Tripath Reports Second Quarter Net Revenue of $3.5 Million Up 28% Compared to March 2005; Unit Shipments Grow by 14% Sequentially and by 115% Year-Over-Year

SAN JOSE, Calif.—(BUSINESS WIRE)—May 4, 2006— Tripath Technology Inc.(OTCBB: TRPH), creators of Digital Power Processing (DPP(R)) technology and Class-T(R) advanced 1-bit digital audio amplifiers, today reported financial results for the second quarter of fiscal 2006, which ended March 31, 2006.

"Demonstrating continued improvement over fiscal 2005, second quarter revenue growth was consistent with our previously stated guidance," said Dr. Adya Tripathi, Tripath's Chairman, President and CEO. "Flat panel television sales again delivered strong revenue, comprising over 63 percent of net revenue. Additionally, digital subscriber line (DSL) driver products contributed almost 22 percent of revenue this past quarter. Due primarily to the strength of both flat panel television and DSL driver sales, we billed for over 14 percent more units this quarter than the previous quarter and over 115 percent more units when compared to the prior year quarter."

"We have been focused on driving fundamental improvements in our business and are committed to the goal of achieving profitability. Our strategy continues to be to leverage our technology leadership and strong intellectual property position with timely and well-positioned product introductions into existing and new markets. We are building on the market opportunities in flat panel TVs, home theater, automotive audio and consumer and convergence as our chips and technology are embedded into a growing number of high-volume end products. Also, we are gaining traction with new design wins and in exploring opportunities to license our technology, enabling us to expand Tripath's presence in the product lines of our industry leading customers," added Dr. Tripathi.

Second Quarter Fiscal 2006 Results:

Net revenue for the second quarter of fiscal 2006 was $3.5 million, an increase of approximately $80,000, or 2.3 percent, from $3.4 million in the fiscal first quarter 2006 and an increase of approximately $800,000, or 28 percent, when compared with net revenue of $2.7 million in the corresponding prior year quarter. Gross margin for the fiscal second quarter was 22 percent, reflecting reduced sales of previously written down inventory. Excluding this effect, the gross margin for the quarter would have been 16 percent.

GAAP net loss for the second quarter of fiscal 2006 was $4.5 million, or an estimated $0.08 per share, down when compared to a GAAP net loss in the first quarter of fiscal 2006 of $4.7 million, or $0.08 per share. The GAAP net loss for the second quarter of fiscal 2005 was $1.8 million, or $0.03 per share. Included in the GAAP net loss for the March 2006 quarter was approximately $480,000 related to the non-cash increase in operating expenses, accounting for stock-based compensation expense as prescribed by SFAS123R and the net unfavorable impact of $1.5 million in non-cash items related to the company's financing activities. Without these items, the company's non-GAAP net loss would have been an estimated $2.5 million, or an estimated $0.04 per share, in line with the company's guidance. A table reconciling these results to GAAP figures is included at the end of this press release.

"During the second quarter, we delivered revenue growth of over 28 percent, increased the product gross margin, exclusive of the effect of the sale of inventory that has previously been written down to its estimated net realizable value, from 10 percent to 16 percent and cut non-GAAP expenses by almost 15 percent compared to a year ago," said Jeffrey L. Garon, Vice President, Finance and CFO of Tripath. "We strengthened our balance sheet with a cash infusion of $2.5 million, ended the quarter with improvements in our working capital position and inventory levels, and reduced vendor prepayments that are expected to help relieve some of the production constraints that negatively impacted us in the first quarter of fiscal 2006."

Financial Guidance:

Please see the note regarding forward looking statements in the Safe Harbor section of this release.

Third fiscal quarter revenue is expected to range from approximately $3.5 million to $3.9 million, or from approximately flat to an increase of 10 percent compared to the second fiscal quarter of 2006. The company's growth will depend primarily on the company's ability to gain access to vendor/partners' capacity. Additionally, the company expects the impact to gross margin in the June 2006 quarter from the anticipated sale of inventory that has previously been written down to its estimated net realizable value to be in the range of 3 percent to 5 percent and, thus, would expect to report gross margin for the quarter in the range of 20 percent to 30 percent. The company anticipates the positive effects from sales of previously written down inventory will cease to have a significant impact on quarters after the third fiscal quarter. In addition, the company anticipates its plan of building sustainable unit sales volume through pricing and design strategies will result in improved product mix and that its gross margins will settle toward more normal levels of 30 percent to 40 percent as a result. The company's pricing and design strategies are expected to continue to be followed by sustainable, increased production volumes, which in turn should continue to allow the company to reduce reserved inventory levels and negotiate more advantageous costs while driving to more cost effective solutions through its development efforts.

"Total operating expenses for the third quarter of fiscal 2006 are expected to range from flat to down 10 percent when compared to the second quarter of fiscal 2006. Primary risks of this projection are the uncertainty in our estimated legal expenses associated with pending litigation and stock-based compensation charges required by SFAS123R," said Garon.

"We expect the GAAP net loss for the third quarter of fiscal 2006 to be in the range of $0.06 to $0.08 per share. As we continue to execute our strategy during the balance of calendar 2006, we expect to continue building unit volumes, reducing product costs and expanding our product applications base. We expect our overall performance will continue to drive us in the direction of profitability," Garon concluded.

Second Quarter Fiscal 2006 Conference Call:

Tripath Technology Inc. will hold its quarterly conference call to discuss its second quarter fiscal 2006 financial results and other related items today at 2:00 P.M. (Pacific Time). Analysts and investors are invited to participate on the call by dialing 1-800-706-7741 (Domestic) and 617-614-3471 (International) and entering the participant pass code number 46928695. Investors may take advantage of a live web cast of the call available through the investor relations section of the Tripath website at

A telephone replay of this conference call will be available after 7:00 P.M. (Pacific Time) on May 4, 2006 until May 18, 2006. The access number is 1-888-286-8010 (Domestic) and 617-801-6888 (International) and the participant pass code is 29741402. Additionally, the webcast replay of the call will be available on the investor relations section of the Tripath's website at for a period of one year.

Going Concern Qualification and Weaknesses in Internal Controls:

We have received a going concern opinion from our independent auditors and have identified material weaknesses in our internal controls over financial reporting in connection with the audit of our consolidated financial statements for the year ended September 30, 2005. We continue to take what we believe to be appropriate actions to remediate these weaknesses, but there is no assurance that we will receive an unqualified opinion or a clear Sarbanes-Oxley Section 404 attestation from our independent auditors in the future. In addition, if these weaknesses are not remediated, they could result in material misstatements to the company's future annual or interim financial statements that would not be prevented or detected.

About Tripath Technology Inc.:

Based in San Jose, Calif., Tripath Technology Inc. is a fabless semiconductor company that focuses on providing highly efficient power amplification to the Flat Panel Television, Home Theater, Automotive Audio and Consumer and PC Convergence markets. Tripath owns the patented technology called Digital Power Processing (DPP(R)), which leverages modern advances in digital signal processing and power processing. Tripath markets audio amplifiers with DPP(R) under the brand name Class-T(R). Tripath's current customers include, but are not limited to, companies such as Alcatel, Alpine, Hitachi, JVC, Samsung, Sanyo, Sharp, Sony and Toshiba. For more information on Tripath please visit Tripath's web site at

Special Note Regarding Forward Looking Statements/ Safe Harbor Statement:

Certain statements in this release concerning Tripath's future financial and operating results, including revenue and unit volume growth, gross margins, cost and expense reductions, net loss and prospects for achieving profitability, demand for Tripath products and expansion of its applications base for such products, production volumes, improvement of production constraints and Tripath's competitive position, including those statements made under the "Financial Guidance" section above, are forward-looking statements that involve a number of risks and uncertainties. Actual events and results could differ materially from those stated or implied from the forward looking statements. Factors that may affect the results and circumstances indicated in these forward looking statements include lack of demand for Tripath's products, the availability of sufficient cash resources to fund Tripath's working capital requirements, silicon wafer pricing, the availability of foundry and assembly capacity and raw materials and our ability to develop competitive products. Also, the availability and pricing of competing products and technologies would effect sales and pricing of Tripath's products. Tripath may experience fluctuations in the manufacturing yields of its third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of its products. Further, the company is subject to a number of covenants and potential events of default under the 6 Percent Senior Secured Convertible Debentures it issued in a private placement in November 2005 that also could adversely affect its ability to execute its growth strategy.

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