**UNITED
      STATES**
      **SECURITIES
      AND EXCHANGE COMMISSION**Washington,
      D.C. 20549**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 December 31, 2005**or( )
      Transition Report Pursuant to Section 13 or 15(d) of the Securities and
      Exchange Act of 1934 (No Fee Required)**Commission
      File No. 0-12718**
      ******SUPERTEX,
      INC.**(Exact
      name of Registrant as specified in its Charter)**California**
    **94-2328535**(State
      or other jurisdiction of incorporation or organization)
    (IRS
      Employer Identification #)**1235
      Bordeaux Drive****Sunnyvale,
      California 94089**(Address
      of principal executive offices)Registrant's
      Telephone Number, Including Area Code:**(408)
      222-8888**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*Indicate
      by check mark whether the registrant is an accelerated filer (as defined
      in Rule 12b-2 of the Act).*******Yes****X**
    NoIndicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.Class
    Outstanding
      at February 3, 2006Common
      Stock, no par value
    13,569,447*Exhibit
      index is on Page 25**Total
      number of pages: 28*
 
 ****
 
 ****
 **SUPERTEX,
INC.**
 **QUARTERLY
REPORT - FORM 10Q**
 
 
 Table
      of Contents
    
    Page
      No.PART
      I - FINANCIAL INFORMATIONItem
      1.
    Financial
      StatementsUnaudited
      Condensed Consolidated Statements of Income
    3Unaudited
      Condensed Consolidated Balance Sheets
    4Unaudited
      Condensed Consolidated Statements of Cash Flows
    5Notes
      to Unaudited Condensed Consolidated Financial Statements
    6Item
      2.
    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
    14Item
      3.
    Quantitative
      and Qualitative Disclosures About Market Risk and Interest Rate
      Risk
    23Item
      4.
    Controls
      and Procedures
    24PART
      II - OTHER INFORMATIONItem
      1.
    Legal
      Proceedings
    25Item
      2.
    Unregistered
      Sales of Equity Securities and Use of Proceeds
    25Item
      3.
    Defaults
      Upon Senior Securities
    25Item
      4.
    Submission
      of Matters to a Vote of Security Holders
    25Item
      5.
    Other
      Information
    25Item
      6.
    Exhibits
    25Signatures
    
    26
  2
  **PART
I - FINANCIAL INFORMATION**
 
 **Item
1. Financial Statements**
 
 **SUPERTEX,
INC.**
 **CONDENSED
CONSOLIDATED STATEMENTS OF INCOME**
 *(unaudited)*
 *(in
thousands, except per share amounts)*
 
 **Three
      Months Ended**
    
    **Nine
      Months Ended******
    
    
    **December
      31,**
      **2005**
    
    
    **January
      1,**
      
      **2005**
    
    
    **December
      31,**
      
      **2005**
    
    
    **January
      1,**
      
      **2005**Net
      sales
    
    $
    19,915
    
    $
    14,925
    
    $
    56,134
    
    $
    44,715Cost
      of sales
    
    
    9,161
    
    
    7,043
    
    
    24,811
    
    
    21,543Gross
      profit
    
    
    10,754
    
    
    7,882
    
    
    31,323
    
    
    23,172Research
      and development
    
    
    2,792
    
    
    2,086
    
    
    8,149
    
    
    7,242Selling,
      general and administrative
    
    
    3,464
    
    
    3,049
    
    
    9,900
    
    
    8,400Total
      operating expenses
    
    
    6,256
    
    
    5,135
    
    
    18,049
    
    
    15,642Income
      from operations
    
    
    4,498
    
    
    2,747
    
    
    13,274
    
    
    7,530Interest
      income
    
    
    773
    
    
    441
    
    
    2,032
    
    
    1,102Other
      income, net
    
    
    126
    
    
    251
    
    
    475
    
    
    362Income
      before provision for income taxes
    
    
    5,397
    
    
    3,439
    
    
    15,781
    
    
    8,994Provision
      for income taxes
    
    
    1,708
    
    
    1,189
    
    
    5,026
    
    
    2,968Net
      income
    
    $
    3,689
    
    $
    2,250
    
    $
    10,755
    
    $
    6,026Net
      income per share:Basic
    
    $
    0.27
    
    $
    0.17
    
    $
    0.81
    
    $
    0.47Diluted
    
    $
    0.26
    
    $
    0.17
    
    $
    0.79
    
    $
    0.46Shares
      used in per share computation:Basic
    
    
    13,416
    
    
    13,023
    
    
    13,225
    
    
    12,957Diluted
    
    
    13,970
    
    
    13,419
    
    
    13,605
    
    
    13,204See
      accompanying Notes to Unaudited Condensed Consolidated Financial
      Statements.
   
  3
  **SUPERTEX,
INC.**
 **CONDENSED
CONSOLIDATED BALANCE SHEETS**
 *(unaudited,
in thousands)*
 
 
 **December
      31, 2005**
    
    **April
      2, 2005****ASSETS**Current
      assets:Cash
      and cash equivalents
    
    $                              
      26,531
    
    $                              
      38,634Short-term
      investments
    
    76,435
    
    49,783Trade
      accounts receivable, net of allowances of $909 and $704
    
    12,205
    
    7,898Inventories
    
    14,441
    
    12,624Prepaid
      expenses and other current assets
    
    898
    
    917Deferred
      income taxes
    
    6,321
    
    6,322Total
      current assets
    
    136,831
    
    116,178Property,
      plant and equipment, net
    
    7,970
    
    7,992Other
      assets
    
    98
    
    96Deferred
      income taxes
    
    2,111
    
    2,111**TOTAL
      ASSETS**
    
    $                            
       147,010
    
    $                             
      126,377**LIABILITIES
      AND SHAREHOLDERS' EQUITY**Current
      liabilities:Trade
      accounts payable
    
    $
    4,040
    
    $
    3,280Accrued
      salaries and employee benefits
    
    
    10,497
    
    
    8,720Other
      accrued liabilities
    
    
    1,392
    
    
    634Deferred
      revenue
    
    
    3,851
    
    
    3,610Income
      taxes payable
    
    
    902
    
    
    3,038Total
      current liabilities
    
    
    20,682
    
    
    19,282Commitments
      and contingencies (See Note 7)Shareholders’
      equity:Preferred
      stock, no par value - 10,000 shares authorized, none
      outstanding
    
    
    --
    
    
    --Common
      stock, no par value - 30,000 shares authorized; issued and outstanding
      13,530 and 13,086 shares
    
    
    44,708
    
    
    35,343Retained
      earnings
    
    
    81,620
    
    
    71,752Total
      shareholders' equity
    
    
    126,328
    
    
    107,095**TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY**
    
    $
    147,010
    
    $
    126,377See
      accompanying Notes to Unaudited Condensed Consolidated Financial
      Statements.
 
  4
  **SUPERTEX,
INC.**
 **CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS**
 *(unaudited,
in thousands)*
 ****
    
    **Nine
      Months Ended,**CASH
      FLOWS FROM OPERATING ACTIVITIES
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**Net
      income
    
    $
    10,755
    
    $
    6,026Non-cash
      adjustments to net income:Depreciation
    
    
    2,114
    
    
    2,453Provision
      for doubtful accounts and sales returns
    
    
    969
    
    
    955Provision
      for excess and obsolete inventories
    
    
    857
    
    
    1,317Tax
      benefit from exercise of stock options
    
    
    2,378
    
    
    --Changes
      in operating assets and liabilities:Short-term
      investments, categorized as trading
    
    
    (653
    )
    
    (790
    )Trade
      accounts receivable
    
    
    (5,276
    )
    
    (2,043
    )Inventories
    
    
    (2,674
    )
    
    (602
    )Prepaid
      expenses and other assets
    
    
    17
    
    
    (150
    )Trade
      accounts payable and accrued expenses
    
    
    3,295
    
    
    1,869Deferred
      revenue
    
    
    241
    
    
    (239
    )Income
      taxes payable
    
    
    (2,136
    )
    
    612Total
      adjustments
    
    
    (868
    )
    
    3,382Net
      cash provided by operating activities
    
    
    9,887
    
    
    9,408CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of property, plant and equipment
    
    
    (2,081
    )
    
    (1,031
    )Proceeds
      from disposal of property and equipment
    
    
    --
    
    
    41Purchases
      of short-term investments, categorized as available for
    sale
    
    
    (567,224
    )
    
    (318,859
    )Sales
      of short-term investments, categorized as available for
    sale
    
    
    541,225
    
    
    288,459Net
      cash used in investing activities
    
    
    (28,080
    )
    
    (31,390
    )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from exercise of stock options and employee stock purchase
      plan
    
    
    7,170
    
    
    2,402Repurchase
      of common stock
    
    
    (1,080
    )
    
    (275
    )Net
      cash provided by financing activities
    
    
    6,090
    
    
    2,127NET
      DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (12,103
    )
    
    (19,855
    )CASH
      AND CASH EQUIVALENTS:Beginning
      of period
    
    
    38,634
    
    
    57,717End
      of period
    
    $
    26,531
    
    $
    37,862Supplemental
      cash flow disclosures:Income
      taxes paid, net of refunds
    
    $
    4,782
    
    $
    2,356See
      accompanyingNotes
      to Unaudited Condensed Consolidated Financial Statements.
 
   5
   **Note
1 - Organization and Basis of Presentation**
 
 The
accompanying unaudited condensed consolidated financial statements of Supertex,
Inc. and its subsidiary have been prepared in accordance with accounting
principles generally accepted in the United States of America. This financial
information reflects all adjustments which are in the opinion of the Company’s
management of normal recurring nature and necessary to present fairly the
statements of financial position as of December 31, 2005 and April 2, 2005,
results of operations for the three and nine months ended December 31, 2005 and
January 1, 2005, and cash flows for the nine months ended December 31, 2005 and
January 1, 2005. The April 2, 2005 balance sheet was derived from the audited
financial statements included in the 2005 annual report on Form 10-K. All
significant intercompany transactions and balances have been eliminated.
 
 The
condensed consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in these financial statements have been condensed or omitted
pursuant to such rules and regulations, although the Company believes the
disclosures which are made are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
audited condensed consolidated financial statements of Supertex, Inc. for the
fiscal year ended April 2, 2005, which were included in the annual report on
Form 10-K.
 
 Interim
results are not necessarily indicative of results for the full fiscal year. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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
results of operations for the three months ended December 31, 2005 are not
necessarily indicative of the results to be expected for any future
periods.
 
 The
Company reports on a fiscal year basis and it operates and reports based on
quarterly periods ending on the Saturday nearest the end of the applicable
calendar quarter, except in a 53-week fiscal year, in which case the additional
week falls into the fourth quarter of the fiscal year. Fiscal 2006 will be a
52-week year. The three months ended December 31, 2005, October 1, 2005, January
1, 2005, October 2, 2004, all consist of thirteen weeks.
 
 **Note
2 - Stock-based Compensation**
 
 The
Company accounts for stock-based employee compensation using the intrinsic value
method under the Financial Standards Board (“FASB”) Accounting Principles Board
Opinion No. 25, *Accounting
for Stock Issued to Employees* , (“APB
25”), and related interpretations, and complies with the disclosure provisions
of Statements of Financial Accounting Standards No. 123, *Accounting
for Stock-Based Compensation* , and
Financial Accounting Standards No. 148, *Accounting for Stock-Based Compensation - Transition and
Disclosure* , (“SFAS
123”) and (“SFAS 148”), respectively. SFAS 123 requires the disclosure of pro
forma net income and earnings per share. Under SFAS 123, the fair value of
stock-based awards to employees is calculated through the use of option pricing
models, even though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company’s stock option awards. These models also
require subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated values.
 
  6
  Had the
Company recorded compensation costs for stock options issued to employees under
the Company’s current and former stock option plans and stock sales under its
Employee Stock Purchase Plan (ESPP) based on the fair value at the grant date
for the awards consistent with the provisions of SFAS No. 123, the net income
and net income per share for the three and nine months ended December 31, 2005
and January 1, 2005 would have been reduced to the pro forma amounts indicated
as follows:
  
 **Three Months
Ended**                          
**Nine Months Ended**
 *(in
      thousands except per share amounts)*
    **December
      31, 2005**
    
    **January
      1, 2005**
    
    **December
      31, 2005**
    
    **January 1,**
      **2005**Net
      income as reported
    
    $
      3,689
    
    $ 2,250
    
    $10,755
    
    $6,026Add:
    
    Stock-based
      employee compensation expense included in reported net income, net of
      tax
    --
    
    --
    
    --
    
    --Deduct:
    
    Stock-based
      employee compensation expense determined under fair value based method,
      net of tax
    (403)
    
    (552)
    
    (1,259)
    
    (1,615)Pro
      forma net income
    $
      3,286
    
    $
      1,698
    
    $
      9,496
    
    $
      4,411Basic
      earnings per share
    
    As
      reported
    $
      0.27
    
    $
      0.17
    
    $0.81
    
    $0.47Pro
      forma
    $
      0.25
    
    $
      0.13
    
    $0.72
    
    $0.34Diluted
      earnings per share
    
    As
      reported
    $
      0.26
    
    $
      0.17
    
    $0.79
    
    $0.46Pro
      forma
    $
      0.23
    
    $
      0.13
    
    $0.70
    
    $0.34
 
 **Note
3 - Inventories**
 
 The
Company’s inventories consist of high technology semiconductor devices and
integrated circuits that are specialized in nature, subject to rapid
technological obsolescence and are sold in a highly competitive industry.
Inventory balances at the end of each period are adjusted to approximate the
lower of cost or market value.
 
 Inventories
consisted of *(in
thousands)* :
 
 ****
    
    
    **December
      31, 2005**
    
    
    **April
      2, 2005**Raw
      materials
    
    $
    1,474
    
    $
    1,220Work-in-process
    
    
    9,024
    
    
    7,371Finished
      goods
    
    
    3,943
    
    
    4,033Inventories
    
    $
    14,441
    
    $
    12,624
 
 The
Company wrote down inventory totaling $155,000 and $857,000 for the three and
nine months ended December 31, 2005, respectively. For the comparable periods in
fiscal 2005, the Company wrote down inventory totaling $533,000 and $1,317,000,
respectively. The Company realized gross margin benefits of $266,000 and
$829,000 for the three and nine months ended December 31, 2005 due to sales of
previously reserved inventory. Such benefits were $234,000 and $738,000 for the
three and nine months ended January 1, 2005.
 
 The
Company defers the recognition of revenue on shipments to distributors and the
related costs of sales until the distributors have sold the products to their
end-user customers due to uncertainty associated with possible returns and
pricing concessions. Sales through the distributors are made primarily under
arrangements allowing limited rights of return, limited price protection and the
right of stock rotation on merchandise unsold by distributors. Deferred revenue
also includes a customer advance under a licensing agreement as well as upfront
payments received from customers.
 
 7
 Deferred
revenue consisted of *(in
thousands)* :
 
 **December
      31, 2005**
    
    **April
      2, 2005**Shipments
      to distributors
    
    $
    3,701
    
    $
    3,306Technology
      license
    
    
    150
    
    
    262Others
    
    
    --
    
    
    42Deferred
      revenue
    
    $
    3,851
    
    $
    3,610
 
 **Note
4 - Comprehensive Income**
 
 Comprehensive
income, which includes all changes in equity during a period from non-owner
sources, did not differ from net income for any of the periods
presented.
 
 **Note
5 - Income Taxes**
 
 Income
taxes for interim reporting purposes are computed using estimates of the
effective annual income tax rate for the entire fiscal year. The estimate of
annual effective income tax rate is 35% prior to discrete items. The effective
income tax rate after discrete items during the three months ended December 31,
2005 was 32% compared to 35% for the same period last year. The effective tax
rate after discrete items for the nine months ended December 31, 2005 was 32%
compared to 33% for the same period last year.
 
 The
American Jobs Creation Act of 2004 (the “Jobs Act”), enacted on October 22,
2004, provides for a temporary 85% dividends received deduction on certain
foreign earnings repatriated during a one-year period. The deduction will result
in approximately 5.25% Federal tax rate on the repatriated earnings. To qualify
for the deduction, the earnings must be reinvested in the United States pursuant
to a domestic reinvestment plan established by the Company’s chief executive
officer and approved by the Company’s board of directors. Certain other criteria
in the Jobs Act must be satisfied as well.
 
 The
Company does not anticipate it will apply the above provision to qualify for
earnings repatriations in fiscal 2006; however, as additional clarifying
language on key elements of the repatriation provision becomes available, the
Company will continue to analyze and assess whether such repatriation would be
practical.
 
 The
Company is currently under routine examination by the Internal Revenue Service.
Although the outcome of any tax audit is uncertain, the Company believes that it
has adequately provided in its financial statements for any additional taxes
that may be required to pay as a result of such examinations. If the payment
ultimately proved to be unnecessary, the reversal of these tax liabilities will
result in tax benefits being recognized in the period when the determination is
made that such liabilities are no longer necessary. However, if an ultimate tax
assessment exceeds the estimate of tax liabilities, an additional tax provision
will be recorded.
 
 **Note
6 - Net Income per Share**
 
 Basic
earnings per share (“EPS”) is computed as net income divided by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur from common shares that may be issued
through stock options only, since the Company does not have any warrants or
other convertible securities outstanding. A reconciliation of the numerator and
denominator of basic and diluted earnings per share is provided as follows
(*in thousands, except per share amounts*):
  8
  
 ****
    
    **Three
      Months Ended,**
    **Nine
      Months Ended,******
    
    
    **December
      31, 2005**
    
    
    **January
      1,**
      **2005**
    
    
    **December
      31,**
      **2005**
    
    
    **January
      1,**
      **2005**BASIC:Net
      income
    
    $
    3,689
    
    $
    2,250
    
    $
    10,755
    
    $
    6,026Weighted
      average shares outstanding for the period
    
    
    13,416
    
    
    13,023
    
    
    13,225
    
    
    12,957Net
      income per share
    
    $
    0.27
    
    $
    0.17
    
    $
    0.81
    
    $
    0.47DILUTED:Net
      income
    
    $
    3,689
    
    $
    2,250
    
    $
    10,755
    
    $
    6,026Weighted
      average shares outstanding for the period
    
    
    13,416
    
    
    13,023
    
    
    13,225
    
    
    12,957Dilutive
      effect of stock options
    
    
    554
    
    
    396
    
    
    380
    
    
    247Total
    
    
    13,970
    
    
    13,419
    
    
    13,605
    
    
    13,204Net
      income per share
    
    $
    0.26
    
    $
    0.17
    
    $
    0.79
    
    $
    0.46
 
 Options
to purchase 88,587 shares of the Company’s common stock at an average price of
$46.12 per share, and 135,450 shares at an average price of $39.40 per share at
December 31, 2005 and January 1, 2005, respectively, were outstanding but were
not included in the computation of diluted earnings per share because its effect
would have been anti-dilutive. For the nine months ended December 31, 2005 and
January 1, 2005, respectively, options to purchase the Company’s common stock of
137,836 shares at an average price of $39.55 per share, and 298,956 shares at an
average price of $28.75 per share were not included in the computation of
diluted earnings per share because its effect would have been
anti-dilutive.
 
 **Note
7 - Commitments and Contingencies**
 
 FASB
Interpretation No. 45, or FIN 45, *Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others,* requires
that upon issuance of a guarantee, the guarantor must recognize a liability for
the fair value of the obligation it assumes under that guarantee. In addition,
FIN 45 requires disclosures about the guarantees that an entity has issued,
including a roll forward of the entity’s product warranty
liabilities.
 
 ***Indemnification***
 
 As is
customary in the Company’s industry, the Company has agreed to defend certain
customers, distributors, suppliers, and subcontractors against certain claims,
which third parties may assert that its products allegedly infringe certain of
its intellectual property rights, including patents, trademarks, trade secrets,
or copyrights. The Company has agreed to pay certain amounts of any resulting
damage awards and typically has the option to replace any infringing product
with non-infringing product. The terms of these indemnification obligations are
generally perpetual from the effective date of the agreement. In certain cases,
there are limits on and exceptions to the Company’s potential liability for
indemnification relating to intellectual property infringement claims. The
Company cannot estimate the amount of potential future payments, if any, that it
might be required to make as a result of these agreements. To date, the Company
has not paid any damage award or been required to defend any claim related to
its indemnification obligations, and accordingly, it has not accrued any amount
for indemnification obligations. However, there can be no assurances that the
Company will not have any financial exposure under those indemnification
obligations in the future.
 
  9
  ***Legal
Proceedings***
 
 From time
to time the Company is subject to possible claims or assessments from third
parties arising in the normal course of business. Management has reviewed such
possible claims and assessments with legal counsel and believes that it is
unlikely that they will result in a material adverse impact on the Company’s
financial position or results of operations or cash flows. The
Company is not currently involved in any legal proceedings that it believes will
materially and adversely affect its business.
 
 ***Product
Warranty***
 
 The
Company’s policy is to replace defective products at its own expense for a
period of 90 days from date of shipment. This liability is limited to
replacement of the product and freight and delivery costs or refund or credit of
the purchase price. On certain occasions, the Company may pay for rework. The
Company usually provides a replaced/reworked product at resale value rather than
a refund or credit to meet the warranty obligations. This policy is necessary to
protect the Company’s distributors, to improve customer satisfaction, and for
competitive reasons. Additionally, it is the custom in Japan and Europe to
provide this benefit.
 
 The
Company records a reduction to revenue for estimated product returns, including
warranty related returns, in the same period as the related revenues are
recorded. These estimates are based on historical experience, analysis of
outstanding Return Material Authorization and Allowance Authorization data and
any other form of notification received of pending returns.
 
 The
reductions to revenue for estimated product returns for the three and nine
months ended December 31, 2005 and January 1, 2005 are as follows *(in
thousands)* :
 
 
 **Description**
    
    **Balance
      at Beginning of Period**
    
    **Additions****(1)**
    
    **Deductions****(2)**
    
    **Balance
      at End of Period**Three
      months ended December 31, 2005Allowance
      for sales returns
    
    $
    494
    
    $
    490
    
    $
    236
    
    $
    748Three
      months ended January 1, 2005Allowance
      for sales returns
    
    $
    199
    
    $
    323
    
    $
    175
    
    $
    347Nine
      months ended December 31, 2005Allowance
      for sales returns
    
    $
    463
    
    $
    1,049
    
    $
    764
    
    $
    748Nine
      months ended January 1, 2005Allowance
      for sales returns
    
    $
    186
    
    $
    874
    
    $
    713
    
    $
    347
 ______________
 *(1)
Allowances for sales returns are charged as a reduction to revenue.*
 *(2)
Represents amounts written off against the allowance for sales
returns.*
 
 While the
Company’s sales returns are historically within the expectations and the
allowance established, it cannot guarantee it will continue to experience the
same return rates that it had in the past. Any significant increase in product
failure rates and the resulting sales returns could have a material adverse
impact on the operating results for the period or periods in which such returns
materialize.
 
  10
  **Operating
Lease Obligations**
 
 The
following table summarizes the Company’s future minimum lease payments and
sublease income under all non-cancelable operating leases at December 31, 2005
and the effect such obligations are expected to have on liquidity and cash flow
in future periods (*in thousands*):
 
 **Payment
      Due by Year**
    
    **Operating
      Lease**
    
    **Sublease
      Income**Less
      than 1 year
    
    $
    1,028
    
    $
    3382
      years
    
    
    872
    
    
    2453
      years
    
    
    878
    
    
    --4
      years
    
    
    915
    
    
    --5
      years
    
    
    952
    
    
    --Thereafter
    
    
    321
    
    
    --$
    4,966
    
    $
    583
 
 The
Company leases facilities under non-cancelable lease agreements expiring at
various times through April 2011. Rental expense net of sublease income for the
three and nine months ended December 31, 2005, amounted to $203,000 and
$613,000, respectively.
 ******
 **Note
8 - Common Stock Repurchase**
 
 There
were no shares repurchased during the three months ended December 31, 2005 and
January 1, 2005. Share repurchase activities for the nine months ended December
31, 2005 and January 1, 2005 were as follows:
 
 **Nine
      Months Ended****December
      31, 2005**
    
    
    **January
      1, 2005**Number
      of shares repurchased
    
    
    67,900
    
    
    18,900Cost
      of shares repurchased
    
    $
    1,080,000
    
    $
    275,000Average
      price per share
    
    $
    15.91
    
    $
    14.55
 
 Since the
inception of the repurchase program in 1992 through December 31, 2005, the
Company repurchased a total of 1,115,900 shares of the common stock for an
aggregate cost of $7,327,000. Upon their repurchase, shares are restored to the
status of authorized but unissued shares. As of December 31, 2005, 784,100
shares remain authorized for repurchases under the program.
 
  11
  **Note
9 - Segment Information**
 
 The
Company operates in one business segment comprising of the design, development,
manufacturing and marketing of high voltage semiconductor devices including
analog and mixed signal integrated circuits. The Company's principal markets are
in the United States, Europe, and Asia. The Company’s chief operating decision
maker, who is currently the Company’s chief executive and financial officer,
reviews financial information presented on a consolidated basis for purposes of
making operating decisions and assessing financial performance.
 
 Below is
a summary of sales by major geographic area *(in
thousands)* :
 
 **Three
      Months Ended**
    
    **Nine
      Months Ended****Net
      Sales**
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**United
      States
    
    $
    6,922
    
    $
    8,264
    
    $
    21,492
    
    $
    25,581Europe
    
    
    1,314
    
    
    1,154
    
    
    4,450
    
    
    3,957Japan
    
    
    1,962
    
    
    1,412
    
    
    5,415
    
    
    5,179Asia
      (excluding Japan)
    
    
    9,193
    
    
    3,667
    
    
    22,955
    
    
    8,640Other
    
    
    524
    
    
    428
    
    
    1,822
    
    
    1,358Total
      Net Sales
    
    $
    19,915
    
    $
    14,925
    
    $
    56,134
    
    $
    44,715
 
 The
Company does not segregate information related to operating income generated by
export sales. The Company’s assets are primarily located in the United States of
America.
 
 Net
property, plant and equipment by country was as follows *(in
thousands):*
 
 **Country**
    
    
    **December
      31, 2005**
    
    
    **April
      2, 2005**United
      States
    
    $
    6,834
    
    $
    7,234Hong
      Kong
    
    
    1,136
    
    
    758$
    7,970
    
    $
    7,992
 
 **Note
10 - Significant Customers**
 
 For the
three and nine months ended December 31, 2005, one end-user customer accounted
for more than 25% and 17% of our net sales, respectively. No other customer
accounted for more than 10% of net sales for both periods. For the three and
nine months ended January 1, 2005, there was no end-user customer who accounted
for more than 10% of net sales. However, our Japanese distributor accounted for
9% and 12% of net sales for the three and nine months ended January 1, 2005,
respectively.
 
 **Note
11 - Recent Accounting Pronouncements**
 
 In
November 2005, the Financial Accounting Standards Board (FASB) issued FSP
FAS 115-1 and FAS 124-1, *"The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments"* ("FSP
115-1 and 124-1"), which clarifies when an investment is considered impaired,
whether the impairment is other than temporary, and the measurement of an
impairment loss. It also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and requires certain
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. FSP 115-1 and 124-1 are effective for all
reporting periods beginning after December 15, 2005. At December 31,
2005, all unrealized investment losses on available for sale securities have
been recognized. The Company does not anticipate that the implementation of
these statements will have a significant impact on its financial position or
results of operations.
 
 In
September 2005, the FASB issued EITF Issue No. 04-13, *"Accounting
for Purchases and Sales of Inventory with the Same
Counter-party"* ("EITF 04-13"). The issue provided guidance on the circumstances under
which two or more inventory transactions with the same counter-party should be
viewed as a single non-monetary transaction within the scope of APB Opinion
No. 29, *"Accounting
for Non-monetary Transactions."* The
issue also provided guidance on circumstances under which non-monetary exchanges
of inventory within the same line of business should be recognized at fair
value. EITF 04-13 will be effective for transactions completed in reporting
periods beginning after March 15, 2006. The Company is evaluating the
impact that this issue will have on its consolidated financial
statements.
 
 12
 In May
2005, the FASB issued Statement of Financial Accounting Standards (SFAS) No.
154, “ *Accounting
Changes and Error Corrections”* . SFAS
154 replaces APB Opinion No. 20, *Accounting
Changes, and SFAS 3, Reporting Accounting Changes in Interim Financial
Statements - an amendment of APB Opinion No. 28* . The
Company is required to adopt SFAS 154 for accounting changes and error
corrections at the beginning of fiscal 2007. The Company’s results of operations
and financial condition will only be impacted by SFAS 154 if it implements
changes in accounting principle that are addressed by the standard or corrects
accounting errors in future periods.
 
 In March
2005, the FASB issued Interpretation No. 47, “ *Accounting
for Conditional Asset Retirement Obligations”* , which
clarifies that an entity is required to recognize a liability for the fair value
of a conditional asset retirement obligation if the fair value can be reasonably
estimated even though uncertainty exists about the timing and (or) method of
settlement. The Company is required to adopt Interpretation No. 47 by the end of
fiscal 2006. The Company is currently assessing the impact of Interpretation No.
47 on its results of operations and financial condition.
 
 In
December 2004, FASB issued Statement No. 123 (revised 2004), or SFAS 123R, *“Share-Based
Payment.”* This
statement replaces SFAS 123, *“Accounting
for Stock-Based Compensation”* and
supersedes Accounting Principles Board’s Opinion No. 25 (APB 25), *“Accounting
for Stock Issued to Employees”* . SFAS
123R will require the Company to measure the cost of its employee stock-based
compensation awards granted after the effective date based on the grant date
fair value of those awards and to record that cost as compensation expense over
the period during which the employee is required to perform services in exchange
for the award (generally over the vesting period of the award). In addition, it
will be required to record compensation expense (as previous awards continue to
vest) for the unvested portion of previously granted awards that remain
outstanding at the date of adoption. In April 2005, the U.S. Securities and
Exchange Commission (the “SEC”) announced a deferral of the effective date of
SFAS 123R to the registrant’s fiscal year beginning on or after June 15, 2005.
The Company is therefore required to implement the standard beginning in its
fiscal year 2007. In addition, the SEC issued Staff Accounting Bulletin No. 107,
or (SAB 107) in March 2005. SAB 107 includes interpretive guidance for the
initial implementation of SFAS 123R. The Company is currently evaluating the
impact of the SFAS 123R on its financial statements.
 
 In
November 2004, the FASB issued SFAS No. 151, “ *Inventory
Costs,*  *an
amendment of ARB No.43, Chapter 4”* (SFAS
151). This statement amends the guidance in ARB No. 43, Chapter 4, “ *Inventory
Pricing* ” to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). SFAS 151 requires that those
items be recognized as current-period charges. In addition, this Statement
requires that allocation of fixed production overheads to costs of conversion be
based upon the normal capacity of the production facilities. The provisions of
SFAS 151 are effective for inventory cost incurred in fiscal years beginning
after June 15, 2005. As such, the Company is required to adopt these provisions
at the beginning of fiscal 2007. The Company is currently evaluating the impact
of SFAS 151 on its consolidated financial statements.
 
   13
   **Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations**
 
 The
following discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements and related Notes thereto contained
elsewhere in this Report. The information contained in this quarterly report on
Form 10-Q is not a complete description of our business or the risks associated
with an investment in our common stock. You are urged to carefully review and
consider the various disclosures we made in this Report and in other reports
filed with the SEC, including the annual report on Form 10-K for the year-ended
April 2, 2005.
 
 **Cautionary
Statement Regarding Forward Looking Statements**
 
 *This
Form 10-Q includes forward-looking statements. These forward-looking statements
are not historical facts, and are based on current expectations, estimates, and
projections about the Company’s industry, its beliefs, its assumptions, and its
goals and objectives. Words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", “forecasts”, and "estimates", and variations of
these words and similar expressions, are intended to identify forward-looking
statements. Examples of such forward-looking statements in this Form 10-Q are
the Company’s expectations as to future revenues in the Medical Electronics,
Imaging, Telecom, and Other markets and as to certain products and services
within these markets; the Company’s revenue growth strategy; the Company’s
anticipation that it will not apply the provision to qualify for earnings
repatriation in fiscal 2006 under the Jobs Act; the Company’s belief that it has
provided adequate tax reserves to cover any additional taxes that may be
assessed in its audit; the Company’s anticipated R&D and SG&A expenses
for the fourth quarter of fiscal 2006; the belief that the impact of rising
interest rates on the fair value of the fixed rates securities would be minimal;
the plan to spend approximately $385,000 for capital acquisitions in the fourth
quarter of fiscal 2006; the belief that the Company has ample production
capacity in place to handle any projected increase in business for this fiscal
year; and the anticipation that the available funds and expected cash generated
from operations will be sufficient to meet the liquidity and capital
requirements through the next twelve months. These statements are only
predictions, not a guaranty of future performance, and are subject to risks,
uncertainties, and other factors, some of which are beyond the Company’s control
and are difficult to predict, and could cause actual results to differ
materially from those expressed or forecasted in the forward-looking statements.
These risks and uncertainties include no material adverse changes in the demand
for our customer’s products in which the Company’s products are used;
competition to supply semiconductor devices in the markets in which the Company
competes does not increase and cause price erosion; demand materializes and
increases for recently released customer products incorporating the Company’s
products; that there are no unexpected manufacturing issues as production ramps
up; the demand for the Company’s products or results of its product development
change is such that it would be unwise not to decrease research and development;
that the IRS will determine that more US income was realized than the Company
claimed or that fewer expenses were allowable; and that some of the Company’s
equipment will not be unexpectedly damaged or obsoleted, thereby requiring
replacement as well as those described in " Factors Which May Affect Operating
Results" under Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operation” in the Company’s annual report of Form 10-K
for the fiscal year ended April 2, 2005. The information included in this Form
10-Q is provided as of the filing date with the SEC and future events or
circumstances could differ significantly from the forward-looking statements
included herein. Accordingly, the readers are cautioned not to place undue
reliance on such statements. Except as required by law, the Company undertakes
no obligation to update any forward-looking statement, as a result of new
information, future events, or otherwise.*
 
 **Critical
Accounting Policies**
 
 Our
critical accounting policies are those that both (1) are most important to the
portrayal of the financial condition and results of operations and (2) require
management’s most difficult, subjective, or complex judgments, often requiring
estimates about matters that are inherently uncertain. The critical accounting
policies are described in Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” of our annual report on Form
10-K for the year ended April 2, 2005.
 
 14
 Critical
accounting policies affecting the Company, the critical estimates made when
applying them, and the judgments and uncertainties affecting their application
have not changed materially since April 2, 2005.
 
 **Overview**
 
 We
design, develop, manufacture, and market high voltage semiconductor devices,
including analog and mixed signal integrated circuits utilizing state-of-the-art
high voltage DMOS, HVCMOS and HVBiCMOS analog and mixed signal technologies. We
supply standard and custom high voltage interface products primarily for use in
the telecommunications (telecom), imaging, medical electronics, and industrial
markets. We also supply custom integrated circuits for our customers using
customer-owned designs and mask toolings with our process
technologies.
 
 **Results
of Operations**
 
 **Net
Sales**
 
 We
operate in one business segment comprising the design, development,
manufacturing and marketing of high voltage semiconductor devices including
analog and mixed signal integrated circuits ( IC s).  Net sales
for the three months ended December 31, 2005 were $19,915,000, a 33% increase
compared to $14,925,000 for the same period of prior fiscal year. Net sales for
the nine months ended December 31, 2005 were $56,134,000, a 26% increase
compared to $44,715,000 for the same period of fiscal 2005. The year-over-year
increase in net sales is primarily attributed to an increase in units shipped.
Although our average selling price declined slightly as our mix tended towards
medium priced devices, there was no material price erosion for our product
offerings. Net sales decreased 2% from $20,226,000 when compared to the quarter
ended October 1, 2005. The sequential decrease in net sales is primarily
attributed to the deferred sales to a foreign distributor. A scheduled shipment
to a distributor near the quarter cut-off date was not shipped to the
end-customer as quickly as is typical due to what we believe was a holiday
observance and a production line problem at an end-customer. It is our policy to
recognize revenue on shipments to all our distributors, including the foreign
ones, only upon their resale of our products.
  Our
estimate of the breakdown of net sales to customers in the Medical Electronics,
Imaging, Telecom and Other markets for the three and nine months ended December
31, 2005 and January 1, 2005, as well as year-over-year and quarterly sequential
percentage changes are shown in the below table. We have a broad base of
customers, who in some cases manufacture end products spanning multiple markets.
As such, the assignments of revenue to the aforementioned markets require the
use of estimates, judgment, and extrapolation. Actual results may differ from
those reported.
  **Three
      Months Ended**
    
    
    **Nine
      Months Ended****Net
      Sales**
      **(Dollars
      in thousands)**
    
    **December
      31, 2005**
    
    **January
      1, 2005**
    
    **October
      1, 2005**
    
    **Year-Over-Year
      Change**
    
    **Sequential
      Change**
    
    
    **December
      31, 2005**
    
    **January
      1, 2005**
    
    **Year-Over-Year
      Change**Medical
      Electronics
    
    $
    6,223
    
    $
    5,165
    
    $
    7,281
    
    
    20
    %
    
    -15
    %
    
    $
    19,624
    
    $
    17,051
    
    
    15
    %Imaging
    
    
    8,715
    
    
    5,342
    
    
    8,900
    
    
    63
    %
    
    -2
    %
    
    
    23,203
    
    
    12,854
    
    
    81
    %Telecom
    
    
    3,831
    
    
    3,012
    
    
    3,236
    
    
    27
    %
    
    18
    %
    
    
    10,350
    
    
    9,843
    
    
    5
    %Other
    
    
    1,146
    
    
    1,406
    
    
    809
    
    
    -18
    %
    
    42
    %
    
    
    2,957
    
    
    4,967
    
    
    -40
    %Total
      Net Sales
    
    $
    19,915
    
    $
    14,925
    
    $
    20,226
    
    
    33
    %
    
    -2
    %
    
    $
    56,134
    
    $
    44,715
    
    
    26
    %
 
 
 
 15
 
 
 
 
 **Three
      Months Ended**
    
    
    **Nine
      Months Ended****Markets**
    
    
    **December
      31, 2005**
    
    
    **January
      1,**
      **2005**
    
    
    **October
      1,**
      **2005**
    
    
    
    **December
      31, 2005**
    
    
    **January
      1,**
      **2005**Medical
      Electronics
    
    
    31
    %
    
    35
    %
    
    36
    %
    
    
    35
    %
    
    38
    %Imaging
    
    
    44
    %
    
    36
    %
    
    44
    %
    
    
    41
    %
    
    29
    %Telecom
    
    
    19
    %
    
    20
    %
    
    16
    %
    
    
    18
    %
    
    22
    %Other
    
    
    6
    %
    
    9
    %
    
    4
    %
    
    
    6
    %
    
    11
    %Total
      Net Sales
    
    
    100
    %
    
    100
    %
    
    100
    %
    
    
    100
    %
    
    100
    %
  Sales to
the Medical Electronics market for the three months ended December 31, 2005 was
$6,223,000 as sales increased 20% compared to same period in prior fiscal year,
but decreased 15% sequentially.  For the nine months ended December 31,
2005 sales increased 15% to $19,624,000 compared to same period of the prior
fiscal year. The year-over-year increase in net sales is attributed to strong
shipments of our high voltage pulser circuits and chipsets in addition to added
content in portable and transportable systems. The sequential decrease in sales
is primarily due to a seasonal factor. Customers in this market indicate that
due to timing of the budgeting process and consequential buying practices of the
hospitals that purchase their products; demand for their products typically
increase in the fourth calendar quarter. This results in their increased demand
for components from suppliers like Supertex in the preceding quarter. Thus, the
relatively strong sales to the Medical Electronics market in the quarter ended
October 1, 2005.
   We
believe sales to the Medical Electronics market will increase in the fourth
quarter of this fiscal year and through the next fiscal year. The expected
increase in sales to this market is projected to be provided by the expansion of
our customer base in Asia, an increase in shipments of high-voltage pulsers for
new portable systems, as well as from increased demand of higher resolution
machines as our traditional base of ultrasound customers launches their next
generation products with enhanced imaging capabilities.
   As a
percentage of net sales and in absolute dollars, the Imaging market accounted
for the highest sales of all of our markets for the three and nine months ended
December 31, 2005. Sales in the Imaging market for the three months ended
December 31, 2005 increased 63% to $8,715,000 when compared to the same period a
year ago, and decreased 2% sequentially.  For the nine months ended
December 31, 2005, sales to the Imaging market increased 81% to
$23,203,000 compared to the same period of last fiscal year.  The
year-over-year increase in net sales is primarily attributed to the continued
increase in demand of the electroluminescent (EL) drivers for cellular phones. The
sequential decrease in net sales is primarily attributed to the deferred sales
to a foreign distributor. A scheduled shipment to a distributor near the quarter
cut-off date was not shipped to the end-customer as quickly as is typical during
the holiday observance. It is our policy to recognize revenue on shipments to
all our distributors, including the foreign ones, only upon their resale of our
products. We
forecast increasing EL sales for the fourth fiscal quarter and further increases
in the first fiscal quarter of 2007 as additional platforms and customers are
expected to reach production status.
   Sales to
the Telecom market increased 27% during the three months ended December 31, 2005
to $3,831,000 compared to the same period a year ago and increased 18%
sequentially.  For the nine months ended December 31, 2005, sales to the
Telecom market increased 5% to $10,350,000 compared to the same period of
prior fiscal year.  The increase in year-over-year and sequential sales is
attributed to ramping up of our next generation products. We believe sales to
the Telecom market will see a moderate growth as shipments of the HotSwap
products grow due to customers ramping up their programs into volume production;
and partially from shipments of chip sets for telecom line protection
products.
   Sales to
Other markets decreased 18% during the three months ended December 31, 2005 to
$1,146,000 compared to the same period a year ago but increased 42%
sequentially.  For the nine months ended December 31, 2005, sales to Other
markets decreased 40% to $2,957,000 compared to the same period a year ago.
The year-over-year decrease in sales is primarily due to the shift of our focus
to new products from the lower margin foundry business. Although there was a
slight increase in sales of our foundry business during the quarter ended
December 31, 2005 when compared to the prior quarter, we expect our foundry
business to remain at the current level for the foreseeable future.
   16
 Our
current growth strategy relies on the successful transition of our new products,
and our ability to continuously and successfully introduce and market new
products and technologies that meet our customers’ requirements.
  Our
principal markets are in the United States, Europe, and Asia. Sales by geography
as well as year-over-year and sequential percentage change, were as follows,
where international sales include sales to U.S. based customers if the product
is delivered outside the United States *(in
thousands):*
 
 **Three
      Months Ended**
    
    
    **Nine
      Months Ended****Net
      Sales**
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **October
      1, 2005**
    
    
    **Year-Over-Year
      Change**
    
    
    **Sequential
      Change**
    
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **Year-Over-Year
      Change**United
      States
    
    $
    6,922
    
    $
    8,264
    
    $
    7,220
    
    
    -16
    %
    
    -4
    %
    
    $
    21,492
    
    $
    25,581
    
    
    -16
    %Europe
    
    
    1,314
    
    
    1,154
    
    
    1,831
    
    
    14
    %
    
    -28
    %
    
    
    4,450
    
    
    3,957
    
    
    12
    %Japan
    
    
    1,962
    
    
    1,412
    
    
    1,718
    
    
    39
    %
    
    14
    %
    
    
    5,415
    
    
    5,179
    
    
    5
    %Asia
      (excluding Japan)
    
    
    9,193
    
    
    3,667
    
    
    8,966
    
    
    151
    %
    
    3
    %
    
    
    22,955
    
    
    8,640
    
    
    166
    %Other
    
    
    524
    
    
    428
    
    
    491
    
    
    22
    %
    
    7
    %
    
    
    1,822
    
    
    1,358
    
    
    34
    %Total
      Net Sales
    
    $
    19,915
    
    $
    14,925
    
    $
    20,226
    
    
    33
    %
    
    -2
    %
    
    $
    56,134
    
    $
    44,715
    
    
    26
    %Domestic
      Sales
    
    $
    6,922
    
    $
    8,264
    
    $
    7,220
    
    
    -16
    %
    
    -4
    %
    
    $
    21,492
    
    $
    25,581
    
    
    -16
    %International
      Sales
    
    
    12,993
    
    
    6,661
    
    
    13,006
    
    
    95
    %
    
    0
    %
    
    
    34,642
    
    
    19,134
    
    
    81
    %Total
      Net Sales
    
    $
    19,915
    
    $
    14,925
    
    $
    20,226
    
    
    33
    %
    
    -2
    %
    
    $
    56,134
    
    $
    44,715
    
    
    26
    %
  Net sales
to international customers for the three months ended December 31, 2005 were
$12,993,000 or 65% of net sales as compared to $6,661,000 or 45% of net sales
for the same period of the prior fiscal year and $13,006,000 or 64% in the three
months ended October 1, 2005 . For the
nine months ended December 31, 2005, international sales were $34,642,000 or 62%
of net sales as compared to $19,134,000 or 43% of net sales of same period of
the prior fiscal year. Sales to
international customers for the three and nine months ended December 31, 2005
increased 95% and 81% respectively, compared to the same periods last year, but
decreased slightly sequentially. The
increase in sales year-over-year is
primarily due to shipments of EL backlighting products to customers whose
contract manufacturing vendors are located in China as well as the continuing
transfer of end-customer manufacturing from North America to international
locations, mainly the Asia Pacific Region. The
slight decrease in sales to international customers sequentially is primarily
caused by the deferred sales to a foreign distributor. A scheduled shipment to a
distributor near the quarter cut-off date was not shipped to end-customer as
quickly as is typical due to holiday observance. Sales to
domestic customers for the three and nine months ended December 31, 2005
decreased 16% and 16% respectively, compared to the same periods last year; and
decreased 4% sequentially. The decrease year-over-year and sequentially is
attributed primarily to the transfer of end customer manufacturing and due to
the decline in sales of our foundry products.
   Our
assets are primarily located in the United States.
   17
  ***Gross
Profit***
 
 Gross
profit represents net sales less cost of net sales. Cost of sales includes the
cost of purchasing raw silicon wafers, cost associated with assembly, packaging,
test, quality assurance and product yields, the cost of personnel, facilities,
and equipment associated with manufacturing support and charges for excess
inventory. Gross profit for the quarter ended December 31, 2005 was $10,754,000,
compared to $7,882,000 for the same period of fiscal 2005, and $11,382,000 of
the prior quarter. For the nine months ended December 31, 2005, gross profit was
$31,323,000 compared to $23,172,000 for the same period of last fiscal year.
These changes were primarily attributable to corresponding changes in our
revenue although as shown below, our gross margin percentage did fluctuate
somewhat.
 
 **Three
      Months Ended**
    
    
    **Nine
      Months Ended***(Dollars
      in thousands)*
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **October
      1, 2005**
    
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**Gross
      Margin Percentage
    
    
    54
    %
    
    53
    %
    
    56
    %
    
    
    56
    %
    
    52
    %*Included
      in Gross Margin Percentage Above*Gross
      Margin Benefit from Sale of Previously Written Down
    Inventory
    
    
    $     266
    
    
    $   
      234
    
    
    $     306
    
    
    
    $     829
    
    
    $    738Percentage
      of Net Sales
    
    
    1
    %
    
    2
    %
    
    2
    %
    
    
    1
    %
    
    2
    %
 
 Gross
margin, which is gross profit as a percent of net sales, was 54% for the three
months ended December 31, 2005 compared to 53% for the same period of the prior
fiscal year and 56%, sequentially. For the nine months ended December 31, 2005,
gross margin was 56% compared to 52% for the same period of the prior fiscal
year. The improvement in gross margin for the three and nine months ended
December 31, 2005 over the comparable periods in fiscal 2005 was primarily
attributed to the increase in plant capacity utilization, and to a lesser degree
from favorable product mix which consisted of higher sales of our newer products
replacing declining sales of the lower margin foundry products. The sequential
decrease in gross margin was mostly due to the slightly lower sales in the
current quarter and due to operating inefficiencies during the quarter caused by
numerous holidays and the production facilities being shutdown in the last week
of the quarter for annual maintenance and upgrade work.
 
 ***Research
and Development (R&D) Expenses***
 
 **Three
      Months Ended**
    
    
    **Nine
      Months Ended***(Dollars
      in thousands)*
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **October
      1, 2005**
    
    
    **Year-Over-Year
      Change**
    
    
    **Sequential
      Change**
    
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **Year-Over-Year
      Change**R&D
      Expenses
    
    
    $    
      2,792
    
    
    $   
      2,086
    
    
    $   
      2,598
    
    
    34
    %
    
    7
    %
    
    
    $   
      8,149
    
    
    $   
      7,242
    
    
    13
    %Percentage
      of Net Sales
    
    
    14
    %
    
    14
    %
    
    13
    %
    
    
    
    
    
    
    
    
    15
    %
    
    16
    %
 
 R&D
expenses include payroll and benefits, as well as expensed material and facility
costs associated with the development of new processes and new products. We also
expense prototype wafers and mask sets related to new products as research and
development expenses until new products are released to production.
 
 In
absolute dollars, R&D expenses in the three and nine months ended December
31, 2005 increased to $2,792,000 and $8,149,000, respectively compared to
$2,086,000 and $7,242,000 for the respective periods a year ago. The increase
for both periods is attributed to an increase in payroll and benefit expenses
due to additional headcount, increase in expense for prototype cost, and
increase in expenses for engineering supplies and services. Compared to the
prior quarter, R&D expenses increased to $2,792,000 from $2,598,000. The
increase is attributed to an increase in payroll and related benefit expenses
due to additional headcount, increase in expenses for engineering supplies and
services, offset by a decrease in expense for prototype costs. Some aspects of
our R&D efforts require significant short-term expenditures. As such, timing
of such expenditures may cause fluctuations in our R&D
expenses.
 
 18
 We plan
to increase R&D activities to enhance our product offerings in order to meet
current and future technological requirements of our customers and markets. As
such, R&D expenses in absolute dollars are likely to increase in the next
quarter and throughout the next fiscal year. However, R&D expenses as a
percentage of net sales may fluctuate.
 
 ***Selling,
General and Administrative (SG&A*** **)
Expenses**
 
 ****
    
    **Three
      Months Ended**
    
    **Nine
      Months Ended***(Dollars
      in thousands)*
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **October
      1, 2005**
    
    
    **Year-Over-Year
      Change**
    
    
    **Sequential
      Change**
    
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **Year-**
      **Over-Year
      Change**SG&A
      Expenses
    
    
    $   
      3,464
    
    
    $   
      3,049
    
    
    $   
      3,248
    
    
    14
    %
    
    7
    %
    
    
    $   
      9,900
    
    
    $   
      8,400
    
    
    18
    %Percentage
      of Net Sales
    
    
    17
    %
    
    20
    %
    
    16
    %
    
    
    
    
    
    
    
    
    18
    %
    
    19
    %
 
 SG&A
expenses consist primarily of employee-related expenses, commissions to sales
representatives, occupancy expenses including expenses associated with the our
regional sales offices, cost of advertising and publications, and outside
services such as legal, auditing, tax, and Sarbanes-Oxley compliance services.
 
 SG&A
expenses for the three months ended December 31, 2005 increased $415,000 or 14%
to $3,464,000 from $3,049,000 for the comparable period of last year. This
increase is primarily attributed to a $180,000 increase in payroll related
expenses due to increased headcount as we continue to expand our sales and
marketing efforts worldwide, and a $184,000 increase in commissions expense and
salesmen bonus resulting from increased sales. Compared to the prior quarter,
SG&A expenses increased $216,000 or 7%. The increase is primarily attributed
to a $186,000 increase in payroll related expenses from additional headcount,
partially offset by a $132,000 decrease in commission and salesmen bonus due to
a lower sales in the current quarter when compared to the prior
quarter.
 
 SG&A
expenses for the nine months ended December 31, 2005 increased $1,500,000 or
18%, compared to the same period last year. This increase is primarily
attributed to a $745,000 increase in payroll related expenses due to increased
headcount as we continue to expand our sales and marketing efforts worldwide, a
$658,000 increase in commissions expense and salesmen bonus resulting from
increased sales, $94,000 increase in travel expenses; partially offset by a
$101,000 reduction in advertising costs.
 
 SG&A
expenses for the fourth quarter of fiscal 2006 are expected to increase in
absolute dollars as we continue to expand our sales and marketing presence
worldwide; however, SG&A expenses as a percentage of net sales may
fluctuate.
 
 ***Interest
Income and Other Income, Net***
 
 **Three
      Months Ended**
    
    
    
    
    
    
    **Nine
      Months Ended***(Dollars
      in thousands)*
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **October
      1, 2005**
    
    
    **Year-Over-Year
      Change**
    
    
    **Sequential
      Change**
    
    
    
    **December
      31, 2005**
    
    
    **January
      1, 2005**
    
    
    **Year-Over-Year
      Change**Interest
      Income and Other Income, Net
    
    
    $   
      899
    
    
    $   
      692
    
    
    $   
      702
    
    
    30
    %
    
    28
    %
    
    
    $   
      2,507
    
    
    $   
      1,464
    
    
    71
    %Percentage
      of Net Sales
    
    
    5
    %
    
    5
    %
    
    3
    %
    
    
    
    
    
    
    
    
    4
    %
    
    3
    %
 
 19
 Interest
income, which consists primarily of interest income from our cash, cash
equivalents and short-term investments, was $773,000 and $441,000 for the three
months ended December 31, 2005 and January 1, 2005, respectively. For the nine
months ended December 31, 2005, interest income was $2,032,000, compared to
$1,102,000 of the same period of the last fiscal year. The increases in interest
income for the three and nine months ended December 31, 2005 are primarily a
result of higher investment yields and to a lesser extent from larger cash, cash
equivalents and short-term investments balance compared to the same periods of
fiscal 2005.
 
 Other
income, net, for the three months ended December 31, 2005 was $126,000 and
consisted primarily of an increase in fair market value of investments held by
the our Supplemental Employee Retirement Plan of $137,000, offset by foreign
currency exchange loss of $34,000. For the comparable period in fiscal 2005,
other income, net was $251,000 and consisted primarily of an increase in fair
market value of investments held by the our Supplemental Employee Retirement
plan of $295,000, offset by foreign currency exchange loss of
$23,000.
 
 Other
income, net, for the nine months ended December 31, 2005 was $475,000 and
consisted primarily of an increase in fair market value of investments held by
our Supplemental Employee Retirement Plan of $428,000, offset by foreign
currency exchange loss of $44,000. For the comparable nine months ended January
1, 2005, other income, net of $362,000 is primarily attributed an increase in
fair market value of investments held by our Supplemental Employee Retirement
Plan of $324,000 and a foreign currency gain of $49,000.
 
 ***Provision
for Income Taxes***
 
 Provision
for income taxes represents federal, state and foreign taxes. The provision for
income taxes for the three months ended December 31, 2005 was $1,708,000 at the
effective tax rate of 32%, compared to $1,189,000 and 35% for the same period in
the prior fiscal year. The provision for income taxes for the nine months ended
December 31, 2005 was $5,026,000 at the effective tax rate of 32% compared to
$2,968,000 and 33% for the same period in the prior fiscal year. The effective
tax rate for the three and nine months ended December 31, 2005 was favorably
impacted by the tax exempt interest, federal and California research and
development credit, and the release of certain tax reserves due to the
expiration of the status of limitation.
 
 We
maintain within our income taxes payable account reserves for tax contingencies.
These reserves involve considerable judgment and estimation and are continuously
monitored by management and professional tax consultants based on the best
information available including changes in tax regulations, the outcome of
relevant court cases and other information. We are currently undergoing a
routine tax audit by the Internal Revenue Service (IRS). Although the outcome of
any tax audit is uncertain, we believe we have adequately provided in our
financial statements for any additional taxes we may be required to pay as a
result of the IRS audit. If the payment ultimately proves to be unnecessary, the
reversal of these reserves for tax liability would result in tax benefits being
recognized in the period we determine such liabilities are no longer necessary.
However, if an ultimate tax assessment exceeds our estimate of tax liabilities,
an additional tax provision will be recorded. The impact of either adjustment in
our tax accounts could have a material impact on our results of operations in
future periods
 
 
 **Financial
Condition**
 
 ***Overview***
 
 We ended
the third quarter of fiscal 2006 with $102,966,000 in cash, cash equivalents,
and short-term investments. This represents an increase of $14,549,000 when
compared with the amount of $88,417,000 on April 2, 2005. As of December 31,
2005, the working capital was $116,149,000, an increase of $19,253,000 from
$96,896,000 as of April 2, 2005. Working capital is defined as current assets
less current liabilities. The increase in working capital was mostly the result
of cash generated from operations.
 
  20
  ***Liquidity
and Capital Resources***
 ******
 Our cash
and cash equivalents decreased $12,103,000 during the nine months ended December
31, 2005 to $26,531,000 from $38,634,000 at April 2, 2005. The decrease in cash
and cash equivalents during the nine months ended December 31, 2005 is
due to cash used in investing activities of $28,080,000, as we moved cash and
cash equivalents into short-term investments and $2,081,000 of cash used in the
purchase of property, plant and equipment; offset by positive cash flows from
operating activities of $9,887,000 and from financing activities of $6,090,000.
 
 Our
operating activities generated cash of $9,887,000 for the nine months ended
December 31, 2005, compared to $9,408,000, for the same period in the prior
fiscal year. The positive cash flows from operating activities were primarily
attributable to net income, adjusted for non-cash items. Net operating cash
flows for the nine months ended December 31, 2005 were favorably impacted by
non-cash charges for tax benefit associated with employee stock option exercises
of $2,378,000, depreciation of $2,114,000, non-cash charges for provisions
relating to inventory of $857,000, and non-cash charge in provisions for
doubtful accounts and sales returns totaling $969,000.  Working
capital sources of cash included an increase in accounts payable and accrued
expenses of $3,295,000 primarily from timing of payments for purchases and
increased accruals for employee benefits payables. Working capital uses of cash
included an increase in accounts receivable of $5,276,000 due primarily to
increased sales, an increase of inventories of $2,674,000 to support higher
projected fourth fiscal quarter sales, and decrease in income tax payable of
$2,136,000, and an increase in short-term investments categorized as trading
securities of $653,000.
 
 In the
comparable period in fiscal 2005, the positive cash flows from operating
activities were primarily attributable to net income, adjusted for non-cash
items. Net operating cash flows were favorably impacted by non-cash charges for
depreciation of $2,453,000, non-cash charges for provisions relating to
inventory of $1,317,000, and non-cash charges for provisions for doubtful
accounts and sales returns totaling $955,000.  Working
capital sources of cash included an increase in accounts payable and accrued
expenses of $1,869,000 primarily from timing of payments and increased accruals
for employee benefits payable and an increase in income taxes payable of
$612,000 due to higher income. Working capital uses of cash included an increase
in accounts receivable of $2,043,000 due primarily to higher sales, an increase
of inventories of $602,000, and a decrease in deferred revenue of
$239,000.
 
 Net cash
used in investing activities in the nine months ended December 31, 2005 was
$28,080,000, primarily for purchases of short-term investments categorized as
available for sale of $567,224,000 and purchases of property, plant and
equipment of $2,081,000, partially offset by $541,225,000, proceeds from sales
of short-term investments categorized as available for sale. In the comparable
period in fiscal 2005, net cash used in investing activities was $31,390,000,
primarily for purchases of short-term investments categorized as available for
sale of $318,859,000 and equipment purchases of $1,031,000, partially offset by
proceeds from sales of short-term investments categorized as available for sale
of $288,459,000.
 
 Net cash
provided from financing activities during the nine months ended December 31,
2005, was $6,090,000, which consisted primarily of proceeds from employee
exercises of stock options under the current and former option plans and
proceeds from employee purchases of stocks under the ESPP, totaling $7,170,000,
offset by common stock repurchase of $1,080,000. During the nine months period,
we bought back 67,900 shares of our common stock in open market transactions for
the total amount of $1,080,000. The repurchase prices ranged from $15.45 to
$17.05 with a weighted average price of $15.91. The repurchases were made under
the repurchase program previously approved by the Board of Directors. In the
comparable period in fiscal 2005, net cash provided by financing activities was
$2,127,000, which consisted primarily of proceeds from employee exercises of
stock options under the current and former option plans and proceeds from
employee purchases of stocks under the ESPP totaling $2,402,000, offset by
$275,000 from common stock repurchases.
 
 We expect
to spend approximately $385,000 for capital acquisitions in the fourth quarter
of fiscal 2006. We believe that we have substantial production capacity in place
to handle any projected increase in business for the next fiscal year. We also
believe our existing cash, cash equivalents and short-term investments, together
with cash flow from operations, will be sufficient to meet liquidity and capital
requirements through the next twelve months.
 
 21
 ***Off-Balance
Sheet Arrangements***
 
 We do not
have any off-balance sheet arrangements that have, or are likely to have, a
current or future material effect on the financial condition, revenues,
expenses, results of operations, liquidity, capital expenditures, or capital
resources.
 
 ***Contractual
Obligations***
 
 The
following table summarizes our significant contractual cash obligations at
December 31, 2005, and the effect such obligations are expected to have on our
liquidity and cash flow in future periods (*in thousands*):
 
 **Payment
      Due by Year****Contractual
      Obligations**
    
    
    **Total**
    
    
    **Less
      than 1 Year**
    
    
    **2-3
      Years**
    
    
    **4-5
      Years**
    
    
    **After
      5 Years**Operating
      lease obligations(1)
    
    $
    4,966
    
    $
    1,029
    
    $
    1,749
    
    $
    1,866
    
    $
    322Purchase
      obligations(2)
    
    
    5,776
    
    
    5,255
    
    
    521
    
    
    --
    
    
    --Total
      contractual cash obligations
    
    $
    10,742
    
    $
    6,284
    
    $
    2,270
    
    $
    1,866
    
    $
    322
 
 *(1)
We lease facilities under non-cancelable lease agreements expiring at various
times through April 2011. Rental expense net of sublease income for the three
and nine months ended December 31, 2005, amounted to $203,000 and $613,000,
respectively.*
 
 *(2)
To obtain favorable pricing and resource commitment, we commit to volume
purchases from suppliers of manufacturing materials and
services.*
 
 
 ***Recent
Accounting Pronouncements***
 
 In
November 2005, the Financial Accounting Standards Board (FASB) issued FSP
FAS 115-1 and FAS 124-1, *"The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments"* ("FSP
115-1 and 124-1"), which clarifies when an investment is considered impaired,
whether the impairment is other than temporary, and the measurement of an
impairment loss. It also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and requires certain
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. FSP 115-1 and 124-1 are effective for all
reporting periods beginning after December 15, 2005. At December 31,
2005, all unrealized investment losses on available for sale securities have
been recognized. We do not anticipate that the implementation of these
statements will have a significant impact on our financial position or results
of operations.
 
 In
September 2005, the FASB issued EITF Issue No. 04-13, *"Accounting
for Purchases and Sales of Inventory with the Same
Counter-party"* ("EITF 04-13"). The issue provided guidance on the circumstances under
which two or more inventory transactions with the same counter-party should be
viewed as a single non-monetary transaction within the scope of APB Opinion
No. 29, "Accounting for Non-monetary Transactions." The issue also provided
guidance on circumstances under which non-monetary exchanges of inventory within
the same line of business should be recognized at fair value. EITF 04-13
will be effective for transactions completed in reporting periods beginning
after March 15, 2006. We are evaluating the impact that this issue will
have on our consolidated financial statements.
 
 In May
2005, the FASB issued Statement of Financial Accounting Standards (SFAS) No.
154, “ *Accounting
Changes and Error Corrections”* . SFAS
154 replaces APB Opinion No. 20, *Accounting
Changes* , and
SFAS 3, *Reporting
Accounting Changes in Interim Financial Statements*  *- an
amendment of APB Opinion No. 28* . We are
required to adopt SFAS 154 for accounting changes and error corrections at the
beginning of fiscal 2007. Our results of operations and financial condition will
only be impacted by SFAS 154 if we implement changes in accounting principle
that are addressed by the standard or correct accounting errors in future
periods.
 
 22
 In March
2005, the FASB issued Interpretation No. 47, “ *Accounting
for Conditional Asset Retirement Obligations”* , which
clarifies that an entity is required to recognize a liability for the fair value
of a conditional asset retirement obligation if the fair value can be reasonably
estimated even though uncertainty exists about the timing and (or) method of
settlement. We are required to adopt Interpretation No. 47 by the end of fiscal
2006. We are currently assessing the impact of Interpretation No. 47 on its
results of operations and financial condition.
 
 In
December 2004, FASB issued Statement No. 123 (revised 2004), or SFAS 123R, *“Share-Based
Payment.”* This
statement replaces SFAS 123, *“Accounting
for Stock-Based Compensation”* and
supersedes Accounting Principles Board’s Opinion No. 25 (APB 25), *“Accounting
for Stock Issued to Employees”* . SFAS
123R will require us to measure the cost of our employee stock-based
compensation awards granted after the effective date based on the grant date
fair value of those awards and to record that cost as compensation expense over
the period during which our employee is required to perform services in exchange
for the award (generally over the vesting period of the award). In addition, we
will be required to record compensation expense (as previous awards continue to
vest) for the unvested portion of previously granted awards that remain
outstanding at the date of adoption. In April 2005, the U.S. Securities and
Exchange Commission (the “SEC”) announced a deferral of the effective date of
SFAS 123R to the registrant’s fiscal year beginning on or after June 15, 2005.
We are therefore required to implement the standard beginning on our fiscal year
2007. In addition, the SEC issued Staff Accounting Bulletin No. 107, or (SAB
107) in March 2005. SAB 107 includes interpretive guidance for the initial
implementation of SFAS 123R. We are currently evaluating the impact of the SFAS
123R on its financial statements.
 
 In
November 2004, the FASB issued SFAS No. 151, “ *Inventory
Costs,*  *an
amendment of ARB No.43, Chapter 4”* (SFAS
151). This statement amends the guidance in ARB No. 43, Chapter 4, “ *Inventory
Pricing* ” to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). SFAS 151 requires that those
items be recognized as current-period charges. In addition, this Statement
requires that allocation of fixed production overheads to costs of conversion be
based upon the normal capacity of the production facilities. The provisions of
SFAS 151 are effective for inventory cost incurred in fiscal years beginning
after June 15, 2005. As such, we are required to adopt these provisions at the
beginning of our fiscal 2007. We are currently evaluating the impact of SFAS 151
on its consolidated financial statements.
 
 
 ***Available
Information***
 
 We file
electronically with the SEC our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments, if any, to those
reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934. The SEC maintains an Internet site at http://sec.gov that
contains reports, proxy and information statements and other information
regarding Supertex, Inc. We make available free of charge and through our
Internet website at www.supertex.com copies
of these reports as soon as reasonably practicable after filing or furnishing
the information to the SEC. Copies of such documents may be requested by
contacting our Investor Relations department at (408) 222-4887.
 
 
 **Item
3. Quantitative and Qualitative Disclosures About Market Risk and Interest Rate
Risk**
 
 The
Company is exposed to financial market risks due primarily to changes in
interest rates. The Company does not use derivatives to alter the interest
characteristics of its investment securities. The Company has no holdings of
derivative or commodity instruments, and its holdings are for purposes other
than trading purposes. The Company's portfolio is primarily comprised of fixed
rate securities.  The fair value of these fixed rate securities may be
affected by a rise in interest rates; however, the Company believes that the
impact would be minimal since the maturities of these securities are short,
typically no more than 35 days.
 
 23
 To date,
the Company’s international customer agreements are denominated primarily in
U.S. dollars, and accordingly, it has not been exposed materially to foreign
currency exchange rate fluctuations related to customer agreements. The Company
does not engage in foreign currency hedging transactions. The functional
currency of the Company’s operations in Hong Kong is the U.S. dollar. Therefore,
as the local expenditures are denominated in the local currency of Hong Kong, it
is subject to foreign currency exchange rate fluctuations associated with
remeasurement to U.S. dollars. The Company does not enter into forward exchange
contracts as a hedge against foreign currency exchange risk on transactions
denominated in foreign currencies or for speculative or trading purposes. A
hypothetical change of 10% in the foreign currency exchange rates would not have
a material impact on the Company’s consolidated financial position or results of
operations.
 
 **Item
4. Controls and Procedures**
 
 **(a)
Disclosure Controls and Procedures.**
 
 *Disclosure
Controls and Procedures* *.* The
Company’s disclosure controls and procedures are designed to ensure that
information required to be disclosed in the Company’s reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and forms, including,
without limitation, that such information is accumulated and communicated to
Company management, including the Company’s principal executive and financial
officer, as appropriate to allow timely decisions regarding required
disclosures.
 
 *Limitations
on the Effectiveness of Disclosure Controls* *.* In
designing and evaluating the Company’s disclosure controls and procedures,
management recognized that disclosure controls and procedures, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures are met.
Additionally, in designing disclosure controls and procedures, Company
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and procedures. The
design of any disclosure controls and procedures also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
 
 *Evaluation
of Disclosure Controls and Procedures.* The
Company’s principal executive and financial officer has evaluated the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures as defined in Exchange Act Rules 13a-14(c) as of December 31,
2005, and has determined that they are reasonably effective, taking into account
the totality of the circumstances, including the limitations described
above.
 
 
 **(b)
Internal Control over Financial Reporting.**
 
 Our
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) is designed to provide reasonable assurance regarding
the reliability of our financial reporting and preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. There were no significant changes in the Company’s
internal control over financial reporting that occurred during the third quarter
of fiscal 2006 that have materially affected, or are reasonably likely to
materially affect, such control.
  24
  **PART
II - OTHER INFORMATION**
 
 **Item
1. Legal Proceedings**
 
 From time
to time the Company is subject to possible claims or assessments from third
parties arising in the normal course of business. Management has reviewed such
possible claims and assessments with legal counsel and believes that it is
unlikely that they will result in a material adverse impact on the Company’s
financial position or results of operations. ******
 
 **Item
2.** **** **Unregistered
Sales of Equity Securities and Use of Proceeds**
 
 Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
 
 Neither
the Company nor any affiliated purchaser repurchased any of the Company’s shares
during the three months ended December 31, 2005. There are 784,100 shares
currently remaining in the repurchase program adopted in 1999, which was
documented in the Quarterly Report on Form 10-Q for the period ended June 30,
2004. This 1999 repurchase program has no expiration date, other than unless
extended, when the remaining 784,100 shares have been repurchased. Neither this
program nor any other repurchase program or plan has expired during the three
months ended December 31, 2005, nor has the Company decided to terminate any
repurchase plan or program prior to this expiration. There are no existing
repurchase plans or programs under which the Company does not intend to make
further purchases.
 
 ****
 **Item
3. Defaults Upon Senior Securities**
 
 None
 
 **Item
4. Submission of Matters to a Vote of Security Holders**
 
 None
 
 
 **Item
5. Other Information**
 
 None
 
 **Item
6. Exhibits**
 
 Exhibit
31 - Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Securities and Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 Exhibit
32 - Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 
 
 
 25
 
 
 
 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 the undersigned thereunto
duly authorized.
 
 
 **SUPERTEX, INC.**
 *(Registrant)*
 
 Date:
February 7, 2006
 By: /s/
Henry C. Pao
 Henry C. Pao, Ph.D.
 President
 (Principal Executive
and Financial Officer)
  26
  Exhibit
31
 **Certifications
Under Rule 13a-14(a)/l5d-14(a)**
 
 I, Henry
C. Pao, certify that:
 
 1.  I have
reviewed this quarterly report on Form 10-Q of Supertex, Inc., a California
corporation;
 
 2.  Based on
my knowledge, this quarterly report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly report;
 
 3.  Based on
my knowledge, the financial statements, and other financial information included
in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
 
 4.  I am
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and I have:
 
 (a)  designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under my supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to me by others within those entities, particularly during the
period in which this quarterly report is being prepared;
 
 (b)
designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under my supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles ;
 
 (c)  evaluated
the effectiveness of the registrant's disclosure controls and procedures and
presented in this report my conclusion about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
 
 (d)  disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
 
 5.  I have
disclosed, based on my most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):
 
 (a)  all
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize, and
report financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
 
 (b)  any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control  over
financial reporting.
 
 Date:
February 7, 2006  /s/
Henry C. Pao
 Henry C. Pao,
Ph.D.
 Chief
Executive Officer and Chief Financial Officer
 (Principal Executive and Financial Officer)
 
 27
 **Exhibit
32**
 
 **Statement
of Chief Executive Officer and Chief Financial Officer under 18 U.S.C.
§ 1350**
 
 
 
 I, Henry
C. Pao, the chief executive officer and chief financial officer of Supertex,
Inc., a California corporation (the “Company”), certify pursuant to Section 1350
of Chapter 63 of Title 18 of the United States Code, that to my
knowledge:
 
 (i)
    the
      quarterly report of the Company on Form 10-Q for the period ended
      December 31, 2005, as filed with the Securities and Exchange Commission
      (the “Report”), fully complies with the requirements of Section 13(a) or
      15(d), whichever is applicable, of the Securities Exchange Act of 1934,
      and
 
 (ii)
    the
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the Company
      at the dates and for the periods indicated.
 
 
 
 Date:
February 7, 2006  /s/
Henry C. Pao
 Henry C. Pao, Ph.D.
 Chief Executive Officer and Chief
Financial Officer
 
 
 *The
material contained in this Exhibit 32 is not deemed “filed” with the SEC and is
not to be incorporated by reference into any filing of the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, whether made
before or after the date hereof and irrespective of any general incorporation
language contained in such filing.*
 
 
 
 28