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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to
 Commission file number 000-50857
 Volterra Semiconductor Corporation
  Delaware(State or other jurisdiction of 
incorporation or organization)
    
    94-3251865(I.R.S. Employer
Identification No.)
 
  þ o
  o þ o
 o þ




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Cautionary Note Regarding Forward-Looking Statements
  2




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##### 



Volterra Semiconductor Corporation and Subsidiaries
 PagePART I. FINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements
    
    
    4Condensed Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005
    
    
    4Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 2006 and 2005
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September
30, 2006 and 2005
    
    
    6Notes to the Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATION
    
    
    20Item 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 6. Exhibits
    
    
    34SIGNATURES
    
    
    36EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  3




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 VOLTERRA SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    36,954
    
    
    $
    32,955Short-term investments
    
    
    9,947
    
    
    
    14,952Accounts receivable, net of allowances of $672 and $654, respectively
    
    
    13,247
    
    
    
    8,711Inventory
    
    
    9,420
    
    
    
    4,283Prepaid expenses and other current assets
    
    
    1,244
    
    
    
    1,091Total current assets
    
    
    70,812
    
    
    
    61,992Property and equipment, net
    
    
    4,220
    
    
    
    3,477Other assets
    
    
    70
    
    
    
    34Total assets
    
    $
    75,102
    
    
    $
    65,503Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    5,327
    
    
    $
    4,267Accrued liabilities
    
    
    3,594
    
    
    
    3,476Total current liabilities
    
    
    8,921
    
    
    
    7,743Commitments (note 4)Stockholders equity:Preferred stock, $0.001 par value; 5,000,000 shares authorized;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 200,000,000 shares authorized;
24,096,758 and 23,585,590 shares issued and outstanding, respectively
    
    
    26
    
    
    
    24Additional paid-in capital
    
    
    100,934
    
    
    
    96,227Deferred stock-based compensation
    
    
    
    
    
    
    (189
    )Accumulated deficit
    
    
    (34,779
    )
    
    
    (38,302
    )Total stockholders equity
    
    
    66,181
    
    
    
    57,760Total liabilities and stockholders equity
    
    $
    75,102
    
    
    $
    65,503
 4




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VOLTERRA SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net revenue
    
    $
    20,113
    
    
    $
    12,509
    
    
    $
    53,345
    
    
    $
    40,325Cost of revenue*
    
    
    9,678
    
    
    
    5,885
    
    
    
    26,222
    
    
    
    17,643Gross margin
    
    
    10,435
    
    
    
    6,624
    
    
    
    27,123
    
    
    
    22,682Operating expenses:Research and development*
    
    
    6,121
    
    
    
    4,031
    
    
    
    17,266
    
    
    
    11,666Selling, general and administrative*
    
    
    2,921
    
    
    
    2,035
    
    
    
    8,328
    
    
    
    6,840Total operating expenses
    
    
    9,042
    
    
    
    6,066
    
    
    
    25,594
    
    
    
    18,506Income from operations
    
    
    1,393
    
    
    
    558
    
    
    
    1,529
    
    
    
    4,176Interest and other income
    
    
    541
    
    
    
    331
    
    
    
    1,509
    
    
    
    872Interest and other expense
    
    
    (13
    )
    
    
    (4
    )
    
    
    (52
    )
    
    
    (13
    )Income before income taxes
    
    
    1,921
    
    
    
    885
    
    
    
    2,986
    
    
    
    5,035Income tax expense / (benefit)
    
    
    158
    
    
    
    247
    
    
    
    (537
    )
    
    
    957Net income
    
    $
    1,763
    
    
    $
    638
    
    
    $
    3,523
    
    
    $
    4,078Basic net income per share
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.15
    
    
    $
    0.17Shares used in computing basic net income per share
    
    
    24,171
    
    
    
    23,675
    
    
    
    24,013
    
    
    
    23,538Diluted net income per share
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.13
    
    
    $
    0.16Shares used in computing diluted net income per share
    
    
    26,001
    
    
    
    26,159
    
    
    
    26,122
    
    
    
    26,189
 
 *
    
    Includes stock-based compensation expense as follows: Cost of revenue
    
    $
    79
    
    
    $
    7
    
    
    $
    212
    
    
    $
    22Research and development
    
    
    454
    
    
    
    11
    
    
    
    1,686
    
    
    
    98Selling, general and administrative
    
    
    516
    
    
    
    82
    
    
    
    1,280
    
    
    
    244Total stock-based compensation expense
    
    $
    1,049
    
    
    $
    100
    
    
    $
    3,178
    
    
    $
    364
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VOLTERRA SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    3,523
    
    
    $
    4,078Adjustments to reconcile net income to net cash
provided (used) by operating activities:Depreciation and amortization
    
    
    1,138
    
    
    
    450Accretion of discount in debt securities
    
    
    242
    
    
    
    (202
    )Provision for doubtful accounts
    
    
    (152
    )
    
    
    Stock-based compensation
    
    
    3,178
    
    
    
    364Changes in operating assets and liabilities:Accounts receivable
    
    
    (4,384
    )
    
    
    (7,091
    )Inventory
    
    
    (5,049
    )
    
    
    (173
    )Prepaid expenses, other current and other assets
    
    
    (189
    )
    
    
    (128
    )Accounts payable
    
    
    1,060
    
    
    
    2,565Accrued liabilities
    
    
    118
    
    
    
    1,011Net cash (used) provided by operating activities
    
    
    (515
    )
    
    
    874Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,881
    )
    
    
    (1,915
    )Purchases of short-term investments
    
    
    (9,854
    )
    
    
    (14,618
    )Proceeds from maturity of short-term investments
    
    
    14,617
    
    
    
    14,878Net cash provided (used) by investing activities
    
    
    2,882
    
    
    
    (1,655
    )Cash flows from financing activities:Proceeds from issuance of common stock, net
    
    
    1,632
    
    
    
    1,114Net cash provided by financing activities
    
    
    1,632
    
    
    
    1,114Net increase in cash and cash equivalents
    
    
    3,999
    
    
    
    333Cash and cash equivalents, beginning of period
    
    
    32,955
    
    
    
    24,895Cash and cash equivalents, end of period
    
    $
    36,954
    
    
    $
    25,228Supplemental disclosure of cash flows and
non-cash investing and financing activities:Cash paid for income taxes
    
    $
    909
    
    
    $
    189Stock based compensation capitalized to inventory
    
    $
    88
    
    
    $
    
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VOLTERRA SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
 1. Description of Business and Significant Accounting Policies
  Basis of Presentation
    Use of Estimates
  Reclassifications
  Concentrations of Credit Risk
  7




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Segment Reporting and Significant Customers
   Net Revenue
    
    Accounts ReceivableThree months ended
    
    Nine months ended
    
    As of
    
    As ofSeptember 30,
    
    September 30,
    
    September 30,
    
    December 31,Customer
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006
    
    2005A
    
    
    42
    %
    
    
    31
    %
    
    
    37
    %
    
    
    26
    %
    
    
    49
    %
    
    
    23
    %B
    
    
    19
    %
    
    
    12
    %
    
    
    15
    %
    
    
    12
    %
    
    
    16
    %
    
    
    10
    %C
    
    
    10
    %
    
    
    *
    
    
    
    13
    %
    
    
    11
    %
    
    
    17
    %
    
    
    28
    %D
    
    
    *
    
    
    
    16
    %
    
    
    *
    
    
    
    11
    %
    
    
    *
    
    
    
    11
    %E
    
    
    *
    
    
    
    14
    %
    
    
    *
    
    
    
    10
    %
    
    
    *
    
    
    
    *
 
   Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,Geographic Area
    
    2006
    
    2005
    
    2006
    
    2005Singapore
    
    
    51
    %
    
    
    40
    %
    
    
    50
    %
    
    
    44
    %China
    
    
    25
    %
    
    
    25
    %
    
    
    24
    %
    
    
    22
    %Taiwan
    
    
    9
    %
    
    
    7
    %
    
    
    8
    %
    
    
    10
    %Thailand
    
    
    6
    %
    
    
    3
    %
    
    
    7
    %
    
    
    3
    %United States
    
    
    6
    %
    
    
    6
    %
    
    
    7
    %
    
    
    6
    %Japan
    
    
    2
    %
    
    
    16
    %
    
    
    3
    %
    
    
    11
    %Other
    
    
    1
    %
    
    
    3
    %
    
    
    1
    %
    
    
    4
    %
  Revenue Recognition
  8




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Earnings Per Share
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Net income (in thousands)
    
    $
    1,763
    
    
    $
    638
    
    
    $
    3,523
    
    
    $
    4,078Denominator:Weighted average shares outstanding, basic
    
    
    24,171,289
    
    
    
    23,674,662
    
    
    
    24,013,232
    
    
    
    23,537,571Dilutive effect of stock options
    
    
    1,830,540
    
    
    
    2,483,917
    
    
    
    2,109,454
    
    
    
    2,651,868Weighted average shares outstanding, diluted
    
    
    26,001,829
    
    
    
    26,158,579
    
    
    
    26,122,686
    
    
    
    26,189,439Basic net income per share
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.15
    
    
    $
    0.17Diluted net income per share
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.13
    
    
    $
    0.16
  Accounting for Stock-Based Compensation
  9




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Three months ended
    
    Nine months endedSeptember 30, 2005
    
    September 30, 2005Net income as reported
    
    $
    638
    
    
    $
    4,078Add:
stock-based compensation for employee awards included in the determination of net income, net of tax
    
    
    59
    
    
    
    252Deduct:
stock-based compensation for employee awards determined under the fair-value method, net of tax
    
    
    (921
    )
    
    
    (2,794
    )Pro forma net income
    
    
    (224
    )
    
    
    1,536Basic net income per share:As reported
    
    
    0.03
    
    
    
    0.17Pro forma
    
    
    (0.01
    )
    
    
    0.07Diluted net income per share:As reported
    
    
    0.02
    
    
    
    0.16Pro forma
    
    
    (0.01
    )
    
    
    0.06
   2. Inventory
  September 30,
    
    
    December 31,2006
    
    
    2005Work-in-process
    
    $
    6,562
    
    
    $
    2,219Finished goods
    
    
    2,858
    
    
    
    2,064$
    9,420
    
    
    $
    4,283
 10




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3. Property and Equipment
  September 30,
    
    
    December 31,2006
    
    
    2005Computer hardware
    
    $
    1,424
    
    
    $
    999Computer software
    
    
    4,409
    
    
    
    4,244Equipment and furniture
    
    
    3,327
    
    
    
    2,155Leasehold improvements
    
    
    691
    
    
    
    6349,851
    
    
    
    8,032Less accumulated depreciation and amortization
    
    
    (5,631
    )
    
    
    (4,555
    )$
    4,220
    
    
    $
    3,477
 4. Commitments
   2010 and2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    thereafter
    
    
    TotalFuture minimum lease commitments
    
    $
    152
    
    
    $
    452
    
    
    $
    72
    
    
    $
    24
    
    
    $
    
    
    
    $
    700Inventory purchase commitments
    
    $
    4,228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,228$
    4,380
    
    
    $
    452
    
    
    $
    72
    
    
    $
    24
    
    
    $
    
    
    
    $
    4,928
  5. Income Tax
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  11




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Overview
    Three Months EndedSep 30,
    
    
    Jun 30,
    
    
    Mar 31,
    
    
    Dec 31,
    
    
    Sep 30,2006
    
    
    2006
    
    
    2006
    
    
    2005
    
    
    2005Net revenue (in thousands)
    
    $
    20,113
    
    
    $
    17,580
    
    
    $
    15,652
    
    
    $
    13,541
    
    
    $
    12,509As a percent of net revenue:GAAP Gross margin
    
    
    52
    %
    
    
    50
    %
    
    
    51
    %
    
    
    51
    %
    
    
    53
    %Add: Stock-based compensation
    
    
    *
    %
    
    
    *
    %
    
    
    *
    %
    
    
    *
    %
    
    
    *
    %Non-GAAP Gross margin
    
    
    52
    %
    
    
    50
    %
    
    
    51
    %
    
    
    51
    %
    
    
    53
    %GAAP Income from operations
    
    
    7
    %
    
    
    0
    %
    
    
    1
    %
    
    
    9
    %
    
    
    4
    %Add: Stock-based compensation
    
    
    5
    %
    
    
    5
    %
    
    
    8
    %
    
    
    (1
    )%
    
    
    1
    %Non-GAAP Income from operations
    
    
    12
    %
    
    
    5
    %
    
    
    9
    %
    
    
    8
    %
    
    
    5
    %
 
 *
    
    Stock-based compensation did not have an effect as a percent of revenue.  12




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13




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##### Table of Contents



Net Revenue.
 Cost of Revenue.
 Research and Development.
 Selling, General and Administrative.
 14




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##### Table of Contents



Income Taxes. Accounting for Income Taxes
 Critical Accounting Policies
  Accounting for
Stock Appreciation Rights and Other Variable Stock Option or Awards Plans
  15




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Results of Operations
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net revenue
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Cost of revenue
    
    
    48
    
    
    
    47
    
    
    
    49
    
    
    
    44Gross margin
    
    
    52
    
    
    
    53
    
    
    
    51
    
    
    
    56Operating expenses:Research and development
    
    
    30
    
    
    
    32
    
    
    
    32
    
    
    
    29Selling, general and administrative
    
    
    15
    
    
    
    17
    
    
    
    16
    
    
    
    17Total operating expenses
    
    
    45
    
    
    
    49
    
    
    
    48
    
    
    
    46Income from operations
    
    
    7
    
    
    
    4
    
    
    
    3
    
    
    
    10Interest and other income, net
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    2Income before income taxes
    
    
    10
    
    
    
    7
    
    
    
    6
    
    
    
    12Income tax expense / (benefit)
    
    
    1
    
    
    
    2
    
    
    
    (1
    )
    
    
    2Net Income
    
    
    9
    %
    
    
    5
    %
    
    
    7
    %
    
    
    10
    %
 Comparison of Quarter Ended September 30, 2006 to Quarter Ended September 30, 2005
 Net Revenue.
 Cost of Revenue and Gross Margin.
 Research and Development.
 Selling, General and Administrative.
 Income Tax.
 16




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Comparison of Nine Months Ended September 30, 2006 to Nine Months Ended September 30, 2005
 Net Revenue.
 Cost of Revenue and Gross Margin.
 Research and Development.
 Selling, General and Administrative.
 Income Tax.
 Liquidity and Capital Resources
    17




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##### Table of Contents



Contractual Obligations
   2010 and2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    thereafter
    
    
    TotalFuture minimum lease
commitments
    
    $
    152
    
    
    $
    452
    
    
    $
    72
    
    
    $
    24
    
    
    $
    
    
    
    $
    700Inventory purchase commitments
    
    
    2,803
    
    
    
    1,425
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,228$
    2,955
    
    
    $
    1,877
    
    
    $
    72
    
    
    $
    24
    
    
    $
    
    
    
    $
    4,928
  Recent Accounting Pronouncements
 Share-Based Payment
 Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
  18




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    19




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 The risk factors described in Part II, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2005, as filed with the SEC on March 3, 2006, are set forth below. These risk factors
have not substantively changed, except for those identified by asterisk and restated below.
 Our limited operating history and the nature of our industry makes it difficult for us to
accurately forecast revenue and appropriately plan our expenses. *
  Our financial performance in the past has fluctuated and we may not be able to maintain
profitability on a quarterly or annual basis. *
  20




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Our operating results have fluctuated in the past, and we expect a number of factors to cause our
operating results to fluctuate in the future, making it difficult for us to accurately forecast our
operating results. *
  
    
    the loss of one or more key customers, or a significant reduction in sales to one or more key
customers;
    
    demand for our products or the electronic systems into which our products are incorporated;
    
    our ability to fulfill orders for our products in a timely manner, or at all;
    
    the ability of our foundries and third-party subcontractors to achieve satisfactory yields
or quality;
    
    our customers and distributors management of the inventory they hold;
    
    changes in orders received and shipped during the quarter, or our turns business;
    
    our ability to develop new products or new generations and versions of our existing products
that achieve market acceptance in a timely manner;
    
    the timing of introductions of competing products or technologies;
    
    our ability to obtain sufficient capacity from foundries and other third-party subcontractors to
manufacture, assemble and test our products on a timely and cost-effective basis;
    
    varying order patterns in the markets in which we sell our products;
    
    our customers failure to pay us on a timely basis, or at all;
    
    the ability of our manufacturing subcontractors to obtain an adequate supply of the raw
materials used in the manufacture of our products on a timely and cost-effective basis;
    
    the cyclical nature of the semiconductor industry;
    
    changes in the level of our expenses, including the cost of materials used to manufacture
our products and expenses incurred in complying with new laws and regulations applicable to the
Company;
    
    the loss of one or more key distributors, or a significant reduction in orders from one or
more key distributors;
    
    changes in the prices of our products or the electronic systems into which our products are
incorporated;
    
    our ability to adequately support our future growth;
    
    disputes regarding intellectual property rights;
    
    litigation involving us or our products; and
    
    changes in accounting principles, policies and estimates
 21




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We depend on a small number of customers for substantially all of our net revenue and the loss of,
or a significant reduction in orders from, any of them would significantly reduce our net revenue
and adversely affect our operating results. *
  We depend on a limited number of markets, and in these markets we have experienced varying order
patterns, and if demand for our products in these markets declines, or if we are unable to adjust
to the varying order patterns in these markets or expand into new markets, our business would be
harmed. *
   We sell a limited number of products and a reduction in demand for these products would harm our
business and operating results.
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If we are unable to timely develop new products or new generations and versions of our existing
products that achieve market acceptance, our operating results and competitive position could be
harmed.
   
    
    our accurate prediction of changing customer requirements;
    
    timely development of new designs;
    
    timely qualification and certification of our products for use in electronic systems;
    
    commercial acceptance and production of the electronic systems into which our products are
incorporated;
    
    availability, quality, price, performance, and size of our products relative to competing
products and technologies;
    
    our customer service and support capabilities and responsiveness;
    
    successful development of relationships with existing and potential new customers;
    
    successful development of relationships with key developers of advanced digital
semiconductors; and
    
    changes in technology, industry standards or consumer preferences.
  We have experienced, and may in the future experience, delays in the development and introduction
of our products, which may harm our business and operating results. *
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Our products are highly complex and may require modifications to resolve undetected errors or
failures and to meet our customers specifications, which could lead to an increase in our costs, a
loss of customers, a delay in market acceptance of our products, or product liability claims. *
   Our dependence on third-party semiconductor manufacturers, or foundries, reduces our control over
the manufacture of our products, which could harm our business.
  
    
    inability to increase production and achieve acceptable yields on a timely basis;
    
    reduced control over delivery schedules and product quality;
    
    inability of our foundries to obtain an adequate supply of the raw materials
used in the manufacturing of our products on a timely and cost-effective basis;
    
    increased exposure to potential misappropriation of our intellectual property;
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
    
    limited warranties on silicon wafers or products supplied to us;
    
    labor shortages or labor strikes;
    
    natural disasters affecting countries in which we conduct our business or in
which our products are manufactured; and
    
    political instability in countries where our products are manufactured.
  We rely on third-party subcontractors to assemble and test our products and our failure to
successfully manage our relationships with these subcontractors could damage our relationships with
our customers, decrease our net revenue, and limit our growth.
  If our foundries and assembly and test subcontractors fail to achieve satisfactory yields or
quality, our revenue and operating results could decrease, and our relationships with our customers
and our reputation may be harmed.
  We face significant competition and many of our competitors have greater resources than we have,
and thus we may be unsuccessful in competing against current and future competitors.
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
    
    our ability to continue to recruit and retain engineering talent;
    
    our ability to introduce new products in a timely manner;
    
    the pricing of components used in competing solutions;
    
    the pace at which our customers incorporate our products into their systems;
    
    the availability of foundry, assembly, and test capacity for our products;
    
    protection of our products by effective utilization of intellectual property laws; and
    
    general economic conditions.
   We rely primarily on a small number of distributors to market and distribute our products, and if
we fail to maintain or expand these relationships, our net revenue would likely decline. *
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The nature of the design process requires us to incur expenses prior to earning revenue associated
with those expenses, and we will have difficulty selling our products and generating profits if
system designers do not design our products into their electronic systems.
    
    
    it can typically take up to 12 months from the time our
products are selected to complete the design process, and
in some cases such design process may take substantially
more time to complete;
    
    it can typically take an additional six to 12 months to
complete commercial introduction of the electronic systems
that use our products, and in some cases such introduction
may take substantially more time to complete, if they are
introduced at all;
    
    our customers usually require a comprehensive technical
evaluation of our products before they incorporate them
into their electronic systems;
    
    OEMs typically limit the initial release of their
electronic systems to evaluate performance and consumer
demand; and
    
    the development and commercial introduction of products
incorporating new technology are frequently delayed.
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We are subject to the highly cyclical nature of the semiconductor industry and any future downturns
could significantly harm our business. *
  Any disruption to our operations or the operations of our foundries or assembly and test
subcontractors resulting from earthquakes, droughts, or other natural disasters or public health
issues could significantly delay the production or shipment of our products. *
  The average selling prices of our products could decrease rapidly, which may negatively impact our
net revenue and operating results.
  We are subject to inventory risks and manufacturing costs that could negatively impact our
operating results.
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We have significant international activities and customers, and plan to continue such efforts,
which subjects us to additional business risks including increased logistical complexity,
additional regulatory restrictions, political instability, and currency fluctuations. *
  
    
    cultural and language barriers;
    
    increased complexity and costs of managing international operations;
    
    protectionist laws and business practices that favor local competition in some countries;
    
    multiple, conflicting and changing laws and regulatory and tax environments, including the
European Unions Restrictions of Hazardous Substances (RoHS), which bans lead and certain
other substances from products put on the market;
    
    potentially longer and more difficult collection periods;
    
    political instability, international terrorism, and anti-American sentiment, particularly in
emerging markets;
    
    highly volatile economies in Asia;
    
    difficulty in hiring qualified management, technical sales personnel, and applications
engineers; and
    
    less effective protection of intellectual property than is afforded to us in the United States.
   Environmental laws and regulations could cause a disruption in our business and operations. *
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We rely on the services of our key personnel, and if we are unable to retain our current personnel
and hire additional personnel, our ability to develop and successfully market our products could be
harmed. *
  Our ability to compete will be harmed if we are unable to adequately protect our intellectual
property. *
  Assertions by third parties of infringement by us of their intellectual property rights could
result in significant costs and cause our operating results to suffer.
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
    
    stop selling products or using technology that contain the allegedly infringing intellectual
property;
    
    pay damages to the party claiming infringement;
    
    attempt to obtain a license to the relevant intellectual property, which may not be available
on reasonable terms or at all; and
    
    attempt to redesign those products that contain the allegedly infringing intellectual property.
  Any potential dispute involving our patents or other intellectual property could also include our
customers, which could trigger our indemnification obligations to them and result in substantial
expense to us.
  If we do not effectively manage our growth, our resources, systems, and controls may be strained
and our operating results may suffer. *
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We may need to raise additional capital, which might not be available or which, if available, may
be on terms that are not favorable to us.
  We may undertake acquisitions to expand our business that may pose risks to our business and dilute
the ownership of our existing stockholders.
  
    
    our lack of experience acquiring other businesses;
    
    problems integrating the acquired operations, technologies, or products with
our existing business and products;
    
    diversion of managements time and attention from our core business;
    
    the need for financial resources above our planned investment levels;
    
    overestimation of potential synergies or a delay in realizing those synergies;
    
    difficulties in retaining business relationships with suppliers and customers
of the acquired company;
    
    risks associated with entering markets in which we lack prior experience; and
    
    the potential loss of key employees of the acquired company.
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Our stock price will fluctuate and may be volatile, which could result in substantial losses for
investors and significant costs related to litigation.
  
    
    actual or anticipated fluctuations in our revenue, operating results or growth rate;
    
    failure to meet the expectations of securities analysts or investors with respect
to our financial performance;
    
    actual or anticipated fluctuations in our competitors operating results or changes
in their growth rates;
    
    sales of our common stock or other securities in the future;
    
    stock market price and trading volume fluctuations of publicly-traded companies in
general and semiconductor companies in particular;
    
    the trading volume of our common stock;
    
    changes in financial estimates and ratings by securities analysts for us, our
competitors or companies in the semiconductor industry generally;
    
    changes in the condition of the financial markets, the economy as a whole, the
semiconductor industry, our customers or our competitors;
    
    publicity about the semiconductor industry, our competitors or our customers; and
    
    additions or departures of key personnel.
   Our principal stockholders have significant voting power and may influence actions that may not be
in the best interests of our other stockholders. *
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Anti-takeover provisions of our charter documents and Delaware law could prevent or delay
transactions resulting in a change in control.
  
    
    our board of directors is classified so that not all members of our board may be
elected at one time;
    
    directors may only be removed for cause and only with the approval of stockholders
holding a majority of our outstanding voting stock;
    
    the ability of our stockholders to call a special meeting of stockholders is prohibited;
    
    advance notice requirements for nominations for election to our board of directors or
for proposing matters that can be acted upon at stockholder meetings;
    
    stockholder action by written consent is prohibited, thereby requiring all stockholder
actions to be taken at a meeting of our stockholders; and
    
    our board of directors may designate the terms of and issue new series of preferred
stock, commonly referred to as blank check preferred stock, with rights senior to
those of common stock without stockholder approval.
   
 Item 6. Exhibits
 Exhibit No.
    
    Description3.1(1)
    
    Amended and Restated Certificate of Incorporation of Volterra Semiconductor Corporation.3.2(2)
    
    Amended and Restated Bylaws of Volterra Semiconductor Corporation.4.1
    
    Reference is made to Exhibits 3.1 and 3.2.4.2(3)
    
    Specimen stock certificate.31.1
    
    Certification of Chief Executive Officer required under Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer required under Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer required under Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section
1350.
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Exhibit No.
    
    Description32.2*
    
    Certification of Chief Financial Officer required under Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section
1350.
 
 (1)
    
    Previously filed as Exhibit 3.1 to Volterra Semiconductor
Corporations Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2004, as filed with the Securities and
Exchange Commission on September 9, 2004, and incorporated by
reference herein.(2)
    
    Previously filed as Exhibit 3.4 to Volterra Semiconductor
Corporations Registration Statement on Form S-1 (No.
333-115614), as filed with the Securities and Exchange Commission
on May 19, 2004, as amended, and incorporated by reference
herein.(3)
    
    Previously filed as Exhibit 4.2 to Volterra Semiconductor
Corporations Registration Statement on Form S-1/A (No.
333-115614), as filed with the Securities and Exchange Commission
on July 9, 2004, as amended, and incorporated by reference
herein.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompany
this Quarterly Report on Form 10-Q pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by
Volterra Semiconductor Corporation for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended. 35




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Signature
  Dated: November 8, 2006
    
    VOLTERRA SEMICONDUCTOR CORPORATIONBy:
    
    /s/ Greg HildebrandGreg HildebrandChief Financial Officer(Principal Financial, Chief Accounting andDuly Authorized Officer)
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EXHIBIT INDEX
 Exhibit No.
    
    Description3.1(1)
    
    Amended and Restated Certificate of Incorporation of Volterra Semiconductor Corporation.3.2(2)
    
    Amended and Restated Bylaws of Volterra Semiconductor Corporation.4.1
    
    Reference is made to Exhibits 3.1 and 3.2.4.2(3)
    
    Specimen stock certificate.31.1
    
    Certification of Chief Executive Officer required under Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer required under Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer required under Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section
1350.32.2*
    
    Certification of Chief Financial Officer required under Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section
1350.
 
 (1)
    
    Previously filed as Exhibit 3.1 to Volterra Semiconductor
Corporations Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2004, as filed with the Securities and
Exchange Commission on September 9, 2004, and incorporated by
reference herein.(2)
    
    Previously filed as Exhibit 3.4 to Volterra Semiconductor
Corporations Registration Statement on Form S-1 (No.
333-115614), as filed with the Securities and Exchange Commission
on May 19, 2004, as amended, and incorporated by reference
herein.(3)
    
    Previously filed as Exhibit 4.2 to Volterra Semiconductor
Corporations Registration Statement on Form S-1/A (No.
333-115614), as filed with the Securities and Exchange Commission
on July 9, 2004, as amended, and incorporated by reference
herein.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompany
this Quarterly Report on Form 10-Q pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by
Volterra Semiconductor Corporation for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended. 37