            
            
            $
            10.00Granted
            
            
            -
            
            
            
            -
            
            
            
            873
            
            
            
            3.22
            
            
            
            3,245
            
            
            
            2.04Shares
      vested/options exercised
            
            
            (1,195
            )
            
            
            8.66
            
            
            
            (587
            )
            
            
            4.71
            
            
            
            (49
            )
            
            
            2.06Forfeited/expired
            
            
            (141
            )
            
            
            11.52
            
            
            
            (69
            )
            
            
            4.01
            
            
            
            (708
            )
            
            
            9.18Balance
      at December 31, 2009
            
            
            638
            
            
            $
            9.90
            
            
            
            828
            
            
            $
            3.36
            
            
            
            5,307
            
            
            $
            5.32





Exercisable
options and their related average exercise prices were 2,701 ($9.77), 2,514
($10.05) and 2,389 ($9.21) as of December 31, 2007, 2008 and 2009,
respectively.




Included
within the restricted stock shares granted during year ended December 31, 2008
are 357 shares granted pursuant to long-term incentive awards (LTI) issued to
management contingent upon the Company’s performance using multi-year adjusted
earnings per share and revenue targets measured over a three-year period ending
December 31, 2010.  The number of shares issuable pursuant to the LTI
award can vary upon actual performance to such targets and range from 50% to
150% of the base share award.  In August 2008, 27 shares of the 357
LTI shares were released upon the separation of our former chief executive
officer.  As of December 31, 2009, a total of 174 LTI shares have
forfeited since their initial grant date.  Based upon the performance
of the Company through December 31, 2009, no further stock-based compensation
for LTI has been expensed.




The total
fair value of restricted stock vested during the years ended December 31, 2007,
2008 and 2009 were $25,023, $11,457 and $4,964, respectively. The intrinsic
value of exercised options during the years ended December 31, 2007, 2008 and
2009 were $18,120, $1,775 and $130 respectively.








Weighted
      average information as of December 31, 2009Options
      currently exercisableShares issuable upon
      exercise
            
            
            2,389Weighted average exercise
      price
            
            $
            9.21Weighted average remaining
      contractual term
            
            3.8
      yearsWeighted
      average remaining contractual term for outstanding options
            
            6.7
      yearsIntrinsic
      value of exercisable options
            
            $
            833Intrinsic
      value of outstanding options
            
            $
            7,101Unrecognized
      stock-based compensation costOption plans
            
            $
            2,390Restricted stock
            
            $
            4,923Weighted
      average remaining vest period for option plans
            
            1.5
      yearsWeighted
      average remaining vest period for restricted stock
            
            0.6
      years





Stock
options outstanding at December 31, 2009 are summarized as follows:





Range
      of exercise prices
            
            
            Outstanding
      Options at December 31, 2009
            
            
            Weighted
      average remaining contractual life
            
            
            Weighted
      average exercise price
            
            
            Exercisable
      at December 31, 2009
            
            
            Weighted
      average exercise price$
            1.39
      - $2.03
            
            
            
            2,921
            
            
            
            8.6
            
            
            $
            1.97
            
            
            
            154
            
            
            $
            1.93$
            2.08
      - $8.79
            
            
            
            1,010
            
            
            
            4.5
            
            
            $
            5.28
            
            
            
            877
            
            
            $
            5.50$
            8.84
      - $15.56
            
            
            
            1,227
            
            
            
            4.4
            
            
            $
            11.24
            
            
            
            1,213
            
            
            $
            11.23$
            15.94
      - $31.75
            
            
            
            149
            
            
            
            1.1
            
            
            $
            22.39
            
            
            
            145
            
            
            $
            22.49





Valuation
for ESP Plan and Stock Option Awards




The fair
value of these equity awards was estimated at the date of grant using a
Black-Scholes option pricing model. The weighted average assumptions and fair
values for stock-based compensation grants used for the years ended December 31,
2007, 2008 and 2009 are summarized below:





Year
      ended December 31,2007
            
            
            2008
            
            
            2009Stock
      option awards:Risk-free
      interest rate
            
            
            4.8
            %
            
            
            N/A
            
            
            
            1.6
            %Expected
      volatility
            
            
            71
            %
            
            
            N/A
            
            
            
            99
            %Average
      expected term (in years)
            
            
            4.75
            
            
            
            N/A
            
            
            
            5.00Expected
      dividend yield
            
            
            0.0
            %
            
            
            N/A
            
            
            
            0.0
            %Weighted
      average fair value of options granted
            
            $
            6.91
            
            
            
            N/A
            
            
            $
            1.52ESP
      Plan:Risk-free
      interest rate
            
            
            3.3
            %
            
            
            0.4
            %
            
            
            0.5
            %Expected
      volatility
            
            
            58
            %
            
            
            112
            %
            
            
            80
            %Average
      expected term
            
            
            1
            
            
            
            1
            
            
            
            1Expected
      dividend yield
            
            
            0
            %
            
            
            0
            %
            
            
            0
            %Weighted
      average fair value of purchase option
            
            $
            2.99
            
            
            $
            0.75
            
            
            $
            0.63




The Company
regularly assesses the assumptions used in its option valuation.  For
equity awards with expected terms of less than one year, the assumption for
expected volatility is based on the Company’s historical volatility. For equity
awards with expected terms of greater than one year, the Company used a
combination of historical and implied volatility for options granted in the year
ended December 31, 2009 whereas for options granted in the year ended December
31, 2007, it used a combination of both Company and peer company historical
volatility which at the time of grant was deemed reflective of our development
as a larger capitalization company. The expected term of the stock options is
based on historical observations of employee exercise patterns combined with
expectations of employee exercise behavior in the future giving consideration to
the contractual terms of the stock-based awards. The risk free interest rate
assumption has consistently been based on the yield at the time of grant of a
U.S. Treasury security with an equivalent remaining term. The Company has never
paid cash dividends and does not currently intend to pay cash dividends and has
consistently assumed a 0% dividend yield.




The Company
also sponsors an Employee Savings and Protection Plan under Section 401(k) of
the Internal Revenue Code which is available to all full-time employees.
Employees can make voluntary contributions up to limitations prescribed by the
Internal Revenue Code. The Company matches 50% of employee contributions up to
6% of their gross pay. During the first quarter of 2009, the Company
discontinued matching 401(k) contributions, as part of an overall cost reduction
plan.  The Company recorded expense of $885, $1,163 and $254 for the
years ended December 31, 2007, 2008 and 2009, respectively, relating to plan
contributions.





13.
EARNINGS PER SHARE




The
reconciliation of shares used to calculate basic and diluted earnings (loss) per
share consists of the following:





Year ended
      December 31,2007
            
            
            2008
            
            
            2009Weighted
      average common shares for basic earnings (loss) per share
            
            
            55,189
            
            
            
            60,183
            
            
            
            62,372Effect
      of dilutive securities:Stock options (*)
            
            
            1,630
            
            
            
            -
            
            
            
            -Unvested restricted stock
      (*)
            
            
            1,802
            
            
            
            -
            
            
            
            -Adjusted
      weighted average shares for diluted earnings (loss) per
    share
            
            
            58,621
            
            
            
            60,183
            
            
            
            62,372


*
            Incremental
      shares from restricted stock and stock options are computed using the
      treasury stock method.




Dilution
arising from the Company's unvested restricted stock, outstanding stock options
or shares potentially issuable upon conversion of the convertible notes was not
included in the years ended December 31, 2008 and 2009 as their effect was
anti-dilutive. Potential dilution arising from any of the remainder of the
Company's outstanding stock options, unvested restricted shares or units, or
shares potentially issuable upon conversion of the convertible notes are
detailed below. Such potential dilution was excluded as their effect was
anti-dilutive.





Year ended
      December 31,2007
            
            
            2008
            
            
            2009Convertible
      notes
            
            
            7,600
            
            
            
            7,600
            
            
            
            -Stock
      options
            
            
            1,703
            
            
            
            2,819
            
            
            
            5,307Unvested
      restricted stock
            
            
            204
            
            
            
            2,585
            
            
            
            1,466





14.         PURCHASE
OF ASSETS OF RF GROUP




On September
5, 2007, the Company purchased certain assets and assumed certain related
obligations of the radio frequency group of Fairchild Semiconductor (RF group)
in exchange for cash of $2,415, inclusive of transaction costs of $115. The
assets acquired were principally equipment used in researching and developing
RFICs for the broadband wireless communications markets. No products or
manufacturing processes were included as part of the purchase. The RF group
staff of 23 accepted employment with the Company.




Included in
the purchase were fixed assets with an estimated fair market value of $1,723,
non-exclusive rights to certain intellectual property and assembled workforce
valued at approximately $168 and $524, respectively. The fixed assets,
intellectual property and assembled workforce costs were amortized over their
estimated useful lives of 3, 2 and 3 years, respectively.During the fourth quarter
of 2008, the Company recorded an impairment charge equal to the remaining
unamortized value of the intellectual property and assembled workforce
intangibles. See Note 2 for further discussion.





15.         DISCONTINUED
OPERATIONS




On April 2,
2007, the Company sold the majority of Telcom’s operating assets to GTRAN
Camarillo, Inc. in exchange for $500 and effectively ceased Telcom’s operations.
As a consequence of the sale, the financial results, position and cashflow of
Telcom have been classified as discontinued operations in the accompanying
financial statements for all periods presented.




Summarized
operating results and loss on sale of discontinued operations in the year ended
December 31, 2007 was as follows:





Year
      ended December 31, 2007Revenue
            
            $
            559Operating
      loss
            
            
            (479
            )Interest
      income
            
            
            4Loss
      on sale of discontinued operations
            
            
            (490
            )Loss
      from discontinued operations
            
            $
            (965
            )




The assets
and liabilities of Telcom as of December 31, 2007 were zero.





16. OTHER
ACCUMULATED COMPREHENSIVE INCOME




The
components of other accumulated comprehensive income are as
follows:





As
      of December 31,2008
            
            
            2009Unrealized
      income on marketable securities
            
            $
            13
            
            
            $
            2,714Foreign
      currency translation adjustment
            
            
            118
            
            
            
            33Total
            
            $
            131
            
            
            $
            2,747





17. LEGAL
PROCEEDINGS




On or about
November 11, 2008, plaintiff Charlie Attias filed a putative securities class
action lawsuit in the United States District Court for the District of New
Jersey, captioned Charlie
Attias v. Anadigics, Inc., et al., No. 3:08-cv-05572, and, on or about
November 21, 2008, plaintiff Paul Kuznetz filed a related class action lawsuit
in the same court, captioned Paul J. Kuznetz v. Anadigics, Inc.,
et al., No. 3:08-cv-05750 (jointly, the "Class Actions").  The
Complaints in the Class Actions, which were consolidated under the caption In re Anadigics, Inc. Securities
Litigation, No. 3:08-cv-05572, by an Order of the District Court dated
November 24, 2008, seek unspecified damages for alleged violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10b-5
promulgated thereunder, in connection with alleged misrepresentations and
omissions in connection with, among other things, Anadigics's manufacturing
capabilities and the demand for its products.  On October 23, 2009,
plaintiffs filed a Consolidated Amended Class Action Complaint, which names the
Company, a current officer and a former officer-director, and alleges a proposed
class period that runs from July 24, 2007 through August 7, 2008.  On
December 23, 2009, defendants filed a motion to dismiss the Amended
Complaint.  The motion is scheduled to be fully briefed by the parties
on or before March 30, 2010.




On or about
January 14, 2009, a shareholder's derivative lawsuit, captioned Sicari v. Anadigics, Inc., et
al., No. SOM-L-88-09, was filed in the Superior Court of New Jersey, and,
on or about February 2, 2009, a related shareholder's derivative lawsuit,
captioned Moradzadeh v.
Anadigics, Inc., et al., No. SOM-L-198-09, was filed in the same court
(jointly, the "Derivative Lawsuits").  The Derivative Lawsuits seek
unspecified damages for alleged state law claims against certain of the
Company's current and former directors arising out of the matters at issue in
the Class Actions.  By Order dated March 6, 2009, the New Jersey
Superior Court consolidated the Derivative Lawsuits under the caption In re Anadigics, Inc. Derivative
Litigation, No. SOM-L-88-09.  By Order dated March 27, 2009,
the court stayed the Derivative Lawsuits pending disposition of the defendants'
motion to dismiss the Amended Complaint in the Class Actions.




Because the
Class Actions and the Derivative Lawsuits, which are in a preliminary stage, do
not specify alleged monetary damages, the Company is unable to reasonably
estimate a possible range of loss, if any, to the Company in connection
therewith.




The Company
is also a party to ordinary course litigation arising out of the operation of
our business. The Company believes that the ultimate resolution of such ordinary
course litigation should not have a material adverse effect on its consolidated
financial condition or results of operations.





18.
QUARTERLY FINANCIAL DATA (UNAUDITED)





2008 and
2009 Quarterly Financial Data


The
following table sets forth certain unaudited results of operations for each
quarter during 2008 and 2009. The unaudited information has been prepared on the
same basis as the audited consolidated financial statements and includes all
adjustments which management considers necessary for a fair presentation of the
financial data shown. The operating results for any quarter are not necessarily
indicative of the results to be attained for any future period. Basic and
diluted (loss) income per share are computed independently for each of the
periods presented. Accordingly, the sum of the quarterly (loss) income per share
may not agree to the total for the year (in thousands, except for per share
data).




Quarter
      Ended2008
            
            
            2009March
      29
            
            
            June
      28
            
            
            Sept.
      27
            
            
            Dec.
      31
            
            
            April
      4
            
            
            July
      4
            
            
            Oct.
      3
            
            
            Dec.
      31(
            *)
            
            
            (
            *)
            
            
            
            
            
            
            
            
            (
            *)
            
            
            (
            *)Net
      sales
            
            $
            74,369
            
            
            $
            80,493
            
            
            $
            58,065
            
            
            $
            45,243
            
            
            $
            30,495
            
            
            $
            31,463
            
            
            $
            36,716
            
            
            $
            41,810Cost
      of sales
            
            
            47,764
            
            
            
            50,573
            
            
            
            44,790
            
            
            
            36,456
            
            
            
            29,245
            
            
            
            28,703
            
            
            
            32,246
            
            
            
            30,132Gross
      profit
            
            
            26,605
            
            
            
            29,920
            
            
            
            13,275
            
            
            
            8,787
            
            
            
            1,250
            
            
            
            2,760
            
            
            
            4,470
            
            
            
            11,678Research
      and development expenses
            
            
            14,331
            
            
            
            14,797
            
            
            
            12,931
            
            
            
            12,393
            
            
            
            11,625
            
            
            
            10,376
            
            
            
            11,025
            
            
            
            12,943Selling
      and administrative expense
            
            
            8,880
            
            
            
            9,441
            
            
            
            14,576
            
            
            
            8,201
            
            
            
            7,432
            
            
            
            6,338
            
            
            
            6,315
            
            
            
            6,829Restructuring
      and impairment charges
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            21,304
            
            
            
            2,598
            
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      income (loss)
            
            
            3,394
            
            
            
            5,682
            
            
            
            (14,232
            )
            
            
            (33,111
            )
            
            
            (20,405
            )
            
            
            (13,954
            )
            
            
            (12,870
            )
            
            
            (8,094
            )Interest
      income
            
            
            1,938
            
            
            
            1,281
            
            
            
            978
            
            
            
            1,057
            
            
            
            559
            
            
            
            287
            
            
            
            184
            
            
            
            104Interest
      expense
            
            
            (591
            )
            
            
            (591
            )
            
            
            (592
            )
            
            
            (591
            )
            
            
            (591
            )
            
            
            (591
            )
            
            
            (584
            )
            
            
            (131
            )Other
      (expense) income
            
            
            (812
            )
            
            
            (324
            )
            
            
            (1,622
            )
            
            
            (3,736
            )
            
            
            (1,545
            )
            
            
            -
            
            
            
            89
            
            
            
            138Benefit
      from income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (321
            )
            
            
            -Net
      (loss) income
            
            $
            3,929
            
            
            $
            6,048
            
            
            $
            (15,468
            )
            
            $
            (36,381
            )
            
            $
            (21,982
            )
            
            $
            (14,258
            )
            
            $
            (12,860
            )
            
            $
            (7,983
            )Basic
      (loss) income per share:Net
      (loss) income
            
            $
            0.07
            
            
            $
            0.10
            
            
            $
            (0.26
            )
            
            $
            (0.60
            )
            
            $
            (0.36
            )
            
            $
            (0.23
            )
            
            $
            (0.21
            )
            
            $
            (0.13
            )Diluted
      (loss) income per share:Net
      (loss) income
            
            $
            0.07
            
            
            $
            0.10
            
            
            $
            (0.26
            )
            
            $
            (0.60
            )
            
            $
            (0.36
            )
            
            $
            (0.23
            )
            
            $
            (0.21
            )
            
            $
            (0.13
            )





(*)           See
Note 2 for further discussion.





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.




None.





ITEM 9A. CONTROLS AND PROCEDURES.





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures




We maintain
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports filed with the Securities and Exchange
Commission, or SEC, is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate, to allow
timely decisions regarding required disclosure.  As of December 31,
2009, an evaluation was performed under the supervision and with the
participation of our Management, including our CEO and CFO, of the effectiveness
of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) under the U.S. Securities Exchange Act of
1934).  Based on that evaluation, our management, including our CEO
and CFO, concluded that our disclosure controls and procedures were effective as
of December 31, 2009.





Management’s
Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Under the supervision and with the participation of our management,
including our CEO and CFO, we conducted an evaluation of the effectiveness of
our internal control over financial reporting based on the framework of Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on that evaluation, our management concluded
that our internal control over financial reporting was effective as of December
31, 2009.




The
effectiveness of our internal control over financial reporting as of December
31, 2009 has been audited by Ernst & Young LLP, an independent registered
public accounting firm, as stated in their report which is included
below.




There was no
change in the Company’s internal control over financial reporting during the
Company’s last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.





Inherent
Limitations of Controls




Because of
their inherent limitations, disclosure controls and procedures and internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.











Report of
Independent Registered Public Accounting Firm








To the
Board of Directors and Stockholders


ANADIGICS,
Inc.








We have
audited ANADIGICS, Inc.’s internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). ANADIGICS, Inc.’s management is responsible for
maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our
audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





In our
opinion, ANADIGICS, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on the
COSO criteria.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of ANADIGICS,
Inc. as of December 31, 2009 and 2008, and the related consolidated statements
of operations, comprehensive income (loss), stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2009 of ANADIGICS
Inc. and our report dated March 12, 2010 expressed an unqualified opinion
thereon.








/s/ Ernst & Young LLP


MetroPark,
New Jersey


March 12, 2010

















ITEM 9B. OTHER
INFORMATION




None.





PART
III





ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE.




The Company
has adopted a Code of Conduct and Business Ethics that applies to directors,
officers and employees, including the President and Chief Executive Officer, and
Chief Financial Officer and has posted such code on its website at
(www.anadigics.com). Changes to and waivers granted with respect to the
Company’s Code of Conduct and Business Ethics for officers and directors that
are required to be disclosed pursuant to the applicable rules and regulations
will be filed on a current report on Form 8-K and posted on the Company
website.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2010 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





ITEM 11. EXECUTIVE COMPENSATION.





The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2010 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2010 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statemen t for its
2010 annual meeting of shareholders that is responsive to the information
required with respect to this Item.





ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2010 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





PART
IV








ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





(a) 1.
Financial Statements





Financial
Statements are included in Item 8, "Financial Statements and Supplementary Data"
as follows:





-
            Report
      of Independent Registered Public Accounting Firm-
            Consolidated
      Balance Sheets - December 31, 2008 and
2009





-
            Consolidated
      Statements of Operations - Year ended December 31, 2007, 2008 and
      2009-
            Consolidated
      Statements of Comprehensive Income (Loss) - Year ended December 31, 2007,
      2008 and 2009





-
            Consolidated
      Statements of Stockholders’ Equity - Year ended December 31, 2007, 2008
      and 2009-
            Consolidated
      Statements of Cash Flows - Year ended December 31, 2007, 2008 and
      2009





-
            Notes
      to Consolidated Financial
Statements





2.
Financial Statement Schedules





Schedule
II - Valuation and Qualifying Accounts





All other
schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.





(b)
Exhibit List





2.1
            Stock
      Purchase Agreement dated April 2, 2001, among the Company, Telcom Devices
      Corp. and the sellers named therein. Filed as an exhibit to the Company’s
      Current Report on Form 8-K dated April 6, 2001, and incorporated herein by
      reference.3.1
            Amended
      and Restated Certificate of Incorporation of the Company, together with
      all amendments thereto. Filed as an exhibit to the Company's Registration
      Statement on Form S-3 (Registration No. 333-75040), and incorporated
      herein by reference.3.2
            Amended
      and Restated By-laws of the Company. Filed as an exhibit to the Company's
      current report on Form 8-K dated January 22, 2008, and incorporated herein
      by reference.4.1
            Form
      of Common Stock Certificate. Filed as an exhibit to the Company's
      Registration Statement on Form S-1 (Registration No. 33-89928), and
      incorporated herein by reference.4.2
            Form
      of Registration Rights Agreement. Filed as an exhibit to the Company's
      Registration Statement on Form S-1 (Registration No. 33-89928), and
      incorporated herein by reference.4.3
            Schedule
      to Form of Registration Rights Agreement. Filed as an exhibit to the
      Company's Registration Statement on Form S-1 (Registration No. 333-20783),
      and incorporated herein by reference.4.4
            Rights
      Agreement dated as of December 17, 1998 between the Company and Chase
      Mellon Shareholder Services L.L.C., as Rights Agent. Filed as an exhibit
      to the Company’s Current Report on Form 8-K dated December 17, 1998, and
      incorporated herein by reference.4.5
            Amendment
      No. 1 dated as of November 30, 2000 to the Rights Agreement dated as of
      December 17, 1998 between the Company and Chase Mellon Shareholder
      Services L.L.C., as Rights Agent. Filed as an exhibit to the Company’s
      Current Report on Form 8-K dated December 4, 2000, and incorporated herein
      by reference.4.6
            Amendment
      No. 2 dated as of October 2, 2008, to the Rights Agreement, dated as of
      December 17, 1998, as amended as of November 30, 2000, between the Company
      and Mellon Investor Services LLC (f/k/a ChaseMellon Shareholder Services,
      L.L.C.).  Filed as an exhibit to the Company’s Form 8-A filed on
      October 2, 2008 and incorporated herein by reference.10.1
            1994
      Long-Term Incentive and Share Award Plan. Filed as an exhibit to the
      Company's Registration Statement on Form S-1 (Registration No. 33-89928),
      and incorporated herein by reference.10.2
            1995
      Long-Term Incentive and Share Award Plan, as amended May 29, 1997 and May
      24, 2000. Filed as an exhibit to the Company’s Current Report on Form S-8
      (Registration No. 333-49632), and incorporated herein by
      reference.10.3
            Employee
      Savings and Protection Plan. Filed as an exhibit to the Company's
      Registration Statement on Form S-1 (Registration No. 33-89928), and as
      incorporated herein by reference.10.4
            First
      Amendment to Employee Savings and Protection Plan, effective as of May 1,
      200510.5
            Amended
      and Restated Employee Stock Purchase Plan. Filed as an exhibit to the
      Company's Quarterly Report on Form 10-Q filed on May 16, 2008, and
      incorporated herein by reference.10.6
            Lease
      Agreement between United States Land Resources, L.P. (and its successor in
      interest, Warren Hi-Tech Center, L.P.), and the Company dated as of April
      26, 1996. Filed as an exhibit to the Company's Registration Statement on
      Form S-1 (Registration No. 333-20783); as amended in the Company’s Annual
      Report filed on Form 10-K405 dated March 29, 2002; each as incorporated
      herein by reference.10.7
            Employment
      Agreement between the Company and Mario A. Rivas, dated January 15, 2009.
      Filed as an exhibit to the Company’s current report on Form 8-K dated
      January 15, 2009; as amended and filed as an exhibit to the Company’s
      Current Report on Form 8-K dated January 4, 2010; each as incorporated
      herein by reference.10.8
            Employment
      Agreement between the Company and Thomas C. Shields, dated July 25, 2000.
      Filed as an exhibit to the Company’s Annual Report on Form 10-K405 dated
      March 29, 2002; as amended and filed as an exhibit to the Company’s
      Current Report on Form 8-K dated May 10, 2005; as amended and filed as an
      exhibit to the Company’s Current Report on Form 8-K dated November 7,
      2005; each as incorporated herein by reference.*10.9
            Employment
      Agreement between the Company and Charles Huang, dated July 25, 2000.
      Filed as an exhibit to the Company’s Annual Report on Form 10-K405 dated
      March 29, 2002, each as incorporated herein by reference, as amended June
      14, 2005, as further amended December 17, 2008, as further amended April
      7, 2009 (each such amendment filed herewith.)10.10
            Form
      of 1997 Long-Term Incentive and Share Award Plan. Filed as an exhibit to
      the Company’s Annual Report on Form 10-K405 dated February 18, 1997, and
      incorporated herein by reference.10.11
            Amended
      and Restated 2005 Long Term Incentive and Share Award Plan. Filed as an
      exhibit to the Company’s current report on Form 8-K filed on May 16, 2008;
      and incorporated herein by reference.10.12
            Employment
      Agreement between the Company and Ron Michels, dated as of January 27,
      2009.  Filed as an exhibit to the Company’s current report on
      Form 8-K filed on January 30, 2009.*10.13
            Employment
      Agreement between the Company and Greg White, dated as of November 13,
      2009.*21
            Subsidiary
      Listing*23.1
            Consent
      of Ernst & Young LLP.24.1
            Power
      of Attorney (included on the signature page of this Annual Report on Form
      10-K).*31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Mario Rivas, President and Chief
      Executive Officer of ANADIGICS, Inc.*31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Thomas C. Shields, Executive Vice
      President and Chief Financial Officer of ANADIGICS,
Inc.*32.1
            Section
      1350 Certification of Mario Rivas, President and Chief Executive Officer
      of ANADIGICS, Inc.*32.2
            Section
      1350 Certification of Thomas C. Shields, Executive Vice President and
      Chief Financial Officer of ANADIGICS, Inc.*
      Filed herewith





SIGNATURES





Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on the 12th day of March,
2010.





ANADIGICS,
INC.





BY: /s/
Mario A. Rivas


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


Mario A.
Rivas


CHIEF
EXECUTIVE OFFICER AND PRESIDENT





KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints each of Mario A. Rivas and Thomas C. Shields as his
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
and file any and all amendments to this Annual Report on Form 10-K, with all
exhibits thereto and hereto, and other documents with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue
hereof.





PURSUANT
TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN
SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF ANADIGICS, INC. IN THE CAPACITIES
AND ON THE DATES INDICATED:





Name
            Title
            Date/s/
      Mario A. Rivas
            President
      and Chief Executive Officer (Principal Executive Officer)
            March
      12, 2010Mario
      A. Rivas/s/ Thomas C.
      Shields
            Executive
      Vice President and Chief Financial Officer (Principal Financial Accounting
      Officer)
            March
      12, 2010Thomas
      C. Shields/s/
      Lewis Solomon
            Chairman
      of the Board of Directors
            March
      12, 2010Lewis
      Solomon/s/
      Paul S. Bachow
            Director
            March
      12, 2010Paul
      S. Bachow/s/
      David Fellows
            Director
            March
      12, 2010David
      Fellows/s/
      Harry T. Rein
            Director
            March
      12, 2010Harry
      T. Rein/s/
      Ronald Rosenzweig
            Director
            March
      12, 2010Ronald
      Rosenzweig/s/
      Dennis Strigl
            Director
            March
      12, 2010Dennis
      Strigl










SCHEDULE
II--VALUATION AND QUALIFYING ACCOUNTS








Description
              (Dollars
      in Thousands)
            
            Balance
      at beginning of period
            
            
            Additions
      charged to costs and expenses
            
            
            Deductions
            
            
            
            
            
            Balance
      at end of periodYear
      ended December 31, 2009:Deducted
      from asset account:Allowance for doubtful accounts
            
            $
            739
            
            
            $
            -
            
            
            
            -
            
            
            
            (1
            )
            
            $
            739Reserve for excess and obsolete inventory
            
            
            9,028
            
            
            
            2,940
            
            
            
            (2,089
            )
            
            
            (2
            )
            
            
            9,879Reserve
      for warranty claims
            
            
            645
            
            
            
            2,077
            
            
            
            (1,728
            )
            
            
            (3
            )
            
            
            994Year
      ended December 31, 2008:Deducted
      from asset account:Allowance for doubtful accounts
            
            $
            924
            
            
            $
            69
            
            
            $
            (254
            )
            
            
            (1
            )
            
            $
            739Reserve for excess and obsolete inventory
            
            
            4,237
            
            
            
            5,383
            
            
            
            (592
            )
            
            
            (2
            )
            
            
            9,028Reserve
      for warranty claims
            
            
            327
            
            
            
            1,149
            
            
            
            (831
            )
            
            
            (3
            )
            
            
            645Year
      ended December 31, 2007:Deducted
      from asset account:Allowance for doubtful accounts
            
            $
            923
            
            
            $
            1
            
            
            $
            -
            
            
            
            (1
            )
            
            $
            924Reserve for excess and obsolete inventory
            
            
            3,530
            
            
            
            977
            
            
            
            (270
            )
            
            
            (2
            )
            
            
            4,237Reserve
      for warranty claims
            
            
            347
            
            
            
            521
            
            
            
            (541
            )
            
            
            (3
            )
            
            
            327





(1)
Uncollectible accounts written-off to the allowance account.




(3)
Warranty expenses incurred to the reserve for warranty claims.