##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File Number
    000-50770
  
 Leadis Technology,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

77-0547089(State or other jurisdiction
    of

(IRS Employerincorporation or
    organization)

Identification No.)800 W. California Avenue, Ste
    200

94086Sunnyvale, CA

(Zip Code)(Address of principal executive
    offices)   (408) 331-8600 (Registrants
    telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of each class

Name of each exchange on which registeredCommon Stock, $0.001 par
    value

The NASDAQ Stock Market
    LLC   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 



LEADIS
    TECHNOLOGY, INC.Form 10-K
    For the Fiscal Year Ended December 31, 2006
    TABLE OF CONTENTS
  
  PagePART IItem 1


Business


1Item 1A


Risk
    Factors


7Item 1B


Unresolved Staff
    Comments


20Item 2


Properties


20Item 3


Legal
    Proceedings


20Item 4


Submission of
    Matters to a Vote of Security Holders


21PART IIItem 5


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


21Item 6


Selected Financial
    Data


23Item 7


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


24Item 7A


Quantitative and
    Qualitative Disclosures about Market Risk


36Item 8


Financial
    Statements and Supplementary Data


37Item 9


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


64Item 9A


Controls and
    Procedures


64Item 9B


Other
    Information


65PART IIIItem 10


Directors and
    Executive Officers of the Registrant


65Item 11


Executive
    Compensation


65Item 12


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


65Item 13


Certain
    Relationships and Related Transactions


65Item 14


Principal
    Accountant Fees and Services


65PART IVItem 15


Exhibits


66Signatures


68EXHIBIT 10.21EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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##### Table of Contents



PART I  FORWARD-LOOKING
    STATEMENTS
  This Annual Report on
    Form 10-K,
    and particularly the sections entitled Business,
    Risk Factors, and Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations, contains forward-looking statements within the
    meaning of Section 27A of the Securities Act of 1933 and
    Section 21E of the Securities Exchange Act of 1934, which
    are subject to the safe harbor created by those
    sections. These statements relate to future events or our future
    financial performance and involve known and unknown risks,
    uncertainties and other factors that may cause our financial
    performance or achievements to differ materially from these
    forward-looking statements. Forward-looking statements can often
    be identified by terminology such as may,
    will, could, should,
    expect, believe, anticipate,
    estimate, continue, plan,
    intend, potential, project
    or other similar words. Except as required by law, we undertake
    no obligation to update or publicly revise any forward-looking
    statements to reflect events or circumstances after the date of
    this document.
  ITEM 1.
    BUSINESS  Overview
    time-to-market
  www.leadis.com. Form 10-K, Form 10-Q, Form 8-K www.leadis.com
  Industry
    Overview
   1




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##### Table of Contents



Display
    Driver Product Solutions
  system-on-a-chip,
  tm tm
 2




---



##### Table of Contents



TFT technology
  tm
  STN technology
  tm
  OLED technology
    LED
    Driver Product Solutions
  tm
 3




---



##### Table of Contents



2
  Future
    Consumer Audio Product Solutions
      Product
    Strategy
    
    Create greater value in our display
    drivers.  Incorporating innovative technology into
    our display drivers is essential for our long term success. In
    2007, we will add a
    PowerLitetm
    solution, consisting of a dynamic backlight control algorithm,
    and several high-speed serial interfaces to our display driver
    products. In addition, by combining our new family of LED
    drivers with our new
    PowerLitetm
    LCD drivers, we believe we will be able to provide a system
    solution for display modules, further enhancing the value of our
    display driver products.
    Continue to focus on a-TFT and LTPS.  In order
    to succeed we must be able to develop products that satisfy the
    evolving technology and product specifications required by the
    major handset manufacturers. As the market continues its shift
    toward TFT LCD displays, we plan to increase the focus of our
    display driver product development on a-TFT and LTPS products to
    expand our presence in this key portion of the mobile handset
    display market. We will maintain a strong focus on research and
    development to maintain a product portfolio that supports the
    evolving demands of the handset market.
    Provide high-quality and cost-effective
    designs.  In 2006, we allocated resources to
    improving our new product development processes and overall
    quality. While this will continue to be a focus in 2007, our
    cost reduction strategy also depends upon process technology
    migration. We are now designing our new products using a 0.15um
    high voltage process and we plan to co-develop a 0.13um high
    voltage process with a foundry partner for our next generation
    products. This will enable us to cost-effectively incorporate
    more features on our display drivers and improve our overall
    cost structure.
    Expand beyond display drivers.  We will seek to
    leverage our core capabilities in analog and mixed-signal
    product development and a strong position with mobile handset
    and display module makers, to move into related, higher margin
    product areas. Due to their anticipated synergy with our
    existing display driver business, we plan to expand initially
    with LED drivers and touch sensor technology products. While we
    will introduce these products initially in the mobile handset
    market, both areas lend themselves well to diversifying into
    other markets. Therefore these new product lines may provide
    both product diversification, as well as market diversification.
    We also recently announced our future expansion into consumer
    audio applications through our acquisition of Mondowave Inc. 4




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Sales and
    Marketing
      Customers
    Seasonality
      Manufacturing
   5




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Inventory
  product-by-product
  Research
    and Development
    Intellectual
    Property
     6




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Competition
        Employees
    Financial
    Information by Geographic Location
    ITEM 1A.
    RISK
    FACTORS  You should carefully consider the risks described below as
    well as the other information contained in this annual report on
    Form 10-K
    in evaluating our company and our business. The risks and
    uncertainties described below may not be the only risks and
    uncertainties that we face. Additional risks and uncertainties
    not presently known to us or that we currently deem immaterial
    may also impair our business operations. If any of the following
    risks actually occurs, our business, financial condition and
    results of operations would be impaired. In such case, the
    trading price of our common stock could decline, and you may
    lose all or part of your investment.
 7




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We
    depend on a small number of key customers for substantially all
    of our revenue and the loss of, or a significant reduction in
    orders from, any key customer would significantly reduce our
    revenue and adversely impact our operating
    results.
        Our
    customers include our products in displays sold to a small
    number of handset manufacturers, and the loss of business by our
    customers with these handset manufacturers could adversely
    affect our business.
    Our
    efforts to expand our product portfolio and enter into new
    markets have attendant execution risk.
   8




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We may
    undertake acquisitions to expand our business that may pose
    risks to our business, reduce our cash balance and dilute the
    ownership of our existing stockholders.
    
    problems integrating the acquired operations, technologies or
    products with our existing business and products;
    diversion of managements time and attention from our core
    business;
    need for financial resources above our planned investment levels;
    difficulties in retaining business relationships with suppliers
    and customers of the acquired company;
    risks associated with entering markets in which we lack prior
    experience;
    potential loss of key employees of the acquired company; and
    potential requirement to amortize intangible assets.    If we
    are unable to timely develop new and enhanced products that
    achieve market acceptance, our operating results and competitive
    position could be harmed.
      
    accurate prediction of changing requirements of customers within
    the mobile device and small panel display markets;
    timely completion and introduction of new designs, including
    low-cost versions of existing products;
    timely qualification and certification of our drivers for use in
    our customers products;
    the prices at which we are able to offer our products;
    quality, performance, power use and size of our products as
    compared to competing products and technologies;
    successful integration of the display module, including
    components supplied by other suppliers;
    commercial acceptance and commercial production of the products
    into which our drivers are incorporated; 9




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
    achievement of acceptable manufacturing yields;
    interoperability of our products with other display module
    components;
    our customer service and support capabilities and responsiveness;
    successful development of our relationships with existing and
    potential customers;
    mobile service providers demand for handsets incorporating
    our products; and
    changes in technology, industry standards or end-user
    preferences.  tm
  If we
    are unable to comply with evolving customer specifications and
    requirements, customers may choose other products instead of our
    own.
    The
    average selling prices of our products tend to decline over
    time, often rapidly, and if we are unable to develop successful
    new products in a timely manner, our operating results will be
    harmed.
   10




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We are
    dependent on sales of a small number of products, and the
    absence of continued market acceptance of these products could
    harm our business.
    Our
    business is highly dependent on the mobile handset market, which
    is highly concentrated and characterized by significant price
    competition, short product life cycles, fluctuations in demand,
    and seasonality, any of which could negatively impact our
    business or results of operations.
        Our
    revenue has fluctuated significantly from year to year, so you
    should not rely on the results of any past periods as an
    indication of future revenue performance or
    growth.
    We
    have incurred losses in prior periods and will incur losses in
    the future.
   11




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Our
    quarterly financial results fluctuate, which leads to volatility
    in our stock price.
  quarter-to-quarter
  Our
    products are complex and may require modifications to resolve
    undetected errors or failures, which could lead to an increase
    in our costs, a loss of customers or a delay in market
    acceptance of our products.
    Our
    products must interoperate with the display module components
    supplied to our customers by other suppliers.
    Failure
    to transition to new manufacturing process technologies could
    adversely affect our operating results and gross
    margin.
   12




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Our
    limited operating history makes it difficult for us to
    accurately forecast revenue and appropriately plan our
    expenses.
    If we
    fail to accurately forecast customer demand, we may have excess
    or insufficient inventory, which may increase our operating
    costs and harm our business.
    Our
    customer orders are subject to cancellation, reduction or delay
    in delivery schedules, which may result in lower than
    anticipated revenue.
    We
    face significant competition and may be unsuccessful in
    competing against current and future competitors.
   13




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We
    face competition from businesses related to our customers, which
    could harm our business.
    We
    rely on a limited number of independent foundries and
    subcontractors for the manufacture, assembly and testing of our
    chipsets and on a third party logistics provider to ship
    products to our customers. The failure of any of these
    third-party vendors to deliver products or otherwise perform as
    requested could damage our relationships with our customers,
    decrease our sales and limit our growth.
  and/or and/or
  We
    face risks associated with relying on third-party vendors for
    the manufacture, assembly and testing of our
    products.
    
    reduced ability to increase production and achieve acceptable
    yields on a timely basis;
    reduced control over delivery schedules and product quality;
    limited warranties on wafers or products supplied to us;
    limited ability to obtain insurance coverage for business
    interruptions related to contractors;
    increased exposure to potential misappropriation of our
    intellectual property;
    shortages of materials that foundries use to manufacture our
    products;
    labor shortages or labor strikes;
    political instability in countries where contractors are
    located; and
    actions taken by our subcontractors that breach our agreements 14




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We do
    not have long-term supply contracts with our third-party
    manufacturing vendors and they may allocate capacity to other
    customers and may not allocate sufficient capacity to us to meet
    future demands for our products.
    Failure
    to achieve expected manufacturing yields for existing
    and/or new
    products would reduce our gross margin and could adversely
    affect our ability to compete effectively.
    Use of
    our customized manufacturing process by our foundry contractors
    in connection with their manufacturing of our competitors
    products could harm our business.
   15




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The
    semiconductor industry is highly cyclical, and our operating
    results may be negatively impacted by downturns in the general
    semiconductor industry.
    Any
    disruption to our operations or the operations of our foundry,
    assembly and test contractors resulting from earthquakes or
    other natural disasters could cause significant delays in the
    production or shipment of our products.
    We
    rely on our key personnel to manage our business, and if we are
    unable to retain our current personnel and hire additional
    personnel, our ability to develop and successfully market our
    products could be harmed.
    Our
    ability to compete will be harmed if we are unable to adequately
    protect our intellectual property.
   16




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Assertions
    by third parties of infringement by us of their intellectual
    property rights could result in significant costs and cause our
    operating results to suffer.
    
    stop selling products or using technology that contain the
    allegedly infringing intellectual property;
    pay damages to the party claiming infringement;
    attempt to obtain a license to the relevant intellectual
    property, which may not be available on reasonable terms or at
    all; and
    attempt to redesign those products that contain the allegedly
    infringing intellectual property.    We
    have significant international activities and customers, and
    plan to continue such efforts, which subjects us to additional
    business risks including increased logistical complexity,
    political instability and currency fluctuations.
  and/or
  
    increased complexity and costs of managing international
    operations;
    protectionist and other foreign laws and business practices that
    favor local competition in some countries;
    difficulties in managing foreign operations, including cultural
    differences;
    difficulty in hiring qualified management, technical sales and
    applications engineers;
    inadequate local infrastructure;
    multiple, conflicting and changing laws, regulations, export and
    import restrictions, and tax schemes;
    potentially longer and more difficult collection periods and
    exposure to foreign currency exchange rate fluctuations; and
    political and economic instability.   17




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Our
    inability to effectively manage growth in our operations may
    prevent us from successfully expanding our
    business.
    Difficulties
    in collecting accounts receivable could result in significant
    charges against income and the deferral of revenue recognition
    from sales to affected customers, which could harm our operating
    results and financial condition.
  and/or
  We may
    need to raise additional capital, which might not be available
    or which, if available, may be on terms that are not favorable
    to us.
    Our
    stock price is volatile, which could result in substantial
    losses for investors and significant costs related to
    litigation.
    
    quarterly variations in revenue or operating results;
    failure to meet the expectations of securities analysts or
    investors with respect to our financial performance;
    changes in financial estimates by securities analysts; 18




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
    announcements by us or our competitors of new product and
    service offerings, significant contracts, acquisitions or
    strategic relationships;
    publicity about our company or our products or our competitors;
    announcements by mobile handset manufacturers;
    actual or anticipated fluctuations in our competitors
    operating results or changes in their growth rates;
    additions or departures of key personnel;
    the trading volume of our common stock;
    any future sales of our common stock or other
    securities; and
    stock market price and volume fluctuations of publicly-traded
    companies in general and semiconductor companies in particular.    Our
    principal stockholders have significant voting power and may
    influence actions that may not be in the best interests of our
    other stockholders.
    Our
    reported financial results may be adversely affected by changes
    in accounting principles generally accepted in the United
    States.
   19




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If we
    fail to maintain the adequacy of our internal controls, our
    ability to provide accurate financial statements could be
    impaired and any failure to maintain our internal controls and
    provide accurate financial statements could cause our stock
    price to decrease substantially.
    Anti-takeover
    provisions of our charter documents and Delaware law could
    prevent or delay transactions resulting in a change in
    control.
    
    establish a classified board of directors, so that not all
    members of our board may be elected at one time;
    set limitations on the removal of directors;
    limit who may call a special meeting of stockholders;
    establish advance notice requirements for nominations for
    election to our board of directors or for proposing matters that
    can be acted upon at stockholder meetings;
    prohibit stockholder action by written consent, thereby
    requiring all stockholder actions to be taken at a meeting of
    our stockholders; and
    provide our board of directors the ability to designate the
    terms of and issue new series of preferred stock without
    stockholder approval.    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS   20




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES      Fiscal Year 2006


Fiscal Year 2005High


Low


High


LowFirst Quarter

$
5.78


$
4.96


$
10.50


$
5.63Second Quarter


6.29



4.81



8.16



5.41Third Quarter


5.39



3.87



8.74



6.26Fourth Quarter


5.14



3.84



6.94



4.87     Use of
    Proceeds from the Sale of Registered Securities
  Form S-1 No. 333-113880)
  Equity
    Compensation Plan Information
   21




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##### Table of Contents



Stock
    Performance Graph
    COMPARISON
    OF CUMULATIVE TOTAL RETURN FOR THE PERIOD
    JUNE 16, 2004 THROUGH DECEMBER 31, 2006
  
 22




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA        Years Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share amounts)Consolidated Statement of
    Operations Data:Revenue

$
101,208


$
64,182


$
150,250


$
84,456


$
7,893Cost of sales(1)


88,506



50,197



97,725



54,305



6,781Gross profit


12,702



13,985



52,525



30,151



1,112Operating expenses:Research and development(1)


13,796



14,522



14,964



7,042



1,398Selling, general and
    administrative(1)


14,785



12,766



8,545



3,538



1,493Total operating expenses


28,581



27,288



23,509



10,580



2,891Operating income (loss)


(15,879
)


(13,303
)


29,016



19,571



(1,779
)Interest and other income
    (expense), net


4,349



2,718



956



59



119Net income (loss) before income
    taxes


(11,530
)


(10,585
)


29,972



19,630



(1,660
)Provision for income taxes


523



765



12,379



6,870



Net income (loss) before
    cumulative effect of change in accounting principle


(12,053
)


(11,350
)


17,593



12,760



(1,660
)Cumulative effect of change in
    accounting principle, net of tax(1)


142















Net income (loss)

$
(11,911
)

$
(11,350
)

$
17,593


$
12,760


$
(1,660
)Basic net income (loss) per share
    before cumulative effect of change in accounting principle

$
(0.42
)

$
(0.40
)

$
0.72


$
0.62


$
(0.28
)Cumulative effect of change in
    accounting principle


0.01















Basic net income (loss) per share

$
(0.41
)

$
(0.40
)

$
0.72


$
0.62


$
(0.28
)Diluted net income (loss) per
    share before cumulative effect of change in accounting principle

$
(0.42
)

$
(0.40
)

$
0.63


$
0.55


$
(0.28
)Cumulative effect of change in
    accounting principle


0.01















Diluted net income (loss) per share

$
(0.41
)

$
(0.40
)

$
0.63


$
0.55


$
(0.28
)Weighted-average number of shares
    used in calculating basic net income (loss) per share


28,802



28,143



24,469



20,572



5,980Weighted-average number of shares
    used in calculating diluted net income (loss) per share


28,802



28,143



27,817



23,130



5,980  23




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(1)
    
    As required under SFAS No. 123(R), we recorded a
    cumulative effect of change in accounting principle benefit of
    $0.1 million for the year ended December 31, 2006,
    reflecting estimated future forfeitures of options previously
    expensed under APB No. 25. Amounts in 2006 include
    stock-based compensation expenses recorded under
    SFAS No. 123(R), and amounts in 2002 through 2005
    include amortization of deferred stock-based compensation
    recorded under APB No. 25 as follows (in thousands):  Years Ended December 31,2006


2005


2004


2003


2002(SFAS123R)


(APB25)


(APB25)


(APB25)


(APB25)Cost of sales

$
417


$
97


$
269


$
26


$
Research and development

$
1,017


$
794


$
1,730


$
692


$
Selling, general and administrative

$
3,232


$
1,211


$
2,492


$
202


$
   December 31,2006


2005


2004


2003


2002(In thousands)Consolidated Balance Sheet
    Data:Cash and cash equivalents

$
62,697


$
72,801


$
45,012


$
22,956


$
8,685Working capital

$
109,310


$
116,040


$
124,351


$
26,470


$
12,138Total assets

$
140,729


$
143,914


$
154,815


$
61,652


$
16,501Total debt

$



$



$



$



$
Redeemable convertible preferred
    stock

$



$



$



$
14,300


$
13,250Stockholders equity (deficit)

$
114,037


$
119,815


$
127,106


$
13,607


$
(147
)   ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Cautionary
    Statement
  This Managements Discussion and Analysis of Financial
    Condition and Results of Operations should be read in
    conjunction with the accompanying audited consolidated financial
    statements and notes included in this report. This Annual Report
    on
    Form 10-K
    contains forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933 and
    Section 21E of the Securities Exchange Act of 1934, which
    include, without limitation, statements about the market for our
    technology, our strategy, competition, expected financial
    performance, and all information disclosed under Item 7 of
    this Part II. Any statements about our business, financial
    results, financial condition and operations contained in this
    Form 10-K
    that are not statements of historical fact may be deemed to be
    forward-looking statements. Without limiting the foregoing, the
    words believes, anticipates,
    expects, intends, projects,
    or similar expressions are intended to identify forward-looking
    statements. Our actual results could differ materially from
    those expressed or implied by these forward-looking statements
    as a result of various factors, including the risk factors
    described under the heading Risk Factors and
    elsewhere in this report. We undertake no obligation to update
    publicly any forward-looking statements for any reason, except
    as required by law, even as new information becomes available or
    events occur in the future.
  Overview
  time-to-market
 24




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Critical
    Accounting Policies and Estimates
   25




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Revenue Recognition.
  Allowance for Uncollectible Accounts
    Receivable.
  Inventory Valuation. first-in,
 26




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Warranty Obligations.
    Accounting for Income Taxes.
    Stock-Based Compensation.
 27




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No. 96-18,
 28




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Results
    of Operations
    Years Ended December 31,2006


2005


2004Total revenue


100
%


100
%


100
%Cost of sales


87
%


78
%


65
%Gross profit


13
%


22
%


35
%Operating expenses:Research and development


14
%


23
%


10
%Selling, general and administrative


15
%


20
%


6
%Total operating expenses


29
%


43
%


16
%Operating income (loss)


(16
)%


(21
)%


19
%Net income (loss)


(12
)%


(18
)%


12
%   Total
    Revenue
  2006 vs. 2005





2005 vs. 20042006


Change


2005


Change


2004(In thousands)Total revenue

$
101,208



58
%

$
64,182



(57
)%

$
150,250   year-to-year
   29




---



##### Table of Contents



Revenue
    by Customer
  % of Revenue for the


% of Accounts ReceivableYears Ended December 31,


at December 31,2006


2005


2004


2006


2005Samsung SDI


35
%


42
%


37
%


16
%


22
%TPO Displays Corp.**


31
%


21
%


53
%


42
%


29
%AU Optronics Corp.


21
%



*


*



15
%


13
%Rikei Corp.



*



*


*



17
%


*Hosiden Corp.



*


17
%


*



*



*     *
    
    Less than 10%**
    
    TPO Displays Corp. includes both Philips Mobile Display Systems
    and Toppoly Optoelectronics Corporation for all periods
    presented as a result of the merger of these companies in 2006.      Revenue
    by Geography
    Years Ended December 31,2006


2005


2004China


82
%


55
%


54
%Korea


8



32



42Taiwan


4



13



4Japan


6







Total revenue


100
%


100
%


100
%  30




---



##### Table of Contents



Gross
    Profit
  2006 vs. 2005





2005 vs. 20042006


Change


2005


Change


2004(In thousands)Gross Profit

$
12,702



(9
)%

$
13,985



(73
)%

$
52,525% of Total revenue


13
%






22
%






35
%         Research
    and Development
  2006 vs. 2005





2005 vs. 20042006


Change


2005


Change


2004(In thousands)Research and development

$
13,796



(5
)%

$
14,522



(3
)%

$
14,964% of Total revenue


14
%






23
%






10
%    31




---



##### Table of Contents



Selling,
    General and Administrative
  2006 vs. 2005





2005 vs. 20042006


Change


2005


Change


2004(In thousands)Selling, general and administrative

$
14,785



16
%

$
12,766



49
%

$
8,545% of Total revenue


15
%






20
%






6
%        32




---



##### Table of Contents



Interest
    and Other Income (Expense), net
  2006 vs. 2005





2005 vs. 20042006


Change


2005


Change


2004(In thousands)Interest and other income
    (expense), net

$
4,349



60
%

$
2,718



184
%

$
956       Provision
    for Income Taxes
  2006 vs. 2005





2005 vs. 20042006


Change


2005


Change


2004(In thousands)Provision for income taxes

$
523



(32
)%

$
765



(94
)%

$
12,379Effective tax rate


(5
)%






(7
)%






41
%% of Total revenue


1
%






1
%






8
%       Liquidity
    and Capital Resources
   33




---



##### Table of Contents



34




---



##### Table of Contents



Recently
    issued accounting pronouncements
         35




---



##### Table of Contents



No. 06-03 No. 06-03), No. 06-03 No. 06-03
  Contractual
    Obligations
      Payments Due by PeriodLess Than


1-3


4-5


More ThanTotal


1 Year


Years


years


5 YearsOperating lease obligations

$
2,229


$
1,190


$
1,039


$



$
Purchase obligations


12,776



12,776











Total

$
15,005


$
13,966


$
1,039


$



$
   Off-Balance-Sheet
    Arrangements
  Regulation S-K.
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest Rate Risk.
  Foreign Currency Exchange Risk.
 36




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       Consolidated
    financial statements
      Internal
    control over financial reporting
  Internal Control  Integrated
    Framework Internal Control  Integrated
    Framework
   37




---



##### Table of Contents



38




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
 CONSOLIDATED
    BALANCE SHEETS  December 31,2006


2005(In thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
62,697


$
72,801Short-term investments


43,845



34,077Accounts receivable, net


17,399



14,775Inventories


7,024



13,075Prepaid taxes and deferred tax
    assets


3,087



3,643Prepaid expenses and other current
    assets


1,411



1,050Total current assets


135,463



139,421Property and equipment, net


4,160



3,505Other assets


1,106



988Total assets

$
140,729


$
143,914LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
19,623


$
17,781Taxes payable


2,342



2,330Deferred margin


383



331Other accrued liabilities


3,805



2,939Total current liabilities


26,153



23,381Other noncurrent liabilities


539



718Total liabilities


26,692



24,099Commitments (Note 4)Stockholders equity:Preferred stock: $0.001 par
    value; 5,000,000 shares authorized and 0 shares issued
    and outstanding at December 31, 2006 and 2005






Common stock: $0.001 par
    value; 120,000,000 shares authorized and
    29,306,230 shares issued and outstanding at
    December 31, 2006; 120,000,000 shares authorized and
    28,492,148 shares issued and outstanding at
    December 31, 2005


29



28Additional paid-in capital


107,853



103,674Deferred stock-based compensation






(1,196
)Accumulated other comprehensive
    income


1,228



471Retained earnings


4,927



16,838Total stockholders equity


114,037



119,815Total liabilities and
    stockholders equity

$
140,729


$
143,914    39




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Years Ended December 31,2006


2005


2004(In thousands, except per share data)Revenue

$
101,208


$
64,182


$
150,250Cost of sales(1)


88,506



50,197



97,725Gross Profit


12,702



13,985



52,525Research and development
    expenses(1)


13,796



14,522



14,964Selling, general and
    administrative expenses(1)


14,785



12,766



8,545Total operating expenses


28,581



27,288



23,509Operating income (loss)


(15,879
)


(13,303
)


29,016Interest and other income
    (expense), net


4,349



2,718



956Net income (loss) before income
    taxes


(11,530
)


(10,585
)


29,972Provision for income taxes


523



765



12,379Income (loss) before cumulative
    effect of change in accounting principle


(12,053
)


(11,350
)


17,593Cumulative effect of change in
    accounting principle, net of tax(1)


142







Net income (loss)

$
(11,911
)

$
(11,350
)

$
17,593Basic net income (loss) per share
    before cumulative effect of change inaccounting principle

$
(0.42
)

$
(0.40
)

$
0.72Cumulative effect of change in
    accounting principle


0.01







Basic net income (loss) per share

$
(0.41
)

$
(0.40
)

$
0.72Diluted net income (loss) per
    share before cumulative effect of changein accounting principle

$
(0.42
)

$
(0.40
)

$
0.63Cumulative effect of change in
    accounting principle


0.01







Diluted net income (loss) per share

$
(0.41
)

$
(0.40
)

$
0.63Weighted-average number of shares
    used in calculating net income (loss)per shareBasic


28,802



28,143



24,469Diluted


28,802



28,143



27,817     (1)
    
    As required under SFAS No. 123(R), we recorded a
    cumulative effect of change in accounting principle benefit of
    $0.1 million for the year ended December 31, 2006,
    reflecting estimated future forfeitures of options previously
    expensed under APB No. 25. Amounts in 2006 include
    stock-based compensation expenses recorded under
    SFAS No. 123(R), and amounts in 2005 and 2004 include
    amortization of deferred stock-based compensation recorded under
    APB No. 25 as follows (in thousands):  Years Ended December 31,2006


2005


2004(SFAS123R)


(APB 25)


(APB 25)Cost of sales

$
417


$
97


$
269Research and development expenses


1,017



794



1,730Selling, general and
    administrative expenses


3,232



1,211



2,492    40




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Years Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
(11,911
)

$
(11,350
)

$
17,593Adjustments to reconcile net
    income (loss) to net cash provided by (used in) operating
    activities:Depreciation and amortization


1,229



783



325Net (gain) loss on disposal or
    sale of fixed assets


(2
)


21



13Provision for excess and obsolete
    inventory


2,859



1,888



3,461Deferred tax provision (benefits)


(4
)


1,912



(1,137
)Cumulative effect of change in
    accounting principle


(142
)






Stock-based compensation expense


4,666



2,102



4,491Tax benefit from exercise of
    options and warrants


(98
)


1,199



Changes in current assets and
    liabilities:Accounts receivable


(2,626
)


15,764



(1,372
)Inventory


4,111



(8,854
)


(3,576
)Prepaid taxes


327



(131
)


(3,172
)Prepaid expenses and other assets


(296
)


(182
)


(682
)Accounts payable


1,792



(2,748
)


(4,671
)Accrued and other liabilities


(284
)


(622
)


121Taxes payable


274



(543
)


(1,408
)Deferred margin


52



224



(380
)Net cash provided by (used in)
    operating activities


(53
)


(537
)


9,606Cash flows from investing
    activities:Purchases of available for sale
    securities


(43,834
)


(33,880
)


(89,589
)Sales or maturity of available for
    sale securities


34,066



63,763



25,601Restricted cash










1,500Purchase of property and equipment


(1,605
)


(2,131
)


(1,273
)Net cash provided by (used in)
    investing activities


(11,373
)


27,752



(63,761
)Cash flows from financing
    activities:Proceeds from initial public
    offering, net of issuance costs










76,492Issuance of common stock under
    stock plans


754



701



127Receipt of common stock
    subscription and stockholder note receivable










119Excess tax benefit from employee
    stock option plans


98







Net cash provided by financing
    activities


852



701



76,738Effect of exchange rate changes on
    cash and cash equivalents


470



(127
)


(527
)Net increase (decrease) in cash
    and cash equivalents


(10,104
)


27,789



22,056Cash and cash equivalents at
    beginning of year


72,801



45,012



22,956Cash and cash equivalents at end
    of year

$
62,697


$
72,801


$
45,012Supplemental
    disclosures:Total taxes paid

$
844


$
2,513


$
19,077    41




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  Notes





AccumulatedConvertible








Additional


Receivable


Deferred


Other





TotalPreferred Stock


Common Stock


Paid-In


from


Stock-based


Comprehensive


Retained


Stockholders


ComprehensiveShares


Amount


Shares


Amount


Capital


Stockholders


Compensation


Income (Loss)


Earnings


Equity


Income (Loss)(In thousands)Balance at December 31, 2003





$




8,918


$
9


$
6,677


$
(119
)

$
(3,592
)

$
37


$
10,595


$
13,607Net income


































17,593



17,593


$
17,593Currency translation adjustment,
    net of tax






























404







404



404Unrealized loss on investments, net
    of tax






























(27
)






(27
)


(27
)Comprehensive income









































$
17,970Deferred stock-based compensation


















4,235







(4,235
)










Amortization of deferred
    stock-based compensation


























4,491











4,491Conversion of preferred stock to
    common stock










12,310



12



14,288



















14,300Proceeds from initial public
    offering, net of issuance costs of $7,508










6,000



6



76,486



















76,492Exercise of warrants










352



























Exercise of common stock options










445



1



126



















127Repayment of shareholder note






















119















119Balance at December 31, 2004










28,025



28



101,812







(3,336
)


414



28,188



127,106Net loss


































(11,350
)


(11,350
)

$
(11,350
)Currency translation adjustment,
    net of tax






























104







104



104Unrealized loss on investments, net
    of tax






























(47
)






(47
)


(47
)Comprehensive loss









































$
(11,293
)Deferred stock-based compensation


















(38
)






38











Amortization of deferred
    stock-based compensation


























2,102











2,102Exercise of common stock options










363







113



















113Issuance of common shares under
    stock purchase plan










104







588



















588Tax benefits realized from warrant
    exercises


















1,199



















1,199Balance at December 31, 2005










28,492



28



103,674







(1,196
)


471



16,838



119,815Net loss


































(11,911
)


(11,911
)

$
(11,911
)Currency translation adjustment,
    net of tax






























664







664



664Unrealized gain on investments, net
    of tax






























93







93



93Comprehensive loss









































$
(11,154
)Elimination of deferred stock-based
    compensation upon adoption of SFAS No. 123(R)


















(1,196
)






1,196











Cumulative effect of change in
    accounting principle, net of tax


















(142
)


















(142
)Stock-based compensation


















4,666



















4,666Exercise of common stock options










683



1



216



















217Issuance of common shares under
    stock purchase plan










131







537



















537Tax benefits realized from employee
    stock option plans


















98



















98Balance at December 31, 2006





$




29,306


$
29


$
107,853


$



$



$
1,228


$
4,927


$
114,037    42




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  Note 1.
    Nature of
    Operations    Note 2.
    Summary
    of Significant Accounting Policies    Basis
    of presentation
    Use of
    estimates
    Foreign
    currency translation
    Foreign
    exchange contracts
   43




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cash,
    cash equivalents and short-term investments
    Risks
    and uncertainties and concentrations of credit
    risk
        Inventory
    valuation
  first-in,
   44




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue
    recognition
    Warranty
    accrual
      Stock-based
    compensation
     45




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year EndedDecember 31,2006Stock-based compensation recorded
    under SFAS 123(R)

$
4,666Stock-based compensation expense
    that would have beenrecorded under APB 25


1,099Net impact on adoption of
    SFAS 123(R)

$
3,567Net impact upon adoption of
    SFAS 123(R) on basic anddiluted loss per share

$
0.12     No. 96-18,
  Stock-Based
    Compensation Information under
    SFAS No. 123(R)
   46




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31, 2006Stock PurchaseStock Options


Plan RightsExpected term


4.25 years



0.73 yearsVolatility


56.1
%


67.1
%Risk-free interest rate


4.7
%


3.6
%Dividend yield


0.0
%


0.0
%Weighted-average estimated fair
    value

$
2.47


$
2.63        47




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Pro Forma
    Information under SFAS No. 123 for Periods Prior to
    Fiscal 2006
    Years Ended December 31,2005


2004Net income (loss) as reported

$
(11,350
)

$
17,593Add: stock-based employee
    compensation expense included in reported net income (loss), net
    of tax


1,522



2,874Deduct: total stock-based employee
    compensation determined under fair value based method for all
    awards, net of tax


(4,105
)


(3,285
)Pro forma net income (loss)

$
(13,933
)

$
17,182Basic net income (loss) per share
    as reported

$
(0.40
)

$
0.72Diluted net income (loss) per
    share as reported

$
(0.40
)

$
0.63Pro forma basic net income (loss)
    per share

$
(0.50
)

$
0.70Pro forma diluted net income
    (loss) per share

$
(0.50
)

$
0.62     Stock Options


Stock Purchase Plan RightsYears Ended December 31,


Years Ended December 31,2005


2004


2005


2004Expected life (years)


3.66



4.00



0.67



Risk-free interest rate


4.0
%


2.9
%


2.5
%


Dividend yield


0.0
%


0.0
%


0.0
%


Expected annualized volatility


82.8
%


107.0
%


94.0
%


Weighted-average estimated fair
    value

$
3.66


$
6.90


$
3.08



     Net
    income (loss) per share
   48




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2006


2005


2004Numerator:Net income (loss) before
    cumulative effect of change in accounting principle

$
(12,053
)

$
(11,350
)

$
17,593Net income (loss)

$
(11,911
)

$
(11,350
)

$
17,593Denominator:Weighted-average common shares
    outstanding


28,887



28,290



19,191Weighted-average participating
    redeemable convertible preferred shares outstanding










5,642Less: unvested common shares
    subject to repurchase


(85
)


(147
)


(364
)Total shares, basic


28,802



28,143



24,469Effect of dilutive securities:Stock options and warrants










2,984Unvested shares subject to
    repurchase










364Total shares, diluted


28,802



28,143



27,817Net income (loss) per common share
    before cumulative effect of change in accounting principle, basic

$
(0.42
)

$
(0.40
)

$
0.72Cumulative effect of change in
    accounting principle


0.01







Net income (loss) per common
    share, basic

$
(0.41
)

$
(0.40
)

$
0.72Net income (loss) per common share
    before cumulative effect of change in accounting principle,
    diluted

$
(0.42
)

$
(0.40
)

$
0.63Cumulative effect of change in
    accounting principle


0.01







Net income (loss) per common
    share, diluted

$
(0.41
)

$
(0.40
)

$
0.63     2006


2005


2004Stock options


5,506



5,391



78Unvested shares subject to
    repurchase


24



147



   Comprehensive
    income (loss), net of tax
   49




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2006


2005Unrealized loss on available for
    sale securities, net of tax

$
(21
)

$
(74
)Cumulative translation adjustment


1,249



545Accumulated other comprehensive
    income

$
1,228


$
471   Recently
    issued accounting pronouncements
          No. 06-03 No. 06-03), No. 06-03 No. 06-03
 50




---



##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 3.
    Financial
    Statement Details  Financial
    instruments
    Gross


GrossUnrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueMoney market funds

$
9,451


$



$



$
9,451U.S. government agency bonds


20,938



3



(12
)


20,929Foreign debt securities


987



1







988Auction rate securities


14,750











14,750Commercial paper


38,591







(1
)


38,590Corporate bonds


9,189







(12
)


9,177$
93,906


$
4


$
(25
)

$
93,885Included in:Cash and cash equivalents













$
50,040Short-term investments













$
43,845     Gross


GrossUnrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueMoney market funds

$
10,137


$



$



$
10,137U.S. government agency bonds


11,965







(66
)


11,899Municipal bonds


18,199







(36
)


18,163Auction rate securities


3,000











3,000Commercial paper


54,725



6



(3
)


54,728Corporate bonds


2,527







(16
)


2,511$
100,553


$
6


$
(121
)

$
100,438Included in:Cash and cash equivalents













$
66,361Short-term investments













$
34,077     2006


2005Due in one year or less

$
77,059


$
97,438Due after one year


16,826



3,000$
93,885


$
100,438    51




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounts
    receivable, net
    December 31,2006


2005Accounts receivable, gross

$
17,791


$
15,269Allowance for doubtful accounts


(392
)


(494
)Accounts receivable, net

$
17,399


$
14,775     Balance December 31, 2003

$
560Provision/Adjustments


1Write-offs


Balance December 31, 2004


561Provision/Adjustments


(26
)Write-offs


(41
)Balance December 31, 2005


494Provision/Adjustments


(60
)Write-offs


(42
)Balance December 31, 2006

$
392   Inventories
    December 31,2006


2005Finished goods

$
4,307


$
4,234Work-in-progress


2,717



8,841$
7,024


$
13,075  52




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property
    and equipment, net
    December 31,2006


2005Computer equipment and software

$
3,411


$
2,416Machinery, equipment and vehicles


2,495



1,729Furniture and fixtures


292



271Building


293



269Leasehold improvements


382



2926,873



4,977Less: accumulated depreciation and
    amortization


(2,713
)


(1,472
)$
4,160


$
3,505     Other
    accrued liabilities
    December 31,2006


2005Accrued compensation costs

$
1,083


$
838Warranty accrual


928



839Reserve for adverse purchase
    commitments


887



Other accrued liabilities


907



1,262$
3,805


$
2,939   Warranty
    accrual
   53




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Balance December 31, 2003

$
1,112Accruals for warranty


1,792Settlements made


(546
)Balance December 31, 2004


2,358Accruals for warranty


612Adjustments


(1,110
)Settlements made


(1,021
)Balance December 31, 2005


839Accruals for warranty


907Adjustments


(704
)Settlements made


(114
)Balance December 31, 2006

$
928     Revenue
    and accounts receivable by customer
  % of Revenue for the


% of Accounts ReceivableYears Ended December 31,


at December 31,2006


2005


2004


2006


2005Samsung SDI


35
%


42
%


37
%


16
%


22
%TPO Displays Corp. **


31
%


21
%


53
%


42
%


29
%AU Optronics Corp.


21
%


*



*



15
%


13
%Rikei Corp.


*



*



*



17
%


*Hosiden Corp.


*



17
%


*



*



*     *
    
    Less than 10%**
    
    TPO Displays Corp. includes both Philips Mobile Display Systems
    and Toppoly Optoelectronics Corporation for all periods
    presented as a result of the merger of these companies in 2006.   54




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Interest
    and other income (expense), net
    Years Ended December 31,2006


2005


2004Interest income

$
4,762


$
3,034


$
948Foreign exchange gain (loss)


(473
)


(214
)


7Other income (expense), net


60



(102
)


1$
4,349


$
2,718


$
956   Note 4.
    Commitments
    and Contingencies  Indemnifications
    Operating
    leases
    Years Ended December 31,2007

$
1,1902008


6782009


2542010


1072011 and thereafter


$
2,229     Note 5.
    Common
    Stock and Preferred Stock       55




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 6.
    Stock
    Plans  Stock
    option plans
           56




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     OptionsAvailable





Weightedfor Future


Outstanding


AverageIssuance


Options


PriceBalance at December 31, 2003


1,829



3,174


$
0.16Authorized


4,161



Options granted


(1,192
)


1,192


$
5.07Exercised






(445
)

$
0.29Forfeited/cancelled


29



(29
)

$
0.94Balance at December 31, 2004


4,827



3,892


$
1.65Authorized


1,638



Options granted


(2,051
)


2,051


$
6.18Exercised






(363
)

$
0.31Forfeited/cancelled


189



(189
)

$
6.38Balance at December 31, 2005


4,603



5,391


$
3.29Authorized


1,676



Options granted


(1,497
)


1,497


$
4.99Exercised






(684
)

$
0.32Forfeited/cancelled


698



(698
)

$
5.99Balance at December 31, 2006


5,480



5,506


$
3.78     WeightedAverageNumber of


Grant DateShares


Fair ValueShares issued but unvested,
    December 31, 2003


540


$
0.59Additional shares granted in 2004


185


$
10.12Vested


(361
)

$
0.22Shares issued but unvested,
    December 31, 2004


364


$
5.79Vested


(217
)

$
6.48Shares issued but unvested,
    December 31, 2005


147


$
4.76Vested


(123
)

$
3.86Shares issued but unvested,
    December 31, 2006


24


$
5.79  57




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Outstanding


Options Vested and ExercisableWeighted


Weighted








Weighted


WeightedAverage


Average





Shares


Average


AverageRemaining


Exercise


Aggregate


Vested


Remaining


Exercise


AggregateRange of

Shares


Contractual


Price


Intrinsic


and


Contractual


Price


IntrinsicExercise Prices

Outstanding


Life in Years


per Share


Value


Exercisable


Life in Years


per Share


Value$0.10


655



4.27


$
0.10


$
3,008



655



4.27


$
0.10


$
3,008$0.12


470



6.24


$
0.12


$
2,148



423



6.23


$
0.12


$
1,934$ 0.24 - $ 0.50


819



6.23


$
0.32


$
3,582



685



6.09


$
0.30


$
3,005$ 3.98 - $ 5.45


1,482



5.74


$
4.74


$
359



401



6.26


$
4.84


$
45$ 5.54 - $ 5.98


1,150



4.92


$
5.58


$




240



4.85


$
5.59


$
$ 6.07 - $ 9.69


894



5.75


$
7.29


$




450



5.91


$
7.33


$
$12.00 - $14.00


36



7.42


$
13.10


$




33



7.43


$
13.22


$
5,506



5.52


$
3.78


$
9,097



2,887



5.61


$
2.54


$
7,992   in-the-money
        Employee
    Stock Purchase Plan
      Stock
    options issued to non-employees
   58




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 7.
    Income
    Taxes    Years Ended December 31,2006


2005


2004US operations

$
(4,449
)

$
(2,303
)

$
23,281Foreign operations


(7,081
)


(8,282
)


6,691Total pretax income (loss)

$
(11,530
)

$
(10,585
)

$
29,972       Years Ended December 31,2006


2005


2004Current:Federal

$
(151
)

$
(1,833
)

$
11,323State


13



36



490Foreign


665



650



1,699Total current


527



(1,147
)


13,512Deferred:Federal


(119
)


1,992



(1,116
)State


150



(83
)


(27
)Foreign


(35
)


3



10Total deferred


(4
)


1,912



(1,133
)Total provision for income taxes

$
523


$
765


$
12,379  59




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2006


2005Deferred tax assets:Net operating loss carryforwards

$
10


$
6Tax credits


15



12Warranty


6



6Inventory valuation differences


46



174Allowance for doubtful accounts


3



4Stock based compensation


704



Other comprehensive income


(517
)


(253
)Accruals, reserves and other


133



138Fixed assets and other


62



Gross deferred tax assets


462



87Valuation allowance


(381
)


Deferred tax assets, net of
    valuation allowance

$
81


$
87Deferred tax liabilities:Fixed assets and other






14Net deferred tax assets (included
    in prepaid taxes and deferred tax assets)

$
81


$
73        60




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Years Ended December 31,2006


2005


2004Tax at federal statutory rate

$
(4,036
)

$
(3,705
)

$
10,490State income taxes, net of federal
    tax benefit


4



(24
)


338Stock-based compensation


871



736



1,572Foreign earnings taxed at
    different rates


3,169



3,792



(179
)Change in valuation allowance


645







Tax credits






(18
)


(18
)Tax exempt interest income


(33
)


(277
)


Other


(97
)


261



176Total provision for income taxes

$
523


$
765


$
12,379   Note 8.
    Operating
    Segment and Geographic Information        Years Ended December 31,2006


2005


2004China


82
%


55
%


54
%Korea


8



32



42Taiwan


4



13



4Japan


6







Total revenue


100
%


100
%


100
%   Note 9.
    Legal
    Proceedings   61




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 10.
    Subsequent
    Event    SUPPLEMENTARY
    FINANCIAL DATA
    Quarterly Data (Unaudited)
  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share data)Year Ended December 31,
    2006Revenue

$
24,057


$
30,936


$
22,312


$
23,903Cost of sales

$
20,395


$
27,848


$
19,443


$
20,820Gross profit

$
3,662


$
3,088


$
2,869


$
3,083Research and development expenses

$
3,635


$
3,394


$
3,797


$
2,970Selling, general and
    administrative expenses

$
3,659


$
3,864


$
3,316


$
3,946Operating loss

$
(3,632
)

$
(4,170
)

$
(4,244
)

$
(3,833
)Cumulative effect of change in
    accounting principle, net of tax

$
142


$



$



$
Net loss

$
(2,790
)

$
(3,226
)

$
(2,822
)

$
(3,073
)Basic net loss per share

$
(0.10
)

$
(0.11
)

$
(0.10
)

$
(0.11
)Diluted net loss per share

$
(0.10
)

$
(0.11
)

$
(0.10
)

$
(0.11
)Weighted-average number of shares
    used in basic net loss per share calculation


28,455



28,654



28,935



29,187Weighted-average number of shares
    used in diluted net loss per share calculation


28,455



28,654



28,935



29,187   62




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##### Table of Contents



LEADIS
    TECHNOLOGY, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share data)Year Ended December 31,
    2005Revenue

$
11,604


$
13,538


$
17,585


$
21,455Cost of sales

$
8,449


$
9,723


$
13,712


$
18,313Gross profit

$
3,155


$
3,815


$
3,873


$
3,142Research and development expenses

$
3,741


$
3,930


$
3,443


$
3,408Selling, general and
    administrative expenses

$
2,589


$
3,101


$
3,345


$
3,731Operating loss

$
(3,175
)

$
(3,216
)

$
(2,915
)

$
(3,997
)Net loss

$
(2,529
)

$
(2,625
)

$
(2,549
)

$
(3,647
)Basic net loss per share

$
(0.09
)

$
(0.09
)

$
(0.09
)

$
(0.13
)Diluted net loss per share

$
(0.09
)

$
(0.09
)

$
(0.09
)

$
(0.13
)Weighted-average number of shares
    used in basic net loss per share calculation


27,867



28,031



28,192



28,297Weighted-average number of shares
    used in diluted net loss per share calculation


27,867



28,031



28,192



28,297  63




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of disclosure controls and procedures.
  Rule 13a-15, Form 10-K Form 10-K
  Managements
    Annual Report on Internal Control Over Financial
    Reporting.
  Rules 13a-15(f) 15d-15(f). Internal Control  Integrated Framework Internal Control  Integrated Framework Form 10-K.
  Changes
    in internal control over financial reporting.
    Limitations
    on the effectiveness of controls.
   64




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT  www.leadis.com. Regulation S-K, Form 8-K.
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   65




---



##### 



PART IV  ITEM 15.
    EXHIBITS    1.
    Consolidated
    Financial Statements:  PageNumberReport of
    Independent Registered Public Accounting Firm


37Consolidated
    Balance Sheets


39Consolidated
    Statements of Operations


40Consolidated
    Statements of Cash Flows


41Consolidated
    Statements of Stockholders Equity


42Notes to
    Consolidated Financial Statements


43    2.
    Exhibits:  Exhibit No.

Description of Document3
.1

Registrants Amended and
    Restated Certificate of Incorporation.(1)3
.2

Amended and Restated Bylaws of
    Leadis Technology, Inc.(2)4
.1

Reference is made to
    Exhibits 3.1 and 3.2.4
.2

Form of Specimen Certificate for
    Registrants common stock.(2)4
.3

Amended and Restated Investor
    Rights Agreement dated August 19, 2002 by and among the
    Registrant and certain holders of the Registrants capital
    stock.(1)10
.1

Registrants 2000 Stock
    Incentive Plan and forms of related agreements.(1)10
.2

Registrants 2004 Equity
    Incentive Plan and form of related agreement.(1)10
.3

Registrants 2004
    Non-Employee Directors Stock Option Plan and form of
    related agreement.(1)10
.4

Registrants 2004 Employee
    Stock Purchase Plan.(1)10
.5

Form of Indemnity Agreement
    entered into between the Registrant and certain of its officers
    and directors.(1)10
.6

Employment Agreement with Ken Lee,
    dated August 15, 2002.(1)10
.7

Employment Agreement with Victor
    Lee, dated December 3, 2002.(1)10
.8

Form of Stock Option Grant Notice
    under the Leadis Technology, Inc. 2004 Equity Incentive Plan.(3)10
.9

Form of Stock Option Grant Notice
    under the Leadis Technology, Inc. 2004 Non-Employee
    Directors Stock Option Plan.(3)10
.10

Form of offering document under
    the Leadis Technology, Inc. 2004 Employee Stock Purchase Plan.(4)10
.11

Lease by and between the
    Registrant and Sunnyvale Business Park, dated as of
    December 23, 2004.(4)10
.12

Framework Agreement by and between
    Leadis International Limited and Philips Electronics Hong Kong
    Limited  Mobile Display Systems, dated
    December 15, 2004.(4)10
.13

Registrants 2005 Management
    Bonus Plan.(5)10
.14

Employment Agreement with Chol
    Chong, dated April 1, 2005.(6)10
.15

Employment Agreement with Antonio
    R. Alzarez dated November 28, 2005.(7)10
.16

Registrants Non-Employee
    Director Cash Compensation Policy.(8)10
.17

Employment Agreement with Jose
    Arreola dated January 20, 2006.(9)10
.18

Lease Contract by and between the
    Korea Institute of Design Promotion and Leadis Technology Korea,
    Inc., dated as of June 30, 2006.(12)10
.19

Registrantss 2006 Management
    Bonus Plan.(10) 66




---



##### Table of Contents



Exhibit No.

Description of Document10
.20

Form of Change of Control Plans
    for Chief Executive Officer, Class I Executives and
    Class II Executives.(11)10
.21

Forms of Phantom Stock Award Grant
    Notice and Phantom Stock Award Agreement under the Leadis
    Technology, Inc. 2004 Equity Incentive Plan.(13)21
.1

Subsidiaries of the Registrant.(13)23
.1

Consent of PricewaterhouseCoopers
    LLP, Independent Registered Public Accounting Firm.(13)24
.1

Power of Attorney (see signature
    page).31
.1

Certification of the
    Registrants Chief Executive Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.(13)31
.2

Certification of Registrants
    Chief Financial Officer, as required by Section 302 of the
    Sarbanes-Oxley Act of 2002.(13)32
.1

Certification of Registrants
    Chief Executive Officer, as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.(13)(14)32
.2

Certification of Registrants
    Chief Financial Officer, as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.(13)(14)     
    
    Indicates a management contract or compensatory plan or
    arrangement.(1)
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-113880)
    filed on March 24, 2004.(2)
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1/A
    (File
    No. 333-113880)
    filed on June 14, 2004.(3)
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended September 30, 2004.(4)
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the year ended December 31, 2004.(5)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on June 17, 2005.(6)
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended June 30, 2005.(7)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on December 1, 2005.(8)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on December 8, 2005.(9)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on January 26, 2006.(10)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on March 21, 2006.(11)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on June 14, 2006.(12)
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended June 30, 2006.(13)
    
    Filed herewith.(14)
    
    The certifications attached as Exhibits 32.1 and 32.2
    accompany this Annual Report on
    Form 10-K
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    and shall not be deemed filed by Leadis Technology,
    Inc. for purposes of Section 18 of the Securities Exchange
    Act of 1934, as amended. 67




---



##### Table of Contents



SIGNATURES  Form 10-K
    By:
    /s/  Victor
    K. Lee  Victor K. Lee
 Chief Financial Officer and Secretary
  POWER OF
    ATTORNEY
  his/her attorneys-in-fact, Form 10-K, attorneys-in-fact attorneys-in-fact
  Form 10-K
  Signature

Title

Date/s/  Antonio
    R. AlvarezAntonio
    R. Alvarez

President, Chief Executive Officer
    and Director (Principal Executive Officer)

March 12, 2007/s/  Victor
    K. LeeVictor
    K. Lee

Chief Financial Officer and
    Secretary (Principal Financial and
    Accounting Officer)

March 12, 2007/s/  Keunmyung
    LeeKeunmyung
    Lee

Executive Vice President, Chief
    Operating Officer and Director

March 12, 2007/s/  Byron
    BynumByron
    Bynum

Director

March 12, 2007/s/  Kenneth
    GoldmanKenneth
    Goldman

Director

March 12, 2007/s/  Doug
    McBurnieDoug
    McBurnie

Director

March 12, 2007 68




---



##### Table of Contents



Signature

Title

Date/s/  James
    PlummerJames
    Plummer

Director

March 12, 2007/s/  Jack
    SaltichJack
    Saltich

Director

March 12, 2007  69




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Description of Document3
.1

Registrants Amended and
    Restated Certificate of Incorporation.(1)3
.2

Amended and Restated Bylaws of
    Leadis Technology, Inc.(2)4
.1

Reference is made to
    Exhibits 3.1 and 3.2.4
.2

Form of Specimen Certificate for
    Registrants common stock.(2)4
.3

Amended and Restated Investor
    Rights Agreement dated August 19, 2002 by and among the
    Registrant and certain holders of the Registrants capital
    stock.(1)10
.1

Registrants 2000 Stock
    Incentive Plan and forms of related agreements.(1)10
.2

Registrants 2004 Equity
    Incentive Plan and form of related agreement.(1)10
.3

Registrants 2004
    Non-Employee Directors Stock Option Plan and form of
    related agreement.(1)10
.4

Registrants 2004 Employee
    Stock Purchase Plan.(1)10
.5

Form of Indemnity Agreement
    entered into between the Registrant and certain of its officers
    and directors.(1)10
.6

Employment Agreement with Ken Lee,
    dated August 15, 2002.(1)10
.7

Employment Agreement with Victor
    Lee, dated December 3, 2002.(1)10
.8

Form of Stock Option Grant Notice
    under the Leadis Technology, Inc. 2004 Equity Incentive Plan.(3)10
.9

Form of Stock Option Grant Notice
    under the Leadis Technology, Inc. 2004 Non-Employee
    Directors Stock Option Plan.(3)10
.10

Form of offering document under
    the Leadis Technology, Inc. 2004 Employee Stock Purchase Plan.(4)10
.11

Lease by and between the
    Registrant and Sunnyvale Business Park, dated as of
    December 23, 2004.(4)10
.12

Framework Agreement by and between
    Leadis International Limited and Philips Electronics Hong Kong
    Limited  Mobile Display Systems, dated
    December 15, 2004.(4)10
.13

Registrants 2005 Management
    Bonus Plan.(5)10
.14

Employment Agreement with Chol
    Chong, dated April 1, 2005.(6)10
.15

Employment Agreement with Antonio
    R. Alzarez dated November 28, 2005.(7)10
.16

Registrants Non-Employee
    Director Cash Compensation Policy.(8)10
.17

Employment Agreement with Jose
    Arreola dated January 20, 2006.(9)10
.18

Lease Contract by and between the
    Korea Institute of Design Promotion and Leadis Technology Korea,
    Inc., dated as of June 30, 2006.(12)10
.19

Registrantss 2006 Management
    Bonus Plan.(10)10
.20

Form of Change of Control Plans
    for Chief Executive Officer, Class I Executives and
    Class II Executives.(11)10
.21

Forms of Phantom Stock Award Grant
    Notice and Phantom Stock Award Agreement under the Leadis
    Technology, Inc. 2004 Equity Incentive Plan.(13)21
.1

Subsidiaries of the Registrant.(13)23
.1

Consent of PricewaterhouseCoopers
    LLP, Independent Registered Public Accounting Firm.(13)24
.1

Power of Attorney (see signature
    page).31
.1

Certification of the
    Registrants Chief Executive Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.(13)31
.2

Certification of Registrants
    Chief Financial Officer, as required by Section 302 of the
    Sarbanes-Oxley Act of 2002.(13)32
.1

Certification of Registrants
    Chief Executive Officer, as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.(13)(14)32
.2

Certification of Registrants
    Chief Financial Officer, as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.(13)(14)  70




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##### Table of Contents




    
    Indicates a management contract or compensatory plan or
    arrangement.(1)
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-113880)
    filed on March 24, 2004.(2)
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1/A
    (File
    No. 333-113880)
    filed on June 14, 2004.(3)
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended September 30, 2004.(4)
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the year ended December 31, 2004.(5)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on June 17, 2005.(6)
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended June 30, 2005.(7)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on December 1, 2005.(8)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on December 8, 2005.(9)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on January 26, 2006.(10)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on March 21, 2006.(11)
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed on June 14, 2006.(12)
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended June 30, 2006.(13)
    
    Filed herewith.(14)
    
    The certifications attached as Exhibits 32.1 and 32.2
    accompany this Annual Report on
    Form 10-K
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    and shall not be deemed filed by Leadis Technology,
    Inc. for purposes of Section 18 of the Securities Exchange
    Act of 1934, as amended. 71