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

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FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 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

77-0407364(State or other jurisdiction
of Incorporation or Organization)

(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 / /

26,961,161
shares of the Registrant's common stock were outstanding as of April 30, 2001.

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TRIPATH
TECHNOLOGY INC.

FORM
10-Q

For
The Quarter Ended March 31, 2001

TABLE
OF CONTENTS

|PART I. Financial Information |           | 
|----------------------------- | --------- | 
|                              | Item 1.   | 
|                              |           | 
|                              |           | 
|                              |           | 
|                              |           | 
|                              | 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



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

|                                           |                                              | March 31,
2001 |        | December 31,
2000 |  
|------------------------------------------ | -------------------------------------------- | -------------- | ------ | ----------------- | -
|ASSETS                                     |                                              |                |        |                   |  
|Current assets:                            |                                              |                |        |                   |  
|                                           | Cash and cash equivalents:                   |                | $      | 14,796            |  
|                                           | Short-term investments                       |                |        | 11,000            |  
|                                           | Accounts receivable, net                     |                |        | 4,780             |  
|                                           | Inventories                                  |                |        | 5,472             |  
|                                           | Prepaid expenses and other current assets    |                |        | 814               |  
|                                           |                                              |                |        |                   |  
|                                           | Total current assets                         |                |        | 36,862            |  
|Property and equipment, net                |                                              |                | 4,234  |                   |  
|Other assets                               |                                              |                | 375    |                   |  
|                                           |                                              |                |        |                   |  
|                                           | Total assets                                 |                | $      | 41,471            |  
|                                           |                                              |                |        |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                              |                |        |                   |  
|Current liabilities:                       |                                              |                |        |                   |  
|                                           | Accounts payable                             |                | $      | 4,104             |  
|                                           | Current portion of capital lease obligations |                |        | 247               |  
|                                           | Accrued expenses                             |                |        | 1,942             |  
|                                           | Deferred distributor revenue                 |                |        | 1,001             |  
|                                           |                                              |                |        |                   |  
|                                           | Total current liabilities                    |                |        | 7,294             |  
|                                           |                                              |                |        |                   |  
|Capital lease obligations                  |                                              |                | 524    |                   |  
|                                           |                                              |                |        |                   |  
|Stockholders' equity:                      |                                              |                |        |                   |  
|                                           | Common stock                                 |                |        | 27                |  
|                                           | Additional paid-in capital                   |                |        | 159,517           |  
|                                           | Deferred stock-based compensation            |                |        | (5,647            | )
|                                           | Accumulated deficit                          |                |        | (120,244          | )
|                                           |                                              |                |        |                   |  
|Total stockholders' equity                 |                                              |                | 33,653 |                   |  
|                                           |                                              |                |        |                   |  
|Total liabilities and stockholders' equity |                                              | $              | 41,471 |                   | $
|                                           |                                              |                |        |                   |  

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
March 31,2001

2000Revenue

$
5,329

$
742Cost of revenue


5,059


1,507Gross profit (loss)


270


(765
)Operating expenses:Research and development


7,000


5,758Selling, general and administrative


2,840


4,542Total operating expenses


9,840


10,300Loss from operations


(9,570
)

(11,065
)Interest income


428


256Net loss

$
(9,142
)
$
(10,809
)Basic and diluted net loss per share

$
(0.34
)
$
(0.98
)Number of shares used in computing basic and diluted net loss per share


26,589


11,047


Stock-based
compensation included in:

Three months ended
March 31,2001

2000Cost of revenue

$
78

$
20Research and development


1,054


2,911Selling, general and administrative


561


3,311Total stock-based compensation

$
1,693

$
6,242


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

2

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

|                                                     |                                                                            | Three months ended
March 31,       |                                  
|---------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------------------- | ---------------------------------
|
|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           |                                  
|                                                     |                                                                            | Changes in assets and liabilities: |                                  
|                                                     |                                                                            |                                    | Accounts receivable              
|                                                     |                                                                            |                                    | Inventories                      
|                                                     |                                                                            |                                    | Prepaid expenses and other assets
|                                                     |                                                                            |                                    | Accounts payable                 
|                                                     |                                                                            |                                    | Accrued expenses                 
|                                                     |                                                                            |                                    | Deferred distributor revenue     
|                                                     |                                                                            |                                    |                                  
|                                                     | Net cash used in operating activities                                      |                                    |                                  
|                                                     |                                                                            |                                    |                                  
|Cash flows from investing activities:                |                                                                            |                                    |                                  
|                                                     | Purchase of short-term investments                                         |                                    |                                  
|                                                     | Sale of short-term investments                                             |                                    |                                  
|                                                     | Purchase of property and equipment                                         |                                    |                                  
|                                                     |                                                                            |                                    |                                  
|Net cash provided by investing activities            |                                                                            |                                    | 12,546                           
|                                                     |                                                                            |                                    |                                  
|Cash flows from financing activities:                |                                                                            |                                    |                                  
|                                                     | Proceeds from issuance of common stock                                     |                                    |                                  
|                                                     | Principal payments on capital lease obligations                            |                                    |                                  
|                                                     |                                                                            |                                    |                                  
|Net cash provided by financing activities            |                                                                            |                                    | 978                              
|                                                     |                                                                            |                                    |                                  
|Net increase (decrease) in cash and cash equivalents |                                                                            |                                    | 2,145                            
|Cash and cash equivalents, beginning of period       |                                                                            |                                    | 12,651                           
|                                                     |                                                                            |                                    |                                  
|Cash and cash equivalents, end of period             |                                                                            | $                                  | 14,796                           
|                                                     |                                                                            |                                    |                                  

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

3

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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 generally accepted accounting principles 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 months ended March 31, 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, shares issuable upon conversion of convertible preferred stock and common stock issuable upon the exercise of common stock warrants.

A
total of 10,175,000 and 13,251,000 shares of potential common stock were not included in the diluted net loss per share calculation for the periods ending March 31, 2001 and
2000, respectively, because to do so would be anti-dilutive.

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

Three Months ended
March 31,2001

2000Numerator:Net loss

$
(9,142
)
$
(10,809
)Denominator:Weighted average common stock


26,589


11,047Net loss per share:Basic and diluted

$
(0.34
)
$
(0.98
)


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. The fair value per share used to calculate deferred
stock-based compensation was derived by reference to the convertible preferred stock issuance prices. 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
March 312001

2000Deferred stock-based compensation

$
(29
)
$
10,056Amortization of deferred stock-based compensation

$
1,693

$
6,242


Unamortized
deferred stock-based compensation at March 31, 2001 and December 31, 2000 was $5,647,000 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 March 31, 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):

March 31,
2001

December 31,
2000Raw materials

$
3,380

$
1,927Work-in-process


539


340Finished goods


688


358Inventory held by distributors


865


695Total

$
5,472

$
3,320


5

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6.  Recent Accounting Pronouncement

In
June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133, as amended by SFAS 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 SFAS No. 133 effective January 1, 2001. The adoption of
SFAS No. 133 did not have a material impact on our financial position or results of operations.

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 "likely," "will," "suggests," "target," "may," "would," "could," "anticipate," "believe," "estimate," "expect," "intend," "plan," "predict,"
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 the factors set forth below and in
"Risk Factors," which may have a significant impact on the Company's business, operating results or financial condition. Such risks and uncertainties include risks and uncertainties regarding silicon
wafer pricing and the availability of foundry and assembly capacity and raw materials; the availability and pricing of competing products and technologies and the resulting effects on sales and
pricing of our products; fluctuations in the manufacturing yields of our third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of our
products; our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a timely manner; 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
inherently 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. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward looking statements. 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.

6

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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 $9.1 million in the
three months ended March 31, 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.

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.

7

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Results of Operations

Three months ended March 31, 2001 and 2000

Revenue.Revenue for the three months ended March 31, 2001 was $5.3 million, an increase of
$4.6 million from revenues of $742,000 for the three months ended March 31, 2000. The increase in revenue resulted from an increase in sales of our TA2020, TA2022 and TA1101 digital
audio amplifiers.

Sales
to Komatsu Semiconductor Corporation, the majority of which relate to Sony Corporation, Natsteel Electronics Ltd, a subcontractor for Apple Computer, and a major Asian
manufacturer of PC peripheral products accounted for approximately 52.1%, 11.6% and 31.9%, respectively, of revenue in the three months ended March 31, 2001 and 68.0%, 0% and 0%, respectively,
in the corresponding prior year quarter. Sales to our five largest customers represented approximately 97.4% of revenue in the three months ended March 31, 2001 and 96.8% of revenue in the
three months ended March 31, 2000.

Gross Profit (Loss).Gross profit for the three months ended March 31, 2001 was $270,000 (including stock-based
compensation expense of $78,000), compared with a gross loss of $765,000 (including stock-based compensation expense of $20,000) for the three months ended March 31, 2000.

The
gross loss for the three months ended March 31, 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 three months ended March 31, 2001 was due
to a combination of 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 three months ended March 31, 2001 were
$7.0 million (including stock-based compensation expense of $1.0 million), an increase of $1.2 million from $5.8 million (including stock-based compensation expense of
$2.9 million) for the three
months ended March 31, 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
March 31, 2001 were $2.8 million (including stock-based compensation of $561,000) a decrease of $1.7 million from $4.5 million (including stock-based compensation expense
of $3.3 million) for the three months ended March 31, 2000. Excluding stock-based compensation, selling general and administrative expenses increased year over year due to increased
headcount and related costs.

Interest Income.Interest income for the three months ended March 31, 2001 was $428,000, an increase of $172,000
from interest income of $256,000 in the three months ended March 31, 2000. The year-over-year increase in interest income for the three month periods reflected an
increase in our cash equivalents and short-term investments, due to the proceeds from the initial public offering in August, 2000.

8

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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.

Net
cash used by operating activities increased to $11.4 million for the three months ended March 31, 2001 from $4.0 million for the three months ended
March 31, 2000. The increase was due to an increase in inventories and accounts receivables, partially offset by a decrease in stock-based compensation.

Cash
provided by investing activities increased to $12.5 million for the three months ended March 31, 2001 from $1.7 million for the three months ended
March 31, 2000. The increase was due to the sale of short-term investments.

Cash
provided by financing activities increased to $978,000 for the three months ended March 31, 2001 from $365,000 for the three months ended March 31, 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
expect our future liquidity and capital requirements will fluctuate depending on numerous factors, including the cost and timing of future product development efforts, the timing
of introductions of new products and enhancements to existing products, market acceptance of our existing and new products and the cost and timing of sales and marketing activities. We believe that
the net proceeds from our initial public offering, together with cash generated by our operations, if any, will be sufficient to meet our operating and capital requirements for at least the next
twelve months. However, we may need to raise additional capital in future periods through public or private financings, strategic relationships or other arrangements in order to fund our operations
and potential acquisitions, if any, until we achieve profitability, if ever. Additional equity financing may be dilutive to the holders of our common stock, and debt financing, if available, may
involve restrictive covenants. However, we cannot be certain that any such financing will be available on acceptable terms, or at all. If we cannot raise additional capital when needed and on
acceptable terms, we may not be able to pursue our growth strategy.

Recent Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS 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 SFAS No. 133 effective
January 1, 2001. The adoption of SFAS No. 133 did not have a material impact on our financial position or results of operations.

9

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Risk Factors

Risks Related to our Business

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 March 31, 2001, we had an accumulated deficit of $120.2 million. We incurred net losses of approximately $9.1 million in the three
months ended March 31, 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
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 recent revenue growth may not be sustainable and should not be considered indicative of future revenue growth. 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:



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 achieve quarterly operating results that meet the expectations of securities analysts and investors. In addition, we intend to increase our operating
expenses in 2001 and 2002. We do not know whether our business will grow rapidly enough to absorb these costs. As a result, our operating results could fluctuate, and such fluctuations could cause the
market price of our common stock to decline. 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.

10

---

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 Komatsu Semiconductor Corporation, the purchasing agent for Sony Corporation, and Natsteel
Corp., a subcontractor for Apple Computer, and a major Asian manufacturer of PC peripheral products accounted for 52.1%, 11.6% and 31.9%, respectively, of total revenue in the three months ended
March 31, 2001 and 59.6%, 18.9% and 0%, respectively, of total revenue in 2000. Moreover, sales to our five largest customers represented approximately 97.4% of our total revenue in the three
months ended March 31, 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 98.1% of our revenue in the three months ended March 31, 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.

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.

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.
To date we have not had any cancellations or deferrals by customers, however, cancellation or deferral of product orders could result in us holding

11

---

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 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.

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:



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 recruiting and 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. We will need to hire a number of additional technical personnel if we are to increase
the rate at which we develop new products and if we are to provide adequate technical support to a larger number of customers. In addition, the loss of the management and technical expertise of
Dr. Adya S. Tripathi, our founder, president and chief
executive officer, could seriously harm us. We do not have any employment contracts with our employees.

If we fail to improve our operational systems and controls to manage future growth, our business could be seriously harmed.

We have experienced a period of rapid growth, expanding from 22 employees in December 1997 to 141 employees in March 2001. This expansion has
placed, and continues to place, significant demands on our resources. We must continue to improve our operational, financial and management information systems to keep pace with the growth of our
business. In particular, during the past year we implemented a new management information system. While we have not experienced significant problems with this system, we can offer no assurances that
this system or others will not cause problems in the future and result in the disruption of our operations. We cannot be sure that any future efforts to improve our systems will be accomplished
successfully.

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We may engage in acquisitions that may harm our operating results, dilute our stockholders and cause us to incur debt or assume contingent liabilities,

As part of our business strategy, we expect to review acquisition prospects that would complement our existing product offerings, augment our market coverage
or enhance our technological capabilities. Our future acquisitions could result in:



Such
actions by us could seriously harm our results of operations and the price of our common stock. Furthermore, acquisitions entail numerous risks, including:



Since
we have not made any material acquisitions in the past, we cannot be sure that we will be able to successfully integrate any businesses, products, technologies or personnel that
might be acquired in the future.

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 subject to electrical blackouts as a consequence of a shortage of available electrical power. 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.

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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:



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. In addition, if we choose to use a new foundry, several months are typically required to complete the qualification process before we can begin shipping products from the new foundry.
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. In the event either foundry 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.

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

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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 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 98.6% of our total revenue in the three months ended March 31, 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.

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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.

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.

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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 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 may experience substantial
period-to-period fluctuations in future 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.

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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 March 31, 2001, we have seven
issued United States patents and 33 additional United States patent applications which are pending. In addition, we have two international patents issued and an additional 44 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 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.

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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. 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

None

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: April 30, 2001
by: /s/ John J. DiPietro                                                                         
| |  | John J. DiPietro,
Vice President and
Chief Financial Officer
(duly authorized officer and
principal financial officer)

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