##### Table of Contents



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, 2005
  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
 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 INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    4Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004
    
    
    6Notes to 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
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 6. Exhibits
    
    
    28-29SIGNATURE
    
    
    30EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  3




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PART I. FINANCIAL INFORMATION
 
  VOLTERRA SEMICONDUCTOR CORPORATION  AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    25,228
    
    
    $
    24,895Short-term investments
    
    
    19,780
    
    
    
    19,838Accounts receivable, net of allowances of $743 and $1,102, respectively
    
    
    9,188
    
    
    
    2,097Inventory
    
    
    5,307
    
    
    
    5,134Prepaid expenses and other current assets
    
    
    863
    
    
    
    726Total current assets
    
    
    60,366
    
    
    
    52,690Property and equipment, net
    
    
    2,870
    
    
    
    1,414Other assets
    
    
    34
    
    
    
    34Total assets
    
    $
    63,270
    
    
    $
    54,138Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    4,333
    
    
    $
    1,768Accrued liabilities
    
    
    3,116
    
    
    
    2,105Total current liabilities
    
    
    7,449
    
    
    
    3,873Commitments (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;
23,683,411 and 23,336,165 shares issued and outstanding, respectively
    
    
    24
    
    
    
    23Additional paid-in capital
    
    
    95,522
    
    
    
    94,412Deferred stock-based compensation
    
    
    (95
    )
    
    
    (462
    )Accumulated deficit
    
    
    (39,630
    )
    
    
    (43,708
    )Total stockholders equity
    
    
    55,821
    
    
    
    50,265Total liabilities and stockholders equity
    
    $
    63,270
    
    
    $
    54,138
  4




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VOLTERRA SEMICONDUCTOR CORPORATION
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net revenue
    
    $
    12,509
    
    
    $
    12,562
    
    
    $
    40,325
    
    
    $
    29,321Cost of revenue
    
    
    5,878
    
    
    
    5,569
    
    
    
    17,621
    
    
    
    13,469Gross margin
    
    
    6,631
    
    
    
    6,993
    
    
    
    22,704
    
    
    
    15,852Operating expenses:Research and development
    
    
    4,020
    
    
    
    3,708
    
    
    
    11,568
    
    
    
    9,278Selling, general and administrative
    
    
    1,953
    
    
    
    1,525
    
    
    
    6,596
    
    
    
    3,742Stock-based compensation (*)
    
    
    100
    
    
    
    210
    
    
    
    364
    
    
    
    483Total operating expenses
    
    
    6,073
    
    
    
    5,443
    
    
    
    18,528
    
    
    
    13,503Income from operations
    
    
    558
    
    
    
    1,550
    
    
    
    4,176
    
    
    
    2,349Interest and other income
    
    
    331
    
    
    
    107
    
    
    
    872
    
    
    
    189Interest and other expense
    
    
    (4
    )
    
    
    (4
    )
    
    
    (13
    )
    
    
    (9
    )Income before income taxes
    
    
    885
    
    
    
    1,653
    
    
    
    5,035
    
    
    
    2,529Income tax expense
    
    
    247
    
    
    
    113
    
    
    
    957
    
    
    
    154Net income
    
    $
    638
    
    
    $
    1,540
    
    
    $
    4,078
    
    
    $
    2,375Basic net income per share
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    0.17
    
    
    $
    0.25Shares used in computing basic netincome per share
    
    
    23,675
    
    
    
    17,253
    
    
    
    23,538
    
    
    
    9,457Diluted net income per share
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.11Shares used in computing diluted net
income per share
    
    
    26,159
    
    
    
    24,067
    
    
    
    26,189
    
    
    
    21,923(*) Stock-based compensation
consists of:Cost of revenue
    
    $
    7
    
    
    $
    8
    
    
    $
    22
    
    
    $
    21Research and development
    
    
    11
    
    
    
    134
    
    
    
    98
    
    
    
    276Selling, general and administrative
    
    
    82
    
    
    
    68
    
    
    
    244
    
    
    
    186Total
    
    $
    100
    
    
    $
    210
    
    
    $
    364
    
    
    $
    483
  5




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VOLTERRA SEMICONDUCTOR CORPORATION
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Nine MonthsEnded September 30,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    4,078
    
    
    $
    2,375Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization
    
    
    450
    
    
    
    384Amortization of bond discount
    
    
    (202
    )
    
    
    Loss on disposal of fixed assets
    
    
    9Provision for doubtful accounts
    
    
    
    
    
    
    24Interest income on stockholders notes receivable
    
    
    
    
    
    
    (54
    )Stock-based compensation
    
    
    364
    
    
    
    483Changes in operating assets and liabilities:Accounts receivable
    
    
    (7,091
    )
    
    
    (1,834
    )Inventory
    
    
    (173
    )
    
    
    (2,848
    )Prepaid expenses and other current assets
    
    
    (137
    )
    
    
    (414
    )Accounts payable
    
    
    2,565
    
    
    
    2,642Accrued liabilities
    
    
    1,011
    
    
    
    1,178Net cash provided by operating activities
    
    
    874
    
    
    
    1,936Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,915
    )
    
    
    (715
    )Purchases of short-term investments
    
    
    (14,618
    )
    
    
    (14,896
    )Proceeds from maturity of short-term investments
    
    
    14,878
    
    
    
    Net cash used in investing activities
    
    
    (1,655
    )
    
    
    (15,611
    )Cash flows from financing activities:Borrowings under line of credit
    
    
    
    
    
    
    3,350Payments on line of credit
    
    
    
    
    
    
    (5,150
    )Proceeds from initial public offering, net of offering expenses
    
    
    
    
    
    
    31,906Proceeds from issuance of common stock, net
    
    
    1,114
    
    
    
    988Net cash provided by financing activities
    
    
    1,114
    
    
    
    31,094Net increase in cash and cash equivalents
    
    
    333
    
    
    
    17,419Cash and cash equivalents, beginning of period
    
    
    24,895
    
    
    
    10,129Cash and cash equivalents, end of period
    
    $
    25,228
    
    
    $
    27,548Supplemental disclosure of cash flow information:Cash paid for interest
    
    
    
    
    
    
    9Supplemental disclosure of non-cash investing and financing
activities:Deferred stock-based compensation
    
    
    
    
    
    $
    935Decrease in liability for early option exercises, net
    
    
    
    
    
    
    (131
    )Cancellation of notes receivable from stockholders in connection
with stock repurchase
    
    
    
    
    
    $
    1,635
  6




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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
  Financial Instruments and Concentrations of Credit Risk
    7




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Segment Reporting and Significant Customers
   Net Revenue
    
    Accounts ReceivableThree Months
    
    Three Months
    
    Nine Months
    
    Nine Months
    
    As ofEnded
    
    Ended
    
    Ended
    
    EndedCustomer
    
    September 30,
    
    September 30,
    
    September 30,
    
    September 30,
    
    September 30,
    
    December 31,2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004A
    
    
    

    *
    
    
    20
    %
    
    
    
    *

    
    
    13
    %
    
    
    
    *

    
    
    21
    %B
    
    
    31
    %
    
    
    19
    %
    
    
    26
    %
    
    
    19
    %
    
    
    29
    %
    
    
    
    *C
    
    
    10
    %
    
    
    16
    %
    
    
    10
    %
    
    
    22
    %
    
    
    
    *

    
    
    
    *D
    
    
    14
    %
    
    
    15
    %
    
    
    10
    %
    
    
    13
    %
    
    
    
    *
    
    
    
    *E
    
    
    
    *

    
    
    
    *
    
    
    12
    %
    
    
    12
    %
    
    
    23
    %
    
    
    
    *F
    
    
    16
    %
    
    
    
    *

    
    
    11
    %
    
    
    
    *

    
    
    12
    %
    
    
    11
    %G
    
    
    
    *

    
    
    
    *

    
    
    
    *

    
    
    
    *

    
    
    
    *

    
    
    43
    %
 *
    
    Less than 10%
  Three Months
    
    Nine MonthsEnded
    
    EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Singapore
    
    
    40
    %
    
    
    27
    %
    
    
    44
    %
    
    
    38
    %China
    
    
    25
    %
    
    
    32
    %
    
    
    22
    %
    
    
    27
    %Taiwan
    
    
    7
    %
    
    
    21
    %
    
    
    10
    %
    
    
    16
    %Japan
    
    
    16
    %
    
    
    7
    %
    
    
    11
    %
    
    
    7
    %United States
    
    
    6
    %
    
    
    9
    %
    
    
    6
    %
    
    
    9
    %Other
    
    
    6
    %
    
    
    4
    %
    
    
    7
    %
    
    
    3
    %
  Revenue Recognition
   8




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Earnings Per Share
   Three Months
    
    Nine MonthsEnded September 30
    
    Ended September 302005
    
    2004
    
    2005
    
    2004Numerator:Net income (in thousands)
    
    $
    638
    
    
    $
    1,540
    
    
    $
    4,078
    
    
    $
    2,375Denominator:Weighted average common shares  Basic
    
    
    23,674,662
    
    
    
    17,253,214
    
    
    
    23,537,571
    
    
    
    9,457,015Effect of dilutive securities:Stock options
    
    
    2,483,917
    
    
    
    2,398,626
    
    
    
    2,651,868
    
    
    
    2,204,092Convertible preferred stock
    
    
    
    
    
    
    4,346,040
    
    
    
    
    
    
    
    10,140,769Convertible preferred warrants
    
    
    
    
    
    
    69,550
    
    
    
    
    
    
    
    121,564Weighted average common shares  Diluted
    
    
    26,158,579
    
    
    
    24,067,430
    
    
    
    26,189,439
    
    
    
    21,923,440Net income per share  Basic
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    0.17
    
    
    $
    0.25Net income per share  Diluted
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.11Potentially dilutive securities excluded
from the computation above because they
were anti-dilutive during the period:Stock options
    
    
    718,600
    
    
    
    57,000
    
    
    
    504,567
    
    
    
    57,000
 Accounting for Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion
No. 25 Accounting for Stock Appreciation Rights and
Other Variable Stock Option or Awards Plans
 Accounting for Stock-Based
Compensation, Accounting for Stock-Based Compensation  Transition and
Disclosure, an Amendment of FASB Statement No. 123
 9




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income as reported
    
    $
    638
    
    
    $
    1,540
    
    
    $
    4,078
    
    
    $
    2,375Add: stock-based compensation
for employee awards included in the
determination of net income, net of tax
    
    
    59
    
    
    
    120
    
    
    
    252
    
    
    
    380Less: stock-based compensation
for employee awards determined
under the fair-value method, net of tax
    
    
    (921
    )
    
    
    (309
    )
    
    
    (2,794
    )
    
    
    (777
    )Pro forma net income (loss)
    
    $
    (224
    )
    
    $
    1,351
    
    
    $
    1,536
    
    
    $
    1,978Basic net income per share:As reported
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    0.17
    
    
    $
    0.25Pro forma
    
    $
    (0.01
    )
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.21Diluted net income per share:As reported
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.11Pro forma
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.09
 2. Inventory
  September 30,
    
    
    December 31,2005
    
    
    2004Work-in-process
    
    $
    2,741
    
    
    $
    3,430Finished goods
    
    
    2,566
    
    
    
    1,704$
    5,307
    
    
    $
    5,134
 3. Property and Equipment
  September 30,
    
    
    December 31,2005
    
    
    2004Computer hardware
    
    $
    1,104
    
    
    $
    966Computer software
    
    
    3,526
    
    
    
    1,979Equipment and furniture
    
    
    2,318
    
    
    
    2,107Leasehold improvements
    
    
    626
    
    
    
    6267,574
    
    
    
    5,678Less accumulated depreciation and amortization
    
    
    (4,704
    )
    
    
    (4,264
    )$
    2,870
    
    
    $
    1,414
 4. Commitments
  10




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2008 and2005
    
    
    2006
    
    
    2007
    
    
    thereafter
    
    
    TotalFuture minimum lease commitments
    
    $
    124
    
    
    $
    470
    
    
    $
    324
    
    
    $
    
    
    
    $
    918Inventory purchase commitments
    
    $
    1,570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,570$
    1,694
    
    
    $
    470
    
    
    $
    324
    
    
    $
    
    
    
    $
    2,488
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
    Three Months EndedSeptember 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,2005
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2004Net revenue (in thousands)
    
    $
    12,509
    
    
    $
    13,185
    
    
    $
    14,631
    
    
    $
    14,614
    
    
    $
    12,562As a percent of net revenue:Gross margin
    
    
    53
    %
    
    
    60
    %
    
    
    56
    %
    
    
    58
    %
    
    
    56
    %Income from operations
    
    
    4
    %
    
    
    9
    %
    
    
    17
    %
    
    
    18
    %
    
    
    12
    %
   11




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12




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##### Table of Contents



Net Revenue.
 Cost of Revenue.
 Research and Development.
 Selling, General and Administrative.
 Stock-Based Compensation.
 Income Taxes. Accounting for Income Taxes
 Critical Accounting Policies
  Results of Operations
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 302005
    
    
    2004
    
    
    2005
    
    
    2004Net revenue
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Cost of revenue
    
    
    47
    
    
    
    44
    
    
    
    44
    
    
    
    46Gross margin
    
    
    53
    
    
    
    56
    
    
    
    56
    
    
    
    54Operating expenses:Research and development
    
    
    32
    
    
    
    30
    
    
    
    29
    
    
    
    31Selling, general and administrative
    
    
    16
    
    
    
    12
    
    
    
    16
    
    
    
    13Stock-based compensation
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    2Total operating expenses
    
    
    49
    
    
    
    44
    
    
    
    46
    
    
    
    46Income from operations
    
    
    4
    
    
    
    12
    
    
    
    10
    
    
    
    8Interest and other income, net
    
    
    3
    
    
    
    1
    
    
    
    2
    
    
    
    1Income before income taxes
    
    
    7
    
    
    
    13
    
    
    
    12
    
    
    
    9Income tax expense
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    1Net Income
    
    
    5
    %
    
    
    12
    %
    
    
    10
    %
    
    
    8
    %
 13




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Comparison of Quarter Ended September 30, 2005 to Quarter Ended September 30, 2004
 Net Revenue.
 Cost of Revenue and Gross Margin.
 Research and Development.
 Selling, General and Administrative.
 Stock-based Compensation.
 Income Tax Expense.
 Comparison of Nine Months Ended September 30, 2005 to Nine Months Ended September 30, 2004
 Net Revenue.
 Cost of Revenue and Gross Margin.
 Research and Development.
 Selling, General and Administrative.
 14




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Stock-based Compensation.
 Income Tax Expense.
 Liquidity and Capital Resources
     Contractual Obligations
   2008 and2005
    
    
    2006
    
    
    2007
    
    
    thereafter
    
    
    TotalFuture minimum lease commitments
    
    $
    124
    
    
    $
    470
    
    
    $
    324
    
    
    $
    
    
    
    $
    918Inventory purchase commitments
    
    $
    1,570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,570$
    1,694
    
    
    $
    470
    
    
    $
    324
    
    
    $
    
    
    
    $
    2,488
  15




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Recent Accounting Pronouncements
 No Share-Based Payment Accounting for Stock Issued to Employees
 Inventory Costs an Amendment of ARB No. 43,
Chapter 4.
 Factors that May Affect Future Operating Results
  We are an early stage semiconductor company with a limited operating history, which makes it
difficult to evaluate our current business and future prospects and may increase the risk of your
investment.
  
    
    we have limited historical financial data from which to predict our future revenue and operating results;
    
    we are subject to the highly cyclical nature of, and downturns in, the semiconductor industry;
    
    we depend on a small number of customers for substantially all of our net revenue;
    
    we have a limited number of products; and
    
    we may face difficulties in managing growth in personnel and operations.
  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.
  
    
    changes in orders received and shipped during the quarter, which we refer to as
our turns business, which is difficult to estimate and represents an increasing
percentage of our net revenue;
 16




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##### Table of Contents




    
    changes in the level of our expenses, including the cost of materials used to manufacture our products;
    
    the cyclical nature of the semiconductor industry;
    
    the loss of one or more key customers, or a significant reduction in sales to one or more key customers;
    
    the loss of one or more key distributors, or a significant reduction in orders from one or more key distributors;
    
    demand for our products or the electronic systems into which our products are incorporated;
    
    our customers and distributors management of the inventory that they hold;
    
    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 adequately support our future growth;
    
    disputes regarding intellectual property rights;
    
    litigation involving us or our products;
    
    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;
    
    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;
    
    changes in the prices of 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;
    
    customers failure to pay us on a timely basis;
    
    varying order patterns in the markets in which we sell our products;
    
    changes in foreign currency rates; and
    
    changes in accounting principles or policies, including an election by us, or
the requirement, to treat stock option grants as an operating expense.
  We have a history of losses, have only recently experienced revenue growth and become
profitable and may not maintain profitability on a quarterly or annual basis.
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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 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.
    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.
  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.
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
    
    it can take up to 12 months or longer from the time our products are selected
to complete the design process;
    
    it can take an additional six to 12 months or longer to complete commercial
introduction of the electronic systems that use our products, 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.
  Our products are highly complex and may require modifications to resolve undetected errors or
failures and 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.
   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.
  
    
    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.
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Our dependence on third-party semiconductor manufacturers 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;
    
    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.
  If our foundries 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.
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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.
  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.
  
    
    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.
  Our internal controls over financial reporting may not be effective and our independent
auditors may not attest as to their effectiveness, which could have a significant and adverse
effect on our business.
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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.
  We have significant international activities and customers, and plan to continue such efforts,
which subjects us to additional business risks including increased logistical complexity, political
instability and currency fluctuations.
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
    
    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;
    
    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 and applications engineers; and
    
    less effective protection of intellectual property than is afforded to us in the United States.
   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.
  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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If our computer and communications hardware fails, our business, results of operations and
financial condition would be harmed.
  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.
   If securities or industry analysts do not publish research or reports about our business, or
publish negative reports about our business, our stock price and trading volume could decline.
  Our principal stockholders have significant voting power and may influence actions that may
not be in the best interests of our other stockholders.
  Being a public company will increase our expenses and administrative burden.
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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 is required 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.
   New accounting pronouncements or regulatory rulings may impact our future financial position
and results of operations.
 Share Based Payment
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
    
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 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.
 28




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##### Table of Contents



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. 29




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##### Table of Contents



Signature
  Dated: November 9, 2005
    
    VOLTERRA SEMICONDUCTOR CORPORATIONBy:
    
    /s/ Greg HildebrandGreg Hildebrand
Chief Financial Officer
(Principal Financial, Chief Accounting and
Duly 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. 31