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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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(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, 2001

OR

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

For the transition period from  to

Commission File Number 000-26565

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TRIPATH TECHNOLOGY INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of Incorporation or Organization)

77-0407364(I.R.S. Employer Identification No.)


3900 Freedom Circle
Santa Clara, California 95054(Address of Principal Executive Office including (Zip Code)

(408) 567- 3000(Registrant's telephone number, including area code)

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

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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 / /

27,210,658
shares of the Registrant's common stock were outstanding as of August 3, 2001.

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TRIPATH TECHNOLOGY INC.

FORM 10-Q

For The Quarter Ended June 30, 2001

TABLE OF CONTENTS

|PART I. Financial Information |         |                                                     
|----------------------------- | ------- | ----------------------------------------------------
|                              | Item 1. |                                                     
|                              |         | Condensed Consolidated Balance Sheets               
|                              |         | Condensed Consolidated Statements of Operations     
|                              |         | Condensed Consolidated Statements of Cash Flows     
|                              |         | Notes to Condensed Consolidated Financial Statements
|                              | Item 2. |                                                     
|                              | Item 3. |                                                     
|PART II. Other Information    |         |                                                     
|                              | Item 1. |                                                     
|                              | Item 2. |                                                     
|                              | Item 3. |                                                     
|                              | Item 4. |                                                     
|                              | Item 5. |                                                     
|                              | Item 6. |                                                     
|                              |         | Signature                                           

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PART I. Financial Information

Item 1. Financial Statements

TRIPATH TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Unaudited

|                                           |                                              | June 30,
2001 |        | December 31, 2000 |  
|------------------------------------------ | -------------------------------------------- | ------------- | ------ | ----------------- | -
|ASSETS                                     |                                              |               |        |                  
|Current assets:                            |                                              |               |        |                   |  
|                                           | Cash and cash equivalents                    |               | $      | 11,103            |  
|                                           | Short-term investments                       |               |        | 6,100             |  
|                                           | Accounts receivable, net                     |               |        | 2,713             |  
|                                           | Inventories                                  |               |        | 11,081            |  
|                                           | Prepaid expenses and other current assets    |               |        | 640               |  
|                                           |                                              |               |        |                   |  
|                                           | Total current assets                         |               |        | 31,637            |  
|Property and equipment, net                |                                              |               | 3,962  |                   |  
|Other assets                               |                                              |               | 378    |                   |  
|                                           |                                              |               |        |                   |  
|                                           | Total assets                                 |               | $      | 35,977            |  
|                                           |                                              |               |        |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                              |               |        |                  
|Current liabilities:                       |                                              |               |        |                   |  
|                                           | Accounts payable                             |               | $      | 4,550             |  
|                                           | Current portion of capital lease obligations |               |        | 298               |  
|                                           | Accrued expenses                             |               |        | 2,202             |  
|                                           | Deferred distributor revenue                 |               |        | 2,875             |  
|                                           |                                              |               |        |                   |  
|                                           | Total current liabilities                    |               |        | 9,925             |  
|                                           |                                              |               |        |                   |  
|Capital lease obligations                  |                                              |               | 437    |                   |  
|                                           |                                              |               |        |                   |  
|Stockholders' equity:                      |                                              |               |        |                   |  
|                                           | Common stock                                 |               |        | 27                |  
|                                           | Additional paid-in capital                   |               |        | 158,407           |  
|                                           | Deferred stock-based compensation            |               |        | (3,824            | )
|                                           | Accumulated deficit                          |               |        | (128,995          | )
|                                           |                                              |               |        |                   |  
|Total stockholders' equity                 |                                              |               | 25,615 |                   |  
|                                           |                                              |               |        |                   |  
|Total liabilities and stockholders' equity |                                              | $             | 35,977 |                   | $
|                                           |                                              |               |        |                   |  

The
accompanying notes are an integral part of these condensed consolidated financial statements.

1

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TRIPATH TECHNOLOGY INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share data)  Unaudited

|                                                                        |                                     | Three months ended
June 30, |        | Six months ended
June 30, |  
|----------------------------------------------------------------------- | ----------------------------------- | --------------------------- | ------ | ------------------------- | -
|
|Revenue                                                                 |                                     | $                           | 1,783  |                           | $
|Cost of revenue                                                         |                                     |                             | 2,033  |                           |  
|                                                                        |                                     |                             |        |                           |  
|Gross profit (loss)                                                     |                                     |                             | (250   | )                         |  
|                                                                        |                                     |                             |        |                           |  
|Operating expenses:                                                     |                                     |                             |        |                           |  
|                                                                        | Research and development            |                             |        | 6,354                     |  
|                                                                        | Selling, general and administrative |                             |        | 2,347                     |  
|                                                                        |                                     |                             |        |                           |  
|Total operating expenses                                                |                                     |                             | 8,701  |                           |  
|                                                                        |                                     |                             |        |                           |  
|Loss from operations                                                    |                                     |                             | (8,951 | )                         |  
|Interest income                                                         |                                     |                             | 200    |                           |  
|                                                                        |                                     |                             |        |                           |  
|Net loss                                                                |                                     | $                           | (8,751 | )                         | $
|                                                                        |                                     |                             |        |                           |  
|                                                                        |                                     |                             |        |                           |  
|Basic and diluted net loss per share                                    |                                     | $                           | (0.32  | )                         | $
|                                                                        |                                     |                             |        |                           |  
|Number of shares used in computing basic and diluted net loss per share |                                     |                             | 27,012 |                           |  
|                                                                        |                                     |                             |        |                           |  
|Stock-based compensation included in:                                   |                                     |                             |        |                           |  
|
|
|Cost of revenue                                                         |                                     | $                           | 70     |                           | $
|Research and development                                                |                                     |                             | 288    |                           |  
|Selling, general and administrative                                     |                                     |                             | 34     |                           |  
|                                                                        |                                     |                             |        |                           |  
|Total stock-based compensation                                          |                                     | $                           | 392    |                           | $
|                                                                        |                                     |                             |        |                           |  

The
accompanying notes are an integral part of these condensed consolidated financial statements.

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TRIPATH TECHNOLOGY INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)  Unaudited

|                                               |                                                                            | Six months ended June 30,                   |                                  
|---------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------------- | ---------------------------------
|
|Cash flows from operating activities:          |                                                                            |                                             |                                  
|                                               | Net loss                                                                   |                                             | $                                
|                                               | Adjustments to reconcile net loss to net cash used in operating activities |                                             |                                  
|                                               |                                                                            | Depreciation and amortization               |                                  
|                                               |                                                                            | Allowance for doubtful accounts             |                                  
|                                               |                                                                            | Stock-based compensation                    |                                  
|                                               |                                                                            | Forgiveness of stockholder notes receivable |                                  
|                                               |                                                                            | Changes in assets and liabilities:          |                                  
|                                               |                                                                            |                                             | Accounts receivable              
|                                               |                                                                            |                                             | Inventories                      
|                                               |                                                                            |                                             | Prepaid expenses and other assets
|                                               |                                                                            |                                             | Accounts payable                 
|                                               |                                                                            |                                             | Accrued expenses                 
|                                               |                                                                            |                                             | Deferred distributor revenue     
|                                               |                                                                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|Cash flows from investing activities:          |                                                                            |                                             |                                  
|                                               | Purchase of short-term investments                                         |                                             |                                  
|                                               | Sale of short-term investments                                             |                                             |                                  
|                                               | Purchase of property and equipment                                         |                                             |                                  
|                                               |                                                                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|Cash flows from financing activities:          |                                                                            |                                             |                                  
|                                               | Proceeds from issuance of common stock                                     |                                             |                                  
|                                               | Principal payments on capital lease obligations                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|                                               |                                                                            |                                             |                                  
|Net decrease in cash and cash equivalents      |                                                                            |                                             | (1,548                           
|Cash and cash equivalents, beginning of period |                                                                            |                                             | 12,651                           
|                                               |                                                                            |                                             |                                  
|Cash and cash equivalents, end of period       |                                                                            | $                                           | 11,103                           
|                                               |                                                                            |                                             |                                  

The
accompanying notes are an integral part of these condensed consolidated financial statements.

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Tripath Technology Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally
accepted in the United States of America and reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary to state fairly the Company's
financial position, results of operations, and cash flows for the periods presented. Results for the three and six months ended June 30, 2001 are not necessarily indicative of the results of
the entire year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.

The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned Japanese subsidiary, which was incorporated in January 2001.
All significant intercompany balances and transactions have been eliminated in consolidation.

2. Net loss per share

Basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common stock
outstanding during the period. Diluted net
loss per share is computed based on the weighted average number of common stock and dilutive potential common stock outstanding. The calculation of diluted net loss per share excludes potential common
stock if the effect is anti-dilutive. Potential common stock consist of incremental common stock issuable upon the exercise of stock options and warrants.

A
total of 9,627,000 and 8,423,000 shares of potential common stock were not included in the diluted net loss per share calculation for the three and six-month periods
ended June 30, 2001, respectively, because to do so would be anti-dilutive. For the three and six-month periods ended June 30, 2000, 14,733,000 and 13,566,000
shares of potential common stock were excluded from the calculation of diluted net loss per share because they were anti-dilutive.

The
following table sets forth the computation of basic and diluted net loss per share for the three and six-month periods presented (in thousands, except per share
amounts):

|                    |                               | Three months ended
June 30 |   | Six months ended
June 30 |  
|------------------- | ----------------------------- | -------------------------- | - | ------------------------ | -
|
|Numerator:          |                               |                            |   |                          |  
|                    | Net loss                      |                            | $ | (8,751                   | )
|                    |                               |                            |   |                          |  
|Denominator:        |                               |                            |   |                          |  
|                    | Weighted average common stock |                            |   | 27,012                   |  
|                    |                               |                            |   |                          |  
|Net loss per share: |                               |                            |   |                          |  
|                    | Basic and diluted             |                            | $ | (0.32                    | )
|                    |                               |                            |   |                          |  

4

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3. Deferred stock-based compensation

In connection with certain employee stock option grants and issuance of restricted stock to an officer made since January 1998, the Company recognized
deferred stock-based compensation, which is being amortized over the vesting periods of the related options and stock, generally four years, using an accelerated basis. Future compensation charges are
subject to reduction for any employee who terminates employment prior to such employee's option vesting date.

The
Company has granted options to purchase shares of common stock to consultants in exchange for services. The Company determined the value of the options granted to consultants
based on the Black-Scholes option pricing model.

The
following table sets forth, for each of the periods presented, the deferred stock-based compensation recorded and the amortization of deferred stock-based compensation (in
thousands):

|                                                  |  | Three months ended
June 30 |        | Six months ended
June 30
|------------------------------------------------- |  | -------------------------- | ------ | ------------------------
|
|Deferred stock-based compensation                 |  | $                          | (1,431 | )                       
|Amortization of deferred stock-based compensation |  | $                          | 392    |                         

Unamortized
deferred stock-based compensation at June 30, 2001 and December 31, 2000 was $3,824,000 and $7,369,000, respectively.

4. Cash and cash equivalents and short-term investments

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

The
Company categorizes short-term investments as available-for-sale. Accordingly, these investments are carried at fair value. The fair value of
these securities approximates cost, and there were no material unrealized gains or losses as of June 30, 2001 or December 31, 2000. Short-term investments generally have
maturities of less than one year from the date of purchase.

5. Inventories

Inventories
are comprised of the following (in thousands):

June 30,
2001

December 31,
2000Raw materials

$
3,816

$
1,927Work-in-process


638


340Finished goods


4,418


358Inventory held by distributors


2,209


695Total

$
11,081

$
3,320


6. Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 133 (FAS 133), "Accounting for Derivative
Instruments and Hedging Activities." FAS No. 133, as amended

5

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by FAS No. 137 and 138, establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities, and is
effective for fiscal years beginning after June 15, 2000. The Company adopted FAS No. 133 effective January 1, 2001. The adoption of FAS No. 133 did not have a material
impact on the Company's financial position or results of operations.

In
July 2001, the FASB issued FASB Statements Nos. 141 and 142 (FAS 141 and FAS 142), "Business Combinations" and "Goodwill and Other Intangible Assets."
FAS 141 replaces APB 16 and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of
intangible assets and accounting for negative goodwill. FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under FAS 142,
goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. FAS 141 and FAS 142 are effective for all business combinations
completed. Upon adoption of FAS 142, amortization of goodwill after June 30, 2001 recorded for business combinations consummated prior to July1, 2001 will cease, and intangible assets
acquired prior to July 1, 2001 that do not meet the criteria for recognition under FAS 141 will be reclassified to goodwill. Companies are required to adopt FAS 142 for fiscal
years beginning after December 15, 2001, but early adoption is permitted. The Company will adopt FAS 142 on January 1, 2002, the beginning of fiscal 2002. In connection with the
adoption of FAS 142, the Company will be required to perform a transitional goodwill impairment assessment. The Company has not yet determined the impact these standards will have on its
financial position and results of operations, although it does not anticipate that the adoption of these standards will have a material impact on the Company's financial position or results of
operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report contains certain forward looking statements (as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934) and information relating to the Company that are based on the beliefs of management of the Company as well as assumptions made by and information currently
available to management of the Company. In addition, when used in this report, the words "will," "believe," "expect," "intend," "plan," and similar expressions and their variants, as they relate to
the Company or the management of the Company, may identify forward looking statements. Such statements reflect the judgment of the Company as of the date of this quarterly report on
Form 10-Q with respect to future events, the outcome of which are subject to certain risks, including those factors set forth below and in the "Risk Factors" section, which may have
a significant impact on the Company's business, operating results or financial condition. These risks and uncertainties include risks and uncertainties regarding fluctuations in our quarterly
operating results; reliance on a small number of customers; our lengthy sales cycle; customer cancellations and deferrals (even from backlog); the current downturn in the semiconductor industry; the
volume of product sales and pricing concessions on certain product sales; and the timing requirements of our customers with respect to new product introductions. Investors are cautioned that these
forward looking statements are uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein. Although we believe that the expectations reflected in these forward looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. The Company undertakes no obligation to update forward looking statements.

The
following discussion and analysis should be read in connection with the condensed consolidated financial statements and the notes thereto included in Item 1 in this Quarterly
Report and our Annual Report on Form 10-K for the year ended December 31, 2000.

Overview

We design and sell amplifiers based on our proprietary Digital Power Processing technology. We are supplying amplifiers for audio electronics applications, and
we have begun offering amplifiers for DSL applications. We were incorporated in July 1995, and we began shipping products in the first quarter of 1998. Accordingly, we have limited historical
financial information and operating history upon which you may evaluate us and our prospects. We incurred net losses of approximately $17.9 million in the six months ended June 30, 2001,
$41.3 million in 2000, $31.7 million in 1999 and $33.7 million in 1998. We expect to continue to incur net losses and these losses may be significant.

We
sell our products to original equipment manufacturers and distributors. We recognize revenue from product sales upon shipment to original equipment manufacturers and end users, net
of sales returns and allowances. Our sales to distributors are made under arrangements allowing for returns or credits under certain circumstances and we defer recognition on sales to distributors
until products are resold by the distributor to the end user. All of our sales are made in U.S. dollars.

We
currently use independent suppliers to manufacture, test and assemble all of our products. Cost of revenue includes third party manufacturing, test and assembly costs as well as
salaries and overhead costs associated with employees engaged in activities related to manufacturing. Research and development expense consists primarily of salaries and related overhead costs
associated with employees engaged in research, design and development activities as well as the cost of wafers, which are ultra-thin cross-sections of semiconductor material on which
integrated circuits are located, and other materials and related services used in the development process. Selling, general and administrative expense consists primarily of employee compensation and
related overhead expenses and advertising and marketing expenses.

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Stock-based compensation expense relates both to stock-based employee and consultant compensation arrangements. Employee-related stock-based compensation expense is based on the
difference between the estimated fair value of our common stock on the date of grant and the exercise price of options to purchase that stock and is being recognized on an accelerated basis over the
vesting periods of the related options, usually four years, or in the case of fully vested options, in the period of grant. Consultant stock-based compensation expense is based on the Black-Scholes
option pricing model. Future compensation charges will be reduced if any employee or consultant terminates employment or consultation prior to the expiration of the option vesting period.

Results of Operations

Three months ended June 30, 2001 and 2000

Revenue.Revenue for the three months ended June 30, 2001 was $1.8 million, a decrease of $200,000 from
revenues of $2.0 million for the three months ended June 30, 2000. The decrease in revenue resulted from reduced shipments of our TA2020 digital audio amplifiers.

Sales
to Solectron Technology (formerly Natsteel Electronics Ltd.), a subcontractor for Apple Computer, and Komatsu Semiconductor Corporation, a distributor for Sony
Corporation, accounted for approximately, 33.7% and 33.5%, respectively, of revenue in the three months ended June 30, 2001 and 0% and 54.2%, respectively, in the corresponding prior year
quarter. Sales to our five largest customers represented approximately 91.0% of revenue in the three months ended June 30, 2001 and 94.5% of revenue in the three months ended June 30,
2000.

Gross Loss.Gross loss for the three months ended June 30, 2001 was $250,000 (including stock-based compensation
expense of $70,000), compared with a gross loss of $573,000 (including stock-based compensation expense of $29,000) for the three months ended June 30, 2000.

The
gross loss for the three months ended June 30, 2000 reflected inventory reserves and accruals relating to a price concession made to Komatsu (for sales to Sony Corporation)
in order to accelerate the acceptance and introduction of a product in a new market segment. The reduction of the gross loss for the three months ended June 30, 2001 was due to a combination of
changes in the product mix, increased shipments of products related to new design wins, ongoing cost reduction efforts and the reduction of inventory reserves related to inventory sold during the
quarter.

Research and Development.Research and development expenses for the three months ended June 30, 2001 were
$6.4 million (including stock-based compensation expense of $288,000), an increase of $0.2 million from $6.2 million (including stock-based compensation expense of
$2.2 million) for the three months ended June 30, 2000. The year-over-year increase for the three month periods resulted from an increase in personnel costs due
to additional headcount and an increase in product development expenses.

Selling, General and Administrative Expenses.Selling, general and administrative expenses for the three months ended
June 30, 2001 were $2.3 million (including stock-based compensation of $34,000), a decrease of $1.6 million from $3.9 million (including stock-based compensation expense of
$1.2 million) for the three months ended June 30, 2000. The year-over-year decrease resulted from a one-time charge related to the forgiveness of
stockholder notes receivable recorded in the three months ended June 30, 2000, partially offset by increased headcount and related costs for the three months ended June 30, 2001.

Interest Income.Interest income for the three months ended June 30, 2001 was $200,000, an increase of $33,000
from interest income of $167,000 in the three months ended June 30, 2000. The year-over-year increase in interest income for the three-month periods reflected an
increase in our cash

8

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equivalents and short-term investments, due to the remaining proceeds from our initial public offering in August 2000.

Six months ended June 30, 2001 and 2000

Revenue.Revenue for the six months ended June 30, 2001 was $7.1 million, an increase of
$4.4 million from revenues of $2.7 million for the six months ended June 30, 2000. The increase in revenue resulted from an increase in sales of our TA2020, TA2022 and TA1101
digital audio amplifiers.

Sales
to a major Asian manufacturer of PC peripheral products, Solectron Technology (formerly Natsteel Electronics Ltd.), a subcontractor for Apple Computer, and Komatsu
Semiconductor Corporation, a distributor for Sony Corporation, accounted for approximately 23.9%, 17.1% and 47.4%, respectively, of revenue in the six months ended June 30, 2001 and 0%, 0% and
58.0%, respectively, in the corresponding prior year period. Sales to our five largest customers represented approximately 96.5% of revenue in the six months ended June 30, 2001 and 91.6% of
revenue in the six months ended June 30, 2000.

Gross Profit (Loss).Gross profit for the six months ended June 30, 2001 was $20,000 (including stock-based
compensation expense of $148,000), compared with a gross loss of $1.3 million (including stock-based compensation expense of $49,000) for the six months ended June 30, 2000.

The
gross loss for the six months ended June 30, 2000 reflected inventory reserves and accruals relating to a price concession made to Komatsu (for sales to Sony Corporation)
in order to accelerate the acceptance and introduction of a product in a new market segment. The improvement in the gross profit for the six months ended June 30, 2001 was due to a combination
of changes in the product mix, increased shipments of products related to new design wins and ongoing cost reduction efforts.

Research and Development.Research and development expenses for the six months ended June 30, 2001 were
$13.4 million (including stock-based compensation expense of $1.3 million), an increase of $1.5 million from $11.9 million (including stock-based compensation expense of
$5.1 million) for the six months ended June 30, 2000. The year-over-year increase for the six month periods resulted from an increase in personnel costs due to
additional headcount and an increase in product development expenses.

Selling, General and Administrative Expenses.Selling, general and administrative expenses for the six months ended
June 30, 2001 were $5.2 million (including stock-based compensation expense of $595,000), a decrease of $3.3 million from $8.5 million (including stock-based compensation
expense of
$4.5 million) for the six months ended June 30, 2000. Excluding stock-based compensation, selling general and administrative expenses increased year-over-year due
to increased headcount and related costs, partially offset by a one-time charge related to forgiveness of stockholder notes receivable in April 2000.

Interest Income.Interest income for the six months ended June 30, 2001 was $628,000, an increase of $205,000
from interest income of $423,000 in the six months ended June 30, 2000. The year-over-year increase in interest income for the six month periods reflected an increase in
our cash equivalents and short-term investments, due to the remaining proceeds from our initial public offering in August 2000.

Liquidity and Capital Resources

Since our inception, we have financed our operations through the private sale of our equity securities, primarily the sale of preferred stock and through our
initial public offering on August 1, 2000. Net proceeds to the company as a result of our initial public offering were approximately $45.4 million.

9

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Net cash used by operating activities increased to $20.0 million for the six months ended June 30, 2001 from $8.1 million for the six months ended June 30,
2000. The increase was due to an increase in inventories and accounts receivable, partially offset by a decrease in stock-based compensation and an increase in deferred distributor revenue.

Cash
provided by investing activities increased to $17.2 million for the six months ended June 30, 2001 from $2.8 million for the six months ended June 30,
2000. The increase was due to the sale of short-term investments.

Cash
provided by financing activities increased to $1.3 million for the six months ended June 30, 2001 from $899,000 for the six months ended June 30, 2000. The
increase was due to the issuance of common stock under the Employee Stock Purchase Plan and through the exercise of stock options.

We
believe that, taking into account our recent cost cutting measures and our anticipated future burn rate, our existing cash and cash equivalent balances, together with cash
generated by our operations, if any, will be sufficient to meet our operating requirements until the second quarter of 2002. As a result, we will need to raise additional capital through public or
private financings, strategic relationships or other arrangements in order to fund our continued operations. We are attempting to finance our future capital needs through some combination of debt or
equity financing, strategic alliance, increased
product sales and other alternatives, however, there has been a significant contraction in the availability of debt and equity financing in the semiconductor sector in which we operate. Moreover,
additional equity financing, if available, would likely be dilutive to the holders of our common stock, and debt financing, if available, would likely involve restrictive covenants. We cannot be
certain that any such financing will be available on acceptable terms, or at all. If we cannot raise sufficient additional capital, it would adversely affect our ability to achieve our business
objectives and to continue as a going concern.

Recent Accounting Pronouncements

In
June 1998, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging
Activities." FAS No. 133, as amended by FAS No. 137 and 138, establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as
well as other hedging activities, and is effective for fiscal years beginning after June 15, 2000. The Company adopted FAS No. 133 effective January 1, 2001. The adoption of FAS
No. 133 did not have a material impact on our financial position or results of operations.

In
July 2001, the FASB issued FASB Statements Nos. 141 and 142 (FAS 141 and FAS 142), "Business Combinations" and "Goodwill and Other Intangible Assets."
FAS 141 replaces APB 16 and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of
intangible assets and accounting for negative goodwill. FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under FAS 142,
goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. FAS 141 and FAS 142 are effective for all business combinations
completed. Upon adoption of FAS 142, amortization of goodwill after June 30, 2001 recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible
assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under FAS 141 will be reclassified to goodwill. Companies are required to adopt FAS 142 for
fiscal years beginning after December 15, 2001, but early adoption is permitted. The Company will adopt FAS 142 on January 1, 2002, the beginning of fiscal 2002. In connection
with the adoption of FAS 142, the Company will be required to perform a transitional goodwill impairment assessment. The Company has not yet determined the impact these standards will have on
its financial position and results of operations, although we do not anticipate

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that the adoption of these standards will have a material impact on our financial position or results of operations.

Risk Factors

Risks Related to our Business

Failure to raise additional capital will have a material adverse effect on our ability to operate as a going concern.

Because we have had losses and only a nominal amount of cash has been generated from operations, we have funded our operating activities to date from the sale
of securities. We believe that, taking into account our recent cost cutting measures and anticipated future burn rate, our existing cash and cash equivalent balances, together with cash generated by
our operations, if any, will be sufficient to meet our operating requirements until the second quarter of 2002. As a result, we will need to raise additional capital to fund our continued operations.
We cannot be certain that any such financing will be available on acceptable terms, or at all. Moreover, additional equity financing, if available, would likely be dilutive to the holders of our
common stock, and debt financing, if available, would likely involve restrictive covenants. If we cannot raise sufficient additional capital, it would adversely affect our ability to achieve our
business objectives and to continue as a going concern.

Our limited operating history and dependence on new technologies make it difficult to evaluate our future products

We were incorporated in July 1995 but did not begin shipping products until 1998. Many of our products have only recently been introduced. Accordingly,
we have limited historical financial information and operating history upon which you may evaluate us and our products. Our prospects must be considered in the light of the risks, challenges and
difficulties frequently encountered by companies in their early stage of development, particularly companies in intensely competitive and rapidly evolving markets such as the semiconductor industry.
We cannot be sure that we will be successful in addressing these risks and challenges.

We have a history of losses, expect future losses and may never achieve or sustain profitability.

As of June 30, 2001, we had an accumulated deficit of $129.0 million. We incurred net losses of approximately $17.9 million in the six
months ended June 30, 2001 and $41.3 million in 2000. $31.7 million in 1999 and $33.7 million in 1998. We expect to continue to incur net losses and these losses may be
substantial. Furthermore, we expect to generate significant negative cash flow in the future. We will
need to generate substantially higher revenue to achieve and sustain profitability and positive cash flow. Our ability to generate future revenue and achieve profitability will depend on a number of
factors, many of which are described throughout this section. If we are unable to achieve or maintain profitability, we will be unable to build a sustainable business. In this event, our share price
and the value of your investment would likely decline.

Our quarterly operating results are likely to fluctuate significantly and may fail to meet the expectations of securities analysts and investors, which may cause our share
price to decline.

Our quarterly operating results have fluctuated significantly in the past and are likely to continue to do so in the future. The many factors that could cause
our quarterly results to fluctuate include:



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A
large portion of our operating expenses, including salaries, rent and capital lease expenses, are fixed. If we experience a shortfall in revenues relative to our expenses, we may be
unable to reduce our expenses quickly enough to offset the reduction in revenues during that accounting period, which would adversely affect our operating results.

Fluctuations
in our operating results may also result in fluctuations in our common stock price. If the market price of our stock is adversely affected, we may experience difficulty
in raising capital or making acquisitions. In addition, we may become the object of securities class action litigation.

As
a result, we do not believe that period-to-period comparisons of our revenues and operating results are necessarily meaningful. You should not rely on the
results of any one quarter as an indication of future performance.

Our customers may cancel or defer product orders, which could result in excess inventory.

Our sales are generally made pursuant to individual purchase orders that may be canceled or deferred by customers on short notice without significant penalty.
Thus, orders in backlog may not result in future revenue. In the past we have had cancellations and deferrals by customers. Any cancellation or deferral of product orders could result in us holding
excess inventory, which could seriously harm our profit margins and restrict our ability to fund our operations. We recognize revenue upon shipment of products to the end customer. Although we have
not experienced customer refusals to accept shipped products or material difficulties in collecting accounts receivable, such refusals or collection difficulties could result in significant charges
against income, which could seriously harm our revenues and our cash flow.

Industry-wide overcapacity has caused and may continue to cause our results to fluctuate and such shifts could result in significant inventory write-downs and
adversely affect our relationships with our suppliers.

We must build inventory well in advance of product shipments. Because the semiconductor industry is highly cyclical and in light of the current downturn, which
has resulted in excess capacity and overproduction, there is a risk that we will forecast inaccurately and produce excess inventories of our products. As a result of such inventory imbalances, future
inventory write-downs may occur due to lower of cost or market accounting, excess inventory or inventory obsolescence. In addition, any adjustment in our ordering patterns resulting from increased
inventory may adversely impact our suppliers' willingness to meet our demand, if our demand increases in the future.

Our product shipment patterns make it difficult to predict our quarterly revenues.

As is common in our industry, we frequently ship more product in the third month of each quarter than in either of the first two months of the quarter, and
shipments in the third month are higher at the end of that month. This pattern is likely to continue. The concentration of sales in the last month of the quarter may cause our quarterly results of
operations to be more difficult to predict. Moreover, if sufficient business does not materialize or a disruption in our production or shipping occurs near the end of a quarter, our revenues for that
quarter could be materially reduced.

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We rely on a small number of customers for a significant portion of our revenue and a decrease in revenue from these customers could seriously harm our business.

A relatively small number of customers have accounted for a significant portion of our revenues to date. Any reduction or delay in sales of our products to one
or more of these key customers could seriously reduce our sales volume and revenue. In particular, sales to a major Asian manufacturer of PC peripheral products, Solectron Technology (formerly
Natsteel Electronics Corp.), a subcontractor for Apple Computer and Komatsu Semiconductor Corporation, the purchasing agent for Sony Corporation, accounted for 23.9%, 17.1% and 47.4%, respectively, of
total revenue in the six months ended June 30, 2001 and 0%, 0% and 59.6%, respectively, of total revenue in 2000. Moreover, sales to our five largest customers represented approximately 94.5%
of our total revenue in the six months ended June 30, 2001, 88.2% of our revenue in 2000 and 80.8% of our revenue in 1999. We expect that we will continue to rely on the success of our largest
customers and on our success in selling our existing and future products to those customers in significant quantities. We cannot be sure that we will retain our largest customers or that we will be
able to obtain additional key customers.

We currently rely on sales of three products for a significant portion of our revenue, and the failure of these products to be successful in the future could substantially
reduce our sales.

We currently rely on sales of our TA2020, TA2022 and TA1101 digital audio amplifiers to generate a significant portion of our revenue. Sales of these products
amounted to 96.2% of our revenue in the six months ended June 30, 2001, 92.8% of our revenue in 2000 and 52.6% of our revenue in 1999. We have developed additional products and plan to
introduce more products in the future but there can be no assurance that these products will be commercially successful. Consequently, if our existing products are not successful, our sales could
decline substantially.

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Our lengthy sales cycle makes it difficult for us to predict if or when a sale will be made and to forecast our revenue and budget expenses, which may cause fluctuations in our
quarterly results.

Because of our lengthy sales cycles, we may experience a delay between increasing expenses for research and development, sales and marketing, and general and
administrative efforts, as well as increasing investments in inventory, and the generation of revenue, if any, from such expenditures. In addition, the delays inherent in such lengthy sales cycle
raise additional risks of customer decisions to cancel or change product plans, which could result in the loss of anticipated sales by us. Our new products are generally incorporated into our
customers' products or systems at the design stage. To endeavor to have our products selected for design into new products of current and potential customers, commonly referred to as design wins,
often requires significant expenditures by us without any assurance of success. Once we have achieved a design win, our sales cycle will start with the test and evaluation of our products by the
potential customer and design of the customer's equipment to incorporate our products. Generally, different parts have to be redesigned in order to incorporate our devices successfully into our
customers' products. The sales cycle for the test and evaluation of our products can range from a minimum of three to six months, and it can take a minimum of an additional six to nine months before a
customer commences volume production of equipment that incorporates our products. Achieving a design win provides no assurance that such customer will ultimately ship products incorporating our
products or that such products will be commercially successful. Our revenue or prospective revenue would be reduced if a significant customer curtails, reduces or delays orders during our sales cycle,
or chooses not to release products incorporating our products.

The current downturn in the semiconductor industry has lead and may continue to lead to decreased revenue.

During 2001, slowing worldwide demand for semiconductors has resulted in significant inventory buildups for semiconductor companies. Presently, we have no
visibility regarding how long the semiconductor industry downturn will last or how severe the downturn will be. In the three months ended June 30, 2001, our revenues decreased 66% from revenues
for the three months ended March 31, 2001. If the downturn continues or worsens, we may experience greater levels of cancellations and/or pushouts of orders for our products in the future.

We may experience difficulties in the introduction of new or enhanced products that could result in significant, unexpected expenses or delay their launch, which would harm our
business.

Our failure or our customers' failure to develop and introduce new products successfully and in a timely manner would seriously harm our ability to generate
revenues. Consequently, our success depends on our ability to develop new products for existing and new markets, introduce such products in a timely and cost-effective manner and to
achieve design wins. The development of these new devices is highly complex, and from time to time we have experienced delays in completing the development and introduction of new products. The
successful introduction of a new product may currently take up to 18 months. Successful product development and introduction depends on a number of factors, including:



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If we are unable to hire or retain key personnel, we might not be able to operate our business successfully.

We may not be successful in retaining executive officers and other key management and technical personnel. The competition for such employees is intense,
particularly in Silicon Valley and particularly for experienced mixed-signal circuit designers, systems applications engineers and experienced executive personnel. A high level of technical expertise
is required to support the implementation of our
technology in our existing and new customers' products. In addition, the loss of the management and technical expertise of Dr. Adya Tripathi, our founder, president and chief executive officer,
could seriously harm us. We do not have any employment contracts with our employees.

Our headquarters, as well as the facilities of our principal manufacturers and customers are located in geographic regions with increased risks of power supply failure, natural
disasters, labor strikes and political unrest.

Our headquarters is located in Santa Clara, California, an area on or near a known earthquake fault within the state. In addition, businesses within the State
of California are currently experiencing a shortage of available electrical power which has resulted in electrical blackouts. In the event these blackouts continue or increase in severity, they could
disrupt the operations of our facilities within the state.

Our
principal manufacturers and customers are located in the Pacific Rim region. The risk of earthquakes in this region, particularly in Taiwan, is significant due to the proximity of
major earthquake fault lines. Earthquakes, fire, flooding and other natural disasters in the Pacific Rim region likely would result in the disruption of our foundry partners' assembly and testing
capacity and the ability of our customers to purchase our products. Labor strikes or political unrest in these regions would likely also disrupt operations of our foundries and customers. In
particular, there is a recent history of political unrest between China and Taiwan. Any disruption resulting from such events could cause significant delays in shipments of our products until we are
able to shift our manufacturing, assembly and testing from the affected contractor to another third party vendor. We cannot be sure that such alternative capacity could be obtained on favorable terms,
if at all. Moreover, any such disruptions could also cause significant decreases in our sales to these customers until our customers resume normal purchasing volumes.

Risks Related to Manufacturing

We depend on two outside foundries for our semiconductor device manufacturing requirements.

We do not own or operate a fabrication facility, and substantially all of our semiconductor device requirements are currently supplied by two outside
foundries, United Microelectronics Corporation, or UMC, in Taiwan and STMicroelectronics Group in Europe. Although we primarily utilize these two outside foundries, most of our components are not
manufactured at both foundries at any given time. As a result, each foundry is a sole source for certain products. There are significant risks associated with our reliance on outside foundries,
including:



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In
addition, the manufacture of integrated circuits is a highly complex and technologically demanding process. Although we work closely with our foundries to minimize the likelihood
of reduced manufacturing yields, our foundries have from time to time experienced lower than anticipated manufacturing yields, particularly in connection with the introduction of new products and the
installation and start-up of new process technologies.

We
provide our foundries with continuous forecasts of our production requirements; however, the ability of each foundry to provide us with semiconductor devices is limited by the
foundry's available capacity. In many cases, we place our orders on a purchase order basis, and foundries may allocate capacity to the production of other companies' products while reducing the
deliveries to us on short notice. In particular, foundry customers that are larger and better financed than us or that have long-term agreements with our foundries may cause such foundries
to reallocate capacity in a manner adverse to us.

If
we use a new foundry, several months would be typically required to complete the qualification process before we can begin shipping products from the new foundry. In the event
either of our current foundries suffers any damage or destruction to their respective facilities, or in the event of any other disruption of foundry capacity, we may not be able to qualify alternative
manufacturing sources for existing or new products in a timely manner. Even our current outside foundries would need to have certain manufacturing processes qualified in the event of disruption at
another foundry, which we may not be able to accomplish in a timely enough manner to prevent an interruption in supply of the affected products.

If
we encounter shortages or delays in obtaining semiconductor devices for our products in sufficient quantities when required, delivery of our products could be delayed, resulting in
customer dissatisfaction and decreased revenues.

We depend on third-party subcontractors for most of our semiconductor assembly and testing requirements and any unexpected interruption in their services could cause us to miss
scheduled shipments to customers and to lose revenues.

Semiconductor assembly and testing are complex processes, which involve significant technological expertise and specialized equipment. As a result of our
reliance on third-party subcontractors for assembly and testing of our products, we cannot directly control product delivery schedules, which has in the past, and could in the future, result in
product shortages or quality assurance problems that could increase the costs of manufacture, assembly or testing of our products. Almost all of our products are assembled and tested by one of five
subcontractors: AMBIT Microsystems Corporation in Taiwan, ST Assembly Test Services Ltd. in Singapore, Amkor Technology, Inc. in the Philippines, ASE in Korea and ISE Labs Assembly in
the United States. We do not have long-term agreements with any of these suppliers and retain their services on a per order basis. The availability of assembly and testing services from
these subcontractors could be adversely affected in the event a subcontractor suffers any damage or destruction to their respective facilities, or in the event of any other disruption of assembly and
testing capacity. Due to the amount of time normally required to qualify assemblers and testers, if we are required to find alternative manufacturing assemblers or testers of our components, shipments
could be delayed. Any problems associated with the delivery, quality or cost of our products could seriously harm our business.

Failure to transition our products to increasingly smaller semiconductor chip sizes and packaging could cause us to lose our competitive advantage and reduce our gross margins.

We evaluate the benefits, on a product-by-product basis, of migrating to smaller semiconductor process technologies in order to reduce
costs and have commenced migration of some products to smaller semiconductor processes. We believe that the transition of our products to increasingly smaller

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semiconductor processes will be important for us to reduce manufacturing costs and to remain competitive. Moreover, we are dependent on our relationships with our foundries to migrate to smaller
semiconductor processes successfully. We cannot be sure that our future process migrations will be achieved without difficulties, delays or increased expenses. Our gross margins would be seriously
harmed if any such transition is substantially delayed or inefficiently implemented.

Our international operations subject us to risks inherent in doing business on an international level that could harm our operating results.

We currently obtain almost all of our manufacturing, assembly and test services from suppliers located outside the United States and may expand our
manufacturing activities abroad. Approximately 96.5% of our total revenue in the six months ended June 30, 2001 was derived from sales to independent
customers based outside the United States. In 2000 and 1999, 93.1% and 94.6%, respectively, of our total revenue was derived from sales to independent customers based outside of the United States. In
addition, we often ship products to our domestic customers' international manufacturing divisions and subcontractors. Accordingly, we are subject to risks inherent in international operations, which
include:



All
of our international sales to date have been denominated in U.S. dollars. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our
products less competitive in international markets. Conversely, a decrease in the value of the U.S. dollar relative to foreign currencies would increase the cost of our overseas manufacturing, which
would reduce our gross margins.

Risks Related to our Product Lines

Our ability to achieve revenue growth will be harmed if we are unable to persuade electronic systems manufacturers to adopt our new amplifier technology.

We face difficulties in persuading manufacturers to adopt our products using our new amplifier technology. Traditional amplifiers use design approaches
developed in the 1930s. These approaches are still used in most amplifiers and engineers are familiar with these design approaches. In order to adopt our products, manufacturers and engineers must
understand and accept our new technology. To take advantage of our products, manufacturers must redesign their systems, particularly components such as the power supply and heat sinks. Manufacturers
must work with their suppliers to obtain modified components and they often must complete lengthy evaluation and testing. In addition, our amplifiers are often more expensive as components than
traditional amplifiers. For these reasons, prospective customers may be reluctant to adopt our technology.

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We currently depend on high-end consumer audio markets that are typically characterized by aggressive pricing, frequent new product introductions and intense
competition.

A substantial portion of our current revenue is generated from sales of products that address the high-end consumer audio markets, including home
theater, computer audio, and the automotive audio markets. These markets are characterized by frequent new product introductions, declining prices and intense competition. Pricing in these markets is
aggressive, and we expect pricing pressure to continue. In the computer audio segment, our success depends on consumer awareness and acceptance of existing and new products by our customers and
consumers in particular, the elimination of externally-powered speakers. In the automotive audio segment, we face pressure from our customers to deliver increasingly higher-powered solutions under
significant engineering limitations due to the size constraints in car dashboards. In addition, our ability to obtain prices higher than the prices of traditional amplifiers will depend on our ability
to educate manufacturers and their customers about the benefits of our products. Failure of our customers and consumers to accept our existing or new products will seriously harm our operating
results.

If we are not successful in developing and marketing new and enhanced products for the DSL high speed communications markets that keep pace with technology and our customers'
needs, our operating results will suffer.

The market for our DSL products is new and emerging, and is characterized by rapid technological advances, intense competition and a relatively small number of
potential customers. This will likely result in price erosion on existing products and pressure for cost-reduced future versions. We are currently sampling and field testing our first
product for the DSL market and we have not received any large volume orders. Implementation of our products require manufacturers to accept our technology and redesign their products. If potential
customers do not accept our technology or experience problems implementing our devices in their products, our products could be rendered obsolete and our business would be harmed. If we are
unsuccessful in introducing future products with enhanced performance, our ability to achieve revenue growth will be seriously harmed.

We may experience difficulties in the introduction of amplifier products for use in the cellular phone and optics markets that could result in significant expenses or delay in
their launch.

We are currently developing lines of amplifier products for use in the cellular phone and optics markets. We currently have no design wins or customers for
these products under development. We may not introduce our amplifier products for the cellular phone or optics markets on time, and such products may never achieve market acceptance. Furthermore,
competition in these markets is likely to result in price reductions, shorter product life cycles, reduced gross margins and longer sales cycles compared with what we have experienced to date.

Intense competition in the semiconductor industry and in the consumer audio and communications markets could prevent us from achieving or sustaining profitability.

The consumer audio, personal computer, communications and semiconductor industries are highly competitive. We compete with a number of major domestic and
international suppliers of semiconductors in the audio and communications markets. We also may face competition from suppliers of products based on new or emerging technologies. Many of our
competitors operate their own fabrication facilities and have longer operating histories and presence in key markets, greater name recognition, access to larger customer bases and significantly
greater financial, sales and marketing, manufacturing, distribution, technical and other resources than us. As a result, such competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources to the promotion and sale of their products than us. Current and potential competitors have established or may establish
financial or strategic relationships

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among themselves or with existing or potential customers, resellers or other third parties. Accordingly, it is possible that new competitors or alliances among competitors could emerge and rapidly
acquire significant market share. In addition, existing or new competitors may in the future develop technologies that more effectively address the transmission of digital information through existing
analog infrastructures at a lower cost or develop new technologies that may render our technology obsolete. We cannot assure you that we will be able to compete successfully in the future against our
existing or potential competitors, or that our business will not be harmed by increased competition.

Our products are complex and may have errors and defects that are detected only after deployment in customers' products, which may harm our business.

Products such as those that we offer may contain errors and defects when first introduced or as new versions are released. We have in the past experienced such
errors and defects, in particular in the development stage of a new product. Delivery of products with production defects or reliability, quality or compatibility problems could significantly delay or
hinder market acceptance of such products, which could damage our reputation and seriously harm our ability to retain our existing customers and to attract new customers. Moreover, such errors and
defects could cause problems, interruptions, delays or a cessation of sales to our customers. Alleviating such problems may require substantial redesign, manufacturing and testing which would result
in significant expenditures of capital and resources. Despite testing conducted by us, our suppliers and our customers, we cannot be sure that errors and defects will not be found in new products
after commencement of commercial production. Such errors and defects could result in additional development costs, loss of, or delays in, market acceptance, diversion of technical and other resources
from our other development efforts, product repair or replacement costs, claims by our customers or others against us, or the loss of credibility with our current and prospective customers. Any such
event could result in the delay or loss of market acceptance of our products and would likely harm our business.

Downturns in the highly cyclical semiconductor industry and rapid technological change could result in substantial period-to-period fluctuations in
wafer supply, pricing and average selling prices which make it difficult to predict our future performance.

We provide semiconductor devices to the audio, personal computer and communications markets. The semiconductor industry is highly cyclical and subject to rapid
technological change and has been subject to significant economic downturns at various times, characterized by diminished product demand, accelerated erosion of average selling prices and production
overcapacity. The semiconductor industry also periodically experiences increased demand and production capacity constraints. As a result, we have experienced and may experience in the future
substantial period-to-period fluctuations in our results of operations due to general semiconductor industry conditions, overall economic conditions or other factors, many of
which are outside our control. Due to these risks, you should not rely on period-to-period comparisons to predict our future performance.

Risks Related to Our Intellectual Property

Our intellectual property and proprietary rights may be insufficient to protect our competitive position.

Our business depends, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade secret laws to
protect our proprietary technologies. We cannot be sure that such measures will provide meaningful protection for our proprietary technologies and processes. As of June 30, 2001, we have nine
issued United States patents, and 30 additional United States patent applications which are pending. In addition, we have two international patents issued and an additional 45 international patents
pending. We cannot be sure that any patent will issue as a result of these applications or future applications or, if issued, that any claims allowed will be

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sufficient to protect our technology. In addition, we cannot be sure that any existing or future patents will not be challenged, invalidated or circumvented, or that any right granted thereunder would
provide us meaningful protection. The failure of any patents to provide protection to our technology would make it easier for our competitors to offer similar products. In connection with our
participation in the development of various industry standards, we may be required to agree to license certain of our patents to other parties, including our competitors, that develop products based
upon the adopted standards.

We
also generally enter into confidentiality agreements with our employees and strategic partners, and generally control access to and distribution of our documentation and other
proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our products, services or technology without authorization, develop similar
technology independently or design around our patents. In addition, effective copyright, trademark and trade secret protection may be unavailable or limited in certain foreign countries. Some of our
customers have entered into agreements with us pursuant to which such customers have the right to use our proprietary technology in the event we default in our contractual obligations, including
product supply obligations, and fail to cure the default within a specified period of time.

We may be subject to intellectual property rights disputes that could divert management's attention and could be costly.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, we may receive in the
future, notices of claims of infringement, misappropriation or misuse of other parties' proprietary rights. We cannot be sure that we will prevail in these actions, or that other actions alleging
infringement by us of third-party patents,
misappropriation or misuse by us of third-party trade secrets or the invalidity of one or more patents held by us will not be asserted or prosecuted against us, or that any assertions of infringement,
misappropriation or misuse or prosecutions seeking to establish the invalidity of our patents will not seriously harm our business. For example, in a patent or trade secret action, an injunction could
be issued against us requiring that we withdraw particular products from the market or necessitating that specific products offered for sale or under development be redesigned. We have also entered
into certain indemnification obligations in favor of our customers and strategic partners that could be triggered upon an allegation or finding of our infringement, misappropriation or misuse of other
parties' proprietary rights. Irrespective of the validity or successful assertion of such claims, we would likely incur significant costs and diversion of our management and personnel resources with
respect to the defense of such claims, which could also seriously harm our business. If any claims or actions are asserted against us, we may seek to obtain a license under a third party's
intellectual property rights. We cannot be sure that under such circumstances a license would be available on commercially reasonable terms, if at all. Moreover, we often incorporate the intellectual
property of our strategic customers into our designs, and we have certain obligations with respect to the non-use and non-disclosure of such intellectual property.

We
cannot be sure that the steps taken by us to prevent our, or our customers', misappropriation or infringement of the intellectual property will be successful.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments
without significantly increasing risk of loss. Some of the securities that we may invest in the future may be subject to market risk for changes in interest rates. To mitigate this risk, we plan to
maintain a portfolio of cash equivalents and short term investments in a variety of securities, which may include commercial paper, money market funds, government and non-government debt
securities. Currently, we are exposed to minimal market risks.

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We manage the sensitivity of our results of operations to these risks by maintaining a conservative portfolio, which is comprised solely of highly-rated, short-term investments. We do not
hold or issue derivative, derivative commodity instruments or other financial instruments for trading purposes.

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Part II. Other Information

Item 1. Legal proceedings

None

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults in Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

The Company's Annual Meeting of Stockholders was held on August 3, 2001 in Santa Clara, California. Proxies representing 23,694,691 shares of common
stock or 87.57% of the total outstanding shares were voted at the meeting. The table below presents the voting results of election of the Company's Board of Directors:

Votes For

Votes WithheldDr. Adya S. Tripathi

20,532,263

3,162,428Dr. Charles Jungo

21,537,898

2,156,793Sohail Khan

21,537,913

2,156,778Tsuyoshi Taira

21,536,963

2,157,728


The
stockholders approved an amendment to the 2000 Stock Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,300,000. The proposal received
19,494,814 affirmative votes, 4,174,028 negative votes, and 25,849 abstentions.

The
stockholders approved the appointment of PricewaterhouseCoopers LLP as independent accountants of the Company for the fiscal year 2001. The proposal received 23,535,489
affirmative votes, 151,513 negative votes, and 7,689 abstentions.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K



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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 undersigned,
thereunto duly authorized.

| |  | Tripath Technology Inc.                                                                             
| |  | ----------------------------------------------------------------------------------------------------
| |  | Date:                                                                                               
| |  | by:                                                                                                 
| |  | John J. DiPietro,                                                                                   
| |  | Vice President and Chief Financial Officer (duly authorized officer and principal financial officer)

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