**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 
| **(Mark One)** |
|----------------|
| **x**          | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|           |   |
| ** **     | **For the quarterly period ended December 31,  2007** |
| ** **     | ** ** |
| **o**          | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT** |
| ** **     |   |
| ** **     | **For the transition period from                         to                         ** |

 

**Commission file number 000-31081**

** **

**TRIPATH TECHNOLOGY INC.**

(Exact name of small business issuer as specifiedin its charter)

 

| **Delaware**                     | ** ** | **77-0407364**      |
|----------------------------------|------------|---------------------|
| (State or other  jurisdiction of |       | (IRS Employer       |
| incorporation or  organization)  |       | Identification No.) |

 

**46560Fremont Blvd., Suite 109, Fremont, CA 94538**

(Address of principal executive offices)

 

**510-979-0848**

(Issuer’s telephone number)

 

 

(Former name, former address and former fiscalyear, if changed since last report)

 
| Check whether the issuer  (1) filed all reports required to be filed by Section 13 or  15(d) of the Exchange Act during the past 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 o NO x |
|                                                                                                                                                                 |   |
| Indicated by check mark  whether the registrant is a shell company (as defined in Rule 12b-2 of  the Exchange                                                   |
| Act).                                                                                                                                                                | YES x NO £ |
|                                                                                                                                                                 |   |
| On December 31, 2007, the registrant had  outstanding 70,164,582 shares of common stock, which is the registrant’s  only authorized class of common stock. |
|                                                                                                                                                                 |   |
| Transitional Small Business  Disclosure Format (Check One)                                                                                                           | YESoNO x |

** **

 

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**EXPLANATORY NOTE**

** **

On February 8,2007, we filed a voluntary petition for relief under Chapter 11 of theBankruptcy Code with the United States Bankruptcy Court for the NorthernDistrict of California, Case No. 07-50358. Set forth below is a brief summary of our recent history:

 

·                  In our Report on Form 10-Q for the fiscal quarterand nine months ended June 30, 2006, we reported that we did not havesufficient funds to finance our operations through the end of the month of August 2006and that our future depended on our ability to secure additional sources offinancing during the month of August 2006. For a period of time, we approached parties to discuss a sale of all orpart of our assets and/or a financing plan for the company.  Based upon negotiations with third parties,we reported that it was highly likely that any sales or financing transactionwould require concessions from a number of our significant creditors, a largeportion of our existing debt obligations would not be paid in full, and theholders of our common stock would receive no value. Due to the possibility of ashortfall in proceeds to creditors and potential litigation, any potentialbuyer of the assets would likely require that we conclude such a sale under theprotection of the Federal bankruptcy statutes. We also stated that the holdersof our 6% convertible debentures held a first priority security interest in allof our assets and any agreement with a potential buyer would require theconsent of such debenture holders.

 

·                  In our Current Report on 8-K filed on January 2, 2007, we reportedthat we had not made principal and interest payments on our 6% convertibledebentures since September 1, 2006, and that such debenture holdersinformed us that due to the nonpayment of the required principal and interestpayments that the holders could demand immediate payment of all principal andinterest amounts due at a 130% default rate with 18% interest since September 1,2006.  Such a demand would result in anamount due to the holders of approximately $4.7 million as of December 29,2006. In addition, the debenture holders informed us, that pursuant to thesecurity agreement dated November 5, 2005, that we entered into with suchholders, upon an event of default, that they have a right to enter companypremises and take possession of the collateral, the right to operate ourbusiness using the collateral, and the right to sell the collateral to satisfyour obligations to them.

 

·                  On February 8, 2007, we filed a voluntary petition for reliefunder Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Courtfor the Northern District of California, Case No. 07-50358.  As of that date, we had approximately $8million in debt, with approximately $4.8 million in secured claims and $3.25 inunsecured claims.

 

·                  On March 19, 2007, the bankruptcy court granted our motion to sellsubstantially all of our assets.  On May 3,2007, the bankruptcy court conducted an auction that resulted in the high bidof $3.25 million by Cirrus Logic, Inc. for all of our intellectualproperty.  Cirrus Logic, Inc. alsoagreed to purchase our office equipment and furnishings for $25,000. The saleto Cirrus Logic, Inc. closed on June 26, 2007.  We had three other lots of assets that didnot draw qualifying bids at the auction: inventory, lab equipment, and fourtesters used in the manufacturing of our products. At the close of the auction,the bankruptcy court authorized us to solicit further bids for those lots, andto proceed to close sales of those assets, subject to certain guidelinesimposed by the bankruptcy court. On June 12, 2007, the lab equipment wassold pursuant to a joint offer from BidItUp Auction & Appraisals andBaySide Test Equipment for a total of $110,000, and on June 22, 2007 thetesters were sold to Winbond Electronics Corporation for $340,000.00. Wecontinue to liquidate our remaining inventory and have generated approximately$491,388 through September 30, 2007.

 

·                  On December 20, 2007, the Company and Enable Growth Partners LPfiled with the bankruptcy court the “Third Amended Disclosure StatementAccompanying Third Amended Plan of Reorganization dated December 20, 2007Proposed by the Company and Enable Growth Partners LP, for itself and as agentfor the Secured Parties” (the “**Plan of Reorganization**”),which included the proposed merger of Etelos, Incorporated, a Washingtoncorporation (“**Etelos**”), with and into the Company.

 

·                  On February 1, 2008, the bankruptcy court issued an orderconfirming approval of the Plan of Reorganization, including the merger and thetransfer of all of the Company’s existing assets into a separate bankruptcyestate and the discharge of all of the Company’s liabilities.  The overall impact of the confirmed Plan ofReorganization is for the Company to emerge from the bankruptcy proceeding withno assets and no liabilities. As of the effective date of the merger, we willissue 5,000,000 shares in the aggregate of our common stock to our securedcreditors and 10,000 shares in the aggregate to our unsecured creditors, andall other issued and outstanding securities of and interests in the Company,including our debentures, stock options (including, but not limited to, allstock options granted to our employees), warrants, and other shares of commonstock will be canceled and extinguished. In addition, on the effective date ofthe merger, any instrument evidencing or creating any indebtedness orobligation of the Company, will be canceled and extinguished.

 

·      On April 22, 2008, we entered into anagreement and plan of merger with Etelos pursuant to which Etelos merged withand into the Company, at which time the separate corporate existence of Etelosceased and the Company continued after the merger as the surviving corporationand changed its name to Etelos, Inc. In connection with the merger, theCompany, as the surviving corporation has succeeded to all of the assets andliabilities of Etelos. The surviving corporation will conduct the business thatwas previously conducted by Etelos.

 

Theinformation in this Quarterly Report on Form 10-QSB relates to theoperations of the Company through December 31, 2007. It does not addressthe operations of the surviving corporation following the merger.

 

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| **TABLE OF CONTENTS**                        |
|----------------------------------------------|
|                                         |   |   |
| **Part I — Financial Information** |   |
| ** **                                   | ** ** | ** ** |
| Item 1.                                      | Financial  Statements (unaudited) | 1 |
| Item 2.                                      | Management’s  Discussion and Analysis or Plan of Operations | 13 |
| Item 3.                                      | Controls and  Procedures | 17 |
|                                         |   |   |
| **Part II — Other  Information**   | 18 |
|                                         |   |   |
| Item 1.                                      | Legal Proceedings | 18 |
| Item 2.                                      | Unregistered  Sales of Equity Securities and Use of Proceeds | 18 |
| Item 3.                                      | Defaults Upon  Senior Securities | 18 |
| Item 4.                                      | Submission of  Matters to a Vote of Security Holders | 18 |
| Item 5.                                      | Other Information | 18 |
| Item 6.                                      | Exhibits and Reports on  Form 8-K | 18 |
|                                              |  |  |  |

 

----

 

**TRIPATH TECHNOLOGY INC.**

**(DEBTOR - IN - POSSESSION)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

(inthousands, except share data)

(unaudited)

 
| ** **                                                                                                                          | ** ** | **December 31,  2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ASSETS                                                                                                                              |       |                        |       |
| Current assets:                                                                                                                     |       |                        |       |
| Cash and cash  equivalents                                                                                                          |       | $                           | 379        |   |
| Inventories, net                                                                                                                    |       | 20                          |       |
| Prepaid expenses  and other current assets                                                                                          |       | 168                         |       |
|                                                                                                                                |       |                        |       |
| **Total assets**                                                                                                                    | ** ** | **$**                       | **567**    | ** ** |
|                                                                                                                                |       |                        |       |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                          |       |                        |       |
| Current liabilities:                                                                                                                |       |                        |       |
| Liabilities  subject to compromise                                                                                                  |       | $                           | 2,822      |   |
| Accounts payable                                                                                                                    |       | 15                          |       |
| Accrued expenses                                                                                                                    |       | 212                         |       |
| Total liabilities                                                                                                                   |       | 3,049                       |       |
|                                                                                                                                |       |                        |       |
| Stockholders’ deficit:                                                                                                         |       |                        |       |
| Common stock,  $0.001 par value, 100,000,000 shares authorized; 70,164,582 shares issued and  outstanding at December 31, 2007 |       | 70                          |       |
| Additional  paid-in capital                                                                                                         |       | 208,081                     |       |
| Accumulated  deficit                                                                                                                |       | (210,633                    | )          |
| Total  stockholders’ deficit                                                                                                   |       | (2,482                      | )          |
|                                                                                                                                |       |                        |       |
| **Total liabilities and stockholders’ deficit**                                                                                | ** ** | **$**                       | **567**    | ** ** |

 
| The accompanying notes are an integral part of these  financial statements. |   |   |   |   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|

** **

1

----

** **

**TRIPATHTECHNOLOGY INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(DEBTOR- IN - POSSESSION)**

(in thousands,except per share data)

(unaudited)

 
| ** **                                                                                                 | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                 | ** ** | **December 31,**            | ** ** | **December 31,** | ** ** |
| ** **                                                                                                 | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| ** **                                                                                                 | ** ** | **Post-petition**                | ** ** | **Pre-petition** | ** ** |
| Revenue                                                                                                    |       | $                                | 85         |   | $ | 3,405 |   |
| Cost of revenue                                                                                            |       | 124                              |       | 961 |   |
| Gross profit  (loss)                                                                                       |       | (39                              | )          | 2,444 |   |
|                                                                                                       |       |                             |       |   |   |
| Operating  expenses:                                                                                       |       |                             |       |   |   |
| Research and  development                                                                                  |       | —                           |       | 826 |   |
| Selling, general  and administrative                                                                       |       | 178                              |       | 723 |   |
| Total operating  expenses                                                                                  |       | 178                              |       | 1,549 |   |
|                                                                                                       |       |                             |       |   |   |
| Profit (Loss) from  operations                                                                             |       | (217                             | )          | 895 |   |
|                                                                                                       |       |                             |       |   |   |
| Change in fair  value on revaluation of warrant liability                                                  |       | —                           |       | 207 |   |
| Interest and  other expense, net                                                                           |       | —                           |       | (823 | ) |
|                                                                                                       |       |                             |       |   |   |
| Income (loss)  from continuing operations before taxes                                                     |       | (217                             | )          | 279 |   |
|                                                                                                       |       |                             |       |   |   |
| Provision for income  taxes                                                                                |       | —                           |       | — |   |
|                                                                                                       |       |                             |       |   |   |
| Income (loss)  from continuing operations                                                                  |       | (217                             | )          | 279 |   |
|                                                                                                       |       |                             |       |   |   |
| Loss from  discontinued operations, net of taxes                                                           |       | —                           |       | (113 | ) |
|                                                                                                       |       |                             |       |   |   |
| **Net income (loss)**                                                                                      | ** ** | **$**                            | **(217**   | **)** | **$** | **166** | ** ** |
| ** **                                                                                                 | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Basic and  diluted net profit per share for continuing and non-continuing operations                       |       | $                                | 0.00       |   | $ | 0.00 |   |
|                                                                                                       |       |                             |       |   |   |
| Basic and  diluted net loss per share for continuing and non-continuing operations                         |       | $                                | (0.00      | ) | $ | (0.00 | )  |
|                                                                                                       |       |                             |       |   |   |
| Weighted average  number of common shares used in computing basic and diluted net profit (loss)  per share |       | 70,165                           |       | 69,822 |   |

 

The accompanyingnotes are an integral part of these financial statements

 

2

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**TRIPATHTECHNOLOGY INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(DEBTOR- IN - POSSESSION)**

(in thousands)

(unaudited)

 
| ** **                                                                   | ** ** | **Three**             | ** ** | **Three**             | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                   | ** ** | **Months**            | ** ** | **Months**            | ** ** |
| ** **                                                                   | ** ** | **Ending**            | ** ** | **Ending**            | ** ** |
| ** **                                                                   | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                   | ** ** | **2007**              | ** ** | **2006**              | ** ** |
| ** **                                                                   | ** ** | **Post-petition**     | ** ** | **Pre-petition**      | ** ** |
| Cash flows from operating activities:                                        |       |                  |       |                  |       |
| Net profit  (loss)                                                           |       | $                     | (217       | )                     | $          | 166 |   |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                  |       |                  |       |
| Revaluation of  warrant and conversion feature liabilities                   |       | —                |       | (207                  | )          |
| Depreciation and  amortization                                               |       | —                |       | 81                    |       |
| Deferred rent                                                                |       | —                |       | (83                   | )          |
| Provision for  slow moving, excess and obsolete inventory                    |       | —                |       | (113                  | )          |
| Stock-based  compensation                                                    |       | —                |       | 117                   |       |
| Accretion of  debt discount                                                  |       | —                |       | 630                   |       |
| Loss from  discontinued operations                                           |       | —                |       | 113                   |       |
| Changes in  assets and liabilities:                                          |       |                  |       |                  |       |
| Accounts  receivable                                                         |       | —                |       | 420                   |       |
| Inventories, net                                                             |       | 90                    |       | 288                   |       |
| Prepaid expenses  and other assets                                           |       | 11                    |       | (103                  | )          |
| Accounts payable                                                             |       | —                |       | (268                  | )          |
| Customer  deposits                                                           |       | —                |       | (1,524                | )          |
| Accrued expenses                                                             |       | 85                    |       | (4                    | )          |
| Net cash used in  operating activities                                       |       | (31                   | )          | (487                  | )          |
|                                                                         |       |                  |       |                  |       |
| Cash flows from financing activity:                                          |       |                  |       |                  |       |
| Principal  payments on capital lease obligations                             |       | —                |       | (20                   | )          |
|                                                                         |       |                  |       |                  |       |
| Net cash used in  financing activities                                       |       | —                |       | (20                   | )          |
|                                                                         |       |                  |       |                  |       |
| Net increase (decrease) in cash and cash equivalents                         |       | (31                   | )          | (507                  | )          |
| Cash and cash equivalents, beginning of period                               |       | 410                   |       | 752                   |       |
|                                                                         |       |                  |       |                  |       |
| Cash and cash equivalents, end of period                                     |       | $                     | 379        |                  | $          | 245 |   |
|                                                                         |       |                  |       |                  |       |
| Supplemental  disclosure of cash flow information:                           |       |                  |       |                  |       |   |   |
| Interest expense  paid                                                       |       | $                     | 0          |                  | $          | 153 |   |
|                                                                         |       |                  |       |                  |       |
| Supplemental  disclosure of noncash flow investing and financing activities: |       |                  |       |                  |       |
| Issuance of  common stock in lieu of principal payments on note payable      |       | $                     | —     |                  | $          | 39 |   |

 

The accompanying notes are an integralpart of these financial statements. 

 

3

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**TRIPATH TECHNOLOGY INC.**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(Unaudited)**

** **

1.*Basis of Presentation*

* *

The unaudited condensedinterim consolidated financial statements included herein have been prepared byTripath Technology Inc. (the “Company”) in accordance with accountingprinciples generally accepted in the United States of America and reflect alladjustments, consisting of normal recurring adjustments, which in the opinionof management are necessary to state fairly the Company’s financial position,results of operations and cash flows for the periods presented. These interimfinancial statements should be read in conjunction with the consolidatedfinancial statements and footnotes thereto included in the Company’s AnnualReport on Form 10-KSB for the fiscal year ended September 30, 2007.The results of operations for the three months ended December 31, 2007,are not necessarily indicative of the results to be expected for any subsequentquarter or for the entire year.

 

The preparation offinancial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates, and such differencescould affect the results of operations reported in future periods and suchdifferences could be material.

 

The unaudited condensedinterim consolidated financial statements include the accounts of the Companyand its wholly-owned Japanese subsidiary, which was incorporated in January 2001.All significant intercompany balances and transactions have been eliminated inconsolidation. The U.S. dollar is the functional currency for the Company’sJapanese wholly-owned subsidiary. Assets and liabilities that are notdenominated in the functional currency are remeasured into U.S. dollars and theresulting gains or losses are included in “Interest and other income, net.”Such gains or losses have not been material for any period presented.

 

*Going Concern*

* *

The Company’sconsolidated financial statements have been prepared on the basis of a goingconcern, which contemplates the realization of assets and the satisfaction ofliabilities in the normal course of business. The Company has incurredsubstantial losses and has experienced negative cash flow since inception andhas an accumulated deficit of $210.6 million at December 31, 2007. Inaddition, on February 2, 2007, the Company declared bankruptcy under theprovision of Chapter XI of the bankruptcy laws. These factors raise substantialdoubt about the Company’s ability to continue as a going concern.

 

*Bankruptcy*

* *

The  Company entered into bankruptcy in February 2007.  Please refer to the Company’s filing on Form 10-KSBfor more information.

 

4

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On December 20,2007, the Company and Enable Growth Partners LP filed with the bankruptcy courtthe “Third Amended Disclosure Statement Accompanying Third Amended Plan ofReorganization dated December 20, 2007 Proposed by Tripath Technology Inc.and Enable Growth Partners LP, for itself and as agent for the Secured Parties”(the “Plan of Reorganization”), which included the proposed merger of Etelos,Incorporated, a Washington corporation (“Etelos”), with and into the Company.

 

*2.Summary of Significant Accounting Policies*

* *

*RevenueRecognition*

* *

The Company recognizesrevenue in accordance with Securities and Exchange Commission Staff AccountingBulletin No. 104, or SAB 104, “Revenue Recognition in FinancialStatements”. The Company recognizes revenue when all of the following criteriaare met: 1) there is persuasive evidence that an arrangement exists, 2) deliveryof goods has occurred, 3) the sales price is fixed or determinable, and4) collectibility is reasonably assured.

 

*Allowancefor Doubtful Accounts:*

 

The Company provides anallowance for doubtful accounts to ensure trade receivables are not overstateddue to un-collectibility. The collectibility of the Company’s receivables isevaluated based on a variety of factors, including the length of timereceivables are past due, indication of the customer’s willingness to pay,significant one-time events and historical experience. An additional reservefor individual accounts is recorded when the Company becomes aware of acustomer’s inability to meet its financial obligations, such as in the case ofbankruptcy filings or substantial deterioration in the customer’s operatingresults or financial position. If circumstances related to the Company’scustomers change, estimates of the recoverability of receivables would befurther adjusted. There was no bad debt allowance deemed necessary as of December 31,2007.

 

*Net Income (Loss) Per Share*

* *

Basic net income (loss)per share is computed by dividing the net income (loss) available to commonstockholders for the period by the weighted average number of common stockoutstanding during the period. Diluted net income (loss) per share is computedbased on the weighted average number of common stock and dilutive potentialcommon stock outstanding. The calculation of diluted net income (loss) pershare excludes potential common stock if the effect is anti-dilutive. Potentialcommon stock consists of incremental common stock issuable upon the exercise ofstock options, shares issuable upon conversion of convertible preferred stock,common stock issuable upon the exercise of common stock warrants and commonstock issuable upon the conversion of convertible debentures.

 

The following table setsforth the computation of basic and diluted net income (loss) per share for theperiods presented (in thousands, except per share amounts):

 
| ** **                     | ** ** | **Three months ended  December 31** | ** ** |
|--------------------------------|------------|----------------------------------------------------|------------|
| ** **                     | ** ** | **2007**                                           |       | **2006** |   |
| Numerator:                     |       |                                               |       |   |   |
| Net income  (loss)             |       | $                                                  | (217       | ) | $ | 166 |   |
| Denominator:                   |       |                                               |       |   |   |
| Weighted average  common stock |       | 70,165                                             |       | 69,822 |   |
| Net income (loss)  per share:  |       |                                               |       |   |   |
| Basic and  diluted             |       | $                                                  | (0.00      | ) | $ | 0.00 |   |

 

*Cashand Cash Equivalents*

* *

The Company considers allhighly liquid investments with a maturity of three months or less from the dateof purchase to be cash equivalents. Cash and cash equivalents consist of cashon deposit with banks, money market funds and commercial paper, bonds andnotes, the fair value of which approximates cost.

 

*Concentrationof Credit Risk and Significant Customers*

 

Financial instrumentsthat potentially subject the Company to concentrations of credit risk consistprimarily of cash equivalents and short-term investments. Substantially all ofthe Company’s cash and cash equivalents are invested in highly-liquid moneymarket funds with major financial institutions. The Company sells its productsthrough distributors and directly to original equipment manufacturers. TheCompany performs ongoing credit evaluations of its customers and maintains anallowance for potential credit losses, as considered necessary by management.Credit losses to date have been consistent with management’s estimates. Duringthe quarters ended December 31, 2007 and 2006, the Company had no baddebts write-offs.

 

5

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The Company’s accountsreceivable were nonexistent at December 31, 2007, and substantially all ofthe aggregate gross receivables are with one customer at December 31,2006.

 

3. *Inventories*

* *

Inventories are stated atthe lower of cost or market and consist only of finished goods valued atestimated salvage value. This policy requires the Company to make estimatesregarding the market value of the Company’s inventory, including an assessmentof excess or obsolete inventory. The Company, up to February 2007, the date ofthe bankruptcy petition, determined excess and obsolete inventory based on anestimate of the future demand and estimated selling prices for the Company’sproducts within a specified time horizon, generally 12 months. The estimatesthe Company uses for expected demand are also used for near-term capacityplanning inventory purchasing and are consistent with the Company’s revenueforecasts. After the date of the bankruptcy petition, the Company estimated thereserves based on the estimated liquidation values. During the three monthended December 31, 2007 and 2006, the Company sold inventory for which thenet amount of approximately $0.1 million and $0.7 million ofinventory reserves were previously provided, respectively.

 

4.*Segment and geographic information*

* *

The Company hasdetermined that it has one reportable business segment: the sale of anyremaining product that could be sold at any price.

 

6

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Substantially all of the Company’s total revenue for the three monthsended December 31, 2007 and 2006, respectively, was derived from sales toend-customers based outside the United States.

 

*5.Stock Based Compensation*

* *

During the three months ended December 31,2007, the Company did not grant any stock options. All employees had left thecompany by September  30, 2007. TheCompany recorded $117,000 of the stock based compensation for the three monthsending December 31, 2006.

 

*2000 Employee Stock Purchase Plan*

*** ***

The Employee Stock Purchase Plan was deactivated when the Company filedfor bankruptcy in February 2007.

 

6.*Convertible Debt*

* *

In November 2005, the Company had originally entered into aSecurities Purchase Agreement with the purchasers named therein (the “Purchasers”).The transaction closed on November 8, 2005. Pursuant to the SecuritiesPurchase Agreement, the Purchasers purchased 6% Senior Secured ConvertibleDebentures (the “Debentures”) in aggregate principal amount of $5,000,000together with Series A Warrants and Series B Warrants. The Company isusing the proceeds of the financing to finance on-going operations. The Companyhas also entered into a Security Agreement dated November 8, 2005, by andbetween the Company and the signatories thereto (the “Security Agreement”),pursuant to which the Debentures are secured by all of the assets of theCompany, including the Company’s intellectual property. Interest is payable onthe Debentures at a rate of 6% per annum. Monthly principal and interest paymentson the Debentures began on April 8, 2006. At the option of the Company,interest payments on the Debentures are payable either in cash or in registeredCommon Stock, subject to certain conditions as specified in the Debentures.

 

The Debentures have a term of two years and come fully due on November 8,2007. The Debentures are convertible at the option of the holder at any timeand from time to time into Common Stock of the Company at a conversion price of$0.37 per share, subject to certain adjustments. Pursuant to the terms of theDebentures, the conversion price will be reset (the “Reset Provision”) in theevent the Company (i) effects a reverse stock split and/or (ii) hasits Common Stock delisted from the Nasdaq Capital Market (such delisting occurredon December 8, 2005). The Reset Provision adjusts the conversion price onthe 60th day following any such reverse stock split or delisting to the lowerof either the then conversion price or the volume weighted average price of theCompany’s Common Stock (“VWAP”) for the 10 trading days preceding such reset.Because the VWAP on February 6, 2006, was higher than the conversion priceof $0.37 per share, no reset occurred due to the December 8, 2005,delisting. Additionally, in the event that the Company issues Common Stock inan equity financing at a price less than the then conversion price, theconversion price shall be immediately adjusted to the price at which suchCommon Stock was issued.

 

7

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Pursuant to the Securities Purchase Agreement, the Company also issued Series ACommon Stock Warrants and Series B Common Stock Warrants to thePurchasers. The Series A Common Stock Warrants (the “Series AWarrants”) were exercisable from November 8, 2005, until July 1, 2006,to purchase up to 6,756,755 shares of Common Stock (the “Series A ShareAmount”) at an exercise price of $0.37 per share (the “Series A ExercisePrice”). The Series B Common Stock Warrants (the “Series B Warrants”and together with the Series A Warrants, the “Warrants”) are exercisablefrom May 8, 2006, until May 8, 2011, to purchase up to 10,135,133shares of Common Stock (the “Series B Share Amount,” and together with theSeries A Share Amount, the “Warrant Share Amount”) at an exercise price of$0.43 per share, (the “Series B Exercise Price,” and together with the Series AExercise Price, the “Warrant Exercise Price”).

 

The note was partially paid from a balance of $ 3,500,000 to $ 250,000 onJune 15, 2007, as a result of the Bankruptcy trustee’s sale of intellectualpropery. The note holders agreed to waive all default interest rate increases,penalties, and beneficial conversion features as a result of a negotiatedsettlement with the trustee. In addition, the warrants originally issued withthis note were canceled.

 

The following table summarizes the charges to interest, amortizationand other expense, net for the three months ended December 31, 2007 and2006:

 
| ** **                 | ** ** | **For the three  months ended  December 31,  2007** | ** ** | **For the three  months ended  December 31,  2006** | ** ** |
|----------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| Interest expense on debt   |       | $                                                                       | —     |                                                                    | $          | 60 |   |
| Accretion of debt discount |       | —                                                                  |       | 630                                                                     |       |
|                       |       | $                                                                       | —     |                                                                    | $          | 690 |   |

* *

7.*Commitments and Contingencies*

* *

The company rents office space on amonth-to-month basis.

 

8

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*Contingencies:* From time to time, in the normal courseof business, various claims could be made against the Company, its directors orofficers. The Company has agreed to idemnify its officers and directors withrespect to such claims, except in limited circumstances. At December 31,2007, there were no pending claims the outcome of which is expected to resultin a material adverse effect on the financial position or results of operationsof the Company.

 

8.*Recent Accounting Pronouncements*

* *

In June 2006, the Financial AccountingStandards Board (FASB) issued FASB Interpretation (FIN) No. 48, “*Accounting for Uncertainty in Income Taxes*,” whichsupplements Statement of Financial Accounting Standard No. 109, “*Accounting for Income Taxes*,” by defining the confidencelevel that a tax position must meet in order to be recognized in the financialstatements. FIN 48 requires the tax effect of a position to be recognized onlyif it is “more-likely-than-not” to be sustained based solely on its technicalmerits as of the reporting date. If a tax position is not consideredmore-likely-than-not to be sustained based solely on its technical merits, nobenefits of the position are recognized. If the tax position is considered morelikely than not to be sustained, the amount to record is measured at thelargest amount of benefit that is grater than 50% likely of being realized uponultimate settlement. This is a different standard for recognition than waspreviously required. The more-likely-than-not threshold must continue to be metin each reporting period to support continued recognition of a benefit. Atadoption, companies must adjust their financial statements to reflect onlythose tax positions that are more-likely-than-not to be sustained as of theadoption date. Any necessary adjustment is recorded directly to openingretained earnings in the period of adoption and reported as a change inaccounting principle. The Company adopted FIN 48 starting January 1, 2007.The adoption of FIN 48 did not have a material effect on the Company’sfinancial statements.

 

9

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In September 2006, the Securities and ExchangeCommission published Staff Accounting Bulletin No. 108, “*Considering the Effects of Prior Year Misstatements when QuantifyingMisstatements in Current Year Financial Statements*” (SAB 108). Theinterpretations in SAB 108 are being issued to address diversity in practice inquantifying financial statement misstatements and the potential under currentpractice to build up improper amounts on the balance sheet. This guidanceapplies to fiscal years ending after November 15, 2006 and earlyapplication in interim periods is encouraged. The adoption of SAB 108 did nothave an effect on the Company’s financial statements.

 

In September 2006, the FASB issued SFAS No. 157(“FAS 157”), “*Fair Value Measurements*,”which defines fair value, establishes guidelines for measuring fair value andexpands disclosures regarding fair value measurements. FAS 157 does notrequire any new fair value measurements but rather eliminates inconsistenciesin guidance found in various prior accounting pronouncements. FAS 157 iseffective for fiscal years beginning after November 15, 2007. Earlieradoption is permitted, provided that the company has not yet issued financialstatements, including for interim periods, for that fiscal year. The Company iscurrently evaluating the impact of FAS 157, but do not expect the adoptionof FAS 157 to have a material impact on the financial position, results ofoperations or cash flows.

 

In February 2007, the FASB issued SFAS No. 159,“*The Fair Value Option for Financial Assets andFinancial Liabilities*,” which permits entities to choose to measuremany financial assets and financial liabilities at fair value. Unrealized gainsand losses on items for which the fair value option has been elected arereported in earnings. SFAS 159 is effective for fiscal years beginning after November 15,2007. The Company does not expect the adoption of FAS 159 to have a materialimpact.

 

9.*Litigation*

* *

From time to time, the Company becomes subject to various legalproceedings and claims, both asserted and unasserted, that arise in theordinary course of business. Litigation in general, and securities litigationin particular, can be expensive and disruptive to normal business operations.Moreover, the results of legal proceedings are difficult to predict. Anunfavorable resolution of one or more of these lawsuits would materiallyadversely affect the Company’s business, results of operations, or financialcondition. In addition, given the Company’s financial condition and that thereis not sufficient insurance coverage to offset the cost of litigation, thecosts of defending one or more lawsuits would likely adversely affect theCompany’s financial condition. The Company cannot reasonably estimate the amountof potential loss that may be possible for any contingencies and, accordingly,have not recorded any associated liabilities in the consolidated balancesheets. The Company accrues legal costs when incurred.

 

*SEC Investigation*

* *

On or about November 9, 2004, the SEC requested that the Companyvoluntarily produce documents responsive to certain document requests in theinvestigation entitled*  In the Matter of Tripath Technology Inc*.. On or about January 25, 2005, February 14, 2005, and February 16,2005, the SEC made additional documents requests. On or about March 30,2005, the SEC issued a subpoena to the Company seeking additional documents.The Company has produced documents in response to the SEC’s voluntary requestsfor documents as well as the subpoena. The Company has cooperated with the SECin its review of these matters.

 

On February 24,2005, the SEC, pursuant to Section 20(a) of the Securities Act and Section 21(a) ofthe Exchange Act, issued a formal order of private investigation to determinewhether there have been any violations of Section 17(a) of theSecurities Act and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-13, 13a-14,13b2-1 and 13b2-2 thereunder.

 

10

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In a letter dated December 15, 2005, the SEC indicated that theformal investigation of the Company had been terminated and that no enforcementaction has been recommended to the Commission.

 

*Federal Securities Class Actions*

* *

Beginning on November 4, 2004, plaintiffs filed four separatecomplaints purporting to be class actions in the United States District Courtfor the Northern District of California alleging that the Company and certainof the Company’s present or former officers and/or directors, Dr. Adya S.Tripathi, David Eichler, and Graham Wright, violated Sections 10(b) and20(a) of the Exchange Act. Plaintiffs purported to represent a putativeclass of shareholders who purchased or otherwise acquired the Company’ssecurities between January 29, 2004, and October 22, 2004. Thecomplaints contained varying allegations, including that the Company and theindividual defendants made materially false and misleading statements withrespect to financial results and with respect to the Company’s business,prospects and operations in the Company’s filings with the SEC, press releasesand other disclosures. The complaints saught unspecified compensatory damages,attorneys’ fees, expert witness fees, costs and such other relief as may beawarded by the Court.

 

On December 22, 2004, the Court entered a stipulation and orderconsolidating all of these complaints and ordering that the defendants need notrespond to any of these complaints until after plaintiffs file a consolidatedcomplaint. On January 4, 2005, plaintiffs filed motions for theappointment of lead plaintiff. The Court, by Order dated January 28, 2005,appointed Robert Poteet as the sole lead plaintiff and approved Milberg WeissBershad & Schulman LLP as lead counsel.

 

On July 11, 2005, the Company entered into a Stipulation andSettlement Agreement (the “Stipulation”) which was filed with the Court on July 12,2005. The settlement class consisted of all persons who purchased thesecurities of the Company between January 29, 2004, and June 13,2005, inclusive. Under the terms of the Stipulation, the parties agreed thatthe class action will be dismissed in exchange for a payment of $200,000 incash by the Company and the issuance of 2.45 million shares of the Companycommon stock which shall be exempt from registration pursuant to Section 3(a)(10) ofthe Securities Act. The Stipulation remains subject to the satisfaction ofvarious conditions, including without limitation final approval of theStipulation by the Court, including a finding that the 2.45 million sharesof the Company common stock to be issued are exempt from registration. On October 20,2005, the Court entered a Preliminary Order for Notice and Hearing inConnection with Settlement Proceedings. The hearing for final approval of thesettlement was January 24, 2006.

 

Following an April 11, 2006 hearing, the Court entered an Orderand Final Judgment on April 18, 2006, which finally approved the settlement,awarded attorneys’ fees, and authorized the reimbursement of expenses andentered judgment dismissing all of the complaints on the merits and withprejudice in favor of the defendants. 

 

*Langley Securities Fraud Litigation*

* *

On or about June 2, 2005, plaintiff Langley Partners, L.P. (“Langley”)filed a complaint in the United States District Court for the Southern Districtof New York alleging claims against the Company, Dr. Adya Tripathi, theCompany’s President and Chief Executive Officer, and David Eichler, the Company’sformer Chief Financial Officer. Langley alleges that it entered into a stockpurchase agreement with the Company on or about August 2, 2004, in whichLangley purchased 1 million shares of the Company common stock at apurchase price of $2.00 per share. Langley also alleges that it consented tothe receipt of the Company’s Prospectus dated August 2, 2004, and theaccompanying Prospectus dated June 1, 2004, which specificallyincorporated certain of the Company’s filings with the SEC from March throughJuly 2004. The complaint generally alleges that the Company and theindividual defendants made materially false and misleading statements withrespect to the Company’s financial results and with respect to its business,prospects, internal accounting controls and design wins on Godzilla products inthe Company’s filings with the SEC, press releases and other documents. Thecomplaint alleges claims against the Company and the individual defendants forviolations of Sections 10(b) and 20(a) of the Exchange Act,fraud, breach of contract, unjust enrichment and money had and received,rescission, and violations of Sections 11 and 15 of the Securities Act. Onthis basis, the complaint seeks unspecified compensatory damages andrestitution in an amount in excess of $2 million, rescission of thepurchase agreement and a return of $2 million, unspecified punitivedamages, costs, and such other relief as may be awarded by the Court.

 

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On October 6, 2005, the Court entered an Order granting theCompany’s motion to transfer this action from the Southern District of New Yorkto the United States District Court for the Northern District of California. OnOctober 18, 2005, the action was transferred to the Northern District ofCalifornia.

 

On December 9, 2005, the Company and the individual defendantsfiled a motion to dismiss the complaint in its entirety which was granted inpart and denied in part by the Court on March 7, 2006. In particular, theCourt dismissed the claims under Sections 10(b) and 20(a) of theExchange Act and also the claim for unjust enrichment and that money had andreceived with leave to amend within thirty days. Langley did not file anamended complaint seeking to replead the dismissed claims. Trial had beenscheduled for January 22, 2007, or on a date to be determined by the Courtthereafter.

 

During 2006, the Company issued 3,252,000 shares of common stock aspart of the settlement agreement with Langley Partners, L.P.

 

On December 20, 2007, the bankruptcy court issued an orderapproving the compromise and settlement pursuant to rule 9019 betweenTripath and Nortel Networks, Inc. (“Nortel”) concerning the administrativeexpense claim and the unsecured prepetition claim filed by Nortel Networks.  The claim by Nortel concerned the default byTripath on its sublease agreement for its office facility in San Jose and theNortel claim for unpaid rent, operating expenses and late fees under thesublease agreement and lease termination charges to restore the facility to itsprelease condition.

 

Nortel originally claimed prepetition damages of $94,699 and anadministrative expense claim of $401,808 (later increased to $472,130) forpayment of post-prepetition rent and other amounts alleged due under theSublease.

 

Tripath and Nortel agreed to compromise and allow Nortel an administrativeexpense priority claim of $40,000 and a portion of the remaining balance of theadministrative expense claim to be treated as an allowed prepetition unsecuredclaim, such that Nortel will be allowed a general unsecured prepetition claimin the total amount of $278,576.

 

The Company entered into bankruptcy on February 2, 2007.  See the Company’s filing on Form 10-KSBfor additional information.

 

10. *Subsequent Events*

 

On February 1, 2008, the bankruptcy court issued an orderconfirming approval of the Plan of Reorganization, including the merger and thetransfer of all of Tripath’s existing assets into a separate bankruptcy estate(the “Post Effective Date Estate” or “PEDE”) and the discharge of all ofTripath’s liabilities from Tripath and their transfer into the PEDE.  The overall impact of the confirmed Plan isfor Tripath to emerge from the bankruptcy proceeding with (i) cash onhand, (ii) certain causes of action, (iii) miscellaneous other assetsconsisting primarily of remaining inventory, a few personal property assets,and $100,000 to be contributed by Etelos on the effective date of themerger.  As of the effective date of themerger, we will issue 5,000,000 shares in the aggregate of our common stock toour secured creditors and 10,000 shares in the aggregate to our unsecuredcreditors, and all other issued and outstanding securities of and interests inTripath, including our debentures, stock options (including, but not limitedto, all stock options granted to our employees), warrants and other shares ofcommon stock will be canceled and extinguished. In addition, on the effective date of the merger; any instrument evidencingor creating any indebtedness or obligation of Tripath, will be canceled andextinguished on the books of Tripath and transferred into the PEDE fortreatment in accordance with the Plan.

 

As a result of the foregoing, on April 22, 2008, we entered intoan agreement and plan of merger with Etelos (the “Merger Agreement”) pursuantto which Etelos was merged with and into Tripath, at which time the separatecorporate existence of Etelos ceased and Tripath continued after the merger asthe surviving corporation and changed its name to Etelos, Inc.  Under the terms of the Merger Agreement theshareholders of Etelos received common stock of the surviving corporation inexchange for their shares of capital stock of Etelos.  The surviving corporation will conduct thebusiness that was previously conducted by Etelos.

 

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**ITEM 2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

** **

**SPECIAL NOTE REGARDINGFORWARD-LOOKING STATEMENTS**

** **

Thisreport contains forward-looking statements. These forward-looking statements are subject to certain risks anduncertainties that could cause actual results to differ materially fromhistorical results or anticipated results, including those set forth under “ITEM2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION—Risk Factors,”below, and elsewhere in this report.  Insome cases, you can identify forward looking statements by terms such as “may,”“intend,” “might,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,”“estimate,” “predict,” “potential,” or the negative of these terms, and similarexpressions are intended to identify forward-looking statements.  Such statements are subject to certain risksand uncertainties, which could cause actual results to differ materially fromthose projected.  Readers are cautionednot to place undue reliance on these forward-looking statements, which speakonly as of the date hereof.  We undertakeno obligation to publicly release the result of any revisions to theseforward-looking statements, which may be made to reflect events or circumstancesafter the date hereof or to reflect the occurrence of unanticipatedevents.  The forward-looking statementsin this report are based upon management’s current expectations and beliefs,which management believes are reasonable.

 

Inthis report, unless the context indicates otherwise, the terms “Tripath,” “Company,”“we,” “us,” and “our” refer to Tripath Technology Inc., a Delaware corporation.

 

**OVERVIEW**

** **

Thefollowing Management’s Discussion and Analysis of Financial Condition andResults of Operation summarizes the significant factors affecting ourconsolidated operating results, financial condition, liquidity and cash flowduring the period ended December 31, 2007. This discussion and analysis should be read with the consolidatedfinancial statements and financial statement footnotes included in this report.

 

Duringthe period ended December 31, 2007, we were a “debtor in possession” as aresult of the filing on February 8, 2007, of a voluntary petition forrelief under Chapter 11 of the Bankruptcy Code with the United StatesBankruptcy Court for the Northern District of California.  During the period covered by this report, on December 20,2007, the Company and Enable Growth Partners LP filed with the bankruptcy courtthe Third Amended Disclosure Statement Accompanying Third Amended Plan ofReorganization dated December 20, 2007 Proposed by Tripath Technology Inc.and Enable Growth Partners LP, for itself and as agent for the Secured Parties(the “**Plan of Reorganization**”), whichincluded the proposed merger of Etelos, Incorporated, a Washington corporation(“**Etelos**”), with and into the Company.  Subsequent to the end of the period coveredby this report, on February 1, 2008, the bankruptcy court issued an orderconfirming approval of the Plan of Reorganization, including the merger and thetransfer of all of the Company’s existing assets into a separate bankruptcyestate and the discharge of all of the Company’s liabilities. The overallimpact of the confirmed Plan of Reorganization is for the Company to emergefrom the bankruptcy proceeding with no assets and no liabilities. As of theeffective date of the merger, we will issue 5,000,000 shares in the aggregateof our common stock to our secured creditors and 10,000 shares in the aggregateto our unsecured creditors, and all other issued and outstanding securities ofand interests in the Company, including our debentures, stock options(including, but not limited to, all stock options granted to our employees),warrants and other shares of common stock will be canceled andextinguished.  In addition, on theeffective date of the merger; any instrument evidencing or creating anyindebtedness or obligation of the Company, will be canceled and extinguished.

 

OnApril 22, 2008 we entered into an agreement and plan of merger with Etelos(the “**Merger Agreement**”) pursuant to whichEtelos merged with and into the Company, at which time the separate corporateexistence of Etelos ceased and the Company continued after the merger as thesurviving corporation and changed its name to Etelos, Inc.  Under the terms of the Merger Agreement theshareholders of Etelos will receive common stock of the surviving corporationin exchange for their shares of capital stock of Etelos. In connection with themerger, the Company, as the surviving corporation has succeeded to all of theassets and liabilities of Etelos. The surviving corporation will conduct thebusiness that was previously conducted by Etelos.

 

Accordingly,this Management’s Discussion and Analysis of Financial Condition and Results ofOperation will not be a reliable indicator of future performance, andhistorical trends should not be used to anticipate results or trends in futureperiods. This discussion and analysis contains forward-looking statements thatinvolve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in theseforward-looking statements due to many factors, including but not limited tothose set forth under “Risk Factors,” below and “SPECIAL NOTE REGARDINGFORWARD-LOOKING STATEMENTS,” above.

 

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**Business**

** **

Untilwe ceased operations, we designed and sold digital amplifiers based on ourproprietary Digital Power Processing (DPP®) technology.  We were incorporated in July 1995, beganshipping products in the first quarter of 1998 and became a public reportingcompany in August 2000.

 

Wesold our products to original equipment manufacturers and distributors. Werecognized revenue from product sales upon shipment to original equipmentmanufacturers, net of sales returns and allowances. Our sales to distributorswere made under arrangements allowing for returns or credits under certaincircumstances and we deferred recognition on sales to distributors untilproducts were resold by the distributor to the end user. All of our sales weremade in United States, or U.S., dollars.

 

As a “fabless”semiconductor company, we contracted with third party semiconductor fabricatorsto manufacture the silicon wafers based on our integrated circuit, or IC,designs. We also contracted with third party assembly and test houses toassemble and package our die and conduct final product testing.

 

Costof revenue included the cost of purchasing finished silicon wafers and the costof die manufactured by independent foundries, costs associated with assemblyand final product testing, as well as salaries and overhead costs associatedwith employees engaged in activities related to manufacturing. Research anddevelopment expense consisted primarily of salaries and related overhead costsassociated with employees engaged in research, design and developmentactivities, as well as the cost of wafers and other materials and relatedservices used in the development process. Selling, general and administrativeexpense consisted primarily of employee compensation and related overheadexpenses and advertising and marketing expenses.

 

Stock-basedcompensation expense related both to stock-based employee and consultantcompensation arrangements. Employee-related stock-based compensation expensewas based on the difference between the estimated fair value of our commonstock on the date of grant and the exercise price of options to purchase thatstock and was recognized on an accelerated basis over the vesting periods ofthe related options, usually four years, or in the case of fully vestedoptions, in the period of grant.

 

**Critical AccountingPolicies**

** **

Theconsolidated financial statements are prepared in conformity with accountingprinciples generally accepted in the United States of America.  As such, management is required to makejudgments, estimates and assumptions that affect the reported amounts of assetsand liabilities at the date of the consolidated financial statements and thereported amounts of revenues and expenses during the reporting period.  The significant accounting policies which aremost critical to aid in fully understanding and evaluating reported financialresults include the following:

 

*Use ofEstimates*:Management’s discussion and analysis of financial condition and results ofoperations is based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited States of America. The preparation of these financial statementsrequires us to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities. On an ongoing basis, we evaluate ourestimates, including those related to product returns, warranty obligations,bad debts, inventory direct costing and valuation, accruals, valuation of stockoptions and warrants, income taxes (including the valuation allowance fordeferred taxes) and restructuring costs. We base our estimates on historicalexperience and on various other assumptions that we believe to be reasonableunder the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily apparent from the other sources. Actual results may materially differfrom these estimates under different assumptions or conditions. Materialdifferences may occur in our results of operations for any period if we madedifferent judgments or utilized different estimates.

 

*RevenueRecognition*: Werecognize revenue in accordance with Securities and Exchange Commission StaffAccounting Bulletin No. 104, or SAB 104, “*RevenueRecognition in Financial Statements*”. We recognize revenue when allof the following criteria are met: 1) there is persuasive evidence that anarrangement exists, 2) delivery of goods has occurred, 3) the sales price isfixed or determinable, and 4) collectibility is reasonably assured. Thefollowing policies apply to our major categories of revenue transactions.

 

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*Sales toOEM Customers*:Under our standard terms and conditions of sale, title and risk of losstransfer to the customer at the time product is delivered to the customer, FOBshipping point, and revenue is recognized accordingly. We accrue the estimatedcost of post-sale obligations, including product warranties or returns, basedon historical experience. We have experienced minimal warranty or other returnsto date.

 

*Sales toDistributors*:Sales to distributors are made under arrangements allowing limited rights ofreturn, generally under product warranty provisions, stock rotation rights andprice protection on products unsold by the distributor. In addition, thedistributor may request special pricing and allowances which may be grantedsubject to our approval. As a result of these return rights and potentialpricing adjustments, we generally defer recognition of revenue until such timethat the distributor sells product to its customer based upon receipt ofpoint-of-sale reports from the distributor.

 

*Allowancefor Doubtful Accounts*: We provide an allowance for doubtful accounts to ensure tradereceivables are not overstated due to un-collectibility. The collectibility ofour receivables is evaluated based on a variety of factors, including thelength of time receivables are past due, indication of the customer’swillingness to pay, significant one-time events, and historical experience. Anadditional reserve for individual accounts is recorded when we become aware ofa customer’s inability to meet its financial obligations, such as in the caseof bankruptcy filings or substantial deterioration in the customer’s operatingresults or financial position. If circumstances related to our customerschange, then estimates of the recoverability of receivables would be furtheradjusted.

 

*Inventories*: Inventories are stated at the lower ofcost or market. This policy requires us to make estimates regarding the marketvalue of our inventory, including an assessment of excess or obsoleteinventory. We determine excess and obsolete inventory based on an estimate ofthe future demand and estimated selling prices for our products within aspecified time horizon, generally 12 months. The estimates we use for expected demandare also used for near-term capacity planning and inventory purchasing and areconsistent with our revenue forecasts. Actual demand and market conditions maybe different from those projected by our management.

 

*Stock-BasedCompensation*: On December 16,2004, the FASB issued SFAS No. 123 (revised 2004), “*Share-BasedPayment*” (SFAS 123R). SFAS 123R eliminates the alternative ofapplying the intrinsic value measurement provisions of APB 25 to stockcompensation awards issued to employees. Rather, the new standard requiresenterprises to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award.That cost will be recognized over the period during which an employee is requiredto provide services in exchange for the award, known as the requisite serviceperiod (usually the vesting period). On April 14, 2005, the SEC announcedthe adoption of a rule that defers the required effective date of SFAS123R. The SEC rule provides that SFAS 123R is now effective forregistrants as of the beginning of the first fiscal year beginning after June 15,2005.

 

SFAS123R is effective for our fiscal quarter beginning October 1, 2005, andallows for the use of the Modified Prospective Application Method. Under thismethod, SFAS 123R is applied to new awards and to awards modified, repurchased,or cancelled after the effective date. Additionally, compensation cost for theportion of awards for which the requisite service has not been rendered (suchas unvested options) that are outstanding as of the date of adoption isrecognized as the remaining requisite services are rendered. The compensationcost relating to unvested awards at the date of adoption shall be based on thegrant-date fair value of those awards as calculated for pro forma disclosuresunder the original SFAS 123. In addition, companies may use the ModifiedRetrospective Application Method. This method may be applied to all prior yearsfor which the original SFAS 123 was effective or only to prior interim periodsin the year of initial adoption. If the Modified Retrospective ApplicationMethod is applied, financial statements for prior periods will be adjusted togive effect to the fair-value-based method of accounting for awards on a consistentbasis with the pro forma disclosures required for those periods under theoriginal SFAS 123. We have adopted SFAS 123R in our quarter ended June 30,2006 using the Modified Prospective Application Method.

** **

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**Results of DiscontinuedOperations**

** **

***Revenues***

*** ***

We hadrevenues of $85 thousand for the three months ended December 31, 2007,compared to $3.4 million for the same period in 2006.  Our operations during the three months ended December 31,2007, consisted solely of the liquidation of inventory on hand.

 

***Gross Profit***

*** ***

Gross lossfor the three months ended December 31, 2007, was $(39) thousand or 0%,compared with a gross profit of $2,444 thousand or 72% for the same periodin 2006. During the three months ended December 31, 2007, inventory was beingliquidated at or below cost to raise funds.

 

***Research and Development***

*** ***

We hadno research and development expenses for the three months ended December 31,2007, compared with $826 thousand for the same period in 2006.  We discontinued research and developmentactivities when we ceased operations in connection with the Plan ofReorganization.

 

***Selling, General andAdministrative***

*** ***

Selling,general and administrative expenses were $178 thousand for the three monthsended December 31, 2007, compared with $723 thousand for the same periodin 2006.  Selling, general andadministrative expenses during the three months ended December 31, 2007,related to the administration and wind up of our affairs in connection with thePlan of Reorganization.

 

***Change in Fair Value onRevaluation of Warrant and Conversion Feature Liability.***

*** ***

We hadno change in the fair value on revaluation of warrant and conversion liabilityfor the three months ended December 31, 2007 compared to $207 thousand forthe same period in 2006.  The warrant andconversion feature liability represents the difference between the fair valueof the warrants and conversion feature we issued in connection with our March 3,2005 private placement on their original issue date and the fair value of thosesame warrants on December 31, 2007. As the warrants were cancelled duringthe prior fiscal year, there was no change in value this quarter.

 

***Other Income and Expense.***

*** ***

We hadnet interest expense of $0 for the three months ended December 31, 2007,compared to a net interest expense of $823 thousand for the same period in2006.

 

***Income Taxes.***

*** ***

We have incurred only a minimal amount of statutory income tax expenseto date. We have recorded a full valuation allowance against our deferred taxassets. Deferred tax assets will be recognized in future periods only as anytaxable income is realized and consistent profits are reported. Deferred taxassets related to items effecting equity will be charged to equity when realized

 

**Liquidity and CapitalResources**

** **

On December 31,2007, we had $379 thousand in cash and net inventories totaled $20 thousand.  Our working capital deficit at December 31,2007, was $2.5 million.  In connectionwith the Plan of Reorganization, Etelos has agreed to pay $100 thousand inconnection with the transactions contemplated by the Merger Agreement and causethe surviving corporation to issue an aggregate of $5.0 million shares of itscommon stock to our secured and unsecured creditors.  We have no other sources of capital availableto us.  We intend to use the remainingcash, together with the additional cash and common stock received under theMerger Agreement to pay certain of our expenses and claims under the terms ofthe Plan of Reorganization.  Inconnection with the Plan of Reorganization all of our outstanding liabilitieswill be discharged.

** **

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**RISK FACTORS**

** **

Thisreport includes forward-looking statements about our business and results of operationsthat are subject to risks and uncertainties. See “SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS,” above.  Factors that could cause or contribute tosuch differences include those discussed below. In addition to the risk factors discussed below, we are also subject toadditional risks and uncertainties not presently known to us or that wecurrently deem immaterial.  If any ofthese known or unknown risks or uncertainties actually occur, our business couldbe harmed substantially.

 

***We filed for reorganization under Chapter 11 ofthe Bankruptcy Code on February 8, 2007, and are subject to the risks anduncertainties associated with Chapter 11 proceedings.***

*** ***

Forthe duration of our Chapter 11 proceedings, our operations, including ourability to execute our business plan, are subject to the risks anduncertainties associated with bankruptcy. Risks and uncertainties associatedwith our Chapter 11 proceedings include our ability to consummate our proposedPlan of Reorganization.  These risks anduncertainties could affect our business and operations in various ways. Forexample, negative events or publicity associated with our Chapter 11proceedings could adversely affect our future revenues and the futurerelationship with our customers, as well as with vendors and employees, whichin turn could adversely affect our operations and financial condition. Becauseof the risks and uncertainties associated with our Chapter 11 proceedings, theultimate impact that events that occur during these proceedings will have onour business, financial condition and results of operations cannot beaccurately predicted or quantified.

 

***Under the terms of the Plan of Reorganization,upon consummation of the merger contemplated by the Merger Agreement and theeffectiveness of the Plan of Reorganization, all of our existing outstandingcommon stock, warrants and options will be cancelled without consideration.***

*** ***

ThePlan of Reorganzation provides that it will become effective upon theconsummation of our merger with Etelos under the terms of the MergerAgreement.  Under the Plan ofReorganization, certain administrative expenses will be paid in cash, and ourcreditors will be entitled to receive shares of common stock issued by thesurviving corporation in connection with the merger.  Under the terms of the Merger Agreement, eachoutstanding share of our common stock, and any outstanding option or warrant topurchase our common stock will be cancelled and of no further force or effect.  The Plan of Reorganization does not providefor the payment of any value to holders of our outstanding common stock.

 

**ITEM 3.  CONTROLS AND PROCEDURES**

** **

Disclosurecontrols and procedures are designed to ensure (i) that informationrequired to be disclose in the reports an issuer files or submits under theExchange Act are recorded, processed, summarized, and reported within the timeperiods specified in the SEC’s rules and forms; and (ii) thatinformation required to be disclose in the reports an issuer files or submitsunder the Exchange Act is accumulated and communicated to its management,including its principal executive and principal financial officer, or personsperforming similar functions, as appropriate to allow timely decisionsregarding required disclosure.

 

On February 8,2007, we filed a voluntary petition for relief under Chapter 11 of theBankruptcy Code with the United States Bankruptcy Court for the NorthernDistrict of California, Case No. 07-50358. Since that date we have not had any material operations oremployees.  As such, we do not maintaindisclosure controls and procedures designed to ensure that material informationrelated to our company is recorded, processed, summarized and reported withinthe time periods specified in the SEC rules and forms.

 

Ourcompany (as a “non-accelerated filer”) is not now subject to the requirementsof Section 404(b) of SOX, which requirements, subject to change, arenow scheduled to be effective for fiscal years ending on or after December 15,2008.  Under Section 404(b), ourauditors will be required to perform an audit of management’s assessment of theeffectiveness of our internal control over financial reporting intended toenable us to issue a report, based on our audit, containing their opinions onboth management’s assessment and on the effectiveness of our internal controlover financial reporting. Section 404(a) of the SOX, however,requires management to conduct and report upon its ownassessment of a company’s internal control over financial reporting for fiscalyears ending on or after December 15, 2007, and, accordingly, placessubstantial responsibility on management to perform considerable work inpreparing for this activity, not only in the design and conduct of its testingand other assessment procedures in developing adequate, detailed documentationof the company’s internal control policies and procedures, but also theprocedures applied by management in conducting its assessment and the resultsthereof. With respect to such preparation only, but not with respect toperforming management’s assessment procedures, our auditors are available toprovide only limited assistance in documenting and making recommendations tomanagement regarding internal controls, subject to advance approval of theaudit committee or equivalent financial oversight or governance body, but onlyto the extent that, in their sole judgment, our auditors believe theirindependence will not be impaired.  Wewill be implementing disclosure controls and procedures over the course of thecurrent fiscal year.

 

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**PART II —OTHER INFORMATION**

 

**ITEM 1.  LEGALPROCEEDINGS**

** **

Fromtime to time, we become subject to various legal proceedings and claims, bothasserted and unasserted, that arise in the ordinary course of business.Litigation in general, and securities litigation in particular, can beexpensive and disruptive to normal business operations. Moreover, the resultsof legal proceedings are difficult to predict. An unfavorable resolution of oneor more of these lawsuits would materially adversely affect our business,results of operations, or financial condition. We cannot estimate the loss orrange of loss that may be reasonably possible for any of the contingenciesdescribed and accordingly have not recorded any associated liabilities in ourconsolidated balance sheets. We accrue legal costs when incurred.

 

*BankruptcyProceeding*

* *

On February 8,2007, we filed a voluntary petition for relief under Chapter 11 of theBankruptcy Code with the United States Bankruptcy Court for the NorthernDistrict of California, Case No. 07-50358. On December 20, 2007, the Company and Enable Growth Partners LPfiled with the bankruptcy court the Plan of Reorganization, which included theproposed merger of Etelos with and into the Company.  On February 1, 2008, the bankruptcy courtissued an order confirming approval of the Plan of Reorganization, includingthe merger and the transfer of all of the Company’s existing assets into aseparate bankruptcy estate and the discharge of all of the Company’sliabilities.

 

**ITEM 2.  UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

** **

None.

 

**ITEM 3.  DEFAULTS UPONSENIOR SECURITIES**

** **

None.

 

**ITEM 4.  SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS**

** **

None.

 

**ITEM 5.  OTHERINFORMATION**

** **

None

 

**ITEM 6.  EXHIBITS**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                 |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1*                |       | Certification of  Periodic Report by the Principal Executive Officer, Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                          |
| 31.2*                |       | Certification of  Periodic Report by the Principal Financial Officer, Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                          |
| 32.1*                |       | Certification of  Principal Executive Officer pursuant to 18 U.S.C, Section 1350, adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            |
| 32.2*                |       | Certification of  Principal Financial Officer pursuant to 18 U.S.C,  Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002. |

 

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*  Filed as anexhibit to this report

 

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**SIGNATURES**

** **

In accordance with the requirementsof the Exchange Act, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
| April 24, 2008 | **TRIPATH TECHNOLOGY INC.**                                                  |
|---------------------|------------------------------------------------------------------------------|
|                | ** **                                                                   |
|                | ** **                                                                   |
|                | By:                                                                          | /s/ David S.G. Mackenzie |
|                |                                                                         | David S.G. Mackenzie |
|                | Vice President &  Chief Financial Officer and   Chief Accounting Officer |

 

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