SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

(Mark One)

 

 

 

TRIPATH TECHNOLOGY INC.

(Exact name of registrant as specified in its charter)

 

 

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 ý   No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes o   No ý

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter:  $43,393,098 .

 

There were 41,353,812 shares of Tripath Technology Inc. common stock outstanding on March 15, 2003.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Certain Portions of the Registrant’s Proxy Statement for its 2003 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation  14A not later than April 30, 2003, are incorporated herein by reference to Parts II and III of this Annual Report on Form 10-K.

 

 

TRIPATH TECHNOLOGY INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2002

 

PART I
ITEM 1.	Business
ITEM 2.	Properties
ITEM 3.	Legal Proceedings
ITEM 4.	Submission of Matters to a Vote of Security Holders
PART II
ITEM 5.	Market for Registrant’s Common Equity and Related Stockholder Matters
ITEM 6.	Selected Consolidated Financial Data
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risks
ITEM 8.	Consolidated Financial Statements and Supplementary Data
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
ITEM 10.	Directors and Officers of the Registrant
ITEM 11.	Executive Compensation
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13.	Certain Relationships and Related Transactions
ITEM 14.	Controls and Procedures
PART IV
ITEM 15.	Exhibits, Financial Statements, Schedules and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX

 

1

 

PART I

 

The following discussion and analysis contains forward-looking statements.  These statements are based on our current expectations, assumptions, estimates and projections about our business and our industry, and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in, or contemplated by, the forward-looking statements.  Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “should,” “estimate,” “predict,” “potential,” “continue” or the negative of such terms or other similar expressions, identify forward-looking statements.  In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described under the caption “Risk Factors” as well as those discussed elsewhere in this document.  These and many other factors could affect our future financial and operating results.  Tripath  undertakes no obligation to update any forward-looking statement to reflect events after the date of this report.

 

ITEM 1. BUSINESS

 

We design and sell digital amplifiers based on our proprietary technology, called Digital Power Processing®, which enables us to provide significant performance, power efficiency, size and weight advantages over traditional amplifier technology.  Our digital amplifiers are branded “Class-T” and combine a switching mode approach that generates high fidelity sound with low distortion and considerably lower heat dissipation than Class-AB amplifiers. We target and provide digital amplifiers for three primary markets where signal fidelity and power efficiency are important: Consumer Electronics, Digital Subscriber Line (“DSL”) and Wireless.  Within the Consumer Electronics market, we target multiple market segments, which include consumer audio applications such as 5.1 channel home theater systems, flat panel televisions, personal computers, mini/micro component stereo systems, cable set-top boxes and gaming consoles, automotive audio applications such as in-dash head units and trunk amplifiers and professional audio applications such as Digital Video Disc (“DVD”) and audio/ video (“A/V”) receivers and pro-audio amplifiers. We are currently offering digital amplifiers in the form of line drivers for use in DSL equipment.  We also have a research and development program aimed at developing amplifiers for digital wireless handsets and base stations to increase talk time and battery life and improve overall power efficiency.

 

We were incorporated in California in July 1995, and reincorporated in Delaware in July 2000.

 

Markets and Products

 

We have been developing and supplying digital amplifiers for three primary markets: Consumer Electronics, DSL and Wireless.  Within the Consumer Electronics market, we have been targeting the consumer audio, automotive audio and professional audio market segments.  Within the DSL market, we have recently begun offering single and dual channel line driver products.  Within the Wireless market, we have a research and development program aimed at developing a family of amplifier products for use in wireless handsets, also known as Radio Frequency (“RF”) Power Amplifiers.

 

Consumer Electronics - - Consumer Audio Amplifiers

 

We provide a broad range of digital audio amplifiers based on our Digital Power Processing technology. Manufacturers are incorporating our digital audio amplifiers in a diverse set of applications, including 5.1 channel home theater systems, flat panel televisions, professional amplifiers, DVD and A/V receivers, personal computers, mini/micro component stereo systems, cable set-top boxes and gaming consoles.

 

The key factors that differentiate our products are the broad range of power levels, the input format to the amplifier and the level of integration included in our products. We augment our products with applications support that includes reference designs, evaluation kits and consulting services. All of our products share similar characteristics in terms of high efficiencies and excellent sound quality as measured by total harmonic distortion (“THD”).

 

2

 

We offer three categories of digital audio amplifier products, specifically: fully integrated audio amplifiers, amplifier drivers and chipsets. In our integrated products, the actual power output transistors are included in the single integrated circuit package. These products currently support power levels of up to two channels of 100 watts per channel. This 100 watt power level is approximately three times greater than that which has been achieved to date in the industry in a single integrated circuit package. At levels greater than 100 watts per channel, we offer driver products that include our proprietary signal processing integrated circuit and a high voltage integrated circuit that drives a range of external power transistors. The use of external power transistors is required at these power levels due to the heat dissipation limitations of a single integrated circuit package. We offer driver products with power capability that ranges from 100 watts to 2000 watts and chipset products with power capability that ranges from 50 watts to 350 watts. We use a four ohm load for reference when we specify power.

 

Our products support analog inputs to be compatible with existing analog amplifier systems. The digital nature of our amplifier architecture will enable us to support future systems that are all digital and eliminate the need for the conversion of the digital audio content on source material such as compact discs (“CDs”), DVDs and Moving Picture Experts Group Layer –3 (“MP3”) files to an analog signal. Eliminating this conversion will lower costs by eliminating components and improve sound quality introduced in the conversion process. In these all-digital systems, the digital content and quality will be preserved all the way from the source material to the output of the amplifier.

 

The digital input format that we plan to support across the product line in the table below is referred to as I²S. In this interface, the digital content is encoded in a format that is specified by the I²S standard.

 

Consumer Electronics - Automotive Audio Amplifiers

 

Because of their ability to decrease the size and weight of audio systems, our products can be used in applications in automotive audio systems where these issues are critical.  Our proprietary technology allows products to generate high fidelity sound with significantly lower heat dissipation making it ideal for compact design applications. We currently offer products specifically targeted for automotive applications such as in-dash head units and trunk amplifiers.

 

Consumer Electronics - Professional Audio Amplifiers

 

Because of the broad range of product offering we have in our digital amplifiers, we have created specific products to appeal to high-powered applications such as DVD and A/V receivers as well as pro-audio amplifiers.  Our proprietary technology helps realize clear sound, almost half the energy consumption of conventional professional amplifiers and natural heat dissipation without a cooling fan.

 

The table below summarizes our audio products that we are currently selling.

 

		Product		Output (watts/channel)		Operating Efficiency		Total Harmonic		Applications
								Distortion(1)
Integrated Amplifiers
		TA2024		15W		>80%		0.03% THD		•   Flat Panel TVs (Liquid Crystal Display (“LCD”) and Plasma) •   Personal Computers •   Multimedia Speaker Systems •   Gaming Consoles
		TA2020		20W		>80%		0.03% THD		•    DVD and A/V Receivers •    Flat Panel TVs (LCD and Plasma) •    Personal Computers •    Multimedia Speaker Systems •    Gaming Consoles
		TA2021		20W		>80%		0.04% THD		•   DVD and A/V Receivers •    Flat Panel TVs (LCD and Plasma) •    Personal Computers •    Multimedia Speaker Systems •    Gaming Consoles
		TA2041		70W		>80%		0.02% THD		•    Automotive Head Units •    5.1 Channel Home Theater Systems •    DVD and A/V Receivers •    Multimedia Speaker Systems

 

3

 

		TA2022		100W		>90%		0.02% THD		•    5.1 Channel Home Theater Systems •    DVD and A/V Receivers •    Mini / Micro Component Systems •    Automotive Audio •    Cable Set-Top Boxes
Amplifier Drivers
		TA3020		350W		>90%		0.05% THD		•    DVD and A/V Receivers •    Pro-Audio Amplifiers •    Automotive Audio •    Subwoofer Amplifiers
		TA0105A		500W		>90%		0.05% THD		•    Pro-Audio Amplifiers •    Automotive Audio •    Subwoofer Amplifiers •    High Power Stereo Amplifiers
Chipsets
		TK2050		50W		>90%		0.05% THD		•    5.1 Channel Home Theater Systems •    DVD and A/V Receivers •    Mini / Micro Component Systems •    Automotive Audio •    Cable Set-Top Boxes
		TK2051		50W		>90%		0.07% THD		•    5.1 Channel Home Theater Systems •    DVD and A/V Receivers •    Mini / Micro Component Systems •    Automotive Audio •    Cable Set-Top Boxes
		TK2150		200W		>90%		0.01% THD		•    5.1 Channel Home Theater Systems •    DVD and A/V Receivers •    Automotive Audio •    Subwoofer Amplifiers
		TK2350		350W		>90%		0.03% THD		•   Pro-Audio Amplifiers •    DVD and A/V Receivers •    Automotive Audio •    Subwoofer Amplifiers

 

(1) Total Harmonic Distortion, or THD, measures the change in a signal as it is amplified, expressed as a percentage of a pure input signal.  The more accurate an amplifier is, the lower its THD will be.

 

DSL Line Driver Amplifiers

 

Our Digital Power Processing technology allows us to produce highly linear amplifiers for line cards that use power more efficiently than traditional amplifiers with conventional architectures. DSL amplifiers are often called line drivers. Because our line drivers are more power efficient, they eliminate the heat sink and other electronic components used with traditional line drivers. As a result, our line drivers can be smaller than traditional analog-based line drivers. In addition, their efficiency makes them a more attractive solution for DSL service providers because the power budgeted for the equipment in the telephone companies’ central office is fixed.

 

4

 

Our initial product is a line driver for use in the Asymmetric DSL (“ADSL”) market. ADSL, a popular form of DSL technology, is designed to allow greater data rates from the central office to the subscriber than from the subscriber to the central office. This means that typical users will be able to download data faster than they can send data, which is suitable for most residential users. In February 2001, we announced our entry into the ADSL chipset market with a new family of central office ADSL line drivers. These new products offer full reach and data rate capability and can reduce heat dissipation by more than 50 percent versus conventional line drivers. Our line driver configurations feature:

 

•                  power consumption that ranges from 620mW to 880mW per channel

•                  support for full rate and G. LITE data rates

•                  low distortion specifications

•                  low power mode

•                  digitally programmable gain

•                  small footprint package

 

Our DSL line drivers offer DSL service providers the following benefits:

 

•                  Higher Port Density.  Our line drivers enable our customers to increase the number of subscriber lines given fixed power and space constraints. This allows DSL service providers to achieve higher port density.

 

•                  Increased Signal Reach and Connection Speed.   The distance a signal can travel with an effective usefulness is known as signal reach, and the speed at which data can be transferred is known as connection speed. Intermodulation Distortion (“IMD”), is a measure of linearity and indicates how well an amplifier can reduce the impact of undesirable frequencies which are produced in the transmission process. Our line drivers, due to their linearity, can more accurately reproduce the signal inputs, allowing for improvements in output signal reach and connection speed to the consumer.

 

The following table provides additional information concerning the specifications of our current and future generation of DSL line drivers.

 

Product		Power Consumption (milliwatts/channel)		Application
TA4012 Single channel family		660-880mW		Central office ADSL line driver
TA4021 Dual channel family		‹450mW		Central office ADSL line driver

 

The TA4012 DSL line driver is in volume production now and we currently expect to commence the sampling phase of our dual channel line driver in the first half of 2003.

 

RF/Wireless Power Amplifiers

 

Our expertise in the development of highly linear and energy efficient circuits has allowed us to develop an amplifier architecture which we believe is well-suited for use in digital handsets, base stations and other wireless products. The initial targeted market is for cellular phones that utilize a digital transmission method known as Code Division Multiple Access (“CDMA”). Linearity is important to this technology because CDMA uses a complex signal transmission method that requires more accurate reception and reproduction. Additionally, we believe our Digital Power Processing technology could provide significant improvements to the design of cellular phones in terms of talk-time, data connection time and battery size, which are all dependent on the efficiency of the RF Power Amplifier.

 

5

 

Core Technology

 

We believe that one of our key competitive advantages is our broad base of patented core technologies, which are comprised of innovative adaptive and predictive signal processing techniques. These processing techniques are derived from algorithms used in communications theories. These unique techniques are derived from a confluence of four primary disciplines in mixed signal circuit design, digital signal processing (“DSP”), algorithm development, power semiconductor circuit design and packaging design. We intend to continue to build and improve on these four primary technology foundations as our company expands its product reach into other markets and industries.

 

We have implemented unique processing algorithms in a silicon-based processor which we call a Mixed Signal Processor. The execution speed of these complex algorithms by our Mixed Signal Processor allows us to achieve the required linearity and efficiency in our products. The Mixed Signal Processor functionality is a vital component in the architecture of the products we design.

 

Our four key areas of competency are highlighted below:

 

Mixed Signal Circuit Design Expertise

 

We are an innovator in advanced mixed signal circuit design with a particular focus on audio amplifiers, DSL line driver amplifiers and RF Power Amplifiers. We have developed significant intellectual property in our mixed signal circuit designs, which are applicable across multiple market segments. As such, we have demonstrated significant improvements in power efficiency and linearity for audio amplifiers and central office line driver integrated circuits. We are also applying this same core technology to the development of highly linear and highly efficient RF Power Amplifier integrated circuits for incorporation in cellular telephones.

 

DSP Algorithm Expertise

 

We have expertise in developing system applications using our Digital Power Processing technology. This includes industry standard designs as well as customer specific systems in the DSL and Consumer Electronics markets. The high efficiency, high quality power processing products that we design require a comprehensive understanding of new and innovative DSP techniques at the system as well as the device level. We will continue to research and improve our Digital Power Processing technology.