##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 000-51349





Advanced
Analogic Technologies Incorporated

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 77-0462930                             
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification Number)
|                                                               | 
|3230 Scott Blvd., Santa Clara, California                      |  | 95054                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

Registrants telephone number, including area code:

(408) 737-4600





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 Web site, 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definition 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   ̈        Smaller reporting Company   ̈

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

There were 42,112,625 shares of the registrants common stock outstanding as of July 26, 2010.









---

##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                                    |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                                    |  | PAGE
|PART I. FINANCIAL INFORMATION |  | 3                                                                                                                 
|                              |  |                                                                                                                   
|ITEM 1.                       |  | FINANCIAL STATEMENTS (UNAUDITED)                                                                                   |  | 3   
|                              |  |                                                                                                                   
|                              |  | CONDENSED CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2010 AND DECEMBER 31, 2009                                       |  | 3   
|                              |  |                                                                                                                   
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND JUNE 30,
2009 |  | 4   
|                              |  |                                                                                                                   
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND JUNE 30,
2009           |  | 5   
|                              |  |                                                                                                                   
|                              |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                               |  | 6   
|                              |  |                                                                                                                   
|ITEM 2.                       |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                              |  | 16  
|                              |  |                                                                                                                   
|ITEM 3.                       |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                         |  | 23  
|                              |  |                                                                                                                   
|ITEM 4.                       |  | CONTROLS AND PROCEDURES                                                                                            |  | 24  
|                              | 
|PART II. OTHER INFORMATION    |  | 25                                                                                                                
|                              |  |                                                                                                                   
|ITEM 1.                       |  | LEGAL PROCEEDINGS                                                                                                  |  | 25  
|                              |  |                                                                                                                   
|ITEM 1A.                      |  | RISK FACTORS                                                                                                       |  | 25  
|                              |  |                                                                                                                   
|ITEM 2.                       |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                        |  | 35  
|                              |  |                                                                                                                   
|ITEM 3.                       |  | DEFAULTS UPON SENIOR SECURITIES                                                                                    |  | 35  
|                              |  |                                                                                                                   
|ITEM 4.                       |  | REMOVED AND RESERVED                                                                                               |  | 35  
|                              |  |                                                                                                                   
|ITEM 5.                       |  | OTHER INFORMATION                                                                                                  |  | 35  
|                              |  |                                                                                                                   
|ITEM 6.                       |  | EXHIBITS                                                                                                           |  | 35  



2



---

##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except shares and par value)



|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                                                         |  | June 30,2010 |         |   | December 31,2009 |  
|Assets                                                                                                                                                                                                                                                   |  |              |         |   |                  |   |         |  
|Current assets                                                                                                                                                                                                                                           |  |              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                                |  | $            | 10,418  |   |                  | $ | 36,120  |  
|Short-term investments                                                                                                                                                                                                                                   |  |              | 83,518  |   |                  |   | 65,883  |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total cash, cash equivalents and short-term investments                                                                                                                                                                                                  |  |              | 93,936  |   |                  |   | 102,003 |  
|Accounts receivable, net of allowances                                                                                                                                                                                                                   |  |              | 12,818  |   |                  |   | 9,348   |  
|Inventories                                                                                                                                                                                                                                              |  |              | 9,567   |   |                  |   | 7,234   |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                |  |              | 3,153   |   |                  |   | 4,291   |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                                                                                     |  |              | 119,474 |   |                  |   | 122,876 |  
|Property and equipment, net                                                                                                                                                                                                                              |  |              | 4,661   |   |                  |   | 4,607   |  
|Other assets                                                                                                                                                                                                                                             |  |              | 3,263   |   |                  |   | 3,110   |  
|Deferred income taxes                                                                                                                                                                                                                                    |  |              | 318     |   |                  |   | 318     |  
|Intangibles, net                                                                                                                                                                                                                                         |  |              | 83      |   |                  |   | 117     |  
|Goodwill                                                                                                                                                                                                                                                 |  |              | 16,116  |   |                  |   | 16,116  |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                                                                             |  | $            | 143,915 |   |                  | $ | 147,144 |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Liabilities and stockholders equity                                                                                                                                                                                                                     |  |              |         |   |                  |   |         |  
|Current liabilities                                                                                                                                                                                                                                      |  |              |         |   |                  |   |         |  
|Accounts payable                                                                                                                                                                                                                                         |  | $            | 10,249  |   |                  | $ | 6,614   |  
|Accrued liabilities                                                                                                                                                                                                                                      |  |              | 4,825   |   |                  |   | 3,726   |  
|Income tax payable                                                                                                                                                                                                                                       |  |              | 139     |   |                  |   | 114     |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                                                                |  |              | 15,213  |   |                  |   | 10,454  |  
|Long-term income tax payable                                                                                                                                                                                                                             |  |              | 5,067   |   |                  |   | 4,365   |  
|Other long-term liabilities                                                                                                                                                                                                                              |  |              | 290     |   |                  |   | 275     |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                                                                        |  |              | 20,570  |   |                  |   | 15,094  |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Commitments and contingencies (Note 11)                                                                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Stockholders equity                                                                                                                                                                                                                                     |  |              |         |   |                  |   |         |  
|Common stock, $0.001 par value100,000,000 shares authorized; 46,306,066 and 42,112,625 shares issued and outstanding,
respectively, as of June 30, 2010; 46,127,931 and 42,934,490 shares issued and outstanding, respectively, as of December 31, 2009 |  |              | 46      |   |                  |   | 46      |  
|Treasury stock, at cost; 4,193,441 and 3,193,441 shares as of June 30, 2010 and December 31, 2009,
respectively                                                                                                                                          |  |              | (12,251 | ) |                  |   | (8,649  | )
|Additional paid-in capital                                                                                                                                                                                                                               |  |              | 185,442 |   |                  |   | 182,457 |  
|Accumulated other comprehensive loss                                                                                                                                                                                                                     |  |              | (185    | ) |                  |   | (212    | )
|Accumulated deficit                                                                                                                                                                                                                                      |  |              | (49,707 | ) |                  |   | (41,592 | )
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                                                                                                               |  |              | 123,345 |   |                  |   | 132,050 |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                                               |  | $            | 143,915 |   |                  | $ | 147,144 |  
|                                                                                                                                                                                                                                                         |  |              |         |   |                  |   |         |  

See accompanying notes to the unaudited condensed consolidated financial statements.



3



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)



|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                |  | 2010                       |        |   | 2009                     |   |        | 2010 |  |   | 2009   |  
|Net revenues                                                    |  | $                          | 23,146 |   |                          | $ | 22,978 |      |  | $ | 45,064 |   |  | $ | 39,527 |  
|Cost of revenues                                                |  |                            | 12,609 |   |                          |   | 11,882 |      |  |   | 23,924 |   |  |   | 21,000 |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Gross profit                                                    |  |                            | 10,537 |   |                          |   | 11,096 |      |  |   | 21,140 |   |  |   | 18,527 |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating expenses:                                             |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Research and development                                        |  |                            | 7,836  |   |                          |   | 6,808  |      |  |   | 14,938 |   |  |   | 13,391 |  
|Sales, general and administrative                               |  |                            | 6,109  |   |                          |   | 6,281  |      |  |   | 12,270 |   |  |   | 11,710 |  
|Patent litigation                                               |  |                            | 245    |   |                          |   | 385    |      |  |   | 1,329  |   |  |   | 686    |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                        |  |                            | 14,190 |   |                          |   | 13,474 |      |  |   | 28,537 |   |  |   | 25,787 |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Loss from operations                                            |  |                            | (3,653 | ) |                          |   | (2,378 | )    |  |   | (7,397 | ) |  |   | (7,260 | )
|Interest and other income:                                      |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Interest and investment income                                  |  |                            | 77     |   |                          |   | 245    |      |  |   | 177    |   |  |   | 616    |  
|Other income (expense), net                                     |  |                            | (62    | ) |                          |   | 70     |      |  |   | (93    | ) |  |   | 52     |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total interest and other income, net                            |  |                            | 15     |   |                          |   | 315    |      |  |   | 84     |   |  |   | 668    |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Loss before income taxes                                        |  |                            | (3,638 | ) |                          |   | (2,063 | )    |  |   | (7,313 | ) |  |   | (6,592 | )
|Provision for income taxes                                      |  |                            | 273    |   |                          |   | 426    |      |  |   | 802    |   |  |   | 1,105  |  
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net loss                                                        |  | $                          | (3,911 | ) |                          | $ | (2,489 | )    |  | $ | (8,115 | ) |  | $ | (7,697 | )
|                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net loss per share:                                             |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                           |  | $                          | (0.09  | ) |                          | $ | (0.06  | )    |  | $ | (0.19  | ) |  | $ | (0.18  | )
|Diluted                                                         |  | $                          | (0.09  | ) |                          | $ | (0.06  | )    |  | $ | (0.19  | ) |  | $ | (0.18  | )
|Weighted average shares used in net loss per share calculation: |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                           |  |                            | 42,887 |   |                          |   | 42,938 |      |  |   | 42,923 |   |  |   | 42,995 |  
|Diluted                                                         |  |                            | 42,887 |   |                          |   | 42,938 |      |  |   | 42,923 |   |  |   | 42,995 |  

See accompanying notes
to the unaudited condensed consolidated financial statements.



4



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)



|                                                                                                            |  |                           |         |   |      |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                            |  | Six Months Ended June 30, |        
|                                                                                                            |  | 2010                      |         |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                       |  |                           |         |   |      |   |         |  
|Net loss                                                                                                    |  | $                         | (8,115  | ) |      | $ | (7,697  | )
|Adjustments to reconcile net loss to net cash used in operating activities:                                 |  |                           |         |   |      |   |         |  
|Depreciation and amortization                                                                               |  |                           | 919     |   |      |   | 1,041   |  
|Stock-based compensation                                                                                    |  |                           | 2,574   |   |      |   | 3,222   |  
|Provision for doubtful accounts                                                                             |  |                           | (1      | ) |      |   | 34      |  
|Tax benefit from stock option exercises                                                                     |  |                           |        |   |      |   | 22      |  
|Excess tax benefit from stock options                                                                       |  |                           |        |   |      |   | (22     | )
|Net unrealized gain on trading securities                                                                   |  |                           | (3      | ) |      |   | (57     | )
|Loss on sales of property and equipment                                                                     |  |                           | 1       |   |      |   | 68      |  
|Changes in operating assets and liabilities:                                                                |  |                           |         |   |      |   |         |  
|Accounts receivable                                                                                         |  |                           | (3,469  | ) |      |   | (4,735  | )
|Inventories                                                                                                 |  |                           | (2,345  | ) |      |   | (813    | )
|Prepaid expenses and other current assets                                                                   |  |                           | 952     |   |      |   | 686     |  
|Other assets                                                                                                |  |                           | 17      |   |      |   | (6      | )
|Deferred income taxes                                                                                       |  |                           |        |   |      |   | (29     | )
|Accounts payable                                                                                            |  |                           | 3,917   |   |      |   | 5,973   |  
|Accrued liabilities and other long-term liabilities                                                         |  |                           | 1,091   |   |      |   | 166     |  
|Income taxes payable                                                                                        |  |                           | 727     |   |      |   | 981     |  
|                                                                                                            |  |                           |         |   |      |   |         |  
|Net cash used in operating activities                                                                       |  |                           | (3,735  | ) |      |   | (1,166  | )
|                                                                                                            |  |                           |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                       |  |                           |         |   |      |   |         |  
|Purchases of property and equipment                                                                         |  |                           | (1,195  | ) |      |   | (266    | )
|Purchases of short-term investments                                                                         |  |                           | (66,782 | ) |      |   | (37,936 | )
|Proceeds from sales and maturities of short-term investments                                                |  |                           | 49,147  |   |      |   | 48,404  |  
|Sale of long-term investment                                                                                |  |                           | 50      |   |      |   | 50      |  
|Purchases of long-term investment                                                                           |  |                           |        |   |      |   | (175    | )
|                                                                                                            |  |                           |         |   |      |   |         |  
|Net cash provided by (used in) investing activities                                                         |  |                           | (18,780 | ) |      |   | 10,077  |  
|                                                                                                            |  |                           |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                       |  |                           |         |   |      |   |         |  
|Proceeds from exercise of common stock options                                                              |  |                           | 423     |   |      |   | 94      |  
|Common stock repurchases                                                                                    |  |                           | (3,602  | ) |      |   | (3,299  | )
|Excess tax benefit from stock options                                                                       |  |                           |        |   |      |   | 22      |  
|Principal payments on capital lease obligations                                                             |  |                           |        |   |      |   | (41     | )
|                                                                                                            |  |                           |         |   |      |   |         |  
|Net cash used in financing activities                                                                       |  |                           | (3,179  | ) |      |   | (3,224  | )
|                                                                                                            |  |                           |         |   |      |   |         |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                                |  |                           | (8      | ) |      |   | 14      |  
|                                                                                                            |  |                           |         |   |      |   |         |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                        |  |                           | (25,702 | ) |      |   | 5,701   |  
|CASH AND CASH EQUIVALENTSBeginning of period                                                               |  |                           | 36,120  |   |      |   | 52,094  |  
|                                                                                                            |  |                           |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTSEnd of period                                                                     |  | $                         | 10,418  |   |      | $ | 57,795  |  
|                                                                                                            |  |                           |         |   |      |   |         |  
|NONCASH INVESTING ACTIVITY:                                                                                 |  |                           |         |   |      |   |         |  
|Increase (decrease) in accounts payable and accrued liabilities related to property and equipment purchases |  | $                         | (330    | ) |      | $ | 266     |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                           |  |                           |         |   |      |   |         |  
|Cash paid for interest                                                                                      |  | $                         |        |   |      | $ | 1       |  
|Cash paid for income taxes                                                                                  |  | $                         | 70      |   |      | $ | 61      |  

See accompanying notes
to the unaudited condensed consolidated financial statements.



5



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS
OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Advanced Analogic Technologies
Incorporated (the Company) have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC). Certain information and disclosures normally included in
consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with these rules and regulations. The information in this report
should be read in conjunction with the Companys audited consolidated financial statements and notes thereto included in its annual report on Form 10-K filed with the SEC on February 19, 2010.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) necessary to summarize fairly the Companys financial position, results of operations and cash flows for the interim periods presented. The operating results for the three and six months ended June 30,
2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010 or for any other future period. The condensed consolidated balance sheet as of December 31, 2009 is derived from the audited
consolidated financial statements as of and for the year then ended.

2. INVESTMENTS

As of June 30, 2010, the Company had investments in short-term debt instruments and auction rate securities (ARS), which were
classified as available-for-sale. The Company also had investments in ARS that were classified as trading securities. Short-term investments consist primarily of investment grade debt securities with a maturity of greater than 90 days at the time of
purchase. Interest earned on securities is included in Interest and investment income in the Condensed Consolidated Statements of Operations.

The Companys available-for-sale investments are carried at fair market value with the related unrealized gains and losses included
in accumulated other comprehensive loss, which is a separate component of stockholders equity. The Company records other-than-temporary impairment charges for its available-for-sale investments when it intends to sell the securities, it is
more likely than not that it will be required to sell the securities before a recovery, or when it does not expect to recover the entire amortized cost basis of the securities. Trading securities are carried at fair value with unrealized gains and
losses recognized in earnings. The cost of securities sold is based on the specific identification method.

The following
table, which excludes cash, is a summary of cash equivalents, short-term investments and long-term investments classified as available-for-sale as of June 30, 2010 and December 31, 2009:



|                        |  |                |        |                  |   |                     |  |   |                      |   |  |   |       
|----------------------- |  | -------------- | ------ | ---------------- | - | ------------------- |  | - | -------------------- | - |  | - | ------
|                        |  | June 30, 2010 
|                        |  | Amortized Cost |        | Unrealized Gains |   | Unrealized (Losses) |  |   | Estimated Fair Value
|                        |  | (in thousands)
|Money market funds      |  | $              | 4,732  |                  | $ |                    |  | $ |                     |   |  | $ | 4,732 
|Municipal bonds         |  |                | 31,374 |                  |   |                    |  |   | (11                  | ) |  |   | 31,363
|U.S. Treasury bills     |  |                | 52,151 |                  |   | 4                   |  |   |                     |   |  |   | 52,155
|Auction rate securities |  |                | 1,900  |                  |   |                    |  |   | (107                 | ) |  |   | 1,793 
|                        |  |                |        |                  |   |                     |  |   |                      |   |  |   |       
|Total                   |  | $              | 90,157 |                  | $ | 4                   |  | $ | (118                 | ) |  | $ | 90,043
|                        |  |                |        |                  |   |                     |  |   |                      |   |  |   |       
|Amounts included in:    |  |                |        |                  |   |                     |  |   |                      |   |  |   |       
|Cash equivalents        |  | $              | 4,732  |                  | $ |                    |  | $ |                     |   |  | $ | 4,732 
|Short-term investments  |  |                | 83,525 |                  |   | 4                   |  |   | (11                  | ) |  |   | 83,518
|Other assets            |  |                | 1,900  |                  |   |                    |  |   | (107                 | ) |  |   | 1,793 
|                        |  |                |        |                  |   |                     |  |   |                      |   |  |   |       
|Total                   |  | $              | 90,157 |                  | $ | 4                   |  | $ | (118                 | ) |  | $ | 90,043
|                        |  |                |        |                  |   |                     |  |   |                      |   |  |   |       



6



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|                             |  |                   |        |                  |   |                     |  |   |                      |   |  |   |       
|---------------------------- |  | ----------------- | ------ | ---------------- | - | ------------------- |  | - | -------------------- | - |  | - | ------
|                             |  | December 31, 2009
|                             |  | Amortized Cost    |        | Unrealized Gains |   | Unrealized (Losses) |  |   | Estimated Fair Value
|                             |  | (in thousands)   
|Money market funds           |  | $                 | 15,964 |                  | $ |                    |  | $ |                     |   |  | $ | 15,964
|Municipal bonds              |  |                   | 65,129 |                  |   | 13                  |  |   | (23                  | ) |  |   | 65,119
|U.S. government agency bonds |  |                   | 11,999 |                  |   | 12                  |  |   |                     |   |  |   | 12,011
|Auction rate securities      |  |                   | 1,950  |                  |   |                    |  |   | (125                 | ) |  |   | 1,825 
|                             |  |                   |        |                  |   |                     |  |   |                      |   |  |   |       
|Total                        |  | $                 | 95,042 |                  | $ | 25                  |  | $ | (148                 | ) |  | $ | 94,919
|                             |  |                   |        |                  |   |                     |  |   |                      |   |  |   |       
|Amounts included in:         |  |                   |        |                  |   |                     |  |   |                      |   |  |   |       
|Cash equivalents             |  | $                 | 27,213 |                  | $ |                    |  | $ | (2                   | ) |  | $ | 27,211
|Short-term investments       |  |                   | 65,879 |                  |   | 25                  |  |   | (21                  | ) |  |   | 65,883
|Other assets                 |  |                   | 1,950  |                  |   |                    |  |   | (125                 | ) |  |   | 1,825 
|                             |  |                   |        |                  |   |                     |  |   |                      |   |  |   |       
|Total                        |  | $                 | 95,042 |                  | $ | 25                  |  | $ | (148                 | ) |  | $ | 94,919
|                             |  |                   |        |                  |   |                     |  |   |                      |   |  |   |       

3. FAIR VALUE MEASUREMENTS

The Companys financial assets are measured at fair value. Fair value is the price that the Company estimates would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair Value Hierarchy

The Company classifies investments within Level 1 of the fair value hierarchy when the fair value is based on quoted
prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. As of
June 30, 2010, the Companys Level 1 investments consisted of money market funds and U.S. Treasury bills.

The
Company classifies investments within Level 2 of the fair value hierarchy when the fair value is based on broker/dealer quotes which use observable market inputs instead of quoted market prices in active markets. As of June 30, 2010, the
Companys Level 2 investments consisted of municipal bonds.

Investments are classified within Level 3 of the fair value
hierarchy if the fair value is determined using unobservable inputs that are not corroborated by market data. The valuation of Level 3 investments requires the use of significant management judgments or estimation. The Companys Level 3
investments consist of ARS and ARS exchange rights (ARS Put Option). The methodology used for determining the fair value of these Level 3 financial assets is described below.



7



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The following table, which excludes cash, presents the fair value of the Companys
cash equivalents, short-term investments and long-term investments as of June 30, 2010 and December 31, 2009:



|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|-------------------------------------------------------- |  | -------------- | ------ | --------------- | - | ---------------------------------------------------------- |  | ----------------------------------------- | ------ | --------------------------------------- | - | ------ |  | - | -----
|                                                         |  |                |        |                 |   | Fair Value Measurements as of June 30, 2010 
Using:       
|                                                         |  | CarryingAmount |        | Total fairvalue |   | Quoted Prices inActive Marketsfor
IdenticalAssets(Level 1) |  | SignificantOtherObservableInputs(Level 2) |        | SignificantUnobservableInputs(Level
 3)
|                                                         |  | (in thousands)
|Available-for-sale securities:                           |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Money market funds                                       |  | $              | 4,732  |                 | $ | 4,732                                                      |  | $                                         | 4,732  |                                         | $ |       |  | $ |     
|Municipal bonds                                          |  |                | 31,363 |                 |   | 31,363                                                     |  |                                           |       |                                         |   | 31,363 |  |   |     
|U.S. Treasury bills                                      |  |                | 52,155 |                 |   | 52,155                                                     |  |                                           | 52,155 |                                         |   |       |  |   |     
|Auction rate securities                                  |  |                | 1,793  |                 |   | 1,793                                                      |  |                                           |       |                                         |   |       |  |   | 1,793
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Total Available-for-sale securities                      |  | $              | 90,043 |                 | $ | 90,043                                                     |  | $                                         | 56,887 |                                         | $ | 31,363 |  | $ | 1,793
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Other investments:                                       |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Auction rate securities classified as trading securities |  | $              | 1,012  |                 | $ | 1,012                                                      |  | $                                         |       |                                         | $ |       |  | $ | 1,012
|ARS put option                                           |  |                | 188    |                 |   | 188                                                        |  |                                           |       |                                         |   |       |  |   | 188  
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Total Other investments                                  |  | $              | 1,200  |                 | $ | 1,200                                                      |  | $                                         |       |                                         | $ |       |  | $ | 1,200
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Amounts included in:                                     |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Cash and cash equivalents                                |  | $              | 4,732  |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Short-term investments                                   |  |                | 83,518 |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Prepaid expenses and other current assets                |  |                | 1,200  |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Other assets                                             |  |                | 1,793  |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Total                                                    |  | $              | 91,243 |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      



|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|-------------------------------------------------------- |  | -------------- | ------ | --------------- | - | ---------------------------------------------------------- |  | ----------------------------------------- | ------ | --------------------------------------- | - | ------ |  | - | -----
|                                                         |  |                |        |                 |   | Fair Value Measurements as of December 31, 2009 
Using:   
|                                                         |  | CarryingAmount |        | Total FairValue |   | Quoted Prices inActive
Marketsfor IdenticalAssets(Level 1) |  | SignificantOtherObservableInputs(Level 2) |        | SignificantUnobservableInputs(Level
 3)
|                                                         |  | (in thousands)
|Available-for-sale securities:                           |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Money market funds                                       |  | $              | 15,964 |                 | $ | 15,964                                                     |  | $                                         | 15,964 |                                         | $ |       |  | $ |     
|Municipal bonds                                          |  |                | 65,119 |                 |   | 65,119                                                     |  |                                           |       |                                         |   | 65,119 |  |   |     
|U.S. government agency bonds                             |  |                | 12,011 |                 |   | 12,011                                                     |  |                                           |       |                                         |   | 12,011 |  |   |     
|Auction rate securities                                  |  |                | 1,825  |                 |   | 1,825                                                      |  |                                           |       |                                         |   |       |  |   | 1,825
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Total Available-for-sale securities                      |  | $              | 94,919 |                 | $ | 94,919                                                     |  | $                                         | 15,964 |                                         | $ | 77,130 |  | $ | 1,825
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Other investments:                                       |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Auction rate securities classified as trading securities |  | $              | 593    |                 | $ | 593                                                        |  | $                                         |       |                                         | $ |       |  | $ | 593  
|ARS put option                                           |  |                | 604    |                 |   | 604                                                        |  |                                           |       |                                         |   |       |  |   | 604  
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Total Other investments                                  |  | $              | 1,197  |                 | $ | 1,197                                                      |  | $                                         |       |                                         | $ |       |  | $ | 1,197
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Amounts included in:                                     |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Cash and cash equivalents                                |  | $              | 27,211 |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Short-term investments                                   |  |                | 65,883 |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Prepaid expenses and other current assets                |  |                | 1,197  |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Other assets                                             |  |                | 1,825  |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|Total                                                    |  | $              | 96,116 |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      
|                                                         |  |                |        |                 |   |                                                            |  |                                           |        |                                         |   |        |  |   |      



8



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The following table provides a reconciliation of the beginning and ending balances for
the assets measured at fair value using unobservable inputs (Level 3):



|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------- | ----- | - | ------------- | - | ---- | -
|                                                                                                                                                            |  | Fair Value Measurement UsingSignificant Unobservable Inputs(Level 3) |      
|                                                                                                                                                            |  | Auction RateSecurities                                               |       |   | ARS PutOption |  
|Beginning balances as of December 31, 2009                                                                                                                  |  | $                                                                    | 2,418 |   |               | $ | 604  |  
|Unrealized gain included in accumulated other comprehensive loss                                                                                            |  |                                                                      | 8     |   |               |   |     |  
|Unrealized gain (loss) recognized in earnings                                                                                                               |  |                                                                      | 400   |   |               |   | (397 | )
|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  
|Ending balances as of March 31, 2010                                                                                                                        |  |                                                                      | 2,826 |   |               |   | 207  |  
|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  
|Unrealized gain included in accumulated other comprehensive loss                                                                                            |  |                                                                      | 10    |   |               |   |     |  
|Unrealized gain (loss) recognized in earnings                                                                                                               |  |                                                                      | 19    |   |               |   | (19  | )
|Purchases, sales, issuances and settlements, net                                                                                                            |  |                                                                      | (50   | ) |               |   |     |  
|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  
|Ending balances as of June 30, 2010                                                                                                                         |  | $                                                                    | 2,805 |   |               | $ | 188  |  
|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  
|The amount of total unrealized gain for the period included in accumulated other comprehensive loss attributable to assets still
held at the reporting date |  | $                                                                    | 18    |   |               | $ |     |  
|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  
|The amount of total unrealized gain for the period recognized in earnings attributable to assets still held at the reporting date                           |  | $                                                                    | 419   |   |               | $ | (416 | )
|                                                                                                                                                            |  |                                                                      |       |   |               |   |      |  

Auction Rate Securities

As of June 30, 2010, the Companys investment portfolio included $3.1 million of ARS with a fair value of $2.8 million. As of
December 31, 2009, the Companys investment portfolio included $3.2 million of ARS with a fair value of $2.4 million.

The Companys ARS are interest-bearing investments in debt obligations collateralized by Federal Family Education Program student
loans. The Company considers the ARS market to be inactive because auctions have failed to settle on their respective settlement dates since 2008. Further, the secondary market for ARS is inactive and there have been few issuer repurchases. The
Company believes that available pricing information is not determinative of the ARS fair value. As such, the Company estimated the fair value of its ARS as of June 30, 2010 and December 31, 2009 using a discounted cash flow model.

To determine the fair value of its ARS, the Company estimated the contractual interest that will be earned during the
expected time to liquidity, and discounted these cash flows to reflect liquidity and credit risk. The discount factor represents the current market conditions for instruments with similar credit quality, adjusted by 300 basis points to reflect the
risk in the marketplace for the ARS. The following average assumptions were used to determine the ARS fair value as of June 30, 2010 and December 31, 2009:



|                               |  |              |  |                 
|------------------------------ |  | ------------ |  | ----------------
|                               |  | June 30,2010 |  | December 31,2009
|Expected time to liquidity     |  | 2 to 4 years |  | 2 to 4 years    
|Expected annual rate of return |  | 1.3% to 1.8% |  | 1.1% to 1.7%    
|Discount rate                  |  | 4.5% to 6.1% |  | 4.9% to 19.3%   

During the quarter-ended December 31, 2008, the Company entered into a settlement agreement with UBS (the Agreement)
under which it was granted ARS exchange rights (ARS Put Option) that provided it with the right, but not the obligation, to sell one of its ARS to UBS for the full $1.2 million par value during the period of June 30, 2010 to
July 2, 2012. The Company exercised its ARS Put Option to sell these ARS to UBS on June 30, 2010. Following the exercise of the ARS Put Option, the sale of these ARS was settled and the cash was received on July 1, 2010. Due to the
pending sale, as of June 30, 2010 the Company classified the related ARS and the ARS Put Option within prepaid and other current assets on the condensed consolidated balance sheet, as it is the Companys policy to account for the sale of
such securities based on the settlement date as opposed to the trade date. The Companys other ARS are classified within other long-term assets on the condensed consolidated balance sheet because the Company estimates that it will take longer
than one year for a successful auction or issuer repurchase to occur.



9



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



4. STOCKHOLDERS EQUITY

Common Stock Repurchases

On October 29, 2008, the Companys board of directors authorized a program to repurchase shares of the Companys
outstanding common stock. Under the stock repurchase program, the Company was authorized to use up to $30 million to repurchase its outstanding common stock in the open market or through privately negotiated transactions. The timing and actual
number of shares repurchased depends upon market conditions and other factors, in accordance with SEC requirements.

During
the three months ended June 30, 2010, the Company repurchased 1.0 million shares of its common stock for a total cost of $3.6 million. The Company did not repurchase shares of its common stock during the three months ended March 31,
2010. During the three and six months ended June 30, 2009, the Company repurchased a total of 1.1 million shares of its common stock for a total cost of $3.3 million. As of June 30, 2010, the Company has $17.7 million of remaining
funds authorized to purchase shares under the stock repurchase plan. Shares repurchased are accounted for as treasury stock and the total cost of shares repurchased is recorded as a reduction to stockholders equity.

Stock-Based Compensation Expense and Valuation of Awards

The following table summarizes stock-based compensation expense included in the Companys condensed consolidated statements of
operations for the three and six months ended June 30, 2010 and June 30, 2009:



|                                        |  |                            |       |                          |   |       |  |      |       |  |   |      
|--------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                                        |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|Statement of operations classifications |  | 2010                       |       | 2009                     |   | 2010  |  | 2009
|Cost of revenues                        |  | $                          | 65    |                          | $ | 84    |  | $    | 138   |  | $ | 147  
|Research and development                |  |                            | 559   |                          |   | 733   |  |      | 1,137 |  |   | 1,433
|Sales, general and administrative       |  |                            | 635   |                          |   | 829   |  |      | 1,299 |  |   | 1,642
|                                        |  |                            |       |                          |   |       |  |      |       |  |   |      
|Total stock-based compensation expense  |  | $                          | 1,259 |                          | $ | 1,646 |  | $    | 2,574 |  | $ | 3,222
|                                        |  |                            |       |                          |   |       |  |      |       |  |   |      

There was no related tax effect for stock-based
compensation expense for the three and six months ended June 30, 2010 and June 30, 2009 as the Company has a full valuation allowance against its U.S. deferred tax assets.

The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of stock options. The Company used the
following weighted average assumptions to calculate the fair value of stock options granted during the three and six months ended June 30, 2010 and June 30, 2009:



|                                |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------------------------- |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                                |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                                |  | 2010                       |   |  | 2009                     |   |  | 2010 |   |  | 2009 |  
|Volatility                      |  | 63                         | % |  | 59                       | % |  | 63   | % |  | 61   | %
|Expected option term (in years) |  | 4.80                       |   |  | 4.25                     |   |  | 4.80 |   |  | 3.67 |  
|Expected annual dividend yield  |  | 0                          | % |  | 0                        | % |  | 0    | % |  | 0    | %
|Risk free interest rate         |  | 2.18                       | % |  | 1.85                     | % |  | 2.27 | % |  | 1.35 | %

The expected
term of the Companys stock options represents the estimated weighted-average period that the stock options are expected to remain outstanding. Beginning in 2010, to determine the expected term, the Company estimates future employee exercise
behavior by considering its historical option exercise and post-vest cancellation experience as well as the contractual term of its stock option grants. The Company bases its expected volatility assumption on its daily historical volatility data
over a period commensurate with the expected term. Due to the low volume of traded options on the Companys common stock and because the term of traded options was much shorter than the expected term of the Companys stock options, implied
volatility was not included in the valuation of options granted during the three and six months ended June 30, 2010. Prior to 2010, due to the limited history of trading since the Companys initial public offering in 2005, the
Companys expected term and volatility assumptions were based in part on the volatility and expected term data of a group of peer companies.



10



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The risk-free interest rate assumption is based on observed interest rates appropriate
for the expected term of the Companys stock options. The dividend yield is based on the Companys history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on common stock, and it does not
anticipate paying cash dividends in the foreseeable future. Compensation expense for all share-based payment awards is recognized using the straight-line single-option method over the vesting period of the stock options.

5. NET LOSS PER SHARE

The Company calculates basic net loss per common share by dividing net loss by the weighted-average number of common shares outstanding
during the period. To determine diluted net loss per common share, the effect of potentially dilutive securities, which consist of common stock options, is calculated under the treasury stock method. The effect of potentially dilutive securities is
excluded from the computation of diluted net loss per share when their effect is anti-dilutive.

A reconciliation of shares
used in the calculation of basic and diluted net loss per share is as follows:



|                                                                     |  |                            |  |                          |  |        |  |       
|-------------------------------------------------------------------- |  | -------------------------- |  | ------------------------ |  | ------ |  | ------
|                                                                     |  | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                                                     |  | 2010                       |  | 2009                     |  | 2010   |  | 2009  
|                                                                     |  | (in thousands)            
|Weighted average shares used to calculate basic net loss per share   |  | 42,887                     |  | 42,938                   |  | 42,923 |  | 42,995
|Effect of dilutive securities:                                       |  |                            |  |                          |  |        |  |       
|Stock options                                                        |  |                           |  |                         |  |       |  |      
|                                                                     |  |                            |  |                          |  |        |  |       
|Dilutive potential common stock                                      |  |                           |  |                         |  |       |  |      
|                                                                     |  |                            |  |                          |  |        |  |       
|Weighted average shares used to calculate diluted net loss per share |  | 42,887                     |  | 42,938                   |  | 42,923 |  | 42,995
|                                                                     |  |                            |  |                          |  |        |  |       

For both the three and six months ended June 30,
2010, the Company excluded 9.0 million and 9.1 million potentially dilutive securities from the computation of diluted net loss per share, respectively. For the three and six months ended June 30, 2009, the Company excluded
7.5 million and 8.5 million potentially dilutive securities from the computation of diluted net loss per share, respectively.

6.
OTHER COMPREHENSIVE LOSS

Other comprehensive loss includes charges or credits to equity that are not the result of
transactions with owners. The components of comprehensive loss are as follows:



|                                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                 |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                 |  | 2010                       |        |   | 2009                     |   |        | 2010 |  |   | 2009   |  
|                                                                 |  | (in thousands)             |        |   | (in thousands)           |  
|Net loss, as reported                                            |  | $                          | (3,911 | ) |                          | $ | (2,489 | )    |  | $ | (8,115 | ) |  | $ | (7,697 | )
|Changes in cumulative translation adjustment                     |  |                            | 8      |   |                          |   | 46     |      |  |   | 9      |   |  |   | 20     |  
|Changes in unrealized gains(losses) on investments, net of taxes |  |                            | 20     |   |                          |   | (32    | )    |  |   | 18     |   |  |   | (147   | )
|                                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total other comprehensive loss                                   |  | $                          | (3,883 | ) |                          | $ | (2,475 | )    |  | $ | (8,088 | ) |  | $ | (7,824 | )
|                                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  



11



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



7. DETAILS OF CERTAIN BALANCE SHEET COMPONENTS



|                                          |  |                |         |   |                  |   |        |  
|----------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------ | -
|                                          |  | June 30,2010   |         |   | December 31,2009 |  
|                                          |  | (in thousands) |        
|Inventories                               |  |                |         |   |                  |   |        |  
|Work in process                           |  | $              | 5,297   |   |                  | $ | 3,209  |  
|Finished goods                            |  |                | 4,270   |   |                  |   | 4,025  |  
|                                          |  |                |         |   |                  |   |        |  
|Total inventories                         |  | $              | 9,567   |   |                  | $ | 7,234  |  
|                                          |  |                |         |   |                  |   |        |  
|Property and equipment, net               |  |                |         |   |                  |   |        |  
|Computers and software                    |  | $              | 5,740   |   |                  | $ | 5,458  |  
|Office and test equipment                 |  |                | 7,966   |   |                  |   | 7,439  |  
|Leasehold improvements                    |  |                | 1,470   |   |                  |   | 1,441  |  
|Gross property and equipment              |  |                | 15,176  |   |                  |   | 14,338 |  
|Accumulated depreciation and amortization |  |                | (10,515 | ) |                  |   | (9,731 | )
|                                          |  |                |         |   |                  |   |        |  
|Total property and equipment, net         |  | $              | 4,661   |   |                  | $ | 4,607  |  
|                                          |  |                |         |   |                  |   |        |  
|Accrued liabilities                       |  |                |         |   |                  |   |        |  
|Accrued payroll and benefits              |  | $              | 2,893   |   |                  | $ | 1,645  |  
|Deferred revenue                          |  |                | 82      |   |                  |   | 110    |  
|Accrued legal and accounting services     |  |                | 238     |   |                  |   | 458    |  
|Warranty reserve                          |  |                | 63      |   |                  |   | 105    |  
|Accrued payables and other                |  |                | 1,549   |   |                  |   | 1,408  |  
|                                          |  |                |         |   |                  |   |        |  
|Total accrued liabilities                 |  | $              | 4,825   |   |                  | $ | 3,726  |  
|                                          |  |                |         |   |                  |   |        |  

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired in a
business combination. As of June 30, 2010, the Companys goodwill balance was $16.1 million, of which $15.7 million relates to the Companys October 2006 acquisition of Analog Power Semiconductor Corporation and $0.4 million relates
to the Companys June 2008 acquisition of Elite Micro Devices, Inc.

The Company evaluates goodwill for impairment, at a
minimum, on an annual basis on September 30 and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. During the three and six months ended June 30, 2010, the Company determined that goodwill
impairment indicators were not present.

Intangible Assets

The Companys intangible asset balance was $0.1 million as of June 30, 2010 and December 31, 2009. The Company amortizes
intangible assets on a straight-line basis over the estimated useful life of the assets. The intangible assets balance of $0.1 million will be amortized over the remainder of 2010 and 2011.

9. SEGMENT INFORMATION

The Company operates in one reportable segment: the design, development, marketing and sale of power management semiconductor products and
solutions for the communications, computing and consumer portable and personal electronics marketplace. The Companys chief operating decision maker is its chief executive officer.



12



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The following is a summary of net revenues by geographic region based on the location to
which the product is shipped:



|              |  |                            |        |                          |   |        |  |      |        |  |   |       
|------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|              |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|              |  | 2010                       |        | 2009                     |   | 2010   |  | 2009
|              |  | (in thousands)            
|South Korea   |  | $                          | 10,798 |                          | $ | 14,972 |  | $    | 23,041 |  | $ | 26,769
|China         |  |                            | 5,233  |                          |   | 5,450  |  |      | 9,709  |  |   | 8,403 
|Taiwan        |  |                            | 5,998  |                          |   | 1,592  |  |      | 10,172 |  |   | 2,481 
|Europe        |  |                            | 276    |                          |   | 423    |  |      | 643    |  |   | 798   
|North America |  |                            | 247    |                          |   | 342    |  |      | 550    |  |   | 692   
|Japan         |  |                            | 594    |                          |   | 199    |  |      | 949    |  |   | 384   
|              |  |                            |        |                          |   |        |  |      |        |  |   |       
|Total         |  | $                          | 23,146 |                          | $ | 22,978 |  | $    | 45,064 |  | $ | 39,527
|              |  |                            |        |                          |   |        |  |      |        |  |   |       

The following table summarizes net revenues and
accounts receivable for customers who accounted for 10% or more of accounts receivable or net revenues, respectively:



|         |  |                           |   |  |                                        |   |  |                                      |   |  |      |   |  |      |   |  |      |  
|-------- |  | ------------------------- | - |  | -------------------------------------- | - |  | ------------------------------------ | - |  | ---- | - |  | ---- | - |  | ---- | -
|         |  | Accounts Receivable as of |   |  | Net RevenuesThree Months EndedJune 30, |   |  | Net RevenuesSix Months EndedJune 30, |  
|         |  | June 30,2010              |   |  | December 31,2009                       |   |  | 2010                                 |   |  | 2009 |   |  | 2010 |   |  | 2009 |  
|Customer |  |                           |   |  |                                        |   |  |                                      |   |  |      |   |  |      |   |  |      |  
|A        |  | 30                        | % |  | 42                                     | % |  | 18                                   | % |  | 30   | % |  | 22   | % |  | 31   | %
|B        |  | 24                        | % |  | 29                                     | % |  | 17                                   | % |  | 25   | % |  | 18   | % |  | 25   | %
|C        |  | *                         |   |  | *                                      |   |  | 12                                   | % |  | 10   | % |  | 11   | % |  | *    |  
|D        |  | 10                        | % |  | *                                      |   |  | *                                    |   |  | *    |   |  | *    |   |  | *    |  



|* | Amount represents less than 10%.
|- | --------------------------------

10. INCOME
TAXES

The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax
rate. The Company also records the tax effect of unusual or infrequently occurring discrete items, including changes in judgment about valuation allowances and effects of changes in tax laws or tax rates, in the interim period in which they occur.
The Companys effective tax rate reflects the impact of a significant amount of its earnings being taxed in foreign jurisdictions at tax rates below the United States statutory tax rate and a valuation allowance maintained on the Companys
U.S. deferred tax assets.

The Company recorded tax provisions of $0.3 million and $0.4 million for the three months ended
June 30, 2010 and 2009, respectively. The Company recorded tax provisions of $0.8 million and $1.1 million for the six months ended June 30, 2010 and 2009, respectively. The Company established a full valuation allowance against its United
States deferred tax assets on December 31, 2008. The Company has established valuation allowances for deferred tax assets based on a more likely than not threshold. The Companys ability to realize its deferred tax assets
depends on its ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The Company considers the following possible sources of taxable income when
assessing the realization of its deferred tax assets:



| |  |  | Future reversals of existing taxable temporary differences;
| | - |  | -----------------------------------------------------------



| |  |  | Future taxable income exclusive of reversing temporary differences and carryforwards;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Taxable income in prior carryback years; and
| | - |  | --------------------------------------------



| |  |  | Tax-planning strategies.
| | - |  | ------------------------

The Company concludes that a valuation allowance is required when there is significant negative evidence which is objective and
verifiable, such as cumulative losses in recent years. The Company utilizes a rolling three years of actual results as its primary measure of its cumulative losses in recent years. As of June 30, 2010, the Company continues to have a three year
cumulative loss and, therefore, concludes that a valuation allowance is still required.

During the six months ended
June 30, 2010, the Company increased its total amount of unrecognized tax benefits by approximately $3.3 million, including an accrual of interest and penalties of less than $0.1 million. The Company recognizes interest and penalties accrued
related to unrecognized tax benefits in income tax expense.



13



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The Company is currently under examination by the Internal Revenue Service for tax years
2005 to 2007. In May 2009, the Company received an IRS examination report showing proposed changes to its income tax for the 2005 and 2006 tax years. The Company filed a timely protest to the May 2009 IRS examination report, completed its meetings
with the IRS Appeals Division, and is awaiting final resolution. In April 2010, the Company received an IRS examination report showing proposed changes to its income tax for the 2007 tax year. The Company filed a timely protest to the April 2010 IRS
examination report in May 2010 and is currently waiting for discussions with the IRS Appeals Division. The Company believes the adjustments proposed in these IRS examination reports are not supported by the facts and are inconsistent with applicable
tax laws and existing Treasury regulations. No payments, if any, will be made related to the disputed proposed adjustments until the issues are resolved with either the IRS Appeals Division or the tax court. The Company believes that it has
adequately provided in its financial statements for any additional taxes that it may be required to pay as a result of these examinations.

Although the timing of the resolution and/or closure on audits is highly uncertain, it is reasonably possible that the balance of gross
unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined, the Company is unable to estimate the range of possible
adjustments to the balance of gross unrecognized tax benefits.

11. COMMITMENTS AND CONTINGENCIES

Indemnification and Product Warranty

The Company indemnifies certain customers, distributors, suppliers, and subcontractors for attorneys fees and damages and costs
awarded against these parties in certain circumstances in which the Companys products are alleged to infringe third party intellectual property rights, including patents, trade secret, trademarks, or copyrights. The Company cannot estimate the
amount of potential future payments, if any, that it might be required to make as a result of these agreements. To date, the Company has not paid any claim or been required to defend any action related to its indemnification obligations, and
accordingly, it has not accrued any amounts for such indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

The Company provides a warranty against defects in materials and workmanship and will either repair the goods, provide replacement
products at no charge to the customer or refund amounts to the customer for defective products. The Company records estimated warranty costs, based on historical experience by product, at the time it recognizes product revenues. The Companys
warranty reserve balance was $0.1 million as of June 30, 2010 and December 31, 2009.

Legal Proceedings

In May 2003, the Company received a letter from Linear Technology Corporation (Linear Technology) alleging
that certain of its charge pump products infringed United States Patent No. 6,411,531 (531 Patent) owned by Linear Technology. In August 2004, the Company received a letter from Linear Technology alleging that certain of its switching
regulator products infringed United States Patent Nos. 5,481,178, 6,304,066 and 6,580,258 (258 Patent). In response to these letters, the Company contacted Linear Technology to convey its good faith belief that it does not infringe the patents
in question. Subsequently, the Company became aware of a marketing campaign conducted by Linear Technology in which it sought to disrupt the Companys business relationships and sales by suggesting to the Companys customers that its
products infringe the same United States patents mentioned in its two letters to the Company. As a result, in February 2006, the Company initiated a lawsuit against Linear Technology for unfair business practices, interference with existing and
prospective customers and trade libel, as well as a declaration of patent invalidity and non-infringement. This case is currently stayed pending the outcome of the United States International Trade Commission (USITC) action described in
the following paragraphs.

In March 2006, the USITC responded to a complaint filed by Linear Technology by initiating an
investigation under Section 337 of the Tariff Act to determine if certain of the Companys products infringe certain patents owned by Linear Technology. The accused products include charge pumps and switching regulators and are similar to
the products involved in the Companys lawsuit with Linear Technology. A Final Determination was issued September 24, 2007 which was followed by separate appeals for the charge pump and switching regulator products. The last of these
appeals, including the parties respective requests for rehearing, ended in 2009. The overall result of these processes clears the path for importation of the Companys charge pump products. A limited exclusion order was also issued
preventing the Company from importing certain of its switching regulator designs and the scope of this order was expanded by the appeals process. This exclusion order does not, however, prevent the Companys customers from importing downstream
products (i.e., products that incorporate AATI switching regulators) into the United States. To date, the Companys sales of the excluded products in the United States have been minimal.



14



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



On October 1, 2008, the USITC instigated a formal enforcement proceeding at the
request of Linear Technology. In that enforcement proceeding, Linear alleges that the Company imported certain switching regulator products in violation of the limited exclusion order originally issued on September 24, 2007. The list of
products alleged to be in violation was modified by a mutual agreement between the parties under which the Company voluntarily agreed to cease importation of its switching regulator products that do not use its most recent low-noise design. A trial
for the remaining products (i.e., those that use the Companys low-noise design) was completed on January 13, 2010. The final determination of that trial was issued on July 19, 2010 and held that the Companys low-noise switching
regulators are subject to the limited exclusion order and cannot be imported by the Company. As mentioned above, the limited exclusion order applies only to the Company and its agents and does not prevent importation of downstream products. U.S.
sales of the products involved in the enforcement have never been significant.

Both parties are expected to appeal
unfavorable portions of the final determination to the United States Court of Appeals for the Federal Circuit. As a result, the Company expects to incur significant legal expenses that will be expensed when incurred.

In March 2009, the Company initiated a lawsuit against a small, privately held semiconductor manufacturing company alleging patent
infringement of certain of its products. This case, filed in the United States District Court for the Northern District of California, is currently stayed pending a reexamination of the patent that the Company believes has been infringed. The
Company does not believe that this lawsuit will have a material impact on its business or financial condition.

12. RECENT ACCOUNTING
PRONOUNCEMENTS

In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Accounting
Standards Codification Topic 810)Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other
entitys purpose and design and the reporting entitys ability to direct the activities of the other entity that most significantly impact the other entitys economic performance. ASU 2009-17 also requires a reporting entity to
provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is required to disclose how its involvement with a variable interest entity
affects the reporting entitys financial statements. ASU 2009-17 became effective for the Companys 2010 fiscal year and early application was not permitted. The Companys adoption of this new guidance did not have any impact on its
consolidated results of operations or financial position.

In January 2010, the FASB issued Accounting Standards Update
No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06), which amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820) to require
various additional disclosures regarding fair value measurements and also clarify certain existing disclosure requirements. Under ASU 2010-06, the Company is required to: (1) disclose separately the amounts of significant transfers between
Level 1 and Level 2 of the fair value hierarchy, (2) disclose activity in Level 3 fair value measurements including transfers into and out of Level 3 and the reasons for such transfers, and (3) present separately in its reconciliation of
recurring Level 3 measurements information about purchases, sales, issuances and settlements on a gross basis. ASU 2010-06 does not change any accounting requirements, but is expected to have a significant effect on the disclosures of entities that
measure assets and liabilities at fair value. The amendments prescribed by ASU 2010-06 became effective for the Companys fiscal quarter ending March 31, 2010, except for the requirements described in item (3) above, which will be
effective for the Companys fiscal year beginning January 1, 2011. The Companys adoption of this new guidance did not impact its consolidated results of operations or financial position.



15



---

##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our most recently filed Form 10-K. In addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to, those set
forth under Risk Factors and elsewhere in this Quarterly Report on Form 10-Q.

SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this
Quarterly Report on Form 10-Q the words anticipate, objective, may, might, should, could, can, intend, expect, believe,
estimate, predict, potential, plan, is designed to or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:



| |  |  | our expectations regarding our expenses, sales and operations;
| | - |  | --------------------------------------------------------------



| |  |  | our anticipated cash needs and our estimates regarding our capital requirements and our need for additional financing;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to anticipate the future needs of our customers;
| | - |  | ------------------------------------------------------------



| |  |  | our plans for future products and enhancements of existing products;
| | - |  | --------------------------------------------------------------------



| |  |  | our growth strategy elements;
| | - |  | -----------------------------



| |  |  | our intellectual property;
| | - |  | --------------------------



| |  |  | our anticipated trends and challenges in the markets in which we operate; and
| | - |  | -----------------------------------------------------------------------------



| |  |  | our ability to attract customers.
| | - |  | ---------------------------------

These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. While we believe our plans, intentions and expectations reflected in those forward-looking statements are reasonable, we cannot assure
you that these plans, intentions or expectations will be achieved. Our actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this Quarterly
Report on Form 10-Q, including those under the heading Risk Factors.

All forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Quarterly Report on Form 10-Q. Other than as required by applicable laws, we are under no obligation to, and do not intend
to, update any forward-looking statement, whether as a result of new information, future events or otherwise.



16



---

##### Table of Contents

Overview

Our net revenues for the three months ended June 30, 2010 was relatively unchanged compared to the three months ended June 30,
2009. Gross margin for the three months ended June 30, 2010 decreased to 46% compared to 48% for the three months ended June 30, 2009 primarily due to an unfavorable product mix and manufacturing variances, partially offset by a lower
charge for excess and obsolete inventory.

Our net revenues for the six months ended June 30, 2010 increased by $5.5
million compared to the six months ended June 30, 2009 primarily due to higher sales of our products in Taiwan, partially offset by lower sales in Korea. Gross margin for the six months ended June 30, 2010 was relatively unchanged compared
to the six months ended June 30, 2009.

Cash, cash equivalents and short-term investments as of June 30, 2010
decreased by $8.1 million to $93.9 million compared to $102.0 million as of December 31, 2009, primarily due to $3.7 million used in operating activities, $3.6 million used to repurchase shares of our common stock and $1.2 million used to
purchase property and equipment. We continue to be debt free as of June 30, 2010.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts
in our condensed consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenues, inventory valuation, stock-based compensation, income taxes, goodwill, investments and long-lived assets. We
base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Although actual results have historically been reasonably consistent with managements expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

Management believes that there have been no significant changes during the three and six months ended June 30, 2010 to the items
that we disclosed as our critical accounting policies and estimates in the Managements Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31,
2009, except for changes to the assumptions used in our computation of stock-based compensation expense which became effective during the three months ended March 31, 2010.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the award. The fair value of the award that is
ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The expense recognized for the portion of the award that is expected to vest has been reduced by
an estimated forfeiture rate. The forfeiture rate is determined at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The grant date fair value of our stock options was calculated using the Black-Scholes option pricing model. The Black-Scholes option
pricing model requires the use of highly subjective assumptions which determine the fair value of stock options, including the price volatility of the underlying stock and the stock options expected term. The expected term of our stock options
represents the estimated weighted-average period that the stock options are expected to remain outstanding. Beginning in 2010, to determine the expected term, we estimate future employee exercise behavior by considering our historical option
exercise and post-vest cancellation experience as well as the contractual term of our stock option grants. We base our expected volatility assumption on our daily historical volatility data over a period commensurate with the expected term. Due to
the low volume of the traded options on our common stock and because the term of traded options was much shorter than the expected term of our stock options, implied volatility was not included in the valuation of options granted during the three
and six months ended June 30, 2010. Prior to 2010, due to the limited history of trading since our initial public offering in 2005, our expected term and volatility assumptions were based in part on the volatility and expected term data of a
group of peer companies. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of our stock options. The dividend yield is based on our history and expectation of dividend payouts. We have never
declared or paid any cash dividends on common stock, and we do not anticipate paying cash dividends in the foreseeable future.



17



---

##### Table of Contents

If any of the assumptions used in the Black-Scholes model change significantly, stock-based
compensation expense may differ materially in the future from amounts recorded in the current period. Further, to the extent that we revise our estimated forfeiture rate in the future, our stock-based compensation expense could be materially
impacted in the quarter of revision, as well as in the following quarters.

Results of Operations

The following table sets forth our unaudited historical operating results, in dollar amounts and as a percentage of net revenues for the
periods indicated:



|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|------------------------------------ |  | --------------------------- | ------ | - | ------------------------- | ----- | -- | ---- | - | ------ | ---- |  | ----- | -- |  | - | ------ | - |  | ----- | -- |  | - | ------ | - |  | ----- | --
|                                     |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |      
|(in thousands, except percentages)   |  | 2010                        |        |   | 2009                      |       |    | 2010 |   |        | 2009 | 
|Net revenues                         |  | $                           | 23,146 |   |                           | 100.0 | %  |      | $ | 22,978 |      |  | 100.0 | %  |  | $ | 45,064 |   |  | 100.0 | %  |  | $ | 39,527 |   |  | 100.0 | % 
|Cost of revenues                     |  |                             | 12,609 |   |                           | 54.5  |    |      |   | 11,882 |      |  | 51.7  |    |  |   | 23,924 |   |  | 53.1  |    |  |   | 21,000 |   |  | 53.1  |   
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Gross profit                         |  |                             | 10,537 |   |                           | 45.5  |    |      |   | 11,096 |      |  | 48.3  |    |  |   | 21,140 |   |  | 46.9  |    |  |   | 18,527 |   |  | 46.9  |   
|Operating expenses:                  |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Research and development             |  |                             | 7,836  |   |                           | 33.9  |    |      |   | 6,808  |      |  | 29.6  |    |  |   | 14,938 |   |  | 33.1  |    |  |   | 13,391 |   |  | 33.9  |   
|Sales, general and administrative    |  |                             | 6,109  |   |                           | 26.4  |    |      |   | 6,281  |      |  | 27.3  |    |  |   | 12,270 |   |  | 27.2  |    |  |   | 11,710 |   |  | 29.6  |   
|Patent litigation                    |  |                             | 245    |   |                           | 1.1   |    |      |   | 385    |      |  | 1.7   |    |  |   | 1,329  |   |  | 2.9   |    |  |   | 686    |   |  | 1.7   |   
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Total operating expenses             |  |                             | 14,190 |   |                           | 61.3  |    |      |   | 13,474 |      |  | 58.6  |    |  |   | 28,537 |   |  | 63.3  |    |  |   | 25,787 |   |  | 65.2  |   
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Loss from operations                 |  |                             | (3,653 | ) |                           | (15.8 | )  |      |   | (2,378 | )    |  | (10.3 | )  |  |   | (7,397 | ) |  | (16.4 | )  |  |   | (7,260 | ) |  | (18.3 | ) 
|Interest and other income:           |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Interest and investment income       |  |                             | 77     |   |                           | 0.3   |    |      |   | 245    |      |  | 1.1   |    |  |   | 177    |   |  | 0.4   |    |  |   | 616    |   |  | 1.6   |   
|Other income (expense), net          |  |                             | (62    | ) |                           | (0.3  | )  |      |   | 70     |      |  | 0.3   |    |  |   | (93    | ) |  | (0.2  | )  |  |   | 52     |   |  | 0.1   |   
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Total interest and other income, net |  |                             | 15     |   |                           | 0.1   |    |      |   | 315    |      |  | 1.4   |    |  |   | 84     |   |  | 0.2   |    |  |   | 668    |   |  | 1.7   |   
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Loss before income taxes             |  |                             | (3,638 | ) |                           | (15.7 | )  |      |   | (2,063 | )    |  | (9.0  | )  |  |   | (7,313 | ) |  | (16.2 | )  |  |   | (6,592 | ) |  | (16.7 | ) 
|Provision for income taxes           |  |                             | 273    |   |                           | 1.2   |    |      |   | 426    |      |  | 1.9   |    |  |   | 802    |   |  | 1.8   |    |  |   | 1,105  |   |  | 2.8   |   
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   
|Net loss                             |  | $                           | (3,911 | ) |                           | (16.9 | )% |      | $ | (2,489 | )    |  | (10.8 | )% |  | $ | (8,115 | ) |  | (18.0 | )% |  | $ | (7,697 | ) |  | (19.5 | )%
|                                     |  |                             |        |   |                           |       |    |      |   |        |      |  |       |    |  |   |        |   |  |       |    |  |   |        |   |  |       |   

Comparison of Three and Six Months ended June 30, 2010 and June 30, 2009

Revenues

The following table illustrates our net revenues by principal product families:



|                                        |  |                                    |        |                       |                           |   |        |      |                       |  |      |        |  |                       |        |  |        |   |                       |   |        |  |     |  
|--------------------------------------- |  | ---------------------------------- | ------ | --------------------- | ------------------------- | - | ------ | ---- | --------------------- |  | ---- | ------ |  | --------------------- | ------ |  | ------ | - | --------------------- | - | ------ |  | --- | -
|                                        |  | Three Months Ended June 30,        |        |                       | Six Months Ended June 30, |  
|                                        |  | 2010                               |        |                       | 2009                      |   |        | 2010 |                       |  | 2009 |       
|                                        |  | Amount                             |        | Percentof netrevenues |                           |   | Amount |      | Percentof netrevenues |  |      | Amount |  | Percentof netrevenues |        |  | Amount |   | Percentof netrevenues |  
|                                        |  | (in thousands, except percentages) |       
|Display and Lighting Solutions          |  | $                                  | 12,680 |                       | 55                        | % |        | $    | 14,602                |  | 64   | %      |  | $                     | 25,650 |  | 57     | % |                       | $ | 26,095 |  | 66  | %
|Voltage Regulation and DC/DC Conversion |  |                                    | 5,197  |                       | 22                        | % |        |      | 4,005                 |  | 17   | %      |  |                       | 9,440  |  | 21     | % |                       |   | 5,796  |  | 14  | %
|Interface and Power Management          |  |                                    | 3,624  |                       | 16                        | % |        |      | 3,359                 |  | 15   | %      |  |                       | 6,619  |  | 15     | % |                       |   | 6,189  |  | 16  | %
|Battery Management                      |  |                                    | 1,645  |                       | 7                         | % |        |      | 1,012                 |  | 4    | %      |  |                       | 3,355  |  | 7      | % |                       |   | 1,447  |  | 4   | %
|                                        |  |                                    |        |                       |                           |   |        |      |                       |  |      |        |  |                       |        |  |        |   |                       |   |        |  |     |  
|Total                                   |  | $                                  | 23,146 |                       | 100                       | % |        | $    | 22,978                |  | 100  | %      |  | $                     | 45,064 |  | 100    | % |                       | $ | 39,527 |  | 100 | %
|                                        |  |                                    |        |                       |                           |   |        |      |                       |  |      |        |  |                       |        |  |        |   |                       |   |        |  |     |  

Our net revenues for the three months ended June 30, 2010 were relatively unchanged compared to the
three months ended June 30, 2009. Total unit shipments in the three months ended June 30, 2010 increased 12% compared to the three months ended June 30, 2009 while the average selling prices decreased by approximately 9%.



18



---

##### Table of Contents

Our net revenues for the six months ended June 30, 2010 as compared to the six months
ended June 30, 2009 increased by $5.5 million, or 14%. Our sales of Voltage Regulation and DC/DC Conversion and Battery Management product families increased for the six months ended June 30, 2010 compared to the six months ended
June 30, 2009 due to our continued effort to grow and diversify our product offerings. Total unit shipments increased 26% during the first six months of 2010 compared to the first six months of 2009 while the average selling prices decreased
9%.

Geographically, higher sales in Taiwan were offset by a decrease in sales in Korea for the three months ended
June 30, 2010 compared to the three months ended June 30, 2009. For the six months ended June 30, 2010 compared to the six months ended June 30, 2009, the increase in sales was primarily due to higher sales in Taiwan and China,
partially offset by a decrease in sales in Korea.

Gross Profit



|                                   |  |                             |        |   |      |   |        |                           |  |   |      |    |  |      |   |  |                     |        |   |  |   |        |   |  |   |       |   |  |    |  
|---------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | ------------------------- |  | - | ---- | -- |  | ---- | - |  | ------------------- | ------ | - |  | - | ------ | - |  | - | ----- | - |  | -- | -
|                                   |  | Three Months EndedJune 
30, |        |   |      |   |        | Six Months EndedJune 
30, |  |   |      |   
|(in thousands, except percentages) |  | 2010                        |        |   | 2009 |   |        | Increase (Decrease)       |  |   | 2010 |    |  | 2009 |   |  | Increase (Decrease) |       
|Net revenues                       |  | $                           | 23,146 |   |      | $ | 22,978 |                           |  | $ | 168  |    |  | 1    | % |  | $                   | 45,064 |   |  | $ | 39,527 |   |  | $ | 5,537 |   |  | 14 | %
|Cost of revenues                   |  |                             | 12,609 |   |      |   | 11,882 |                           |  |   | 727  |    |  | 6    | % |  |                     | 23,924 |   |  |   | 21,000 |   |  |   | 2,924 |   |  | 14 | %
|                                   |  |                             |        |   |      |   |        |                           |  |   |      |    |  |      |   |  |                     |        |   |  |   |        |   |  |   |       |   |  |    |  
|Gross profit                       |  | $                           | 10,537 |   |      | $ | 11,096 |                           |  |   |      |    |  |      |   |  | $                   | 21,140 |   |  | $ | 18,527 |   |  |   |       |   |  |    |  
|                                   |  |                             |        |   |      |   |        |                           |  |   |      |    |  |      |   |  |                     |        |   |  |   |        |   |  |   |       |   |  |    |  
|Gross profit margin percentage     |  |                             | 45.5   | % |      |   | 48.3   | %                         |  |   | (2.8 | )% |  |      |   |  |                     | 46.9   | % |  |   | 46.9   | % |  |   | 0     | % |  |    |  

Gross margin for the three months ended June 30, 2010 decreased to 46% compared to 48% for
the three months ended June 30, 2009 primarily due to an unfavorable product mix and manufacturing variances, partially offset by a lower charge for excess and obsolete inventory.

Gross margin for the six months ended June 30, 2010 was relatively unchanged compared to the six months ended June 30, 2009
because unfavorable product mix and manufacturing variances were offset by a lower charge for excess and obsolete inventory.

During the three months ended June 30, 2010, our gross inventory write-down was approximately $0.8 million, partially offset by the
sale of $0.5 million of previously written down inventory. During the three months ended June 30, 2009, our gross inventory write-down was approximately $1.2 million, partially offset by the sale of $0.7 million of previously written down
inventory.

During the six months ended June 30, 2010, our gross inventory write-down was approximately $1.3 million,
partially offset by the sale of $1.1 million of previously written down inventory. During the six months ended June 30, 2009, our gross inventory write-down was approximately $2.2 million, partially offset by the sale of $1.1 million of
previously written-down inventory.

Research and Development



|                                   |  |                             |       |   |      |   |       |                           |  |   |       |   |  |      |   |  |                     |        |   |  |   |        |   |  |   |       |    |  |    |  
|---------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | ------------------------- |  | - | ----- | - |  | ---- | - |  | ------------------- | ------ | - |  | - | ------ | - |  | - | ----- | -- |  | -- | -
|                                   |  | Three Months EndedJune 
30, |       |   |      |   |       | Six Months EndedJune 
30, |  |   |       |  
|(in thousands, except percentages) |  | 2010                        |       |   | 2009 |   |       | Increase (Decrease)       |  |   | 2010  |   |  | 2009 |   |  | Increase (Decrease) |       
|Research and development           |  | $                           | 7,836 |   |      | $ | 6,808 |                           |  | $ | 1,028 |   |  | 15   | % |  | $                   | 14,938 |   |  | $ | 13,391 |   |  | $ | 1,547 |    |  | 12 | %
|Percentage of net revenues         |  |                             | 33.9  | % |      |   | 29.6  | %                         |  |   | 4.3   | % |  |      |   |  |                     | 33.1   | % |  |   | 33.9   | % |  |   | (0.8  | )% |  |    |  

Research and development expenses for the three months ended June 30, 2010 increased by $1.0
million as compared to the three months ended June 30, 2009 primarily due to a $0.7 million increase in payroll and personnel related expenses due to an increase in headcount and a $0.4 million increase in non-recurring engineering costs.

Research and development expenses for the six months ended June 30, 2010 increased by $1.5 million as compared to the
six months ended June 30, 2009 primarily due to a $1.3 million increase in payroll and benefit related expenses as a result of an increase in headcount and our conclusion of certain cost reduction measures including company-wide shutdowns that
occurred during the three months ended March 31, 2009 and a $0.5 million increase in outside service expenses, partially offset by a $0.3 million decrease in stock-based compensation expense.



19



---

##### Table of Contents

Sales, General and Administrative



|                                   |  |                             |       |   |      |   |       |                           |  |   |      |    |  |      |    |  |                     |        |   |  |   |        |   |  |   |      |    |  |   |  
|---------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | ------------------------- |  | - | ---- | -- |  | ---- | -- |  | ------------------- | ------ | - |  | - | ------ | - |  | - | ---- | -- |  | - | -
|                                   |  | Three Months EndedJune 
30, |       |   |      |   |       | Six Months EndedJune 
30, |  |   |      |   
|(in thousands, except percentages) |  | 2010                        |       |   | 2009 |   |       | Increase (Decrease)       |  |   | 2010 |    |  | 2009 |    |  | Increase (Decrease) |       
|Sales, general and administrative  |  | $                           | 6,109 |   |      | $ | 6,281 |                           |  | $ | (172 | )  |  | (3   | )% |  | $                   | 12,270 |   |  | $ | 11,710 |   |  | $ | 560  |    |  | 5 | %
|Percentage of net revenues         |  |                             | 26.4  | % |      |   | 27.3  | %                         |  |   | (0.9 | )% |  |      |    |  |                     | 27.2   | % |  |   | 29.6   | % |  |   | (2.4 | )% |  |   |  

Sales, general and administrative expenses for the three months ended June 30, 2010 decreased
by $0.2 million as compared to the three months ended June 30, 2009 primarily due to a $0.3 million decrease in tax and audit related expenses.

Sales, general and administrative expenses for the six months ended June 30, 2010 increased by $0.6 million as compared to the six
months ended June 30, 2009 primarily due to a $0.6 million increase in payroll and payroll related expenses as a result of higher headcount and our conclusion of certain cost reduction measures including company-wide shutdowns that occurred
during the three months ended March 31, 2009.

Patent Litigation



|                                   |  |                             |     |   |      |   |     |                           |  |   |      |    |  |      |    |  |                     |       |   |  |   |     |   |  |   |     |   |  |    |  
|---------------------------------- |  | --------------------------- | --- | - | ---- | - | --- | ------------------------- |  | - | ---- | -- |  | ---- | -- |  | ------------------- | ----- | - |  | - | --- | - |  | - | --- | - |  | -- | -
|                                   |  | Three Months EndedJune 
30, |     |   |      |   |     | Six Months EndedJune 
30, |  |   |      |   
|(in thousands, except percentages) |  | 2010                        |     |   | 2009 |   |     | Increase (Decrease)       |  |   | 2010 |    |  | 2009 |    |  | Increase (Decrease) |      
|Patent litigation                  |  | $                           | 245 |   |      | $ | 385 |                           |  | $ | (140 | )  |  | (36  | )% |  | $                   | 1,329 |   |  | $ | 686 |   |  | $ | 643 |   |  | 94 | %
|Percentage of net revenues         |  |                             | 1.1 | % |      |   | 1.7 | %                         |  |   | (0.6 | )% |  |      |    |  |                     | 2.9   | % |  |   | 1.7 | % |  |   | 1.2 | % |  |    |  

Patent litigation expense decreased by $0.1 million during the three months ended June 30,
2010 compared to the three months ended June 30, 2009 due to the timing of activity in our patent infringement cases.

Patent litigation expense increased by $0.6 million during the six months ended June 30, 2010 compared to the six months ended
June 30, 2009 due to a higher level of activity in our patent infringement cases during the three months ended March 31, 2010.

We believe that we will continue to incur significant litigation expenses for the remainder of 2010 and future years. For a description
of our litigation, please see Part II, Item 1Legal Proceedingsfor further details.

Interest and
Investment Income

Interest and investment income was $0.1 million for the three months ended June 30, 2010,
compared to $0.2 million for the three months ended June 30, 2009 primarily due to lower average interest rates.

Interest and investment income was $0.2 million for the six months ended June 30, 2010, compared to $0.6 million for the six months
ended June 30, 2009 primarily due to lower average interest rates.

Provision for Income Taxes

We adjust our effective tax rate each quarter to be consistent with our estimated annual effective tax rate. We also record the tax effect
of unusual or infrequently occurring discrete items, including changes in judgment about valuation allowances and effects of changes in tax laws or tax rates, in the interim period in which they occur. Our effective tax rate reflects the impact of a
significant amount of our earnings being taxed in foreign jurisdictions at tax rates below the United States statutory tax rate and a valuation allowance maintained on our U.S. deferred tax assets.

We recorded tax provisions of $0.3 million and $0.4 million for the three months ended June 30, 2010 and 2009, respectively. We
recorded tax provisions of $0.8 million and $1.1 million for the six months ended June 30, 2010 and 2009, respectively. We established a full valuation allowance against our United States deferred tax assets on December 31, 2008. We have
established valuation allowances for deferred tax assets based on a more likely than not threshold. Our ability to realize our deferred tax assets depends on our ability to generate sufficient taxable



20



---

##### Table of Contents

income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. We consider the following possible sources of taxable income when assessing
the realization of our deferred tax assets:



| |  |  | Future reversals of existing taxable temporary differences;
| | - |  | -----------------------------------------------------------



| |  |  | Future taxable income exclusive of reversing temporary differences and carryforwards;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Taxable income in prior carryback years; and
| | - |  | --------------------------------------------



| |  |  | Tax-planning strategies.
| | - |  | ------------------------

We conclude that a valuation allowance is required when there is significant negative evidence which is objective and verifiable, such as
cumulative losses in recent years. We utilize a rolling three years of actual results as our primary measure of our cumulative losses in recent years. As of June 30, 2010, we continue to have a three year cumulative loss and, therefore,
conclude that a valuation allowance is still required.

During the six months ended June 30, 2010, we increased our total
amount of unrecognized tax benefits by approximately $3.3 million, including an accrual of interest and penalties of less than $0.1 million. We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense.

We are currently under examination by the Internal Revenue Service for tax years 2005 to 2007. In May 2009, we received an
IRS examination report showing proposed changes to our income tax for the 2005 and 2006 tax years. We filed a timely protest to the May 2009 IRS examination report, completed our meetings with the IRS Appeals Division, and are awaiting final
resolution. In April 2010, we received an IRS examination report showing proposed changes to our income tax for the 2007 tax year. We filed a timely protest to the April 2010 IRS examination report in May 2010 and are currently waiting for
discussions with the IRS Appeals Division. We believe the adjustments proposed in these IRS examination reports are not supported by the facts and are inconsistent with applicable tax laws and existing Treasury regulations. No payments, if any, will
be made related to the disputed proposed adjustments until the issues are resolved with either the IRS Appeals Division or the tax court. We believe that we have adequately provided in our financial statements for any additional taxes that we may be
required to pay as a result of these examinations.

Although the timing of the resolution and/or closure on audits is highly
uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined,
we are unable to estimate the range of possible adjustments to the balance of gross unrecognized tax benefits.

Recent Accounting
Pronouncements

In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Accounting
Standards Codification Topic 810)Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other
entitys purpose and design and the reporting entitys ability to direct the activities of the other entity that most significantly impact the other entitys economic performance. ASU 2009-17 also requires a reporting entity to
provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is required to disclose how its involvement with a variable interest entity
affects the reporting entitys financial statements. ASU 2009-17 became effective for our 2010 fiscal year and early application was not permitted. Our adoption of this new guidance did not have any impact on our consolidated results of
operations or financial position.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06,
Improving Disclosures about Fair Value Measurements (ASU 2010-06), which amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820) to require various additional
disclosures regarding fair value measurements and also clarify certain existing disclosure requirements. Under ASU 2010-06, we are required to: (1) disclose separately the amounts of significant transfers between Level 1 and Level 2 of the fair
value hierarchy, (2) disclose activity in Level 3 fair value measurements including transfers into and out of Level 3 and the reasons for such transfers, and (3) present separately in our reconciliation of recurring Level 3 measurements
information about purchases, sales, issuances and settlements on a gross basis. ASU 2010-06 does not change any accounting requirements, but is expected to have a significant effect on the disclosures of entities that measure assets



21



---

##### Table of Contents

and liabilities at fair value. The amendments prescribed by ASU 2010-06 became effective for our fiscal quarter ending March 31, 2010, except for the requirements described in item
(3) above, which will be effective for our fiscal year beginning January 1, 2011. Our adoption of this new guidance did not impact our consolidated results of operations or financial position.

Liquidity and Capital Resources



|                                                             |  |                           |         |   |      |   |        |                     |  |   |         |  
|------------------------------------------------------------ |  | ------------------------- | ------- | - | ---- | - | ------ | ------------------- |  | - | ------- | -
|                                                             |  | Six Months EndedJune 
30, |         |   |      |  
|(in thousands, except percentages)                           |  | 2010                      |         |   | 2009 |   |        | Increase (Decrease) | 
|Net cash used in operating activities                        |  | $                         | (3,735  | ) |      | $ | (1,166 | )                   |  | $ | (2,569  | )
|Net cash used in (provided by) investing activities          |  |                           | (18,780 | ) |      |   | 10,077 |                     |  |   | (28,857 | )
|Net cash used in financing activities                        |  |                           | (3,179  | ) |      |   | (3,224 | )                   |  |   | 45      |  
|Effect of exchange rate changes on cash and cash equivalents |  |                           | (8      | ) |      |   | 14     |                     |  |   | (22     | )
|                                                             |  |                           |         |   |      |   |        |                     |  |   |         |  
|Net increase (decrease) in cash and cash equivalents         |  | $                         | (25,702 | ) |      | $ | 5,701  |                     |  | $ | (31,403 | )
|                                                             |  |                           |         |   |      |   |        |                     |  |   |         |  

Net Cash Used in Operating Activities

Cash used in operating activities was $3.7 million for the six months ended June 30, 2010. Cash used in operating activities was
comprised of the net loss of $8.1 million, less non-cash adjustments including $2.6 million of stock-based compensation expense and $0.9 million of depreciation and amortization. Cash used in operating activities was also comprised of $3.5 million
used to increase accounts receivable as a result of higher sales and $2.3 million used to increase inventory. These uses were offset by a $3.9 million increase in accounts payable due to the timing of our purchases, a $1.1 million increase in
accrued liabilities and other long-term liabilities primarily due an increase in the accrual for payroll and related expenses, a $1.0 million decrease in prepaid expenses and other current assets primarily due to a decrease in interest receivable
and a $0.7 million increase in income taxes payable due to the current year income taxes.

Cash used in operating activities
was $1.2 million for the six months ended June 30, 2009. Cash used in operating activities was comprised of the net loss of $7.7 million, less non-cash adjustments including $3.2 million of stock-based compensation expense and $1.0 million of
depreciation and amortization. Cash used in operating activities was also comprised of a $4.7 million increase in accounts receivable as a result of higher sales. These uses were offset by a $6.0 million increase in accounts payable due to the
timing of our purchases and a $1.0 million increase in income taxes payable due to the current year income taxes.

Net
Cash Provided By (Used in) Investing Activities

Net cash used in investing activities of $18.8 million for the six
months ended June 30, 2010 was primarily comprised of $66.8 million used to purchase short-term investments and $1.2 million used to purchase property and equipment, partially offset by $49.1 million of proceeds from sales and maturities of
short-term investments.

Net cash provided by investing activities was $10.1 million for the six months ended June 30,
2009 and was comprised of $48.4 million of proceeds from sales and maturities of short-term investments, partially offset by $37.9 million used to purchase short-term investments.

Net Cash Used in Financing Activities

Net cash used in financing activities was $3.2 million for the six months ended June 30, 2010, primarily due to $3.6 million used to
repurchase our common stock during the period, partially offset by $0.4 million of proceeds from stock option exercises.

Net
cash used in financing activities was $3.2 million for the six months ended June 30, 2009, primarily due to $3.3 million used to repurchase our common stock during the period.

Liquidity

Our cash, cash equivalents and short term investments were $93.9 million as of June 30, 2010 and $102.0 million as of
December 31, 2009. We believe our existing cash, cash equivalents and short-term investment balances, as well as any cash expected to be generated from operating activities, will be sufficient to meet our anticipated cash needs for at least the
next 12 months.



22



---

##### Table of Contents

Our long-term future capital requirements will depend on many factors, including our level
of revenues, the timing and extent of spending to support our product development efforts, the expansion of sales and marketing activities, the timing of our introductions of new products, the costs to ensure access to adequate manufacturing
capacity, our level of acquisition activity or other strategic transactions, the continuing market acceptance of our products and the amount and intensity of our litigation activity. We could be required, or could elect, to seek additional funding
through public or private equity or debt financing and additional funds may not be available on terms acceptable to us or at all.

Off Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained
interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity,
market risk or credit risk support to us.

Contractual Obligations

The following table describes our principal contractual cash obligations as of June 30, 2010:



|                              |  |                |        |               |   |        |  |      |       |      |   |       |  |                |       |  |   |     |  |   |    
|----------------------------- |  | -------------- | ------ | ------------- | - | ------ |  | ---- | ----- | ---- | - | ----- |  | -------------- | ----- |  | - | --- |  | - | ---
|                              |  | Total          |        | Remaining2010 |   | 2011   |  | 2012 |       | 2013 |   | 2014  |  | 2015and beyond
|                              |  | (in thousands)
|Operating leases              |  | $              | 7,300  |               | $ | 1,231  |  | $    | 1,952 |      | $ | 1,833 |  | $              | 1,056 |  | $ | 541 |  | $ | 687
|Purchase commitments(1)       |  |                | 9,172  |               |   | 9,172  |  |      |      |      |   |      |  |                |      |  |   |    |  |   |   
|                              |  |                |        |               |   |        |  |      |       |      |   |       |  |                |       |  |   |     |  |   |    
|Total contractual obligations |  | $              | 16,472 |               | $ | 10,403 |  | $    | 1,952 |      | $ | 1,833 |  | $              | 1,056 |  | $ | 541 |  | $ | 687
|                              |  |                |        |               |   |        |  |      |       |      |   |       |  |                |       |  |   |     |  |   |    



|(1) | Purchase commitments consist primarily of our commitment to purchase wafers and assembly services.
|--- | --------------------------------------------------------------------------------------------------

Common Stock Repurchases

On October 29, 2008, our board of directors authorized a program to repurchase shares of our outstanding common stock. Under the
stock repurchase program, we were authorized to use up to $30 million to repurchase our outstanding common stock in the open market or through privately negotiated transactions. The timing and actual number of shares repurchased depended upon market
conditions and other factors, in accordance with Securities and Exchange Commission requirements.

During the three months
ended June 30, 2010, we repurchased a total of 1.0 million shares of our common stock for a total cost of $3.6 million. We did not repurchase shares of our common stock during the three months ended March 31, 2010. During the three
and six months ended June 30, 2009, we repurchased a total of 1.1 million shares of our common stock for a total cost of $3.3 million. As of June 30, 2010, we have $17.7 million of remaining funds authorized to purchase shares under
the stock repurchase plan. Shares repurchased are accounted for as treasury stock and the total cost of shares repurchased is recorded as a reduction to stockholders equity.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

At June 30, 2010, we had cash and cash equivalents totaling $10.4 million, compared to $36.1 million at December 31, 2009. At
June 30, 2010, we had $83.5 million in short-term investments as compared to $65.9 million at December 31, 2009. Cash equivalents have an original or remaining maturity when purchased of 90 days or less; short-term investments generally
have an original or remaining maturity when purchased of greater than 90 days. Our investment policy places emphasis on instruments with more liquidity.

The taxable equivalent interest rates for the three months ended June 30, 2010 and 2009, on those cash equivalents and short-term
investments average approximately 0.3% and 1.0%, respectively. The taxable equivalent interest rates for the six months ended June 30, 2010 and 2009, on those cash equivalents and short-term investments average approximately 0.4% and 1.2%. The
primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. While none of the securities in which we invested are secured by real estate, these securities may be subject to
market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we may maintain our portfolio of cash equivalents and short-term investments in a variety of
securities, including commercial paper, money market funds, debt securities and treasury notes.



23



---

##### Table of Contents

A hypothetical increase in market interest rates of 100 basis points from the market rates
in effect at June 30, 2010 would cause the fair value of these investments to decrease by approximately $0.2 million, which would not significantly impact our financial position or results of operations. A hypothetical decrease in market
interest rates of 100 basis points from the market rates in effect at June 30, 2010 would cause the fair value of these investments to increase by less than $0.1 million. Declines in interest rates over time will result in lower interest
income. Based upon our analysis the fair values did not change materially as our investments are of short duration.

As of
June 30, 2010, our investment portfolio included $3.1 million of ARS with a fair value of $2.8 million. As of December 31, 2009, our investment portfolio included $3.2 million of ARS with a fair value of $2.4 million.

Our ARS are interest-bearing investments in debt obligations collateralized by Federal Family Education Program student loans. We
consider the ARS market to be inactive because auctions have failed to settle on their respective settlement dates since 2008. Further, the secondary market for ARS is inactive and there have been few issuer repurchases. We believe that available
pricing information is not determinative of the ARS fair value. As such, we estimated the fair value of our ARS as of June 30, 2010 and December 31, 2009 using a discounted cash flow model.

To determine the fair value of our ARS, we estimated the contractual interest that will be earned during the expected time to liquidity,
and discounted these cash flows to reflect liquidity and credit risk. The discount factor represents the current market conditions for instruments with similar credit quality, adjusted by 300 basis points to reflect the risk in the marketplace for
the ARS. The following average assumptions were used to determine the ARS fair value as of June 30, 2010 and December 31, 2009:



|                               |  |              |  |                 
|------------------------------ |  | ------------ |  | ----------------
|                               |  | June 30,2010 |  | December 31,2009
|Expected time to liquidity     |  | 2 to 4 years |  | 2 to 4 years    
|Expected annual rate of return |  | 1.3% to 1.8% |  | 1.1% to 1.7%    
|Discount rate                  |  | 4.5% to 6.1% |  | 4.9% to 19.3%   

During the quarter-ended December 31, 2008, we entered into a settlement agreement with UBS (the Agreement) under which
we were granted ARS exchange rights (ARS Put Option) that provided us with the right, but not the obligation, to sell one of our ARS to UBS for the full $1.2 million par value during the period of June 30, 2010 to July 2, 2012.
We exercised our ARS Put Option to sell these ARS to UBS on June 30, 2010. Following the exercise of the ARS Put Option, the sale of these ARS was settled and the cash was received on July 1, 2010. Due to the pending sale, as of
June 30, 2010 we classified the related ARS and the ARS Put Option within prepaid and other current assets on the condensed consolidated balance sheet, as it is our policy to account for the sale of such securities based on the settlement date
as opposed to the trade date. Our other ARS are classified within other long-term assets on the condensed consolidated balance sheet because we estimate that it will take longer than one year for a successful auction or issuer repurchase to occur.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

(a)
Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive
Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. As of June 30, 2010, our management, with the participation of our
Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective to ensure that information that we are required to disclose in reports that we file or submit under the Securities Exchange
Act of 1934 was (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal
Controls Over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2010 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.



24



---

##### Table of Contents

PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

In May
2003, we received a letter from Linear Technology Corporation (Linear Technology) alleging that certain of our charge pump products infringed United States Patent No. 6,411,531 (531 Patent) owned by Linear Technology. In
August 2004, we received a letter from Linear Technology alleging that certain of our switching regulator products infringed United States Patent Nos. 5,481,178, 6,304,066 and 6,580,258 (258 Patent). In response to these letters, we contacted
Linear Technology to convey our good faith belief that we do not infringe the patents in question. Subsequently, we became aware of a marketing campaign conducted by Linear Technology in which it sought to disrupt our business relationships and
sales by suggesting to our customers that our products infringe the same United States patents mentioned in its two letters to us. As a result, in February 2006, we initiated a lawsuit against Linear Technology for unfair business practices,
interference with existing and prospective customers and trade libel, as well as a declaration of patent invalidity and non-infringement. This case is currently stayed pending the outcome of the United States International Trade Commission
(USITC) action described in the following paragraphs.

In March 2006, the USITC responded to a complaint filed by
Linear Technology by initiating an investigation under Section 337 of the Tariff Act to determine if certain of our products infringe certain patents owned by Linear Technology. The accused products include charge pumps and switching regulators
and are similar to the products involved in our lawsuit with Linear Technology. A Final Determination was issued September 24, 2007 which was followed by separate appeals for the charge pump and switching regulator products. The last of these
appeals, including the parties respective requests for rehearing, ended in 2009. The overall result of these processes clears the path for importation of our charge pump products. A limited exclusion order was also issued preventing us from
importing certain of our switching regulator designs and the scope of this order was expanded by the appeals process. This exclusion order does not, however, prevent our customers from importing downstream products (i.e., products that incorporate
AATI switching regulators) into the United States. To date, our sales of the excluded products in the United States have been minimal.

On October 1, 2008, the USITC instigated a formal enforcement proceeding at the request of Linear Technology. In that enforcement
proceeding, Linear alleges that we imported certain switching regulator products in violation of the limited exclusion order originally issued on September 24, 2007. The list of products alleged to be in violation was modified by a mutual
agreement between the parties under which we voluntarily agreed to cease importation of our switching regulator products that do not use our low-noise design. A trial for the remaining products (i.e., those that use our most recent low-noise design)
was completed on January 13, 2010. The final determination of that trial was issued on July 19, 2010 and held that our low-noise switching regulators are subject to the limited exclusion order and cannot be imported by us. As mentioned
above, the limited exclusion order applies only to AATI and its agents and does not prevent importation of downstream products. U.S. sales of the products involved in the enforcement have never been significant.

Both parties are expected to appeal unfavorable portions of the final determination to the United States Court of Appeals for the Federal
Circuit. As a result, we expect to incur significant legal expenses that will be expensed when incurred.

In March 2009, we
initiated a lawsuit against a small, privately held semiconductor manufacturing company alleging patent infringement of certain of its products. This case, filed in the United States District Court for the Northern District of California, is
currently stayed pending a reexamination of the patent that we believe has been infringed. We do not believe that this lawsuit will have a material impact on our business or financial condition.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

If we
fail to forecast demand for our products accurately, we may incur product shortages, delays in product shipments or excess or insufficient product inventory.

We generally do not obtain firm, long-term purchase commitments from our customers. Because production lead times often exceed the amount
of time required to fulfill orders, we often must build in advance of orders, relying on an imperfect demand forecast to project volumes and product mix. Our demand forecast accuracy can be adversely affected by a number of factors, including
inaccurate forecasting by our customers, changes in market conditions, new part introductions by our competitors that lead to our loss of previous design wins, adverse changes in our product order mix and demand for our customers products or
models. Even after an order is received, Our



25



---

##### Table of Contents

customers may cancel these orders or request a decrease in production quantities. Any such cancellation or decrease subjects us to a number of risks, most notably that our projected sales will
not materialize on schedule or at all, leading to unanticipated revenue shortfalls and excess or obsolete inventory which we may be unable to sell to other customers. Alternatively, if we are unable to project customer requirements accurately, we
may not build enough products, which could lead to delays in product shipments and lost sales opportunities in the near term, as well as force our customers to identify alternative sources, which could affect our ongoing relationships with these
customers. We have in the past had customers dramatically increase their requested production quantities with little or no advance notice and after they had submitted their original order. We have on occasion been unable to fulfill these revised
orders within the time period requested. Either overestimating or underestimating demand would lead to excess, obsolete or insufficient inventory, which could harm our operating results, cash flow and financial condition, as well as our
relationships with our customers.

We receive a substantial portion of our revenues from a small number of OEM customers
and distributors, and the loss of, or a significant reduction in, orders from those customers or our other largest customers would adversely affect our operations and financial condition.

We received an aggregate of approximately 89% and 91% of our net revenues from our ten largest customers for the three months ended
June 30, 2010 and June 30, 2009, respectively. Any action by one of our largest customers that affects our orders, product pricing or vendor status could significantly reduce our revenues and harm our financial results.

We receive a substantial portion of our revenues from a small number of customers. For the three months ended June 30, 2010, Samsung
and LG Electronics were our largest customers. Sales to Samsung represented 18% and 30% of our net revenues in the three months ended June 30, 2010 and June 30, 2009, respectively. Additionally, we sell to a number of contract
manufacturers of Samsung. Sales to Samsung and its contract manufacturers represented 28% and 38% of our net revenues for the three months ended June 30, 2010 and June 30, 2009, respectively. Sales to LG Electronics represented 17% and 25%
of our net revenues in the three months ended June 30, 2010 and June 30, 2009, respectively. We anticipate that we will continue to be dependent on these customers for a significant portion of our revenues in the immediate future; however,
we do not have long-term contractual purchase commitments from them, and we cannot assure you that they will continue to be our customers. Because our largest customers account for such a significant part of our business, the loss of, or a decline
in sales to, any of our major customers would negatively impact our business.

Our operating results have fluctuated in
the past and we expect our operating results to continue to fluctuate.

Our revenues are difficult to predict and have
varied significantly in the past from period to period. We expect our revenues and expense levels to continue to vary in the future, making it difficult to predict our future operating results. In particular, we experience seasonality and
variability in demand for our products as our customers manage their inventories. Our customers tend to increase inventory of our products in anticipation of the peak fourth quarter buying season for the mobile consumer electronic devices in which
our products are used, which often leads to sequentially lower sales of our products in the first calendar quarter and, potentially, late in the fourth calendar quarter.

Additional factors that could cause our results to fluctuate include:



| |  |  | the forecasting, scheduling, rescheduling or cancellation of orders by our customers, particularly in China and other emerging markets;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | costs associated with litigation, especially related to intellectual property;
| | - |  | ------------------------------------------------------------------------------



| |  |  | liquidity and cash flow of our distributors, suppliers and end-market customers;
| | - |  | --------------------------------------------------------------------------------



| |  |  | changes in manufacturing costs, including wafer, test and assembly costs, and manufacturing yields, product quality and reliability;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing and availability of adequate manufacturing capacity from our manufacturing suppliers;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully define, design and release new products in a timely manner that meet our customers needs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | the timing, performance and pricing of new product introductions by us and by our competitors;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | general economic conditions in the countries where we operate or our products are used;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | changes in exchange rates, interest rates, tax rates and tax withholding;
| | - |  | -------------------------------------------------------------------------



26



---

##### Table of Contents

| |  |  | geopolitical stability, especially affecting China, Taiwan and Asia in general; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | changes in domestic and international tax laws.
| | - |  | -----------------------------------------------

Unfavorable changes in any of the above factors, most of which are beyond our control, could significantly harm our business and results
of operations.

We may be required to record additional significant charges to earnings if our goodwill becomes
impaired.

Under accounting principles generally accepted in the United States, we review our
goodwill for impairment each year as of
September 30thand when events or changes in
circumstances indicate the carrying value may not be recoverable. The carrying value of our goodwill may not be recoverable due to factors indicating a decrease in the value of the Company, such as a decline in stock price and market capitalization,
reduced estimates of future cash flows and slower growth rates in our industry. Estimates of future cash flows are based on an updated long-term financial outlook of our operations. However, actual performance in the near-term or long-term could be
materially different from these forecasts, which could impact future estimates. For example, a significant decline in our stock price and/or market capitalization may result in goodwill impairment. We may be required to record a charge to earnings
in our financial statements during a period in which an impairment of our goodwill is determined to exist, which may negatively impact our results of operations.

We may be required to record impairment charges in future quarters as a result of the decline in value of our investments in
auction rate securities.

As of June 30, 2010, our investment portfolio included interest bearing auction rate
securities (ARS) with a fair value of $2.8 million. Our ARS represent investments in debt obligations collateralized by Federal Family Education Program student loans. At the time of acquisition, these ARS investments were intended to provide
liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals, allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. The monthly auctions
historically provided a liquid market for these securities. However, beginning in 2008, uncertainties in the credit markets have affected all of our holdings in ARS and auctions for our investments in these securities have failed to settle on their
respective settlement dates. Auctions for our investments in these securities continued to fail through June 30, 2010.

If the current market conditions deteriorate further, the anticipated recovery in market values does not occur, or if we determine that
we intend to sell the ARS, it is possible that we will be required to sell the ARS before a recovery of the auction process, or that we will not recover the entire amortized cost basis of the ARS, we may be required to record impairment charges in
future quarters which may negatively impact our results of operations.

We may be unsuccessful in developing and selling
new products or in penetrating new markets.

We operate in a dynamic environment characterized by rapidly changing
technologies and industry standards and technological obsolescence. Our competitiveness and future success depends on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and
cost-effective basis. A fundamental shift in technologies in any of our product markets could harm our competitive position within these markets. Our failure to anticipate these shifts, to develop new technologies or to react to changes in existing
technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and a loss of design wins to our competitors. For example, we introduced 77 new products in 2009, of which 33
products utilize our new ModularBCD process, however many of them have not yet been adopted by our customers. Our understanding is that our overall product acceptance rate is typical for the semiconductor analog sector due to ongoing competition,
long design-in and qualification cycles, late introduction and/or product not meeting exact customer requirements. In some instances, our products were designed into a customers product or system but our customers product failed to gain
market acceptance so no substantial business resulted. In other cases, we may introduce a product before the market is ready to accept or require the features offered in our product, in which revenues may result at a later and somewhat unpredictable
date in the future.

The success of a new product depends on accurate forecasts of long-term market demand and future
technological developments, as well as on a variety of specific implementation factors, including:



| |  |  | effective marketing, sales and service;
| | - |  | ---------------------------------------



| |  |  | timely and efficient completion of process design and device structure improvements and implementation of manufacturing, assembly and test processes;
and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



27



---

##### Table of Contents

| |  |  | the quality, performance and reliability of the product.
| | - |  | --------------------------------------------------------

If we fail to introduce new products or penetrate new markets, our revenues will likely decrease over time and our financial condition
could suffer.

We may not have the expertise we need to successfully define or develop products for new market opportunities,
and we may lack the sales connections and applications expertise to secure orders for such products. Identifying and hiring such resources may be difficult and we may not be successful in identifying and hiring necessary personnel. Attempts to
balance product development and sales efforts between new and existing applications may delay our entrance into new markets and make it more difficult to penetrate new customers and application opportunities in the future.

Due to defects and failures that may occur, our products may not meet specifications, which may cause customers to return or stop
buying our products and may expose us to product liability claims.

Our customers generally establish demanding
specifications for quality, performance and reliability that our products must meet. Integrated circuits as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement
of commercial shipments, which might require product replacement or recall. In addition, our customers may not use our products in a way that is consistent with our published specifications. If defects and failures occur in our products during the
design phase or after, or our customers use our products in ways that are not consistent with their intended use, we could experience lost revenues, increased costs, including warranty expense and costs associated with customer support, delays in or
cancellations or rescheduling of orders or shipments, or product returns or discounts, any of which would harm our operating results. We cannot assure you that we will have sufficient resources, including any available insurance, to satisfy any
asserted claims.

The nature of the design process requires us to incur expenses prior to earning revenues associated
with those expenses, and we will have difficulty selling our products if system designers do not design our products into their electronic systems.

We devote significant time and resources to working with our customers system designers to understand their future needs and to
provide products that we believe will meet those needs. If a customers system designer initially chooses a competitors product for a particular electronic system, it becomes significantly more difficult for us to sell our products for
use in that electronic system because changing suppliers can involve significant cost, time, effort and risk for our customers.

We often incur significant expenditures in the development of a new product without any assurance that our customers system
designers will select our product for use in their electronic systems. We often are required to anticipate which product designs will generate demand in advance of our customers expressly indicating a need for that particular design. In some cases,
there is minimal or no demand for our products in our anticipated target applications. Even if our products are selected by our customers system designers, a substantial period of time will elapse before we generate revenues related to the
significant expenses we have incurred. The reasons for this delay generally include the following elements of our product sales and development cycle timeline and related influences:



| |  |  | our customers usually require a comprehensive technical evaluation of our products before they incorporate them into their electronic systems;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it can take up to 12 months from the time our products are selected to complete the design process;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | it can take an additional nine to 12 months or longer to complete commercial introduction of the electronic systems that use our products, if they are
introduced at all;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | original equipment manufacturers typically limit the initial release of their electronic systems to evaluate performance and consumer demand; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the development and commercial introduction of products incorporating new technology are frequently delayed.
| | - |  | ------------------------------------------------------------------------------------------------------------

We estimate that the overall sales and development cycle timeline of an average product is approximately 16 months.



28



---

##### Table of Contents

Additionally, even if system designers use our products in their electronic systems, we
cannot assure you that these systems will be commercially successful. As a result, we are unable to accurately forecast the volume and timing of our orders and revenues associated with any new product introductions.

Any increase in the manufacturing cost of our products could reduce our gross margins and operating profit.

The semiconductor business exhibits ongoing competitive pricing pressure from customers and competitors. Accordingly, any increase in the
cost of our products, whether by adverse purchase price variances or adverse manufacturing cost variances, will reduce our gross margins and operating profit. We do not have many long-term supply agreements with our manufacturing suppliers and,
consequently, we may not be able to obtain price reductions or anticipate or prevent future price increases from our suppliers.

The average selling price of our products may decline, or a change in the mix of product orders may occur, either of which could
reduce our gross margins.

During a power management products life, its selling price tends to decrease for a
particular application. As a result, to maintain gross margins on our products, we must continue to identify new applications for our products, reduce manufacturing costs for our existing products and introduce new products. If we are unable to
identify new, high gross margin applications for our existing products, reduce our production costs or sell new, high gross margin products, our gross margins will suffer. A sustained reduction in our gross margins could harm our future operating
results, cash flow and financial condition, which could lead to a significant drop in the price of our common stock.

Because we receive a substantial portion of our revenues through distributors, their financial viability and ability to access the
capital markets could impact our ability to continue to do business with them and could result in lower revenues, which could adversely affect our operating results and our customer relationships.

We obtain a portion of our revenues through sales to distributors located in Asia who act as our fulfillment representatives. Sales to
distributors accounted for 43% and 25% of our net revenues for the three months ended June 30, 2010 and June 30, 2009, respectively. In the normal course of their operation as fulfillment representatives, these distributors typically
perform functions such as order scheduling, shipment coordination, inventory stocking, payment and collections and, when applicable, currency exchange between purchasers of our products and these distributors. Our distributors compensation for
these functions is reflected in the price of the products we sell to these distributors. Many of our current distributors also serve as our sales representatives procuring orders for us to fill directly. If these distributors are unable to pay us in
a timely manner or if we anticipate that they will not pay us, we may elect to withhold future shipments, which could adversely affect our operating results. If one of our distributors experiences severe financial difficulties, becomes insolvent or
declares bankruptcy, we could lose product inventory held by that distributor and we could be required to write off the value of any receivables owed to us by that distributor. We could also be required to record bad debt expense in excess of our
reserves. We may not be successful in recognizing these indications or in finding replacement distributors in a timely manner, or at all, any of which could harm our operating results, cash flow and financial condition.

Our distributor arrangements often require us to accept product returns and to provide price protection and if we fail to properly
estimate our product returns and price protection reserves, this may adversely impact our reported financial information.

A substantial portion of our sales are made through third-party distribution arrangements, which include stock rotation rights that
generally permit the return of up to 5% of the previous three months purchases. We generally accept these returns quarterly. We record estimated returns for stock rotation at the time of shipment. Our arrangements with our distributors
typically also include price protection provisions if we reduce our list prices. We record reserves for price protection at the time we decide to reduce our list prices. In the future, we could receive returns or claims that are in excess of our
estimates and reserves, which could harm our operating results.

If our relationship with any of our distributors deteriorates
or terminates, it could lead to a temporary or permanent loss of revenues until a replacement sales channel can be established to service the affected end-user customers, as well as inventory write-offs or accounts receivable write-offs. In
addition, we also may be obligated to repurchase unsold products from a distributor if we decide to terminate our relationship with that distributor.

Our current backlog may not be indicative of future sales.

Due to the nature of our business, in which order lead times may vary, and the fact that customers are generally allowed to reschedule or
cancel orders on short notice, we believe that our backlog is not necessarily a



29



---

##### Table of Contents

good indicator of our future sales. Our quarterly revenues also depend on orders booked and shipped in that quarter. Because our lead times for the manufacturing of our products generally take
six to ten weeks, we often must build in advance of orders. This exposes us to certain risks, most notably the possibility that expected sales will not occur, which may lead to excess inventory, and we may not be able to sell this inventory to other
customers. In addition, we supply LG Electronics, one of our largest customers, through its central hub and we do not record backlog with respect to the products we ship to the hub. Therefore, our backlog may not be a reliable indicator of future
sales.

We face risks in connection with our internal control over financial reporting and any related remedial measures
that we undertake to correct any material weaknesses in our internal control over financial reporting.

In accordance
with Section 404 of the Sarbanes-Oxley Act, we are required to report annually on the effectiveness of our internal control over financial reporting as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Securities Exchange Act
of 1934. This report must include disclosure of any material weakness in our internal control over financial reporting. In preparation for issuing this management report, we document, evaluate, and test our internal control over financial reporting.

No material weakness will be considered remediated until our remedial efforts have operated for an appropriate period, have
been tested, and management has concluded that they are operating effectively. We cannot be certain that any measures we take to remediate a material weakness will ensure that we implement and maintain adequate internal control over financial
reporting and that we will successfully remediate the material weakness. In addition, we cannot assure you that we will not in the future identify further material weaknesses in our internal control over financial reporting that we have not
discovered to date, which may impact the reliability of our financial reporting and financial statements.

If consumer
demand for mobile consumer electronic devices declines, our revenues will decrease.

Our products are used primarily in
the mobile consumer electronic devices market. For the foreseeable future, we expect to see the significant majority of our revenues continue to come from this market, especially in wireless handsets. If consumer demand for these products declines
and fewer mobile customer electronic devices are sold, our revenues will decrease significantly. For example, in the second half of 2008, we experienced a significant decrease in worldwide billings to our customers, suggesting that our customers
were reacting to decreased consumer demand for their end products. In an adverse economic climate such as the current economic downturn, consumers are less likely to prioritize purchasing new mobile consumer electronic devices or upgrading existing
devices. In addition, if we are unsuccessful in identifying alternative markets for our products in a timely manner, our operating results will suffer dramatically.

Substantially all of our manufacturing suppliers, customers and operations are located in Asia, which subjects us to additional
risks, including regional economic influences, logistical complexity, political instability and natural disasters including earthquakes.

We conduct, and expect to continue to conduct, almost all of our business with companies that are located outside the United States. Based
on ship-to locations, substantially all of our revenues for the three months ended June 30, 2010 and June 30, 2009 came from customers in Asia, particularly South Korea, Taiwan, China and Japan. A vast majority of our contract
manufacturing operations are located in South Korea, Taiwan, Malaysia and China. In addition, we have a design center in Shanghai, China. As a result of our international focus, we face several challenges, including:



| |  |  | increased complexity and costs of managing international operations;
| | - |  | --------------------------------------------------------------------



| |  |  | longer and more difficult collection of receivables;
| | - |  | ----------------------------------------------------



| |  |  | political and economic instability;
| | - |  | -----------------------------------



| |  |  | limited protection of our intellectual property;
| | - |  | ------------------------------------------------



| |  |  | unanticipated changes in local regulations, including tax regulations;
| | - |  | ----------------------------------------------------------------------



| |  |  | timing and availability of import and export licenses; and
| | - |  | ----------------------------------------------------------



| |  |  | foreign currency exchange fluctuations relating to our international operating activities.
| | - |  | ------------------------------------------------------------------------------------------

Our corporate headquarters in Santa Clara, California, our operations office in Chupei, Taiwan, and the production facilities of one of
our wafer fabrication suppliers and several of our assembly and test suppliers in Hsinchu and across Taiwan are located near seismically active regions and are subject to periodic earthquakes. We do not maintain earthquake insurance and our business
could be damaged in the event of a major earthquake or other natural disaster.



30



---

##### Table of Contents

In addition to risks in our operations from natural disasters, our customers are also
subject to these risks. Any disaster impacting our customers could result in loss of orders, delay of business and temporary regional economic recessions.

We are also more susceptible to the regional economic impact of health crises. Because we anticipate that we will continue to rely
heavily on foreign companies or United States companies operating in Asia for our future growth, the above risks and issues that we do not currently anticipate could adversely affect our ability to conduct business and our results of operations.

We outsource our wafer fabrication, testing, packaging, warehousing and shipping operations to third parties, and rely
on these parties to produce and deliver our products according to requested demands in specification, quantity, cost and time.

We rely on third parties for substantially all of our manufacturing operations, including wafer fabrication, wafer probe, wafer thinning,
assembly, final test, warehousing and shipping. Furthermore, for certain packages, at times we rely on a single manufacturer. We depend on these parties to supply us with material of a requested quantity in a timely manner that meets our standards
for yield, cost and manufacturing quality. Any problems with our manufacturing supply chain could adversely impact our ability to ship our products to our customers on time and in the quantity required, which in turn could cause an unanticipated
decline in our sales and possibly damage our customer relationships. The current economic downturn could adversely affect the financial strength of our vendors and adversely impact their ability to manufacture product, resulting in a shortage or
delay in product shipments to our customers.

Our products are manufactured at a limited number of locations. If we experience
manufacturing problems at a particular location or with a particular supplier, we would be required to transfer manufacturing to a backup supplier. Converting or transferring manufacturing from a primary supplier to a backup fabrication facility
could be expensive and could take as long as six to 12 months. During such a transition, we would be required to meet customer demand from our then-existing inventory, as well as any partially finished goods that can be modified to the required
product specifications. We do not seek to maintain sufficient inventory to address a lengthy transition period because we believe it is uneconomical to keep more than minimal inventory on hand. As a result, we may not be able to meet customer needs
during such a transition, which could delay shipments, cause a production delay or stoppage for our customers, result in a decline in our sales and damage our customer relationships. Should we be required to manufacture safety stock and finished
goods to insure against any supply interruptions to our customers, there is no guarantee that our customers would necessarily purchase the extra material and excess inventory may result. There is no guarantee we would be able to sell that excess
inventory to other customers and we may have to write-off this material as an expense adversely affecting our financial performance.

In addition, a significant portion of our sales are to customers that practice just-in-time order management from their suppliers, which
gives us a very limited amount of time in which to process and complete these orders. As a result, delays in our production or shipping by the parties to whom we outsource these functions could reduce our sales, damage our customer relationships and
damage our reputation in the marketplace, any of which could harm our business, results of operations and financial condition.

The loss of any of our key personnel could seriously harm our business, and our failure to attract or retain specialized technical
and management talent could impair our ability to grow our business.

The loss of services of one or more of our key
personnel could seriously harm our business. In particular, our ability to define and design new products, gain new customers and grow our business depends on the continued contributions of Richard K. Williams, our President, Chief Executive Officer
and Chief Technical Officer, as well as our senior level sales, finance, operations, technology and engineering personnel. Our future growth will also depend significantly on our ability to recruit and retain qualified and talented managers and
engineers, along with key manufacturing, quality, sales and marketing staff members. There remains intense competition for these individuals in our industry, especially those with power and analog semiconductor design and applications expertise. We
cannot assure you we will be successful in finding, hiring and retaining these individuals. If we are unable to recruit and retain such talent, our product and technology development, manufacturing, marketing and sales efforts could be impaired.



31



---

##### Table of Contents

In economic downturns where consumer demand for our customers products is reduced or
delayed, we expect lower revenues and reduced profitability. In response to these downturns, we may implement certain cost reduction actions including spending controls, forced holidays and company shutdowns, employee layoffs, shortened work-weeks
and involuntary salary reductions. It is uncertain what affect such measures may have on our ability to retain key talent and staff members, or our ability to rehire employees should business improve. For example, in 2008, we reduced our headcount
and announced employee salary reductions. It is unclear what long term affect these actions may have on our ability to recruit and retain engineering, sales and managerial talent.

Changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns could adversely affect our
results.

Our future effective tax rates could be adversely affected by lower than anticipated earnings in countries
where we have lower statutory rates and higher than anticipated earnings in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting
principles or interpretations thereof. Further, as a result of certain ongoing employment and capital investment commitments made by us, our income in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from tax.
Our failure to meet such commitments could adversely impact our effective tax rate. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess
the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our
operating results and financial condition.

We compete against companies with substantially greater financial and other
resources, and our market share or gross margins may be reduced if we are unable to respond to competitive challenges effectively.

The analog, mixed-signal, or analog with digital, and power management semiconductor industry in which we operate is highly competitive
and dynamic, and we expect it to remain so. Our ability to compete effectively depends on defining, designing and regularly introducing new products that meet or anticipate the power management needs of our customers next-generation products
and applications. We compete with numerous domestic and international semiconductor companies, many of which have greater financial and other resources with which to pursue marketing, technology development, product design, manufacturing, quality,
sales and distribution of their products.

We consider our primary competitors to be Maxim Integrated Products, Inc., Linear
Technology Corporation, Intersil Corporation, Texas Instruments Incorporated, Semtech Corporation and National Semiconductor Corporation. We expect continued competition from existing competitors as well as from new entrants into the power
management semiconductor market. Our ability to compete depends on a number of factors, including:



| |  |  | our success in identifying new and emerging markets, applications and technologies, and developing power management solutions for these markets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our products performance and cost effectiveness relative to that of our competitors products;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | our ability to deliver products in large volume on a timely basis at a competitive price;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | our success in utilizing new and proprietary technologies to offer products and features previously not available in the marketplace;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to recruit application engineers and designers; and
| | - |  | ---------------------------------------------------------------



| |  |  | our ability to protect our intellectual property.
| | - |  | -------------------------------------------------

We cannot assure you that our products will compete favorably or that we will be successful in the face of increasing competition from
new products and enhancements introduced by our existing competitors or new companies entering this market.

Intellectual property litigation could result in significant costs, reduce sales of our products and cause our operating results to
suffer.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights
and positions, which has resulted in protracted and expensive litigation for many companies. We have in the past received, and expect that in the future we may receive, communications from various industry participants alleging our infringement of
their patents, trade secrets or other intellectual property rights. Any lawsuits resulting from such



32



---

##### Table of Contents

allegations could subject us to significant liability for damages and invalidate our proprietary rights. Any potential intellectual property litigation also could force us to do one or more of
the following:



| |  |  | stop selling products or using technology that contain the allegedly infringing intellectual property;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | incur significant legal expenses;
| | - |  | ---------------------------------



| |  |  | pay damages to the party claiming infringement;
| | - |  | -----------------------------------------------



| |  |  | redesign those products that contain the allegedly infringing intellectual property; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, we have in the past agreed, and may in the future agree, to indemnify certain of our
customers, distributors, suppliers, subcontractors and their affiliates for attorneys fees and damages and costs awarded against these parties in certain circumstances in which our products are alleged to infringe third-party intellectual
property rights. These obligations could lead us to incur significant additional costs in related intellectual property litigation involving these parties, which could cause our operating results to suffer.

We initiated a lawsuit against Linear Technology Corporation in February 2006 for unfair business practices, interference with existing
and prospective customers and trade libel, as well as a declaration of patent invalidity and non-infringement. In a related case, the International Trade Commission has initiated an investigation and subsequent enforcement action against AATI at the
request of Linear Technology.

Uncertainty over the outcome of our litigation with Linear Technology may cause our customers
or potential customers to elect not to include our products that are the subject of this litigation into the design of their systems. Once a customers system designer initially chooses a competitors product for a particular electronic
system, it becomes significantly more difficult for us to sell our products for use in that electronic system, because changing suppliers can involve significant cost, time, effort and risk for our customers. As a result, our litigation with Linear
Technology or any similar future litigation may result in significantly increased expenses on a quarterly basis. If we are unsuccessful in any such litigation, our business and our ability to compete in foreign markets could be harmed, and we could
be enjoined from selling the accused products, either directly or indirectly, which could have a material adverse impact on our revenues, financial condition, results of operations and cash flows. See Part II, Item 1  Legal Proceedings.

Our failure to protect our intellectual property rights adequately could impair our ability to compete effectively or
to defend ourselves from litigation, which could harm our business, financial condition and results of operations.

We
rely primarily on patent, copyright, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements to protect our proprietary technologies and know-how. While we have more than 150 patents issued, allowed or pending
in the United States or foreign countries, the rights granted to us may not be meaningful or provide us with any commercial advantage. For example, these patents could be challenged or circumvented by our competitors or be declared invalid or
unenforceable in judicial or administrative proceedings. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer similar products or technologies. Our foreign patent protection is generally
not as comprehensive as our United States patent protection and may not protect our intellectual property in some countries where our products are sold or may be sold in the future. Even if foreign patents are granted, effective enforcement in
foreign countries may not be available. Many United States-based companies have encountered substantial intellectual property infringement in foreign countries, including countries where we sell products.

Monitoring unauthorized use of our intellectual property is difficult and costly. It is possible that unauthorized use of our
intellectual property may occur without our knowledge. We cannot assure you that the steps we have taken will prevent unauthorized use of our intellectual property. Our failure to effectively protect our intellectual property could reduce the value
of our technology in licensing arrangements or in cross-licensing negotiations, and could harm our business, results of operations and financial condition. We may in the future need to initiate infringement claims or litigation. Litigation, whether
we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination favorable to us.



33



---

##### Table of Contents

Any acquisitions we make could disrupt our business, result in integration
difficulties or fail to realize anticipated benefits, which could adversely affect our financial condition and operating results.

We may choose to acquire companies, technologies, assets and personnel that are complementary to our business, including for the purpose
of expanding our new product design capacity, introducing new design, market or application skills or enhancing and expanding our existing product lines. In October 2006, we acquired Analog Power Semiconductor Corporation and related assets and
personnel, primarily located in Shanghai, China. In June 2008, we acquired Elite Micro Devices, located in Shanghai, China. Acquisitions involve numerous risks, including the following:



| |  |  | difficulties in integrating the operations, systems, technologies, products and personnel of the acquired companies;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | diversion of managements attention from normal daily operations of the business and the challenges of managing larger and more widespread
operations resulting from acquisitions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulties in entering markets in which we may have no or limited direct prior experience and where competitors may have stronger market positions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the potential loss of key employees, customers, distributors, suppliers and other business partners of the companies we acquire following and
continuing after announcement of acquisition plans;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | improving and expanding our management information systems to accommodate expanded operations;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | insufficient revenue to offset increased expenses associated with acquisitions; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | addressing unforeseen liabilities of acquired businesses.
| | - |  | ---------------------------------------------------------

Acquisitions may also cause us to:



| |  |  | issue capital stock that would dilute our current stockholders percentage ownership;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | use a substantial portion of our cash resources or incur debt;
| | - |  | --------------------------------------------------------------



| |  |  | assume liabilities;
| | - |  | -------------------



| |  |  | record goodwill or incur amortization expenses related to certain intangible assets; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | incur large and immediate write-offs and other related expenses.
| | - |  | ----------------------------------------------------------------

Any of these factors could prevent us from realizing the anticipated benefits of an acquisition, and our failure to realize these
benefits could adversely affect our business. In addition, we may not be successful in identifying future acquisition opportunities or in consummating any acquisitions that we may pursue on favorable terms, if at all. Any transactions that we
complete may impair stockholder value or otherwise adversely affect our business and the market price of our stock. Failure to manage and successfully integrate acquisitions could materially harm our financial condition and operating results.

Our operating results, financial condition and cash flows may be adversely impacted by worldwide political and economic
uncertainties and specific conditions in the markets we address, including the cyclical nature of and volatility in the semiconductor industry.

The semiconductor industry has historically exhibited cyclical behavior which at various times has included significant downturns in
customer demand. These conditions have caused significant variations in product orders and production capacity utilization, as well as price erosion. Because a significant portion of our expenses is fixed in the near term or is incurred in advance
of anticipated sales, we may not be able to decrease our expenses rapidly enough to offset any unanticipated shortfall in revenues. If this situation were to occur, it could adversely affect our operating results, cash flow and financial condition.

Additionally, general worldwide economic conditions have recently experienced a downturn due to slower economic activity,
concerns about inflation and deflation, fears of recession, increased energy costs, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns in the wired and wireless
communications markets, recent international conflicts and terrorist and military activity and the impact of natural disasters and public health emergencies. Our operations and performance depend significantly on worldwide economic conditions and
their impact on consumer spending, which has recently deteriorated significantly in many countries and regions, including the United States and Asia, and may remain depressed for the foreseeable future. For example, some of the factors that could
influence consumer spending include conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit,



34



---

##### Table of Contents

consumer confidence and other factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for our products and on our financial
condition and operating results. In addition, these conditions make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause United States and foreign businesses to
slow spending on our products and services, which would delay and lengthen sales cycles. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide, or in the semiconductor industry. If the
economy or markets in which we operate do not continue at their present levels, our business, financial condition and results of operations will likely be materially and adversely affected.

We could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide
anti-bribery laws.

The United States Foreign Corrupt Practices Act (FCPA) and similar anti-bribery
laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws.
There can be no assurance that our internal controls and procedures always will protect us from reckless or criminal acts committed by our employees or agents. If we are found to be liable for FCPA violations, we could suffer from criminal or civil
penalties or other sanctions, which could have a material adverse effect on our business.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Issuer Purchases of Equity Securities

We repurchase shares of our common stock under our stock repurchase program announced on October 29, 2008. Under the stock repurchase
program, we were authorized to use up to $30 million to repurchase our outstanding common stock. We may repurchase shares in the open market or through privately negotiated transactions. The timing and actual number of shares repurchased depends
upon market conditions and other factors, in accordance with SEC requirements.

We have entered into agreements pursuant to SEC
Rule 10b5-1 pursuant to which we authorized a third-party broker to purchase shares on our behalf during our normal blackout periods in accordance with predetermined trading instructions. In addition, we may repurchase shares of our common stock
under the guidelines of SEC Rule 10b-18.

During the three months ended June 30, 2010, we repurchased shares of our common
stock as follows:



|                   |  |                                          |  |                             |      |                                                                               |       |                                                                                    |   |       
|------------------ |  | ---------------------------------------- |  | --------------------------- | ---- | ----------------------------------------------------------------------------- | ----- | ---------------------------------------------------------------------------------- | - | ------
|                   |  | Total number ofshares purchased          |  | Average pricepaid per share |      | Total number of sharespurchased as part ofpublicly announcedplans or programs |       | Approximatedollar value ofshares that mayyet be purchasedunder
the planor programs
|                   |  | (In thousands, except per share amounts)
|6/1/2010-6/30/2010 |  | 1,000                                    |  | $                           | 3.60 |                                                                               | 1,000 |                                                                                    | $ | 17,748



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

Not applicable.



|ITEM 4. | (REMOVED AND RESERVED)
|------- | ----------------------



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

Not
applicable.



|ITEM 6. | EXHIBITS
|------- | --------



|      |  |                                                                                                                                                                                  
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|31.1  |  | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|      | 
|31.2  |  | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|      | 
|32.1* |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.   



|* | This exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of
that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation
language in any filings.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



---

##### Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED

SIGNATURE

Pursuant to the requirements 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.



|                     |  |  |  |                                            |  |                                                                           
|-------------------- |  |  |  | ------------------------------------------ |  | --------------------------------------------------------------------------
|                     |  |  |  | ADVANCED ANALOGIC TECHNOLOGIESINCORPORATED
|                     |  |  | 
|Dated: July 30, 2010 |  |  |  | By:                                        |  | /S/    BRIAN R.
MCDONALD                                                  
|                     |  |  |  |                                            |  | Brian R. McDonald                                                         
|                     |  |  |  |                                            |  | Chief Financial Officer, Vice President of
Worldwide Finance and Secretary



36



---

##### Table of Contents

EXHIBIT INDEX



|      |  |                                                                                                                                                                                  
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|31.1  |  | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|      | 
|31.2  |  | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|      | 
|32.1* |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.   



|* | This exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of
that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation
language in any filings.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37