UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
    þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 0-18277
 VICOR CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Delaware

04-2742817(State or other jurisdiction
    of
    incorporation or organization)

(IRS employer
    identification no.)25 Frontage Road, Andover,

01810Massachusetts

(Zip code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (978) 470-2900
  Securities registered pursuant to Section 12(b) of the
    Act:
  Common Stock, $.01 par Value

The NASDAQ Stock Market, LLC(Title of Class)


(Name of Each Exchange on Which
    Registered
)   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large Accelerated
    Filer o

Accelerated
    Filer þ

Non-accelerated
    Filer o
    (Do not check if a smaller reporting company)

Smaller Reporting
    Company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





PART I
  Form 10-K,
  Form 10-K Form 10-K, Forms 10-Q, 8-K,
  ITEM 1 
    BUSINESS  Overview
  and/or
 1




---



##### 



and/or tm
      
    Our Brick Business Unit (BBU) segment designs,
    develops, manufactures and markets our modular power converters,
    known as bricks, and, in 2008, introduced a new line of modular
    power converter, known as a VI
    Bricktm,

    incorporating our V*I Chips into innovative, thermally-enhanced
    packaging. The BBU also designs, develops, manufactures and
    markets a line of configurable products, which are
    complete power supplies assembled using our modular power
    components. The BBU includes the operations of the
    Companys
    Westcortm

    division, which is focused only on configurable products, the
    operations of Vicor Custom
    Powertm

    (previously known as Vicor Integration
    Architectstm),

    which comprises our turnkey custom power solutions business, and
    the operations of Vicor Japan Company, Ltd. (VJCL),
    which is the Companys Japanese subsidiary.
    Our V*I Chip segment consists of V*I Chip Corporation, a
    wholly-owned subsidiary that designs, develops, manufactures and
    markets our Factorized Power
    Architecturetm

    (FPA) products. In April 2003, we introduced FPA, a
    new power system architecture based on an array of proprietary
    power conversion innovations building upon our long-standing
    leadership in the design of power conversion technologies. We
    believe FPA provides power system designers enhanced performance
    at a lower cost than can be attained with conventional power
    architectures. Because V*I Chips and FPA represent innovative
    alternatives to such conventional products and architectures, we
    established a separate business unit to enable the
    organizational focus necessary to support early adopters of
    these disruptive technologies.
    Our Picor segment consists of Picor Corporation, a
    majority-owned subsidiary of Vicor and a fabless designer,
    developer, and marketer of high performance integrated circuits
    and related products for use in a variety of power system
    applications. Picor develops these products to be incorporated
    into Vicors products, to be sold as a complement to our
    products, or for sale to third parties for separate
    applications. Much of the differentiation of our BBU and V*I
    Chip products has been a result of implementation of our power
    conversion innovations in proprietary semiconductor circuitry.
    Because of the considerable semiconductor design expertise
    embodied in this captive organization and the potential 2




---



##### 



for success as a merchant vendor of an expanding portfolio of
    proprietary circuit designs, we established Picor as a separate
    business unit to enable organizational focus and to facilitate a
    distinct
    go-to-market
    strategy.          Form 10-K, Form 10-Q, Form 8-K, Form 10-K
  Market
    Background, Product Trends and Vicor Strategy
       3




---



##### 



go-to-market go-to-market
         4




---



##### 



Our
    Products
  Form 10-K
  Bricks:
    Modular Power Converters
  component-level DC-DC tm tm tm tm
    tm tm
    Accessory
    Power System Components
  and/or
  tm tm
  Configurable
    Products
   5




---



##### 



tm tm tm
  tm tm
  tm tm
  hold-up
    Customer
    Specific Products
  and/or off-the-shelf
    V*I
    Chip Products
   6




---



##### 



tm tm tm
  point-of-load
  Picor
    Products
  tm Electronic Design News
  tm System-in-Package
  MIL-COTS
    Products
    Sales and
    Marketing
       7




---



##### 



tm
  Applications
    and Customers
    Backlog
    Research
    and Development
    Manufacturing
    and Quality Assurance
    and/or
       8




---



##### 



Competition
          Patents
    and Intellectual Property
      Licensing
   9




---



##### 



Employees
        ITEM 1A 
    RISK
    FACTORS  Form 10-K
  Our
    future operating results are difficult to predict and are
    subject to fluctuations.
    
    the effects of adverse economic conditions in the United States
    and international markets, especially in light of the current
    crisis in global credit and financial markets;
    the level of orders and demand from customers;
    changes in customer demand for our products and for end products
    that incorporate our products;
    the effectiveness of our efforts to reduce product costs and
    manage operating expenses;
    the timing of new product announcements or introductions by us
    or our competitors;
    the timing, delay or cancellation of significant customer orders
    and our ability to manage inventory;
    the ability to hire, retain and motivate qualified employees to
    meet the demands of our customers;
    our ability to utilize our manufacturing facilities at efficient
    levels;
    potential significant litigation-related costs;
    the costs related to compliance with increasing worldwide
    environmental and other regulations; and
    the effects of public health emergencies, natural disasters,
    security risk, terrorist activities, international conflicts and
    other events beyond our control.    The
    current crisis in global credit and financial markets could
    materially and adversely affect our business and results of
    operations.
   10




---



##### 



Our
    future success depends upon our ability to develop and market
    leading-edge, cost effective products.
    Our
    future operating results are dependent on the growth in our
    customers businesses and on our ability to identify and
    enter new markets.
    If we
    were unable to use our manufacturing facility in Andover,
    Massachusetts, we would not be able to manufacture for an
    extended period of time.
    We may
    not be able to procure necessary key components for our
    products, or we may purchase too much inventory or the wrong
    inventory.
   11




---



##### 



Our
    revenues may not increase enough to offset the expense of
    additional capacity.
    We
    rely on third-party suppliers and subcontractors for components
    and assemblies and, therefore, cannot control their availability
    or quality.
    We are
    exposed to economic, political and other risks through our
    foreign sales and distributors.
    Our
    ability to successfully implement our business strategy may be
    limited if we do not retain our key personnel and attract and
    retain skilled and experienced personnel.
    Funds
    associated with our investments in auction rate securities may
    not be accessible in the short term.
   12




---



##### 



We may
    be required to make additional adjustments to the carrying value
    of our Failed Auction Securities.
  available-for-sale other-than-temporary available-for-sale,
  other-than-temporary
  
    the default of an issuer or a specific security of that issuer;
    the significant deterioration of the credit rating of a security
    or its issuer;
    a tender offer for a specific security from the issuer valuing
    the security at less than par that is accepted by the number of
    holders necessary to require all holders to tender their
    securities; and
    the development of a robust secondary market for auction rate
    securities, establishing an active market value for our
    securities or similar securities that represents a substantial
    discount to par.  available-for-sale other-than-temporary
 13




---



##### 



We may
    be unable to adequately protect our proprietary rights, which
    may limit our ability to compete effectively.
    We may
    face intellectual property infringement claims that could be
    costly to resolve.
    We may
    face legal claims and litigation that could be costly to
    resolve.
    If we
    are unable to obtain required financial information for certain
    investments on a timely basis, we may not be able to accurately
    report our financial results in the reports we file or submit
    under the Exchange Act, within the time periods
    specified.
    ITEM 1B 
    UNRESOLVED
    STAFF COMMENTS   14




---



##### 



ITEM 2 
    PROPERTIES        ITEM 3 
    LEGAL
    PROCEEDINGS         15




---



##### 



ITEM 4 
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    PART II
  ITEM 5 
    MARKET
    FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS      2008

High


LowFirst Quarter

$
15.84


$
10.34Second Quarter


13.18



9.81Third Quarter


11.49



8.24Fourth Quarter


9.05



3.80   2007

High


LowFirst Quarter

$
11.62


$
8.78Second Quarter


13.54



9.06Third Quarter


14.99



10.81Fourth Quarter


15.60



12.05     Dividend
    Policy
         16




---



##### 



Issuer
    Purchases of Equity Securities
  MaximumNumber (orApproximateTotal Number of


Dollar Value) ofTotal





Shares (or Units)


Shares (or Units)Number





Purchased as Part


that May Yet beof Shares





of Publicly


Purchased Under(or Units)


Average Price Paid


Announced Plans


the Plans orPeriod

Purchased


per Share (or Unit)


or Programs


ProgramsOctober 1  31, 2008





$







$
8,541,000November 1  30, 2008














8,541,000December 1  31, 2008














8,541,000Total





$







$
8,541,000    17




---



##### 



Stockholder
    Return Performance Graph
      Comparison
    of Five Year Cumulative Return
    Among Vicor Corporation, S&P 500 Index
    and S&P SmallCap 600 Index
  
  2003



2004



2005



2006



2007



2008Vicor Corporation


$
100.00



$
114.91



$
138.57



$
98.65



$
142.30



$
62.00S&P 500 Index


$
100.00



$
110.87



$
116.30



$
134.66



$
142.07



$
89.51S&P SmallCap 600 index


$
100.00



$
121.59



$
129.68



$
149.93



$
146.12



$
99.38  18




---



##### 



ITEM 6 
    SELECTED
    FINANCIAL DATA    Year Ended December 31,Statement of Operations Data

2008


2007


2006


2005


2004(In thousands except per share data)Net revenues

$
205,368


$
195,827


$
192,047


$
179,351


$
171,580Income (loss) from operations


(1,142
)


1,071



(33,182
)


3,380



(4,035
)Net income (loss)


(3,595
)


5,335



(29,059
)


3,493



(4,692
)Net income (loss) per share  basic


(.09
)


.13



(.69
)


.08



(.11
)Net income (loss) per share  diluted


(.09
)


.13



(.69
)


.08



(.11
)Weighted average shares  basic


41,651



41,597



41,839



41,923



42,022Weighted average shares  diluted


41,651



41,687



41,839



42,089



42,022Cash dividends per share

$
.30


$
.30


$
.27


$
.12


$
.08   On December 31,Balance Sheet Data

2008


2007


2006


2005


2004(In thousands)Working capital

$
65,297


$
114,924


$
123,467


$
150,385


$
148,419Total assets


171,922



192,458



247,461



243,902



243,452Long-term debt


















Total liabilities


24,751



28,018



77,289



28,965



24,259Stockholders equity


147,171



164,440



170,172



214,937



219,193   ITEM 7 
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview
   19




---



##### 



20




---



##### 



Year Ended December 31,2008


2007


2006Net revenues


100.0
%


100.0
%


100.0
%Gross margin


42.0
%


40.3
%


42.6
%Selling, general and administrative expenses


27.4
%


25.0
%


24.2
%Research and development expenses


15.3
%


15.5
%


16.3
%Income (loss) before income taxes


(0.5
)%


2.8
%


(14.6
)%   Critical
    Accounting Policies and Estimates
  Form 10-K.
  Allowance
    for Doubtful Accounts
    Inventories
    Fair
    Value Measurements
  Fair Value
    Measurements
 21




---



##### 



The Fair Value
    Option for Financial Assets and Financial Liabilities
  Short
    Term and Long-Term Investments
  available-for-sale Available-for-sale
    available-for-sale other-than-temporary available-for-sale,
   22




---



##### 



available-for-sale
    Other
    Investments
  The Equity Method for Accounting for Investments in Common
    Stock Consolidation of Variable Interest
    Entities
 23




---



##### 



other-than-temporary. other-than-temporary
  Long-Lived
    Assets
  Goodwill and Other Intangible Assets Accounting for the Impairment or Disposal of
    Long-Lived Assets
  Stock-Based
    Compensation
  Share Based Payment
  Product
    Warranties
    Income
    Taxes
  Accounting for Income Taxes Accounting for Uncertainty in Income Taxes
 24




---



##### 



Contingencies
  Accounting for
    Contingencies
  Year
    Ended December 31, 2008 compared to Year Ended
    December 31, 2007
      December 31,


Increase2008


2007


$


%BBU

$
189,360


$
185,827


$
3,533



1.9
%V*I Chip


14,991



8,873



6,118



69.0
%Picor


1,017



1,127



(110
)


(9.8
)%Total

$
205,368


$
195,827


$
9,541



4.9
%Book-to-Bill
    Ratio


1.03:1



1.05:1      25




---



##### 



Increase (decrease)Compensation expense

$
3,206



15.3
%(1)Vicor Custom Power related expenses


1,528



52.0
%(2)VJCL compensation expense


655



21.0
%(3)Advertising expense


605



24.4
%(4)Legal fees


440



19.4
%(5)Audit and tax fees


332



18.1
%(6)Training, consultants and computer expense


290



25.1
%Travel expense


234



11.6
%Commissions expense


(320
)


(6.5
)%(7)Other, net


317



4.4
%$
7,287



14.9
%     (1)
    
    Increase primarily attributed to annual compensation adjustments
    in May 2008 and increases in headcount. The increase in
    compensation expense included previously unidentified
    compensation-related accruals of $320,000 for certain of our
    international subsidiaries and additional stock compensation
    expense of $90,000 identified and recorded in the first quarter
    of 2008. The impact on the first quarter of 2008, as well as on
    prior periods, was not material. The figure excludes annual
    compensation adjustments and related personnel expenses
    associated with VJCL and Vicor Custom Power entities.(2)
    
    Increase primarily attributed to $880,000 in increased
    commissions expense due to increased revenues, $362,000 in
    increased compensation expense. $60,000 of increased employee
    benefit costs, $51,000 in increased travel costs and a $121,000
    increase in various supplies and services expenses.(3)
    
    Increase primarily attributed to annual compensation adjustments
    in May 2008 and increases in headcount.(4)
    
    Increase primarily attributed to increases in advertising and
    web development expenses.(5)
    
    Increase primarily attributed to our lawsuit brought against
    certain of our insurance carriers with respect to the Ericsson,
    Inc. settlement of product liability litigation, primarily in
    the fourth quarter of 2008.(6)
    
    Increase primarily attributed to the late filings of our 2007
    Forms 10-Q
    and additional work related to accounting for our investment in
    GWS.(7)
    
    Decrease due to changes in the mix of revenues subject to
    commissions.      Increase (decrease)Compensation

$
1,318



6.6
%(1)Picor non-recurring engineering charges


245



34.4
%(2)Vicor Custom Power related expenses


236



11.2
%(3)Travel expense


99



56.5
%Project materials


(625
)


(16.6
)%(4)Training expense


(58
)


(49.5
)%Other, net


(189
)


(3.9
)%$
1,026



3.4
%  26




---



##### 



(1)
    
    Increase primarily attributed to annual compensation adjustments
    in May 2008.(2)
    
    The Picor business unit provides engineering services to the BBU
    and V*I Chip segments to support certain manufacturing processes
    and research and development activities. A decline in services
    related to manufacturing processes resulted in a decrease in the
    amount of charges allocated to cost of revenues.(3)
    
    Increase primarily attributed to increased project materials of
    $104,000 and outside services of $200,000.(4)
    
    Decrease attributed to reduced expenses at Picor and the BBU of
    $1,134,000, partially offset by increases due to the
    re-engineering of certain V*I Chip materials and processes of
    $509,000.         27




---



##### 



Increase2008


2007


(Decrease)Interest income

$
2,138


$
4,484


$
(2,346
)Minority interest in net income of subsidiaries


(1,817
)


(539
)


(1,278
)Unrealized gain on acquisition of auction rate security rights


1,926







1,926Unrealized loss on trading securities


(2,238
)






(2,238
)Foreign currency gains


82



186



(104
)Gain on disposal of equipment


19



129



(110
)Other


101



128



(27
)$
211


$
4,388


$
(4,177
)   Item 3-
  available-for-sale
      Year EndedDecember 31,2008


2007Provision (benefit) for income taxes

$
976


$
(1,015
)Effective income tax rate


104.8
%


(18.6
)%  28




---



##### 



Year
    Ended December 31, 2007 compared to Year Ended
    December 31, 2006
      December 31,


Increase2007


2006


$


%BBU

$
185,827


$
188,483


$
(2,656
)


(1.4
)%V*I Chip


8,873



2,777



6,096



219.5
%Picor


1,127



787



340



43.2
%Total

$
195,827


$
192,047


$
3,780



2.0
%Book-to-Bill
    Ratio


1.05:1



0.99:1        29




---



##### 



Increase (decrease)Compensation expenses

$
1,666



8.6
%(1)Audit and tax fees


689



60.1
%(2)Travel expense


584



40.7
%(3)Commissions expense


271



5.8
%(4)Outside services


193



57.3
%Legal fees


130



6.1
%Depreciation and amortization


(424
)


(10.5
)%(5)Advertising expense


(295
)


(10.6
)%(6)Employment recruiting expense


(151
)


(35.4
)%Training expenses


(135
)


(10.5
)%Other, net


(46
)


0.0
%$
2,482



5.3
%     (1)
    
    Increase primarily attributed to annual compensation adjustments
    in May 2007.(2)
    
    Increase primarily attributed to the late filings of the
    Companys 2007 Forms
    10-Q and
    additional work related to accounting for the Companys
    investment in GWS.(3)
    
    Increase primarily attributed to increase in corporate travel
    expenses, particularly by BBU and V*I Chip sales and marketing
    personnel.(4)
    
    Increase primarily attributed to the increase in net revenues
    and due to changes in the mix of revenues subject to commissions.(5)
    
    Decrease primarily due to write-off of net book value of
    abandoned patents of $785,000 in 2006 compared to $245,000 in
    2007.(6)
    
    Decrease primarily attributed to a decrease in advertising in
    trade publications.      Increase (decrease)Picor non-recurring engineering charges

$
(713
)


(100.0
)%(1)Vicor Custom related expenses


(425
)


(16.8
)%(2)Facility expenses


(155
)


(8.7
)%Depreciation and amortization


(119
)


(7.9
)%Travel expense


(64
)


(26.6
)%Compensation


529



2.7
%(3)Other, net


(62
)


(1.1
)%$
(1,009
)


3.2
%     (1)
    
    The Picor business unit provides engineering services to the BBU
    and V*I Chip segments to support certain manufacturing processes
    and research and development activities. A decline in services
    related to research and development activities resulted in a
    decrease in the amount of charges allocated to research and
    development.(2)
    
    Decrease primarily attributed to $397,000 of decreased
    sub-contract
    labor costs.(3)
    
    Increase primarily attributed to annual compensation adjustments
    in May 2007. 30




---



##### 



Increase2007


2006


(Decrease)Interest income

$
4,484


$
5,389


$
(905
)Minority interest in net income of subsidiaries


(539
)


(562
)


23Foreign currency gains


186



139



47Gain on disposal of equipment


129



67



62Other


128



59



69$
4,388


$
5,092


$
(704
)   Item 3-
      Year EndedDecember 31,2007


2006(Benefit) provision for income taxes

$
(1,015
)

$
648Effective income tax rate


(18.6
)%


2.3
%    31




---



##### 



LIQUIDITY
    AND CAPITAL RESOURCES
             32




---



##### 



Payments Due by PeriodLess than








More ThanContractual Obligations

Total


1 Year


Years 2 & 3


Years 4 & 5


5 YearsOperating lease obligations

$
2,631


$
1,361


$
1,007


$
263


$
Purchase obligations


1,935



294



605



629



407Total

$
4,566


$
1,655


$
1,612


$
892


$
407               available-for-sale.
 33




---



##### 



other-than-temporary
  available-for-sale,
    available-for-sale
   34




---



##### 



ITEM 7A 
    QUALITATIVE
    AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK    other-than-temporary
   35




---



##### 



ITEM 8 
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  INDEX
  FINANCIAL STATEMENTSReports of Independent Registered Public
    Accounting Firms


37-38Consolidated Balance Sheets as of
    December 31, 2008 and 2007


39Consolidated Statements of Operations For the
    Years Ended December 31, 2008, 2007 and 2006


40Consolidated Statements of Cash Flows For the
    Years Ended December 31, 2008, 2007 and 2006


41Consolidated Statements of Stockholders
    Equity For the Years Ended December 31, 2008, 2007 and
    2006


42Notes to the Consolidated Financial Statements


43Schedule (Refer to Item 15)


79   36




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
        The Fair Value Option for Financial
    Assets and Financial Liabilities
  Internal Control  Integrated Framework
      37




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
        Accounting for
    Uncertainty in Income Taxes Share-Based Payment
      38




---



##### 



VICOR
    CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
 December 31,
    2008 and 2007
  2008


2007(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents

$
22,639


$
20,017Restricted cash and cash equivalents


176



Short-term investments


1,773



57,490Accounts receivable, less allowance of $300 in 2008 and $398 in
    2007


28,757



32,054Inventories, net


26,681



23,078Deferred tax assets


451



741Other current assets


2,279



2,539Total current assets


82,756



135,919Restricted cash and cash equivalents


561



952Long-term investments, net


33,735



Auction rate securities rights


1,926



Property, plant and equipment, net


48,254



50,257Other assets


4,690



5,330$
171,922


$
192,458LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
5,592


$
10,062Accrued compensation and benefits


6,783



6,003Accrued expenses


2,911



3,471Accrual for litigation settlements


162



240Income taxes payable


1,349



278Deferred revenue


662



941Total current liabilities


17,459



20,995Long-term deferred revenue


1,118



42Long-term income taxes payable


259



1,344Deferred income taxes


1,660



1,597Minority interests


4,255



4,040Stockholders equity:Preferred Stock, $.01 par value, 1,000,000 shares
    authorized; no shares issued or outstanding in 2008 and 2007






Class B Common Stock: 10 votes per share, $.01 par
    value, 14,000,000 shares authorized, 11,767,052 shares
    issued and outstanding (11,824,952 shares issued and
    outstanding in 2007)


118



118Common Stock: 1 vote per share, $.01 par value,
    62,000,000 shares authorized, 38,295,908 shares issued
    and 29,897,510 shares outstanding (38,209,486 shares
    issued and 29,811,088 shares outstanding in 2007)


384



384Additional paid-in capital


161,089



159,332Retained earnings


110,174



126,263Accumulated other comprehensive (loss) income


(2,767
)


170Treasury stock at cost: 8,398,398 shares in 2008 and 2007


(121,827
)


(121,827
)Total stockholders equity


147,171



164,440$
171,922


$
192,458    39




---



##### 



VICOR
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 Years
    ended December 31, 2008, 2007 and 2006
  2008


2007


2006(In thousands, except per share amounts)Net revenues

$
205,368


$
195,827


$
192,047Cost of revenues


119,083



116,818



110,211Gross margin


86,285



79,009



81,836Operating expenses:Selling, general and administrative


56,206



48,919



46,437Research and development


31,398



30,372



31,381(Gain) loss from litigation-related settlements, net


(177
)


(1,353
)


37,200Total operating expenses


87,427



77,938



115,018Income (loss) from operations


(1,142
)


1,071



(33,182
)Other income (expense), net


211



4,388



5,092Income (loss) before income taxes


(931
)


5,459



(28,090
)Provision (benefit) for income taxes


976



(1,015
)


648Loss from equity method investment (net of tax)


1,688



1,139



321Net income (loss)

$
(3,595
)

$
5,335


$
(29,059
)Net income (loss) per common share:Basic

$
(.09
)

$
.13


$
(.69
)Diluted

$
(.09
)

$
.13


$
(.69
)Shares used to compute net income (loss) per share:Basic


41,651



41,597



41,839Diluted


41,651



41,687



41,839Cash dividends per share

$
.30


$
.30


$
.27    40




---



##### 



VICOR
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 Years
    ended December 31, 2008, 2007 and 2006
  2008


2007


2006(In thousands)Operating activities:Net income (loss)

$
(3,595
)

$
5,335


$
(29,059
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization


10,515



11,619



14,158Loss from equity method investment (net of tax)


1,688



1,139



321Unrealized gain on acquisition of auction rate security rights


(1,926
)






Unrealized loss on trading securities


2,238







Loss on litigation  related settlement










37,200Stock compensation expense


1,121



667



751Minority interest in net income of subsidiaries


1,817



539



562Long-term deferred revenue


1,076







Accretion of bond discount






(465
)


(167
)Deferred income taxes


127



104



86Gain on disposal of equipment


(22
)


(129
)


(67
)Change in assets and liabilities, net


(3,976
)


(36,628
)


(9,455
)Net cash provided by (used in) operating activities


9,063



(17,819
)


14,330Investing activities:Purchases of investments


(11,574
)


(138,642
)


(189,683
)Sales and maturities of investments


28,004



163,298



199,901Additions to property, plant and equipment


(8,265
)


(9,856
)


(5,603
)Proceeds from sale of equipment


25



129



88Purchase of equity method investment


(1,000
)


(1,000
)


Increase in other assets


(229
)


(120
)


(176
)Decrease (increase) in restricted cash and short term investments


215



93



(139
)Net cash provided by investing activities


7,176



13,902



4,388Financing activities:Proceeds from exercise of stock options


202



645



5,577Dividends paid


(13,662
)


(12,569
)


(11,343
)Acquisitions of treasury stock










(10,835
)Net cash used in financing activities


(13,460
)


(11,924
)


(16,601
)Effect of foreign exchange rates on cash


(157
)


(2
)


40Net increase (decrease) in cash and cash equivalents


2,622



(15,843
)


2,157Cash and cash equivalents at beginning of year


20,017



35,860



33,703Cash and cash equivalents at end of year

$
22,639


$
20,017


$
35,860Change in assets and liabilities:Accounts receivable

$
3,684


$
(1,546
)

$
(2,363
)Insurance receivable for litigation






12,800



Inventories, net


(3,311
)


(997
)


(4,854
)Other current assets


559



83



395Accounts payable and accrued liabilities


(4,410
)


2,840



303Accrual for litigation settlement


(78
)


(49,760
)


Income taxes payable


(141
)


(955
)


(2,869
)Deferred revenue


(279
)


907



(67
)$
(3,976
)

$
(36,628
)

$
(9,455
)Supplemental disclosures:Cash paid during the year for income taxes, net of refunds

$
602


$
(380
)

$
3,590    41




---



##### 



VICOR
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 Years
    ended December 31, 2008, 2007 and 2006
  AccumulatedClass B





Additional





Other





TotalCommon


Common


Paid-In


Retained


Comprehensive


Treasury


StockholdersStock


Stock


Capital


Earnings


Income (Loss)


Stock


Equity(In thousands)Balance on December 31, 2005

$
119


$
377


$
151,698


$
173,807


$
(72
)

$
(110,992
)

$
214,937Sales of Common Stock






5



5,572















5,577Purchase of treasury stock






















(10,835
)


(10,835
)Common stock dividends














(11,343
)










(11,343
)Stock-based compensation expense










751















751Net loss for 2006














(29,059
)










(29,059
)Unrealized gain on investments


















164







164Currency translation adjustments


















(20
)






(20
)Comprehensive loss


























(28,915
)Balance on December 31, 2006


119



382



158,021



133,405



72



(121,827
)


170,172Sales of Common Stock






1



644















645Conversion of Class B Common Stock to Common Stock


(1
)


1



















Common stock dividends(1)














(12,477
)










(12,477
)Stock-based compensation expense










667















667Net income for 2007














5,335











5,335Unrealized gain on investments


















5







5Currency translation adjustments


















93







93Comprehensive income


























5,433Balance on December 31, 2007


118



384



159,332



126,263



170



(121,827
)


164,440Sales of Common Stock










202















202Common stock dividends














(13,662
)










(13,662
)Stock-based compensation expense










1,121















1,121Minority interests adjustment(2)










434















434Minority interest dividends














1,168











1,168Net loss for 2008














(3,595
)










(3,595
)Unrealized loss on investments


















(3,314
)






(3,314
)Currency translation adjustments, net of tax of $226


















377







377Comprehensive loss


























(6,532
)Balance on December 31, 2008

$
118


$
384


$
161,089


$
110,174


$
(2,767
)

$
(121,827
)

$
147,171     (1)
    
    Common stock dividends net of $92,000 in dividends paid to
    outside shareholders(2)
    
    A minority investment had a redemption of preferred stock that
    resulted in a $434,000 adjustment to Additional
    Paid-In-Capital.   42




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    DESCRIPTION
    OF BUSINESS    2.
    SIGNIFICANT
    ACCOUNTING POLICIES  Principles
    of consolidation
    Revenue
    recognition
  No. 00-21 Revenue Arrangements with Multiple Deliverables (EITF 00-21),
  Foreign
    currency translation
  Foreign Currency
    Translation
    Cash
    and cash equivalents
   43




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   2.
    SIGNIFICANT
    ACCOUNTING POLICIES (Continued)    Restricted
    cash and short-term investments
    Short-term
    and long-term investments
    available-for-sale Available-for-sale
  Fair
    value measurements
  available-for-sale Accounting for Certain
    Investments in Debt and Equity Securities available-for-sale
  Fair Value
    Measurements No. FAS 157-2 SFAS 157-2), Effective Date of FASB Statement No. 157 SFAS 157-2 No. FAS 157-3 SFAS 157-3), Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active SFAS 157-3
  The Fair Value Option for Financial Assets and
    Financial Liabilities case-by-case
 44




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   2.
    SIGNIFICANT
    ACCOUNTING POLICIES (Continued)  Allowance
    for doubtful accounts
    Inventories
  first-in,
  Concentrations
    of credit risk
    Goodwill
    and intangible assets
  Goodwill and Other
    Intangible Assets
  Long-lived
    assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets
 45




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   2.
    SIGNIFICANT
    ACCOUNTING POLICIES (Continued)    Other
    investments
  The Equity Method for Accounting for Investments in Common
    Stock Consolidation
    of Variable Interest Entities
  Advertising
    expense
    Product
    warranties
    Net
    income (loss) per common share
  Earnings per Share
  2008


2007


2006Numerator:Net income (loss)

$
(3,595
)

$
5,335


$
(29,059
)Denominator:Denominator for basic income (loss) per share(1)


41,651



41,597



41,839Effect of dilutive securities:Employee stock options(2)






90



Denominator for diluted income (loss) per share(3)


41,651



41,687



41,839Basic income (loss) per share

$
(.09
)

$
.13


$
(.69
)Diluted income (loss) per share

$
(.09
)

$
.13


$
(.69
)     (1)
    
    Denominator represents weighted average number of Common Shares
    and Class B Common Shares outstanding for the year.(2)
    
    Options to purchase 1,084,175 and 1,643,629 shares of
    Common Stock in 2008 and 2006, respectively, were not included
    in the calculation of net loss per share as the effect would
    have been antidilutive. Options to purchase 968,575 shares
    of Common Stock were outstanding in 2007, respectively, but were
    not included in the computation of diluted income per share
    because the options exercise prices were 46




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   2.
    SIGNIFICANT
    ACCOUNTING POLICIES (Continued)  greater than the average market price of the Common Stock and,
    therefore, the effect would have been antidilutive.(3)
    
    Denominator represents weighted average number of Common Shares
    and Class B Common Shares outstanding for the year,
    adjusted to include the dilutive effect, if any, of outstanding
    options.  Income
    taxes
  Accounting for Income Taxes Accounting for Uncertainty in
    Income Taxes
    Stock-based
    compensation
  Share-Based Payment
  Use of
    estimates
    Comprehensive
    (loss) income
  Reporting Comprehensive Income
 47




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   2.
    SIGNIFICANT
    ACCOUNTING POLICIES (Continued)  Impact
    of recently issued accounting standards
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements Consolidated Financial
    Statements
  No. 142-3, Determination of the Useful Life of Intangible Assets FAS 142-3), Goodwill and Other Intangible Assets FAS 142-3 FAS 142-3
  Reclassifications
    3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS    Amended and Restated 2000 Stock Option and Incentive Plan
    (the 2000 Plan)
 48




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)  1998 Stock Option and Incentive Plan (the 1998
    Plan)
  1993 Stock Option Plan (the 1993
    Plan)
    2001 Stock Option and Incentive Plan, as amended (the
    2001 Picor Plan)
    2007 Stock Option and Incentive Plan, as amended (the
    2007 V*I Chip Plan)
      2008


2007


2006Cost of revenues

$
52


$
47


$
85Selling, general and administrative(1)


818



368



385Research and development


251



252



281Total stock based compensation

$
1,121


$
667


$
751     (1)
    
    The increase in selling, general and administrative stock-based
    compensation expense in fiscal 2008 is primarily the result of
    acceleration of the service periods used to amortize the cost of
    V*I Chip stock options granted to the Companys Chief
    Executive Officer in 2007. 49




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)     Vicor:

2008


2007


2006Risk-free interest rate


2.8
%


4.7
%


4.7
%Expected dividend yield


2.6
%


1.8
%


1.5
%Expected volatility


47
%


49
%


53
%Expected lives (years)


3.1



3.8



3.8   Picor:

2008


2007


2006Risk-free interest rate


3.7
%


4.7
%


5.1
%Expected dividend yield










Expected volatility


56
%


43
%


48
%Expected lives (years)


6.5



6.5



6.5   V*I Chip:

2008


2007Risk-free interest rate


3.7
%


4.6
%Expected dividend yield






Expected volatility


61
%


65
%Expected lives (years)


6.5



6.5   Risk-free
    interest rate:
  Vicor
  Picor
  V*I Chip 
  Expected
    dividend yield:
  Vicor
  Picor
  V*I Chip
  Expected
    volatility:
  Vicor
 50




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)  Picor
  V*I Chip
  Expected
    term:
  Vicor
  Picor
  V*I Chip
  Forfeiture
    rate
    Vicor
  Picor
  V*I Chip
 51




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)  Vicor
    Stock Options
    Weighted-Weighted-


AverageAverage


Remaining


AggregateOptions


Exercise


Contractual


IntrinsicOutstanding


Price


Life in Years


ValueOutstanding on December 31, 2005


2,260,248


$
18.14Granted


117,860



17.95Forfeited and expired


(298,585
)


25.84Exercised


(435,844
)


12.78Outstanding on December 31, 2006


1,643,679



18.14Granted


48,530



12.06Forfeited and expired


(371,349
)


18.99Exercised


(73,109
)


8.88Outstanding on December 31, 2007


1,247,751



18.20Granted


109,114



11.28Forfeited and expired


(244,168
)


22.74Exercised


(28,522
)


7.04Outstanding on December 31, 2008


1,084,175



16.77



2.67


$
12Exercisable on December 31, 2008


883,696



17.57



1.81



12Vested or expected to vest on December 31, 2008(1)


1,060,260



16.86



2.56



9     (1)
    
    In addition to the vested options, the Company expects a portion
    of the unvested options to vest at some point in the future.
    Options expected to vest is calculated by applying an estimated
    forfeiture rate to the unvested options.       52




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)    Picor
    Stock Options
      Weighted-Weighted-


AverageAverage


Remaining


AggregateOptions


Exercise


Contractual


IntrinsicOutstanding


Price


Life in Years


ValueOutstanding on December 31, 2005


3,442,000


$
0.45Granted


1,040,500



0.85Forfeited and expired


(147,960
)


0.31Exercised


(30,000
)


0.25Outstanding on December 31, 2006


4,304,540



0.55Granted


114,000



0.74Forfeited and expired


(40,000
)


0.88Exercised






Outstanding on December 31, 2007


4,378,540



0.56Granted


707,500



1.02Forfeited and expired






Exercised






Outstanding on December 31, 2008


5,086,040



0.62



5.61


$
855Exercisable on December 31, 2008


3,526,220



0.49



4.46



855Vested or expected to vest on December 31, 2008(1)


4,983,935



0.61



5.54



855     (1)
    
    In addition to the vested options, Picor expects a portion of
    the unvested options to vest at some point in the future.
    Options expected to vest is calculated by applying an estimated
    forfeiture rate to the unvested options.   53




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)        V*I Chip Stock Options
      Weighted-Weighted-


AverageAverage


Remaining


AggregateOptions


Exercise


Contractual


IntrinsicOutstanding


Price


Life in Years


ValueOutstanding on December 31, 2006





$
Granted


6,655,000



1.00Forfeited and expired


(65,000
)


1.00Exercised






Outstanding on December 31, 2007


6,590,000



1.00Granted


1,637,500



1.00Forfeited and expired


(184,500
)


1.00Exercised






Outstanding on December 31, 2008


8,043,000



1.00



8.48


$
Exercisable on December 31, 2008


1,516,600



1.00



8.41



Vested or expected to vest on December 31, 2008(1)


8,043,000



1.00



8.48



     (1)
    
    In addition to the vested options, V*I Chip expects a portion of
    the unvested options to vest at some point in the future.
    Options expected to vest is calculated by applying an estimated
    forfeiture rate to the unvested options. 54




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   3.
    STOCK-BASED
    COMPENSATION AND EMPLOYEE BENEFIT PLANS (Continued)         401(k)
    Plan
    Stock
    Bonus Plan
    4.
    SHORT-TERM
    AND LONG-TERM INVESTMENTS  available-for-sale
  Gross


Gross


EstimatedUnrealized


Unrealized


FairDecember 31,
    2008

Cost


Gains


Losses


ValueAuction rate securities  student loans

$
20,025


$



$
3,334


$
16,691Certificates of deposit


2,735



20







2,755$
22,760


$
20


$
3,334


$
19,446December 31, 2007Auction rate securities  student loans

$
37,500


$



$



$
37,500Auction rate securities  municipal bonds


17,650











17,650Certificates of deposit


2,340











2,340$
57,490


$



$



$
57,490  55




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   4.
    SHORT-TERM
    AND LONG-TERM INVESTMENTS (Continued)   available-for-sale
  EstimatedCost


Fair ValueDue in one year or less

$
1,860


$
1,863Due in two to ten years


900



917Due in ten to twenty years






Due in twenty to forty years


20,000



16,666$
22,760


$
19,446   available-for-sale
  Gross


Gross


EstimatedUnrealized


Unrealized


FairDecember 31,
    2008

Cost


Gains


Losses


ValueAuction rate securities  student loans

$
18,300


$



$
2,238


$
16,062     EstimatedCost


Fair ValueDue in one year or less

$



$
Due in two to ten years






Due in ten to twenty years


2,000



1,762Due in twenty to forty years


16,300



14,300$
18,300


$
16,062      56




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   4.
    SHORT-TERM
    AND LONG-TERM INVESTMENTS (Continued)     The Fair Value Option for
    Financial Assets and Financial Liabilities, available-for-sale
   57




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   4.
    SHORT-TERM
    AND LONG-TERM INVESTMENTS (Continued)       5.
    FAIR
    VALUE MEASUREMENTS    Level 1
    Inputs used to measure fair value are unadjusted quoted prices
    available in active markets for the identical assets or
    liabilities as of the reporting date.  Level 2
    Inputs used to measure fair value, other than quoted prices
    included in Level 1, are either directly or indirectly
    observable as of the reporting date through correlation with
    market data, including quoted prices for similar assets and
    liabilities in active markets and quoted prices in inactive
    markets. Level 2 also includes assets and liabilities
    valued using models or other pricing methodologies that do not
    require significant judgment since the input assumptions used in
    the models, such as interest rates and volatility factors, are
    corroborated by readily observable data from actively quoted
    markets for substantially the full term of the financial
    instrument.Level 3
    Inputs used to measure fair value are unobservable inputs
    supported by little or no market activity and reflect the use of
    significant management judgment. These values are generally
    determined using pricing models for which the assumptions
    utilize managements estimates of market participant
    assumptions.   58




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   5.
    FAIR
    VALUE MEASUREMENTS (Continued)       UsingSignificantQuoted Prices


Other


Significant


Total Fairin Active


Observable


Unobservable


Value as ofMarkets


Inputs


Inputs


December 31,(Level 1)


(Level 2)


(Level 3)


2008Cash equivalents:Money market funds

$
15,952


$



$



$
15,952Restricted money market


176











176Short term investments:Auction rate securities






25







25Certificates of deposit


1,748











1,748Long term investments:Auction rate securities










32,728



32,728Auction rate security rights










1,926



1,926Certificates of deposit


1,007











1,007Restricted long term investment


561











561     Level 3Balance at the beginning of the period(1)

$
Transfers into Level 3 categorization


40,426Redemptions(2)


(175
)Transfer into Level 2 categorization(3)


(25
)Unrealized loss on trading securities included in Other income
    (expense), net


(2,238
)Unrealized loss included in Accumulated other comprehensive
    (loss) income


(3,334
)Balance at the end of the period

$
34,654     (1)
    
    The Company adopted SFAS 157 in January 2008 and, as such,
    had no beginning balance of such assets.(2)
    
    During the year ending December 31, 2008, the Company
    received partial redemptions of $175,000 at par value.(3)
    
    Partial redemption of $25,000 at par value received on
    January 5, 2009. 59




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   6.
    INVENTORIES    December 31,2008


2007Raw materials

$
23,275


$
23,711Work-in-process


3,152



2,656Finished goods


6,612



4,35733,039



30,724Inventory reserves


(6,358
)


(7,646
)$
26,681


$
23,078   7.
    PROPERTY,
    PLANT AND EQUIPMENT      December 31,2008


2007Land

$
2,089


$
2,089Buildings and improvements


41,362



40,867Machinery and equipment


187,120



179,200Furniture and fixtures


5,741



5,922Construction-in-progress
    and deposits


1,959



2,102238,271



230,180Less accumulated depreciation and amortization


190,017



179,923$
48,254


$
50,257     8.
    OTHER
    INVESTMENTS   60




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   8.
    OTHER
    INVESTMENTS (Continued)     The Equity Method of Accounting for Investments in Common
    Stock
  Business
    Combinations
  December 31,


December 31,2008


2007Equity method goodwill

$



$
634Intangible assets, net of amortization






53$



$
687  61




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   8.
    OTHER
    INVESTMENTS (Continued)     Year Ended December 312008


2007


2006Allocation of losses from equity method investment (net of tax)

$
321


$
306


$
84Amortization of intangible assets (net of tax)


106



213



237Other than temporary decline in investment


1,261



620



$
1,688


$
1,139


$
321   other-than-temporary other-than-temporary other-than-temporary
    2008


2007


2006As of December 31:Current assets

$
1,193


$
2,322


$
1,157Noncurrent assets


4,214



3,110



3,074Current liabilities


1,910



1,743



495Noncurrent liabilities


886



1,354



1,096Minority interest


3,971



3,614



3,648Total stockholders deficit


(1,359
)


(1,280
)


(1,008
)For the year ended December 31:Net revenue


8,077



3,368



2,292Gross margin


5,213



646



818Net loss


1,087



1,280



441     9.
    GOODWILL
    AND OTHER INTANGIBLE ASSETS  Goodwill and Other Intangible Assets
 62




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   9.
    GOODWILL
    AND OTHER INTANGIBLE ASSETS (Continued)       December 31,2008


2007Patent costs

$
3,591


$
3,491Less accumulated amortization


1,626



1,432$
1,965


$
2,059       Year2009

$
2172010


2152011


2042012


1882013


178   10.
    PRODUCT
    WARRANTIES    2008


2007


2006Balance at the beginning of the period

$
679


$
1,046


$
755Accruals for warranties for products sold in the period


595



735



714Fulfillment of warranty obligations


(385
)


(704
)


(185
)Revisions of estimated obligations


7



(398
)


(238
)Balance at the end of the period

$
896


$
679


$
1,046   11.
    STOCKHOLDERS
    EQUITY   63




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   11.
    STOCKHOLDERS
    EQUITY (Continued)     Common
    Stock
      one-for-one
                   64




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   11.
    STOCKHOLDERS
    EQUITY (Continued)     12.
    OTHER
    INCOME (EXPENSE), NET    2008


2007


2006Interest income

$
2,138


$
4,484


$
5,389Minority interest in net income of subsidiaries


(1,817
)


(539
)


(562
)Unrealized gain on auction securities rights


1,926







Unrealized loss on trading securities


(2,238
)






Foreign currency gains, net


82



186



139Gain on disposal of equipment


19



129



67Other


101



128



59$
211


$
4,388


$
5,092  65




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   13.
    INCOME
    TAXES    December 31,2008


2007Deferred tax assets:Net operating loss carryforwards

$
14,223


$
13,830Research and development tax credit carryforwards


7,633



6,662Inventory reserves


2,346



3,068Vacation accrual


1,379



1,280Unrealized loss on investments


1,287



Investment tax credit carryforwards


1,004



1,027Stock-based compensation


805



472Investment basis differences


772



824Alternative minimum tax credit carryforward


407



412Warranty reserves


299



227Bad debt reserves


107



159Other


290



85Total deferred tax assets


30,552



28,046Less: Valuation allowance for deferred tax assets


(27,701
)


(24,158
)Net deferred tax assets


2,851



3,888Deferred tax liabilities:Depreciation


(2,092
)


(3,091
)Patent amortization


(758
)


(797
)Unremitted Vicor Custom earnings


(434
)


(358
)Goodwill


(432
)


(381
)Other


(344
)


(117
)Total deferred tax liabilities


(4,060
)


(4,744
)Net deferred tax liabilities

$
(1,209
)

$
(856
)    66




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   13.
    INCOME
    TAXES (Continued)     2008


2007


2006(as restated)Domestic

$
(1,163
)

$
4,497


$
(29,023
)Foreign


232



962



933$
(931
)

$
5,459


$
(28,090
)     2008


2007


2006Current:Federal

$
1,355


$
(220
)

$
377Foreign


27



191



105State


(533
)


(1,090
)


80849



(1,119
)


562Deferred:Federal


127



104



86$
976


$
(1,015
)

$
648       2008


2007


2006Statutory federal tax rate


(35.0
)%


35.0
%


(35.0
)%State income taxes, net of federal income tax benefit


35.2



3.1



(3.1
)Reduction in tax reserves


(99.2
)


(31.0
)


(0.5
)Permanent items


30.3



4.1



1.7Foreign rate differential


(5.1
)


(4.9
)


(1.0
)Tax credits


(29.4
)


(1.2
)


(3.7
)ETI benefit










(1.2
)Other










0.3Increase (decrease) in valuation allowance


208.0



(23.7
)


44.8104.8
%


(18.6
)%


2.3
%    67




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   13.
    INCOME
    TAXES (Continued)         Balance on January 1, 2008

$
1,084Additions based on tax positions related to the current year


93Additions for tax positions of prior years


101Reductions for tax positions of prior years


(28
)Lapse of statute


(809
)Settlements


Balance on December 31, 2008

$
441    68




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   13.
    INCOME
    TAXES (Continued)         14.
    COMMITMENTS
    AND CONTINGENCIES    Year2009

$
1,3612010


7342011


2742012


1492013 and thereafter


113            69




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   14.
    COMMITMENTS
    AND CONTINGENCIES (Continued)           15.
    SEGMENT
    INFORMATION   70




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   15.
    SEGMENT
    INFORMATION (Continued)       Brick


V*I Chip


Picor


Corporate


Eliminations


Total2008:Net revenues

$
189,362


$
16,766


$
5,096


$



$
(5,856
)

$
205,368Income (loss) from operations


26,317



(25,123
)


(2,817
)


(441
)


922



(1,142
)Total assets


176,609



14,850



9,011



87,445



(115,993
)


171,922Depreciation and amortization


5,920



2,645



384



1,566







10,5152007:Net revenues

$
185,828


$
9,142


$
4,908


$



$
(4,051
)

$
195,827Income (loss) from operations


25,642



(23,484
)


(2,571
)


883



601



1,071Total assets


148,078



13,792



7,286



108,372



(85,070
)


192,458Depreciation and amortization


7,408



2,097



407



1,707







11,6192006:Net revenues

$
188,482


$
3,000


$
4,878


$
2


$
(4,315
)

$
192,047Income (loss) from operations


(7,014
)


(24,588
)


(1,027
)


(1,345
)


792



(33,182
)Total assets


129,959



8,446



7,431



151,823



(50,198
)


247,461Depreciation and amortization


9,624



1,914



327



2,293







14,158      71




---



##### 



VICOR
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   16.
    SUBSEQUENT
    EVENT    17.
    QUARTERLY
    RESULTS OF OPERATIONS (Unaudited)    First


Second


Third


Fourth


Total2008:Net revenues

$
53,469


$
49,297


$
51,278


$
51,324


$
205,368Gross margin


22,460



21,113



21,903



20,809



86,285Net income (loss)


620



(1,323
)


609



(3,501
)


(3,595
)Net income (loss) per share:Basic and diluted


.01



(.03
)


.01



(.08
)


(.09
)   First


Second


Third


Fourth


Total2007:Net revenues

$
46,981


$
47,206


$
47,693


$
53,947


$
195,827Gross margin


20,227



19,599



17,904



21,279



79,009Net income (loss)


2,321



974



543



1,497



5,335Net income (loss) per share:Basic and diluted


.06



.02



.01



.04



.13     
    An unrealized loss of $2,238,000 in connection with the fair
    value measurements for its UBS ARS, which are classified as
    trading securities, in Other income (expense), net
    in the Consolidated Statements of Operations.
    An unrealized gain of $1,926,000 in connection with the fair
    value measurements for its ARS Right, in Other income
    (expense), net in the Consolidated Statements of
    Operations.  
    An
    other-than-temporary
    impairment charge of $555,000 to write-off the remaining
    investment balance in GWS as of December 31, 2008.
    An increase of $300,000 to warranty reserves for certain product
    matters charged against Cost of revenues.
    An increase of $240,000 to inventory reserves for potential
    excess and obsolete inventory charged against Cost of revenues.   Item 3-
 72




---



##### 



ITEM 9 
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A 
    CONTROLS
    AND PROCEDURES  Form 10-K Rule 13a-14
  (a)
    Evaluation
    of disclosure controls and procedures.  Rule 13a-15
  (b)
    Managements
    Report on Internal Control Over Financial Reporting       73




---



##### 



Form 10-K.
  (c)
    Inherent
    Limitations on Effectiveness of Controls    (d)
    Change in
    Internal Control Over Financial Reporting      Form 10-K
  
    We hired a new Chief Financial Officer with the appointment of
    James A. Simms, effective April 14, 2008.
    We reorganized our Accounting Department and redefined certain
    duties and responsibilities in order to address specific
    weaknesses and deficiencies previously identified. We also
    completed an assessment of the staffing requirements of the
    Accounting Department, so that it has the resources and
    expertise to evaluate complex and judgmental accounting, tax,
    and financial reporting issues.
    We amended and expanded our disclosure controls and procedures,
    including the implementation of a Disclosure Committee with
    responsibility for oversight of implementation and execution of
    the disclosure controls and procedures. The Disclosure Committee
    was officially established and began it duties in connection
    with the Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2008. 74




---



##### 



(e)
    Report of
    Independent Registered Public Accounting Firm  
  Internal Control  Integrated Framework
        Internal Control-Integrated Framework
        75




---



##### 



ITEM 9B 
    OTHER
    INFORMATION    PART III
  ITEM 10 
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    ITEM 11 
    EXECUTIVE
    COMPENSATION    ITEM 12 
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13 
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14 
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    PART IV
  ITEM 15 
    EXHIBITS AND
    FINANCIAL STATEMENTS  Financial Statements
    Schedules
     76




---



##### 



Exhibits
  Exhibits



Description of Document3
.1





Restated Certificate of Incorporation, dated February 28, 1990(1)3
.2





Certificate of Ownership and Merger Merging Westcor Corporation,
    a Delaware Corporation, into Vicor Corporation, a Delaware
    Corporation, dated December 3, 1990(1)3
.3





Certificate of Amendment of Restated Certificate of
    Incorporation, dated May 10, 1991(1)3
.4





Certificate of Amendment of Restated Certificate of
    Incorporation, dated June 23, 1992(1)3
.5





Bylaws, as amended(9)4
.1





Specimen Common Stock Certificate(2)10
.1





1984 Stock Option Plan of the Company, as amended(2)10
.2





1993 Stock Option Plan(3)10
.3





1998 Stock Option and Incentive Plan(4)10
.4





Amended and Restated 2000 Stock Option and Incentive Plan(5)10
.5





Form of Non-Qualified Stock Option under the Vicor Corporation
    Amended and Restated 2000 Stock Option and Incentive Plan(6)10
.6





Sales Incentive Plan(7)10
.7





Picor Corporation 2001 Stock Option and Incentive Plan(8)10
.8





Form of Non-Qualified Stock Option under the Picor Corporation
    2001 Stock Option and Incentive Plan(8)10
.9





V*I Chip Corporation Amended 2007 Stock Option and Incentive
    Plan(11)10
.10





Form of Non-Qualified Stock Option Agreement under the V*I Chip
    Corporation Amended 2007 Stock Option and Incentive Plan(10)10
.11





Form of Incentive Stock Option Agreement under the V*I Chip
    Corporation Amended 2007 Stock Option and Incentive Plan(11)10
.12





Form of Stock Restriction Agreement under the V*I Chip
    Corporation Amended 2007 Stock Option and Incentive Plan(11)16
.1





Letter re: change in certifying accountant(12)21
.1





Subsidiaries of the Company(13)23
.1





Consent of Grant Thornton LLP(13)23
.2





Consent of Ernst & Young LLP(13)23
.3





Consent of Lohman Company, PLLC(13)31
.1





Certification of Chief Executive Officer pursuant to Rule
    13a-14(a) of the Securities Exchange Act of 1934(13)31
.2





Certification of Chief Financial Officer pursuant to Rule
    13a-14(a) of the Securities Exchange Act of 1934(13)32
.1





Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002(13)32
.2





Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002(13)     (1)
    
    Filed as an exhibit to the Companys Annual Report on
    Form 10-K
    filed on March 29, 2001 and incorporated herein by
    reference.(2)
    
    Filed as an exhibit to the Companys Registration Statement
    on Form 10, as amended, under the Securities Exchange Act
    of 1934 (File
    No. 0-18277),
    and incorporated herein by reference.(3)
    
    Filed as an exhibit to the Companys Registration Statement
    on
    Form S-8,
    as amended, under the Securities Act of 1933
    (No. 33-65154),
    and incorporated herein by reference.(4)
    
    Filed as an exhibit to the Companys Registration Statement
    on
    Form S-8,
    as amended, under the Securities Act of 1933
    (No. 333-61177),
    and incorporated herein by reference. 77




---



##### 



(5)
    
    Filed as an exhibit to the Companys Proxy Statement for
    use in connection with its 2002 Annual Meeting of Stockholders,
    which was filed on April 29, 2002, and incorporated herein
    by reference.(6)
    
    Filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    filed on November 4, 2004 and incorporated herein by
    reference.(7)
    
    Filed as an exhibit to the Companys Annual Report on
    Form 10-K
    filed on March 16, 2005 and incorporated herein by
    reference.(8)
    
    Filed as an exhibit to the Companys Annual Report on
    Form 10-K
    filed on March 14, 2006 and incorporated herein by
    reference.(9)
    
    Filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    filed on November 8, 2006 and incorporated herein by
    reference.(10)
    
    Filed as an exhibit to the Companys Current Report on
    Form 8-K,
    dated June 6, 2007 and incorporated herein by reference.(11)
    
    Filed as an exhibit to the Companys Current Report and
    Form 8-K,
    dated March 6, 2008 incorporated herein by reference.(12)
    
    Filed as an exhibit to the Companys Current Report and
    Form 8-K,
    dated June 11, 2008 incorporated herein by reference.(13)
    
    Filed herewith.  Separate Financial Statements of
    Subsidiaries Not Consolidated and Fifty Percent or Less Owned
    Persons
    PageConsolidated Financial Statements

ReferencesIndependent Auditors Report


80Consolidated Balance Sheets


81Consolidated Statements of Operations


82Consolidated Statements of Changes in Stockholders Deficit


83Consolidated Statements of Cash Flows


84Notes to Consolidated Financial Statements


85  78




---



##### 



VICOR
    CORPORATIONSCHEDULE II
    VALUATION AND QUALIFYING ACCOUNTS
    Years ended December 31, 2008, 2007 and 2006
  (Credit) ChargeBalance at


to Costs and


Other Charges,


Balance atDescription

Beginning of Period


Expenses


Deductions(1)


End of PeriodAllowance for doubtful accounts:Year ended December 31, 2008

$
398,000


$
39,000


$
(137,000
)

$
300,000Year ended December 31, 2007


583,000



246,000



(431,000
)


398,000Year ended December 31, 2006


635,000



96,000



(148,000
)


583,000     (1)
    
    Reflects uncollectible accounts written off, net of recoveries.  (Credit) Charge


OtherBalance at


to Costs and


Charges,


Balance atDescription

Beginning of Period


Expenses


Deductions(2)


End of PeriodInventory Reserves:Year ended December 31, 2008

$
7,646,000


$
923,000


$
(2,211,000
)

$
6,358,000Year ended December 31, 2007


8,363,000



1,075,000



(1,792,000
)


7,646,000Year ended December 31, 2006


10,691,000



702,000



(3,030,000
)


8,363,000     (2)
    
    Reflects amounts associated with inventory that have been
    discarded or sold. 79




---



##### 



INDEPENDENT
    AUDITORS REPORT
                  80




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
    CONSOLIDATED BALANCE SHEETS
    December 31, 2008 and 2007
  2008


2007ASSETSCurrent assetsCash

$
323,130


$
270,402Accounts receivable, net of allowance for sales returns


68,780



1,040,124Related party accounts receivable


83,181



121,720Inventory


706,005



878,930Prepaid expenses and other current assets


12,401



10,648Total current assets


1,193,497



2,321,824Property and equipmentComputer hardware and equipment


241,758



214,513Machinery


180,442



180,442Furniture and fixtures


7,321



7,321429,521



402,276Less accumulated depreciation


(368,349
)


(339,611
)Total property and equipment


61,172



62,665Intangible assets, net of accumulated amortization


696,813



723,826Other assetsRelated party notes and interest receivable


2,438,651



1,306,224Investment


1,016,981



1,016,981Total other assets


3,455,632



2,323,205Total assets

$
5,407,114


$
5,431,520LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilitiesAccounts payable

$
954,665


$
1,412,660Accrued expenses


263,565



286,439Current maturities of notes payable


485,000



Current portion of deferred revenue


46,215



43,903Billings in excess of costs and estimated earnings on an
    uncompleted contract


160,178



Total current liabilities


1,909,623



1,743,002Notes payable


100,000



520,000Deferred revenue


785,631



834,157Commitments and contingenciesMinority interests in subsidiary


3,970,601



3,614,497Stockholders deficitCommon stock, voting; $0.001 par value;


30,000



30,00050,000,000 authorized;30,000,000 issued and outstanding in 2008 and 2007Common stock, non-voting; $0.001 par value;


1,160



910104,497,382 authorized;1,160,000 issued and outstanding in 2008;910,000 issued and outstanding in 2007Preferred stock, voting; $0.001 par value;


20,000



20,00020,000,000 authorized;20,000,000 issued and outstanding in 2008 and 2007Preferred stock, non-voting; $0.001 par value;


69,117



60,17381,227,861 authorized;69,116,948 issued and outstanding in 2008;60,172,405 issued and outstanding in 2007Additional paid-in capital


9,324,235



8,325,267Accumulated deficit


(10,803,253
)


(9,716,486
)Total stockholders deficit


(1,358,741
)


(1,280,136
)Total liabilities and stockholders deficit

$
5,407,114


$
5,431,520    81




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF OPERATIONS
    Years ended December 31, 2008, 2007 and 2006
  2008


2007


2006Net revenueNet product sales and other

$
3,077,318


$
3,368,046


$
2,291,785Patent infringement award


5,000,000







Total net revenue


8,077,318



3,368,046



2,291,785Cost of revenue


2,864,623



2,721,716



1,474,281Gross margin


5,212,695



646,330



817,504Operating expensesLegal and settlement


2,855,859



31,133



19,588Sales, general and administrative


1,489,135



717,426



257,379Research and development


1,538,308



1,079,342



845,645Depreciation and amortization


213,497



233,823



174,546Total operating expenses


6,096,799



2,061,724



1,297,158Loss from operations


(884,104
)


(1,415,394
)


(479,654
)Other incomeInterest income


120,674



99,648



88,438Other income


399



530



97Total other income


121,073



100,178



88,535Other expenseLoss on settlement of stockholders dispute


1,316,865







Interest expense


39,372



43,611



4,491Total other expense


1,356,237



43,611



4,491Net loss before minority interests


(2,119,268
)


(1,358,827
)


(395,610
)Minority interests in net loss (income) of subsidiary


1,032,501



79,009



(45,293
)Net loss

$
(1,086,767
)

$
(1,279,818
)

$
(440,903
)    82




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
    DEFICIT
    Years ended December 31, 2008, 2007 and 2006
  UnvestedPortion ofCommon Stock


Preferred Stock


Restricted


Additional





TotalVoting, $0.001 Par


Non-Voting, $0.001 Par


Voting, $0.001 Par


Non-Voting, $0.001 Par


Common


Paid in


Accumulated


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Shares


Amount


Stock


Capital


Deficit


DeficitBeginning balance,January 1, 2006


30,000,000


$
30,000



910,000


$
910



20,000,000


$
20,000



51,227,861


$
51,228


$
(6,000
)

$
7,242,202


$
(7,995,765
)

$
(657,425
)Restricted stock vested


































6,000



66,000







72,000Vested stock options






































18,691







18,691Net loss










































(440,903
)


(440,903
)Ending balance,December 31, 2006


30,000,000



30,000



910,000



910



20,000,000



20,000



51,227,861



51,228







7,326,893



(8,436,668
)


(1,007,637
)Vested stock options






































7,319







7,319Issuance of stock


























8,944,544



8,945







991,055







1,000,000Net loss










































(1,279,818
)


(1,279,818
)Ending balance,December 31, 2007


30,000,000



30,000



910,000



910



20,000,000



20,000



60,172,405



60,173







8,325,267



(9,716,486
)


(1,280,136
)Vested stock options






































6,663







6,663Issuance of stock










250,000



250











8,944,543



8,944







992,305







1,001,499Net loss










































(1,086,767
)


(1,086,767
)Ending balance,December 31, 2008


30,000,000


$
30,000



1,160,000


$
1,160



20,000,000


$
20,000



69,116,948


$
69,117


$



$
9,324,235


$
(10,803,253
)

$
(1,358,741
)    83




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    Years ended December 31, 2008, 2007 and 2006
  2008


2007


2006Cash flows from operating activitiesNet loss

$
(1,086,767
)

$
(1,279,818
)

$
(440,903
)Adjustments to reconcile net loss to net cash provided (used)
    by operating activities:Minority interests in net (loss) income of subsidiary


(1,032,501
)


(79,009
)


45,293Loss on settlement of stockholders dispute


1,316,865







Depreciation and amortization


213,497



233,823



174,546Allowance for credit losses


812,000







Provision for sales returns






1,059



(3,669
)Write-off of obsolete inventory


500,625







Deferred revenue


(46,215
)


(46,214
)


(58,446
)Restricted common stock compensation










72,000Share-based compensation expense


13,403



14,732



65,167(Increase) decrease in:Accounts receivable


971,344



(788,155
)


57,834Related party accounts receivable


38,539



(37,700
)


8,022Inventory


(327,700
)


(557,559
)


(62,090
)Prepaid expenses and other current assets


(1,753
)


918



(8,411
)Related party interest receivable


(94,427
)


(88,061
)


(82,125
)Increase (decrease) in:Accounts payable


(457,995
)


1,157,632



21,504Accrued expenses


(22,874
)


104,851



46,578Billings in excess of costs and estimated earnings on an
    uncompleted contract


160,178







Net cash provided (used) by operating activities


956,219



(1,363,501
)


(164,700
)Cash flows from investing activitiesPurchases of property and equipment


(27,244
)


(59,466
)


(7,887
)Disbursements on related party notes receivable


(1,850,000
)






Legal costs incurred on patent applications


(157,746
)


(121,678
)


(218,860
)Net cash used by investing activities


(2,034,990
)


(181,144
)


(226,747
)Cash flows from financing activitiesProceeds from notes payable


285,000



290,000



230,000Payments on notes payable


(220,000
)






Issuance of GWS stock


1,001,499



1,000,000



Issuance of 3D stock


65,000



38,097



165,454Net cash provided by financing activities


1,131,499



1,328,097



395,454Net increase (decrease) in cash


52,728



(216,548
)


4,007Cash, beginning


270,402



486,950



482,943Cash, ending

$
323,130


$
270,402


$
486,950Supplemental disclosure of cash flow informationCash payments for:Interest

$
39,372


$
43,611


$
4,491Income taxes

$
850


$
850


$
850    84




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 1.
    Operations,
    Summary of Significant Accounting Policies and Use of
    Estimates  Nature
    of business:
    Principles
    of consolidation:
    Operating
    cycle:
    Concentration
    of cash:
    Accounts
    receivable:
    Inventory:
  work-in-process.
 85




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 1.
    Operations,
    Summary of Significant Accounting Policies and Use of Estimates
    (Continued)    Property
    and equipment:
      Intangible
    assets:
  Goodwill and Other
    Intangible Assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets
  Notes
    receivable:
    Investment:
   86




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 1.
    Operations,
    Summary of Significant Accounting Policies and Use of Estimates
    (Continued)  and/or
  Revenue
    recognition:
        No. 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21), percentage-of-completion cost-to-cost
       87




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 1.
    Operations,
    Summary of Significant Accounting Policies and Use of Estimates
    (Continued)  Sales
    taxes:
    Advertising:
    Income
    taxes:
    Accounting
    for share-based compensation:
  Share-Based
    Payment
  No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services.
  Use of
    estimates:
    Reclassification:
   88




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 2.
    Going
    Concern      Note 3.
    Recent
    Accounting Pronouncements  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement 109 Accounting for Income Taxes Accounting for Contingencies FIN 48-3.
  Business Combinations: Applying the Acquisition Method
  No. 142-3, Determination of the Useful Life of Intangible Assets No. 142-3). No. 142-3 Goodwill and Other Intangible
    Assets No. 142-3 No. 142-3 No. 142-3
 89




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 3.
    Recent
    Accounting Pronouncements (Continued)  No. 142-3
  Noncontrolling Interests in Consolidated Financial Statements Consolidated
    Financial Statements
  Note 4.
    Change in
    Accounting Estimate    Note 5.
    Intangible
    Assets    2008


2007Acquired patents

$
837,000


$
837,000Patents


420,659



127,097Unpatented technology


240,558



376,373Less accumulated amortization expense


(801,404
)


(616,644
)$
696,813


$
723,826       Years Ending December 31:2009

$
199,1652010

$
199,1652011

$
174,1652012

$
21,9862013

$
10,405  90




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6.
    Related
    Party Notes and Interest Receivable        Note 7.
    Costs and
    Estimated Earnings on an Uncompleted Contract     91




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 8.
    Notes
    Payable    2008


2007Convertible lines of credit with maximum aggregate borrowings of
    $2,000,000 with a stockholder; interest accrues monthly ranging
    from a fixed rate of 12% to variable interest rates, ranging
    from the greater of 7% or prime (prime rate was 3.25% at
    December 31, 2008), plus 2.5%. Interest is due monthly and
    the principal is due December 2009 or upon 10 days notice
    from the stockholder. Loan advances are at the discretion of the
    lender. The line is subject to certain non-financial covenants
    and collateralized by substantially all the assets of the
    Company.

$
450,000


$
420,000Convertible unsecured line of credit with maximum borrowings of
    $250,000 with a stockholder; interest accrues monthly at 12%.
    Interest is due monthly and the principal is due in full upon
    30 days notice from the stockholder. Loan advances are at
    the discretion of the lender. The line is subject to certain
    non-financial covenants.


35,000



Convertible unsecured line of credit with maximum borrowings of
    $150,000 with an individual; interest accrues monthly at 12%.
    Interest is due monthly and the principal is due December 2012.
    Loan advances are at the discretion of the lender. The line is
    subject to certain non-financial covenants.


100,000



100,000585,000



520,000Less current maturities


(485,000
)


$
100,000


$
520,000         Years Ending December 31:2009

$
485,0002010


2011


2012


100,000$
585,000    92




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 9.
    Deferred
    Revenue      Note 10.
    Commitments
    and Contingencies  Operating
    leases:
      Years Ending December 31:2009

$
39,5742010


3,304$
42,878   Licensing
    and development agreement:
    Litigation:
   93




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 10.
    Commitments
    and Contingencies (Continued)        Note 11.
    Common
    and Preferred Stock    Common
    Stock:
    Preferred
    Stock
    Series A-1
    and
    Series A-2:
  Series A-l Series A-l Series A-2 Series A-2 Series A-1 Series A-1
  Series A-l Series A-2
  Series A-l Series A-2
 94




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11.
    Common
    and Preferred Stock (Continued)        Preferred
    Stock Series B and
    Series B-2:
  Series B-2 Series B-2 Series B-2
  Series B-2 Series B-2 Series B-2
  Series B-2
      Series B-2
    Series B-2
 95




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11.
    Common
    and Preferred Stock (Continued)  Preferred
    Stock
    Series C-1
    and
    Series C-2:
  Series C-1 Series C-1 Series C-2 Series C-2 Series C-1 Series C-2
  Series C-1 Series C-2 Series C-1 Series C-2 Series C-1 Series C-2
  Series C-1 Series C-2
  Series C-1 Series C-2
    Series C-1 Series B-1
  Preferred
    Stock
    Series D-1:
  Series D-1 Series D-1 Series D-1
  Series D-1 Series D-1 Series D-1
  Series D-1
  Series D-1
 96




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11.
    Common
    and Preferred Stock (Continued)    Series D-1 Series B-1, Series C-1 Series C-2
  Series D-1 Series D-1
  Restricted
    Stock:
    Note 12.
    Settlement
    and License Agreement    Note 13.
    Loss on
    Settlement of Stockholders Dispute   97




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 14.
    Minority
    Interests      Note 15.
    Related
    Party Transactions               98




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 15.
    Related
    Party Transactions (Continued)    Note 16.
    Major
    Customers    2008


2007


2006Customer ASales


N/A


$
381,540


$
455,660Percent of net revenue


N/A



11
%


20
%Customer BSales

$
1,086,678


$
1,218,699


$
449,689Percent of net revenue


13
%


36
%


20
%Customer CSales

$
964,536


$
1,344,589



N/APercent of net revenue


12
%


40
%


N/ACustomer DSales


N/A



N/A


$
301,631Percent of net revenue


N/A



N/A



13
%Customer ESales


N/A



N/A


$
250,000Percent of net revenue


N/A



N/A



11
%Customer FSales

$
5,000,000



N/A



N/APercent of net revenue


62
%


N/A



N/A   Note 17.
    Stock
    Option Plan   99




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 17.
    Stock
    Option Plan (Continued)  and/or
  and/or
     100




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 17.
    Stock
    Option Plan (Continued)    2008Weighted-AverageShares


Exercise PriceOutstanding at beginning of year


8,015,000


$
.009Granted


440,000


$
.030Exercised


250,000


$
.006Forfeited


60,000


$
.030Outstanding at end of year


8,145,000


$
.010Exercisable at end of year


6,427,250


$
.017   2007Weighted-AverageShares


Exercise PriceOutstanding at beginning of year


7,045,000


$
.015Granted


1,005,000


$
.030Forfeited


35,000


$
.030Outstanding at end of year


8,015,000


$
.009Exercisable at end of year


5,994,000


$
.012   2006Weighted-AverageShares


Exercise PriceOutstanding at beginning of year


6,395,000


$
.013Granted


700,000


$
.030Forfeited


50,000


$
.030Outstanding at end of year


7,045,000


$
.015Exercisable at end of year


5,345,500


$
.011  101




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 17.
    Stock
    Option Plan (Continued)    2008Options Outstanding


Options ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageNumber


Contractual


Exercise


Number


ExerciseRange of Exercise Prices

Outstanding


Life


Price


Exercisable


Price$.006


4,250,000



3.4 years


$
.006



4,250,000


$
.006$.030


3,895,000



5.0 years


$
.030



2,177,250


$
.030$.006 to $.030


8,145,000






$
.010



6,427,250


$
.017   2007Options Outstanding


Options ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageNumber


Contractual


Exercise


Number


ExerciseRange of Exercise Prices

Outstanding


Life


Price


Exercisable


Price$.006


4,500,000



4.6 years


$
.006



4,500,000


$
.006$.030


3,515,000



6.0 years


$
.030



1,494,000


$
.030$.006 to $.030


8,015,000






$
.009



5,994,000


$
.012   2006Options Outstanding


Options ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageNumber


Contractual


Exercise


Number


ExerciseRange of Exercise Prices

Outstanding


Life


Price


Exercisable


Price$.006


4,500,000



5.4 years


$
.006



4,318,500


$
.006$.030


2,545,000



7.5 years


$
.030



1,027,000


$
.030$.006 to $.030


7,045,000






$
.015



5,345,500


$
.011   No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services.
 102




---



##### 



GREAT
    WALL SEMICONDUCTOR CORPORATION AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 18.
    Income
    Tax Matters    2008


2007Deferred tax assets, current:Allowance for credit losses and sales returns

$
335,000


$
2,000Section 263A adjustment


8,000



3,000343,000



5,000Deferred tax assets, noncurrent:Deferred salaries


52,000



41,000Depreciation and amortization


655,000



830,000Deferred revenue


341,000



360,000Federal research and development tax credit carryforwards


561,000



470,000Arizona research and development tax credit carryforwards


471,000



390,000California research and development tax credit carryforwards


56,000



51,000Federal net operating loss carryforwards


4,532,000



3,978,000State net operating loss carryforwards


682,000



684,0007,350,000



6,804,000Net deferred tax assets


7,693,000



6,809,000Less valuation allowance


(7,693,000
)


(6,809,000
)$



$
       Note 19.
    Employee
    Benefits   103




---



##### 



SIGNATURES
      By:
    /s/  James
    A. Simms         Signature

Title

Date/s/  Patrizio
    VinciarelliPatrizio
    Vinciarelli

President, Chief Executive Officer and Chairman of the Board
    (Principal Executive Officer)

March 13, 2009/s/  James
    A. SimmsJames
    A. Simms

Chief Financial Officer Vice President (Principal Financial
    Officer and Principal Accounting Officer)

March 13, 2009/s/  Estia
    J. EichtenEstia
    J. Eichten

Director

March 13, 2009/s/  David
    T. RiddifordDavid
    T. Riddiford

Director

March 13, 2009/s/  Barry
    KelleherBarry
    Kelleher

Director

March 13, 2009/s/  Samuel
    AndersonSamuel
    Anderson

Director

March 13, 2009/s/  Claudio
    TuozzoloClaudio
    Tuozzolo

Director

March 13, 2009/s/  Jason
    L. CarlsonJason
    L. Carlson

Director

March 13, 2009  104