##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 0-26946
  INTEVAC, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

94-3125814(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   3560 Bassett Street
 Santa Clara, California 95054
 (Address of principal executive
    office, including Zip Code)
 Registrants telephone number, including area code:
    (408) 986-9888
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock ($0.001 par value)

The Nasdaq Stock Market LLC (NASDAQ Global Select)   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. o
  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.
  Form 10-K.




---





Except for historical information contained in this
    Form 10-K,
    certain statements set forth herein, including statements
    regarding growth in industry shipments of hard disk drives;
    trends in semiconductor manufacturing equipment including line
    width dimensions, wafer size and market size; timing of shipment
    and revenue recognition for our new semiconductor equipment
    products; projected growth in Imaging Instrumentation product
    sales as a percentage of Imaging Instrumentation revenues;
    timing of volume production for our night-vision sensor modules
    for rifle sights and our
    LIVAR®
    cameras; the expectation that a significant portion of our
    revenue will continue to be concentrated with a small number of
    international customers; continued government and internal
    funding for development of Digital Enhanced Night Vision
    Goggles; the estimated cost of compliance with environmental
    regulations; projected reduction in new 200
    Lean®
    shipments in 2008 relative to 2007; expected fluctuations in our
    quarterly and annual revenues and operating margins; and our
    expectation that we will continue to retain our earnings, rather
    then paying dividends are forward- looking statements that are
    dependant on certain risks and uncertainties including such
    factors, among others, as hard disk drive industry conditions;
    our ability to forecast and meet the equipment needs of
    semiconductor manufacturers and deliver our Lean Etch systems as
    planned; our ability to design and market new Imaging
    Instrumentation products and sell increasing levels of those
    products to military and commercial customers; our ability to
    continue to raise external funding and provide internal funding
    for development of our Imaging Instrumentation products; our
    ability to maintain compliance with environmental regulations on
    a cost-effective basis; our ability to cost-effectively manage
    significant fluctuations in our business levels from quarter to
    quarter and other factors described below. Therefore, actual
    outcomes and result may differ materially from what is expressed
    or forecast in such forward-looking statements. Words such as
    expect, anticipate, intend,
    plan, believe, seek,
    estimate and variations of such words and similar
    expressions are intended to identify such forward looking
    statements. See Risk Factors in the
    Business section of this Annual Report on
    Form 10-K
    for a more thorough list of potential risks and
    uncertainties.
 TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security-HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Consolidated Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataCONSOLIDATED FINANCIAL STATEMENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOMECONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSItem 9. Changes In and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESPOWER OF ATTORNEYSCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTSEXHIBIT 10.9EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1    Table of Contents  
  PART I
 
  Item 1.
    Business  Overview
    Equipment:
  Imaging Instrumentation:
  (408) 986-9888.
  Equipment
    Segment
  Hard
    Disk Drive Equipment Market
   1




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®
  Hard
    Disk Drive Equipment Products
  Disk
    Sputtering Systems
      Disk
    Lubrication Systems
    tm
   2




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##### Table of Contents



Non-Systems
    Business
    Semiconductor
    Equipment Market
        12-inch,
    Semiconductor
    Manufacturing Products
  tm
  Imaging
    Instrumentation Segment
  Imaging
    Instrumentation Market
   3




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##### Table of Contents



Imaging
    Instrumentation Products
  Raman Spectrometers tm
  Near Infrared Cameras ®
  Near-Eye Display Systems field-of-view
  Low-Light Cameras ® ®
  Night Vision Rifle Sights
  Head Mounted Night Vision Systems
  Long-Range Target Identification ®
  Intensified Photodiodes
 4




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##### Table of Contents



Backlog
    Customer
    Concentration
        Competition
     5




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##### Table of Contents



Marketing
    and Sales
      and/or and/or
  start-up
      state-of-the-art.
 6




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##### Table of Contents



Research
    and Development and Intellectual Property
          and/or
  Manufacturing
   7




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##### Table of Contents



Employees
    Compliance
    with Environmental Regulations
    Executive
    Officers of the Registrant
    Name

Age

PositionExecutive Officers:Norman H. Pond


69


Chairman of the BoardKevin Fairbairn


54


President and Chief Executive OfficerJeffrey Andreson


46


Vice President, Finance and Administration, Chief Financial
    Officer, Treasurer and SecretaryMichael Barnes


49


Vice President and Chief Technical OfficerKimberly Burk


42


Sr. Director, Human ResourcesRalph Kerns


61


Vice President, Business Development, Equipment ProductsLuke Marusiak


45


Chief Operating OfficerJoseph Pietras


53


Vice President and General Manager, Imaging InstrumentationOther Key Officers:Verle Aebi


53


Chief Technology Officer, Imaging InstrumentationJames Birt


43


Vice President, Customer Support, Equipment ProductsTerry Bluck


48


Vice President, Technology, Equipment ProductsJerry Carollo


55


Vice President and General Manager, Creative Display SystemsKeith Carron


49


Managing Director and General Manager, DeltaNuTimothy Justyn


45


Vice President, Manufacturing, Equipment ProductsDave Kelly


45


Vice President, Engineering, Imaging Instrumentation  8




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##### Table of Contents



Mr. Pond
  Mr. Fairbairn
  Mr. Andreson
  Dr. Barnes
  Ms. Burk
  Mr. Kerns
  Mr. Marusiak
  Mr. Pietras
  Mr. Aebi
 9




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##### Table of Contents



Mr. Birt
  Mr. Bluck
  Mr. Carollo
  Dr. Carron
  Mr. Justyn
  Mr. Kelly
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov www.intevac.com
  Trade
    Marks
  ® TM  TM tm ® ® ® ®
 10




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##### Table of Contents



Item 1A.
    Risk
    Factors  Demand
    for capital equipment is cyclical, which subjects our business
    to long periods of depressed revenues interspersed with periods
    of unusually high revenues.
      If
    demand for hard disk drives does not continue to grow and our
    customers do not replace or upgrade their installed base of disk
    sputtering systems, then future sales of our disk sputtering
    systems will suffer.
          We are
    exposed to risks associated with a highly concentrated customer
    base.
   11




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##### Table of Contents



Our
    operating results fluctuate significantly from quarter to
    quarter, which may cause the price of our stock to
    decline.
    
    changes in the demand, due to seasonality, cyclicality and other
    factors in the markets, for computer systems, storage subsystems
    and consumer electronics containing disks our customers produce
    with our systems;
    delays or problems in the introduction and acceptance of our new
    products, or delivery of existing products;
    timing of orders, acceptance of new systems by our customers or
    cancellation of those orders; and
    new products, services or technological innovations by our
    competitors or us.  quarter-to-quarter
  Our
    long-term revenue growth is dependent on new products. If these
    new products are not successful, then our results of operations
    will be adversely affected.
     12




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Our
    sales cycle is long and unpredictable, which requires us to
    incur high sales and marketing expenses with no assurance that a
    sale will result.
    state-of-the-art
    We
    operate in an intensely competitive marketplace, and our
    competitors have greater resources than we do.
   13




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We may
    not be successful in maintaining and obtaining the necessary
    export licenses to conduct operations abroad, and the United
    States government may prevent proposed sales to foreign
    customers.
    Our
    products are complex, constantly evolving and often must be
    customized to individual customer requirements.
    Our
    Imaging Instrumentation business depends heavily on government
    contracts, which are subject to immediate termination and are
    funded in increments. The termination of or failure to fund one
    or more of these contracts could have a negative impact on our
    operations.
   14




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Unexpected
    increases in the cost to develop or manufacture our products
    under fixed-price contracts may cause us to experience
    un-reimbursed cost overruns.
    Our
    sales of Equipment products are dependent on substantial capital
    investment by our customers, far in excess of the cost of our
    products.
    Our
    stock price is volatile.
    
    our perceived prospects;
    hard disk drive market expectations;
    variations in our operating results and whether we achieve our
    key business targets;
    sales or purchases of large blocks of our stock; 15




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
    changes in, or our failure to meet, our revenue and earnings
    estimates;
    changes in securities analysts buy or sell recommendations;
    differences between our reported results and those expected by
    investors and securities analysts;
    announcements of new contracts, products or technological
    innovations by us or our competitors;
    market reaction to any acquisitions, joint ventures or strategic
    investments announced by us or our competitors;
    our high fixed operating expenses, including research and
    development expenses;
    developments in the financial markets; and
    general economic, political or stock market conditions in the
    United States and other major regions in which we do business.    The
    liquidity of our Auction Rate Securities may be impaired, which
    may impact our ability to meet our cash requirements and require
    additional debt funding.
  other-than-temporary
  Changes
    in tax rates or tax liabilities could affect future
    results.
   16




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We
    have experienced significant growth and contraction in our
    business and operations and if we do not appropriately manage
    this growth and contraction, now and in the future, then our
    operating results will be negatively affected.
      Our
    current and future success depends on international sales and
    the management of global operations.
    
    varying regional and geopolitical business conditions and
    demands;
    global trade issues;
    variations in protection of intellectual property and other
    legal rights in different countries;
    rising raw material and energy costs;
    variations in the ability to develop relationships with
    suppliers and other local businesses;
    changes in laws and regulations of the United States (including
    export restrictions) and other countries, as well as their
    interpretation and application;
    fluctuations in interest rates and currency exchange rates,
    particularly with the recent decline in the value of the
    U.S. dollar;
    the need to provide sufficient levels of technical support in
    different locations;
    political instability, natural disasters (such as earthquakes,
    hurricanes or floods), pandemics, terrorism or acts of war where
    we have operations, suppliers or sales; 17




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##### Table of Contents




    cultural differences; and
    shipping delays.  Changes
    in existing financial accounting standards or practices or
    taxation rules or practices may adversely affect our results of
    operations.
    We are
    required to evaluate our internal control over financial
    reporting under Section 404 of the
    Sarbanes-Oxley
    Act of 2002, and any adverse results from such evaluation could
    result in a loss of investor confidence in our financial reports
    and have an adverse effect on our stock price.
  Form 10-K
    Our
    dependence on suppliers for certain parts, some of them
    sole-sourced, makes us vulnerable to manufacturing interruptions
    and delays, which could affect our ability to meet customer
    demand.
  sub-assemblies
  Our
    business depends on the integrity of our intellectual property
    rights and failure to protect our intellectual property rights
    adequately could have a material adverse effect on our
    business.
    
    any of our pending or future patent applications will be allowed
    or that any of the allowed applications will be issued as
    patents or will issue with claims of the scope we sought;
    any of our patents will not be invalidated, deemed
    unenforceable, circumvented or challenged;
    the rights granted under our patents will provide competitive
    advantages to us; 18




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##### Table of Contents




    other parties will not develop similar products, duplicate our
    products or design around our patents; or
    our patent rights, intellectual property laws or our agreements
    will adequately protect our intellectual property or competitive
    position.  We may
    be subject to claims of intellectual property
    infringement.
    Our
    success is dependent on recruiting and retaining a highly
    talented work force.
      Changes
    in demand caused by fluctuations in interest and currency
    exchange rates may reduce our international sales.
        Difficulties
    in integrating past or future acquisitions could adversely
    affect our business.
   19




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We use
    hazardous materials and are subject to risks of non-compliance
    with environmental and safety regulations.
    Future
    sales of shares of our common stock by our officers, directors
    and affiliates could cause our stock price to
    decline.
    Anti-takeover
    provisions in our charter documents and under Delaware law could
    prevent or delay a change in control, which could negatively
    impact the value of our common stock by discouraging a favorable
    merger or acquisition of us.
    We
    could be involved in litigation.
  Form 10-K
 20




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Business
    interruptions could adversely affect our
    operations.
   
  Item 1B.
    Unresolved
    Staff Comments   
  Item 2.
    Properties    Location

Square Footage


Lease Expire


Principal UseSanta Clara, CA


169,583



Mar 2012


Corporate Headquarters; Equipment and Imaging Instrumentation
    Marketing, Manufacturing, Engineering and Customer SupportFremont, CA


9,505



Feb 2013


Imaging Instrumentation Sensor FabricationLaramie, WY


4,000



Feb 2009


Imaging Instrumentation Raman Spectrometer MfgCarlsbad, CA


10,360



May 2010


Imaging Instrumentation Micro Display Product MfgChicago, IL


120



Aug 2008


Imaging Instrumentation Micro Display Product SalesSingapore


31,947



Jun 2010


Equipment Manufacturing and Customer SupportKorea


1,558



May 2008


Equipment Customer SupportMalaysia


1,291



Aug 2008


Equipment Customer SupportJapan


1,507



Nov 2008


Equipment Customer SupportShenzhen, China


2,568



Jul 2008


Equipment Customer Support    21




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##### Table of Contents



Item 3.
    Legal
    Proceedings  Patent
    Infringement Complaint against Unaxis
            Other
    Legal Matters
   
  Item 4.
    Submission
    of Matters to a Vote of Security-Holders  Form 10-K.
 22




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##### Table of Contents



PART II
 
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Price
    Range of Common Stock
      High


LowFiscal 2006:First Quarter

$
28.80


$
13.42Second Quarter


30.60



18.86Third Quarter


25.35



14.81Fourth Quarter


27.94



16.29Fiscal 2007:First Quarter

$
30.57


$
22.00Second Quarter


26.77



18.92Third Quarter


22.37



13.23Fourth Quarter


18.12



14.01   Dividend
    Policy
   23




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##### Table of Contents



Performance
    Graph
    COMPARISON
    OF CUMULATIVE TOTAL RETURN SINCE DECEMBER 31, 2002
    AMONG INTEVAC, NASDAQ STOCK MARKET TOTAL RETURN INDEX AND
    NASDAQ COMPUTER MANUFACTURERS TOTAL RETURN INDEX
  
  12/31/02



12/31/03



12/31/04



12/30/05



12/29/06



12/31/07Intevac, Inc.


$
100



$
353



$
190



$
331



$
650



$
364Nasdaq Stock Market Total Return Index



100




150




163




166




183




198Nasdaq Computer Manufacturers Total Return Index



100




139




181




185




189




277  24




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##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data    Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share data)Consolidated Statement of Operations Data:Net revenues:Systems and components

$
202,292


$
250,158


$
130,168


$
61,326


$
27,738Technology development


13,542



9,717



7,061



8,289



8,556Total net revenues


215,834



259,875



137,229



69,615



36,294Cost of net revenues:Systems and components


111,514



151,287



87,525



45,528



19,689Technology development


7,415



6,102



5,253



6,856



6,032Inventory provisions


862



1,527



873



1,375



743Total cost of net revenues


119,791



158,916



93,651



53,759



26,464Gross profit


96,043



100,959



43,578



15,856



9,830Operating expenses:Research and development


40,137



30,036



14,384



11,580



12,037Selling, general and administrative


28,470



22,924



14,477



9,525



8,448Total operating expenses


68,607



52,960



28,861



21,105



20,485Operating income (loss)


27,436



47,999



14,717



(5,249
)


(10,655
)Interest income


6,544



3,501



1,303



634



269Other income (expense), net


1,598



277



552



381



(1,879
)Income (loss) before income taxes


35,578



51,777



16,572



(4,234
)


(12,265
)Provision for (benefit from) income taxes


8,233



5,079



421



110



38Net income (loss)

$
27,345


$
46,698


$
16,151


$
(4,344
)

$
(12,303
)Basic earnings (loss) per share:Net income (loss)

$
1.28


$
2.22


$
0.79


$
(0.22
)

$
(0.95
)Shares used in per share calculations


21,447



21,015



20,462



19,749



12,948Diluted earnings (loss) per share:Net income (loss)

$
1.23


$
2.13


$
0.76


$
(0.22
)

$
(0.95
)Shares used in per share calculations


22,150



21,936



21,202



19,749



12,948Consolidated Balance Sheet Data:Cash, cash equivalents and short-term Investments

$
138,658


$
95,035


$
49,731


$
42,034


$
19,507Working capital


154,630



118,061



77,353



53,100



22,638Total assets


215,413



206,003



130,444



79,622



55,975Long-term debt


1,898















Total stockholders equity


185,163



144,310



87,874



69,375



30,869  25




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis contains
    forward-looking statements which involve risks and
    uncertainties. Words such as believes,
    expects, anticipates and the like
    indicate forward-looking statements. These forward looking
    statements include comments related to our projected revenue,
    gross margin, operating expense, profitability, income tax
    expense, effective tax rate, capital spending and cash balances;
    the adequacy of our cash balances to fund our operations;
    projected volatility in our financial results; projected
    customer requirements for new capacity and technology upgrades
    for our installed base of magnetic disk manufacturing equipment
    and when, and if, our customers will place orders for these
    products; projected change from period to period in the
    customers, and location of customers, that constitute the
    majority of our revenues; the length of development, marketing
    and deployment cycles for military customers; Imaging
    Instrumentations ability to proliferate its technology
    into major military weapons programs and to develop and
    introduce commercial products; and the timing of delivery
    and/or
    acceptance of our backlog for revenue. Our actual results may
    differ materially from the results discussed in the
    forward-looking statements for a variety of reasons, including
    those set forth under Risk Factors and should be
    read in conjunction with the Consolidated Financial Statements
    and related Notes contained elsewhere in this Annual Report on
    Form 10-K.
  Overview
    Equipment:
  Imaging Instrumentation:
  Equipment
    Business
     26




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Imaging
    Instrumentation Business
    Critical
    Accounting Policies
  Form 10-K.
        Revenue
    Recognition
   27




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Inventories
  work-in-progress
  Warranty
  case-by-case
 28




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##### Table of Contents



Income
    Taxes
        Results
    of Operations
  Net
    revenues
  Year Ended December 31,


% Change


% Change2007


2006


2005


2007 vs. 2006


2006 vs. 2005(In thousands, except percentages)Equipment net revenues

$
196,686


$
248,482


$
129,280



(21
)%


92
%Imaging Instrumentation net revenues


19,148



11,393



7,949



68
%


43
%Total net revenues

$
215,834


$
259,875


$
137,229



(17
)%


89
%     ®
   29




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##### Table of Contents



Gross
    margin
  Year Ended December 31,


% Change


% Change2007


2006


2005


2007 vs. 2006


2006 vs. 2005(In thousands, except percentages)Equipment gross profit

$
87,885


$
97,161


$
42,623



(10
)%


128
%%of Equipment net revenues


44.7
%


39.1
%


33.0
%Imaging Instrumentation gross profit

$
8,158


$
3,798


$
955



115
%


298
%%of Imaging Inst. net revenues


42.6
%


33.3
%


12.0
%Total gross profit

$
96,043


$
100,959


$
43,578



(5
)%


132
%%of net revenues


44.5
%


38.8
%


31.8
%    30




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##### Table of Contents



Research
    and development
  Year Ended December 31,

% Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(In thousands, except percentages)Research and development expense

$
40,137


$
30,036


$
14,384



34
%


109
%% of net revenues


18.6
%


11.6
%


10.5
%     tm
  tm
    Selling,
    general and administrative
  Year Ended December 31,

% Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(In thousands, except percentages)Selling, general and administrative expense

$
28,470


$
22,924


$
14,477



24
%


58
%% of net revenues


13.2
%


8.8
%


10.5
%    31




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Interest
    income and other, net
  Year Ended December 31,


% Change


% Change2007


2006


2005


2007 vs. 2006


2006 vs. 2005(In thousands, except percentages)Interest income and other, net

$
8,142


$
3,778


$
1,855



116
%


104
%     Provision
    for income taxes
  Year Ended December 31,


% Change


% Change2007


2006


2005


2007 vs. 2006


2006 vs. 2005(In thousands, except percentages)Provision for income taxes

$
8,233


$
5,079


$
421



62
%


1106
%      32




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Liquidity
    and Capital Resources
    work-in-progress.
           33




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##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodTotal


< 1 Year


1-3 Years


3-5 Years


> 5 Years(In thousands)Operating lease obligations

$
10,530


$
2,534


$
4,906


$
3,054


$
36Purchase obligations


9,392



9,392











Total

$
19,922


$
11,926


$
4,906


$
3,054


$
36   Off-Balance
    Sheet Arrangements
  Regulation S-K).
 
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest rate risk.
    Fair2008


2009


2010


Beyond


Total


ValueCash equivalentsFixed rate amounts

$
7,750














$
7,750


$
7,750Weighted-average rate


4.28
%Variable rate amounts

$
7,973














$
7,973


$
7,976Weighted-average rate


4.82
%










Short-term investmentsFixed rate amounts

$
110,985














$
110,985


$
111,019Weighted-average rate


5.53
%










Long-term investmentsFixed rate amounts





$
2,009










$
2,009


$
2,010Weighted-average rate






4.43
%






Total investment portfolio

$
126,708


$
2,009










$
128,717


$
128,755     Foreign exchange risk.
 34




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  INTEVAC,
    INC.
 
    CONSOLIDATED FINANCIAL STATEMENTS
    Contents
  PageReport of Independent Registered Public Accounting Firm


36Consolidated Balance Sheets


37Consolidated Statements of Income and Comprehensive Income


38Consolidated Statement of Stockholders Equity


39Consolidated Statements of Cash Flows


40Notes to Consolidated Financial Statements


41  35




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             Accounting for Uncertainty in Income
    Taxes
  Internal Control  Integrated Framework
  
    36




---



##### Table of Contents



INTEVAC,
    INC.
 
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2007


2006(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
27,673


$
39,440Short-term investments


110,985



55,595Trade and other accounts receivable, net of allowances of $57
    and $143 at December 31, 2007 and 2006, respectively


14,142



39,927Inventories, including $2,276 and $5,765 held at customer
    locations at December 31, 2007 and 2006, respectively


22,133



37,942Prepaid expenses and other current assets


4,162



2,506Deferred tax assets


3,609



3,269Total current assets


182,704



178,679Property, plant and equipment, at cost:Leasehold improvements


12,631



11,062Machinery and equipment


27,185



23,92639,816



34,988Less accumulated depreciation and amortization


24,414



21,44215,402



13,546Long-term investments


2,009



8,000Investment in 601 California Avenue LLC






2,431Goodwill


7,905



Other intangible assets, net of amortization of $218


1,805



Deferred income taxes and other long term assets


5,588



3,347Total assets

$
215,413


$
206,003LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable

$
1,992


$
Accounts payable


7,678



15,994Accrued payroll and related liabilities


8,610



11,769Other accrued liabilities


5,454



6,612Customer advances


4,340



26,243Total current liabilities


28,074



60,618Other long-term liabilities


278



1,075Long-term notes payable


1,898



Stockholders equity:Undesignated preferred stock, $0.001 par value,
    10,000 shares authorized, no shares issued and outstanding






Common stock, $0.001 par value at December 31, 2007
    and no par value at December 31, 2006:Authorized shares  50,000Issued and outstanding shares  21,591 and 21,188 at
    December 31, 2007 and 2006, respectively


22



99,468Additional
    paid-in-capital


120,056



7,319Accumulated other comprehensive income


571



354Retained earnings


64,514



37,169Total stockholders equity


185,163



144,310Total liabilities and stockholders equity

$
215,413


$
206,003    37




---



##### Table of Contents



INTEVAC,
    INC.
 
  CONSOLIDATED
    STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
  Years Ended December 31,2007


2006


2005(In thousands, except per share amounts)Net revenues:Systems and components

$
202,292


$
250,158


$
130,168Technology development


13,542



9,717



7,061Total net revenues


215,834



259,875



137,229Cost of net revenues:Systems and components


111,514



151,287



87,525Technology development


7,415



6,102



5,253Inventory provisions


862



1,527



873Total cost of net revenues


119,791



158,916



93,651Gross profit


96,043



100,959



43,578Operating expenses:Research and development


40,137



30,036



14,384Selling, general and administrative


28,470



22,924



14,477Total operating expenses


68,607



52,960



28,861Operating income


27,436



47,999



14,717Interest income


6,544



3,501



1,303Other income


1,598



277



552Income before income taxes


35,578



51,777



16,572Provision for income taxes


8,233



5,079



421Net income

$
27,345


$
46,698


$
16,151Other comprehensive income, net of income taxes:Foreign currency translation adjustments


217



116



(15
)Total comprehensive income

$
27,562


$
46,814


$
16,136Basic income per share:Net income

$
1.28


$
2.22


$
0.79Shares used in per share amounts


21,447



21,015



20,462Diluted income per share:Net income

$
1.23


$
2.13


$
0.76Shares used in per share amounts


22,150



21,936



21,202    38




---



##### Table of Contents



INTEVAC,
    INC.
 
  CONSOLIDATED
    STATEMENT OF STOCKHOLDERS EQUITY
  Accumulated


RetainedAdditional


Other


Earnings


TotalCommon Stock


Paid-In


Comprehensive


(Accumulated


StockholdersShares


Amount


Capital


Income


Deficit)


Equity(In thousands)Balance at December 31, 2004


20,182


$
93,634


$
1,168


$
253


$
(25,680
)

$
69,375Shares issued in connection with:Exercise of stock options


358



1,856















1,856Employee stock purchase plan


129



488















488Compensation expense in form of stock options










19











19Foreign currency translation adjustment














(15
)






(15
)Net income


















16,151



16,151Balance at December 31, 2005


20,669


$
95,978


$
1,187


$
238


$
(9,529
)

$
87,874Shares issued in connection with:Exercise of stock options


360



2,666















2,666Employee stock purchase plan


159



824















824Income tax benefits realized from activity in employee stock
    plans










2,707











2,707Stock-based compensation expense










3,425











3,425Foreign currency translation adjustment














116







116Net income


















46,698



46,698Balance at December 31, 2006


21,188


$
99,468


$
7,319


$
354


$
37,169


$
144,310Shares issued in connection with:Exercise of stock options


313



2,141



353











2,494Employee stock purchase plan


90



671



704











1,375Reclassification of par value forDelaware reincorporation






(102,258
)


102,258











Income tax benefits realized from activity in employee stock
    plans










3,009











3,009Stock-based compensation expense










6,379











6,379Foreign currency translation adjustment










34



217







251Net income


















27,345



27,345Balance at December 31, 2007


21,591


$
22


$
120,056


$
571


$
64,514


$
185,163    39




---



##### Table of Contents



INTEVAC,
    INC.
 
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2007


2006


2005(In thousands)Operating activitiesNet income

$
27,345


$
46,698


$
16,151Adjustments to reconcile net income to net cash and cash
    equivalents provided by operating activities:Depreciation & amortization


4,203



2,846



2,150Net accretion of investment premiums and discounts


(175
)


(264
)


(55
)Amortization of intangible assets


218







Inventory provisions


862



1,527



873Equity-based compensation


6,379



3,425



19Deferred income taxes


(1,654
)


(4,581
)


Tax benefit from equity-based compensation


(3,009
)


(2,707
)


Loss on disposal of equipment






39



4Changes in assets and liabilities:Accounts receivable


26,687



2,928



(38,081
)Inventory


15,686



(14,590
)


(10,354
)Prepaid expenses and other assets


(2,537
)


(1,903
)


(1,661
)Accounts payable


(8,841
)


8,904



5,402Accrued payroll and other accrued liabilities


(2,673
)


9,762



7,645Customer advances


(22,027
)


3,107



19,303Total adjustments


13,119



8,493



(14,755
)Net cash and cash equivalents provided by operating activities


40,464



55,191



1,396Investing activitiesPurchase of investments


(175,624
)


(152,280
)


(100,140
)Proceeds from sales and maturities of investments


126,400



123,425



98,350Sale of investment in 601 California Avenue LLC


2,431







Acquisition of DeltaNu, LLC, net of cash acquired


(1,913
)






Acquisition of Creative Display Systems, LLC, net of cash
    acquired


(4,782
)






Purchase of equipment


(5,735
)


(8,423
)


(4,140
)Net cash and cash equivalents used in investing activities


(59,223
)


(37,278
)


(5,930
)Financing activitiesProceeds from issuance of common stock


3,869



3,490



2,344Tax benefit from equity-based compensation plans


3,009



2,707



Net cash and cash equivalents provided by financing activities


6,878



6,197



2,344Effect of exchange rate changes on cash


114



75



(10
)Net increase (decrease) in cash and cash equivalents


(11,767
)


24,185



(2,200
)Cash and cash equivalents at beginning of period


39,440



15,255



17,455Cash and cash equivalents at end of period

$
27,673


$
39,440


$
15,255Cash paid (received) for:Income taxes

$
11,644


$
5,722


$
2Income tax refund


(259
)






Other non-cash changes:Notes payable issued for the acquisition of DeltaNu, LLC

$
3,890


$



$
    40




---



##### Table of Contents



INTEVAC,
    INC.
 
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Business
    and Nature of Operations    Equipment:
  Imaging Instrumentation:
    2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
    Revenue
    Recognition
      Accounting Treatment for Systems.
     41




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other Systems and Non-System Revenue
    Recognition.
  Obligations After Shipment.
    Technology Development Revenue Recognition.
    SOP 81-1
  paid-up
  Trade
    Receivables and Doubtful Accounts
   42




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Warranty
  case-by-case
      2007


2006(In thousands)Beginning balance

$
5,283


$
3,399Expenditures incurred under warranties


(4,158
)


(3,695
)Accruals for product warranties issued during the reporting
    period


2,137



4,354Adjustments to previously existing warranty accruals


(170
)


1,225Ending balance

$
3,092


$
5,283     December 31,2007


2006(In thousands)Other accrued liabilities

$
2,814


$
4,208Other long-term liabilities


278



1,075Total warranty provision

$
3,092


$
5,283   Guarantees
   43




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income
    Taxes
          Customer
    Advances
    Cash,
    Cash Equivalents and Short-term Investments
   44




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,


December 31,2007


2006(In thousands)Amortized principal amount:Debt securities issued by U.S. government agencies

$
29,744


$
8,000Auction rate securities


81,450



53,595Corporate debt securities


1,800



2,000Total investments in debt securities

$
112,994


$
63,595Short-term investments

$
110,985


$
55,595Long-term investments


2,009



8,000Total investments in debt securities

$
112,994


$
63,595Approximate fair value of investments in debt securities

$
113,029


$
63,585   EITF 03-01,
    Valuation
    of Long-lived and Intangible Assets
    
    significant underperformance relative to expected historical or
    projected future operating results;
    significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business; and
    significant negative industry or economic trends. 45




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Prototype
    Costs
    Foreign
    Exchange Contracts
      Foreign
    Currency Translation
    Financial
    Instruments
    Inventories
  first-in,
 46




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)Raw materials

$
13,666


$
19,906Work-in-progress


6,191



12,271Finished goods


2,276



5,765$
22,133


$
37,942     work-in-progress Work-in-progress
    2007


2006(In thousands)Beginning balance

$
9,128


$
10,988New provisions in cost of sales


862



1,527New provisions for refurbishment of consigned products


139



10Disposals of inventory


(2,395
)


(3,355
)Miscellaneous adjustments


16



(42
)Ending balance

$
7,750


$
9,128   Property,
    Plant and Equipment
      Computers and software

3 yearsMachinery and equipment

5 yearsFurniture

7 yearsVehicles

4 yearsLeasehold improvements

Remaining lease term   Comprehensive
    Income
   47




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Employee
    Stock Plans
    Financial
    Presentation
    Net
    income per share
    2007


2006


2005(In thousands)Numerator:Numerator for diluted earnings per share  income
    available to common stockholders

$
27,345


$
46,698


$
16,151Denominator:Denominator for basic earnings per share 
    weighted-average shares


21,447



21,015



20,462Effect of dilutive securities:Employee stock options(1)


703



921



740Dilutive potential common shares


703



921



740Denominator for diluted earnings per share  adjusted


22,150



21,936



21,202     (1)
    
    Potentially dilutive securities, consisting of shares issuable
    upon exercise of employee stock options, are excluded from the
    calculation of diluted EPS if their effect would be
    anti-dilutive. The weighted average number of employee stock
    options excluded from the twelve-month periods ended
    December 31, 2007, 2006, and 2005 was 784,684, 426,606, and
    226,804 respectively.  Use of
    Estimates
   48




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  New
    Accounting Pronouncements
  Fair Value
    Measurements
  SFAS 157-1, Application of FASB Statement No. 157 to FASB
    Statement No. 13 and Other Accounting Pronouncements That
    Address Fair Value Measurements for Purposes of Lease
    Classification or Measurement under Statement 13 FAS 157-1). FAS 157-1 FAS 157-1 FAS 157-1 FAS 157-1
  The Fair Value
    Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Business
    Combinations
  3.
    Stock-Based
    Compensation   49




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Descriptions
    of Plans
  2004
    Equity Incentive Plan
     50




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2003
    Employee Stock Purchase Plan
      Impact
    of the Adoption of SFAS 123(R)
    2007


2006Stock-based compensation by type of award:Stock options

$
5,517


$
2,803Employee stock purchase plan


864



622Amounts capitalized as inventory


(111
)


(69
)Total stock-based compensation


6,270



3,356Tax effect on stock-based compensation


(1,451
)


(403
)Net effect on net income

$
4,819


$
2,953Effect on earnings per share:Basic

$
0.22


$
0.14Diluted

$
0.22


$
0.13     Valuation
    Assumptions
   51




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006Stock Options:Expected volatility


66.67
%


74.44
%Risk free interest rate


4.05
%


4.68
%Expected term of options (in years)


4.49



4.71Dividend yield


None



None   2007


2006Stock Purchase Rights:Expected volatility


63.15
%


59.25
%Risk free interest rate


3.94
%


4.67
%Expected term of purchase rights (in years)


1.97



1.92Dividend yield


None



None    52




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    Plan Activity
  2004
    Equity Incentive Plan
    WeightedAverageWeighted


RemainingAverage


Contractual


AggregateExercise


Term


IntrinsicShares


Price


(Years)


ValueOptions outstanding at December 31, 2006


2,354,215


$
11.47



7.93


$
34,107,462Options granted


750,000


$
17.73Options forfeited


(203,483
)

$
15.74Options exercised


(312,878
)

$
7.97Options outstanding at December 31, 2007


2,587,854


$
13.37



7.64


$
8,004,456Vested and expected to vest at December 31, 2007


2,213,972


$
12.97



7.50


$
7,488,818Options exercisable at December 31, 2007


894,800


$
9.31



6.09


$
5,322,412       Options Outstanding


Options ExercisableWeightedAverageRemaining


Weighted


Number


WeightedNumber of Shares


Contractual Term


Average


Vested and


AverageRange of Exercise Prices

Outstanding


(In Years)


Exercise Price


Exercisable


Exercise Price$ 2.63 - $ 4.06


316,114



4.51


$
2.99



288,530


$
2.88$ 4.12 - $ 7.72


358,175



6.53


$
7.04



111,025


$
6.28$ 7.77 - $10.69


275,765



6.88


$
9.20



182,665


$
9.86$10.95 - $15.40


280,950



8.45


$
14.24



116,250


$
12.93$15.50 - $15.81


157,125



7.95


$
15.80



39,000


$
15.79$16.13 - $16.13


720,475



9.01


$
16.13



85,080


$
16.13$16.87 - $22.01


283,000



8.60


$
19.49



44,000


$
19.03$22.40 - $29.45


196,250



7.94


$
25.41



28,250


$
23.91$ 2.63 - $29.45


2,587,854



7.64


$
13.37



894,800


$
9.31    53




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2003
    Employee Stock Purchase Plan
  WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term (Years)


ValuePurchase rights outstanding at December 31, 2007


354,816


$
11.70



1.04


$
1,008,826Vested and expected to vest at December 31, 2007


313,050


$
11.42



0.97


$
976,332         Prior to
    the Adoption of SFAS No. 123(R)
    2005Net income as reported

$
16,151Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects


(2,907
)Pro forma net income

$
13,244Earnings per share:Basic  as reported

$
0.79Basic  pro forma

$
0.65Diluted  as reported

$
0.76Diluted  pro forma

$
0.62  54




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock Options


Purchase RightsExpected volatility


92.30
%


91.74
%Risk free interest rate


4.30
%


3.89
%Expected term of options and purchase rights (in years)


5.99



1.27Dividend yield


None



None     4.
    Business
    Combinations  Delta
    Nu, LLC
      Net liabilities assumed, net of cash of $4

$
(31
)Backlog


120Trademarks/names


120Customer relationships


60Non-compete agreements


100369Goodwill


5,434Total

$
5,803  55




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Creative
    Display Systems, LLC
      Net assets acquired, net of cash of $130

$
1,896Technology  I-Port


375Technology  Optical Display


515Backlog


110Customer relationships


560Non-compete agreements


403,496Goodwill


2,471Total

$
5,967      56




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008

$
335,0002009


152,0002010


143,0002011


132,0002012


132,000Beyond


768,000Total

$
1,662,000     5.
    Concentrations  Credit
    Risk and Significant Customers
        Products
   57




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    6.
    Equity
    Investments  601
    California Avenue LLC
      7.
    Commitments
    and Contingencies  Leases
      2008

$
2,5342009


2,5202010


2,3862011


2,3102012


744Beyond


36Total

$
10,530     Contingencies
     58




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            8.
    Employee
    Benefit Plan  Employee
    Savings and Retirement Plan
    Employee
    Bonus Plans
   59




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    Segment
    Reporting  Segment
    Description
      Segment
    Profit or Loss and Segment Assets
    Business
    Segment Net Revenues
  2007


2006


2005(In thousands)Equipment

$
196,686


$
248,482


$
129,280Imaging Instrumentation


19,148



11,393



7,949Total

$
215,834


$
259,875


$
137,229   Business
    Segment Profit (Loss)
  2007


2006


2005(In thousands)Equipment(1)(2)

$
32,903


$
52,223


$
20,413Imaging Instrumentation(3)(4)


(2,919
)


(4,826
)


(5,798
)Corporate activities(5)


(2,548
)


602



102Operating income


27,436



47,999



14,717Interest income


6,544



3,501



1,303Other income and expense, net


1,598



277



552Income before income taxes

$
35,578


$
51,777


$
16,572     (1)
    
    Includes inventory provisions of $839,000, $1.4 million and
    $782,000 in 2007, 2006 and 2005, respectively.(2)
    
    Includes stock-based compensation expense of $3.0 million
    and $2.1 million in 2007 and 2006, respectively.(3)
    
    Includes inventory provisions of $23,000, $124,000 and $91,000
    in 2007, 2006 and 2005, respectively.(4)
    
    Includes stock-based compensation expense of $1.4 million
    and $525,000 in 2007 and 2006, respectively.(5)
    
    Includes stock-based compensation expense of $1.7 million
    and $777,000 in 2007 and 2006, respectively. 60




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Business
    Segment Assets
  2007


2006(In thousands)Equipment

$
36,637


$
84,366Imaging Instrumentation


26,715



7,379Corporate activities


152,061



114,258Total assets

$
215,413


$
206,003   Business
    Segment Property, Plant & Equipment
  Additions

2007


2006(In thousands)Equipment

$
2,816


$
5,702Imaging Instrumentation


858



979Corporate activities


2,061



1,742Total additions

$
5,735


$
8,423   Depreciation

2007


2006


2005(In thousands)Equipment

$
2,228


$
1,120


$
822Imaging Instrumentation


1,274



1,217



1,054Corporate activities


701



509



274Total depreciation

$
4,203


$
2,846


$
2,150   Geographic Breakdown

2007


2006(In thousands)United States

$
14,368


$
12,690Asia


1,034



856Net property, plant & equipment

$
15,402


$
13,546   Geographic
    Area Net Trade Revenues
  2007


2006


2005(In thousands)United States

$
38,801


$
26,473


$
39,754Asia


175,907



233,158



96,694Europe


1,083



244



781Rest of world


43







Total revenues

$
215,834


$
259,875


$
137,229    61




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10.
    Income
    Taxes    Years Ended December 31,2007


2006


2005Federal:Current

$
9,534


$
9,479


$
392Deferred


(1,507
)


(3,750
)


8,027



5,729



392State:Current


3



2



9Deferred


(147
)


(831
)


(144
)


(829
)


9Foreign:Current


350



179



20Total

$
8,233


$
5,079


$
421     Years Ended December 31,2007


2006


2005U.S.

$
32,066


$
51,004


$
16,319Foreign


3,512



773



253$
35,578


$
51,777


$
16,572    62




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006Deferred tax assets:Vacation, rent, warranty and other accruals

$
1,142


$
2,090Depreciation and amortization


186



44Inventory valuation


3,217



3,135Deferred income


99



248Equity-based compensation


3,003



1,084Research and other tax credit carry-forwards


2,472



590Other


(47
)


23410,072



7,425Valuation allowance for deferred tax assets


(2,723
)


(2,844
)Net deferred tax assets

$
7,349


$
4,581As reported on the balance sheet:Current assetsDeferred tax assets

$
4,133


$
4,488Valuation allowance for deferred tax assets


(524
)


(1,219
)Net current deferred tax assets


3,609



3,269Other long term assetsDeferred tax assets


5,939



2,937Valuation allowance for deferred tax assets


(2,199
)


(1,625
)Net non-current deferred tax assets


3,740



1,312Net deferred tax assets

$
7,349


$
4,581    63




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2007


2006


2005Income taxes at the federal statutory rate

$
12,452


$
18,122


$
5,795State income taxes, net of federal benefit


27



(539
)


6Effect of foreign operations taxes at various rates


(879
)


(93
)


(39
)Research tax credits


(1,800
)


(2,128
)


Effect of tax rate changes, permanent differences and
    adjustments of prior deferrals


(1,699
)


(38
)


(430
)Stock-based compensation






1,943



Change in valuation allowance


(121
)


(12,188
)


(4,911
)Other


253







Total

$
8,233


$
5,079


$
421     non-U.S. operations non-U.S. subsidiaries
  Accounting for Uncertainty in Income Taxes, Accounting for Income Taxes,
     64




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Other
    Accrued Liabilities  December 31,2007


2006(In thousands)Accrued product warranties

$
2,814


$
4,208Accrued taxes


185



1,533Deferred income


1,541



573Other


914



298Total other accrued liabilities

$
5,454


$
6,612   12.
    Quarterly
    Consolidated Results of Operations (Unaudited)  Three Months EndedMarch 31,


June 30,


Sept. 29,


Dec. 31,2007


2007


2007


2007(In thousands, except per share data)Net sales

$
76,374


$
72,105


$
50,604


$
16,751Gross profit


32,782



30,827



24,615



7,819Net income (loss)


9,845



11,552



8,364



(2,416
)Basic income (loss) per share

$
0.46


$
0.54


$
0.39


$
(0.11
)Diluted income (loss) per share


0.44



0.52



0.38



(0.11
)   Three Months EndedApril 1,


July 1,


Sept. 30,


Dec. 31,2006


2006


2006


2006(In thousands, except per share data)Net sales

$
49,620


$
59,542


$
54,829


$
95,884Gross profit


17,306



21,262



23,280



39,111Net income


7,011



9,333



9,013



21,341Basic income per share

$
0.34


$
0.44


$
0.43


$
1.01Diluted income per share


0.32



0.42



0.41



0.97   13.
    Subsequent
    Events  Auction
    Rate Securities
     65




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Standby
    Line of Credit
   66




---



##### Table of Contents



Item 9.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure   
  Item 9A.
    Controls
    and Procedures  Managements
    Report on Assessment of Internal Controls Over Financial
    Reporting
  Conclusions
    Regarding Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f) Internal Control  Integrated Framework Internal Control  Integrated
    Framework
  Changes
    in Internal Control over Financial Reporting
    Limitations
    on the Effectiveness of Controls
   67




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Fram
        Internal Control  Integrated Framework
        68




---



##### Table of Contents



Item 9B.
    Other
    Information  Form 10-K.
 
  PART III
 
  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K.
 
  Item 11.
    Executive
    Compensation   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Securities authorized for issuance under equity compensation
    plans.
  (a)





(c)Number of Securities


(b)


Number of Securitiesto be Issued Upon


Weighted-Average


Remaining AvailableExercise of


Exercise Price of


for Future IssuanceOutstanding Options,


Outstanding Options,


Under EquityPlan Category

Warrants and Rights


Warrants and Rights


Compensation Plans(1)Equity compensation plans approved by security holders(2)


2,587,854


$
13.37



937,772Equity compensation plans not approved by security holders





$




Total


2,587,854


$
13.37



937,772     (1)
    
    Excludes securities reflected in column (a).(2)
    
    Included in the column (c) amount are 297,919 shares
    available for future issuance under Intevacs 2003 Employee
    Stock Purchase Plan.   69




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##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   
  Item 14.
    Principal
    Accountant Fees and Services   
  PART IV
 
  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K.
  Form 10-K:
                Form 10-K:
      3.
    Exhibits  ExhibitNumber

Description3
.1(1)

Certificate of Incorporation of the Registrant3
.2(1)

Bylaws of the Registrant10
.1+(2)

The Registrants 1995 Stock Option/Stock Issuance Plan, as
    amended10
.2+(2)

The Registrants Employee Stock Purchase Plan, as amended10
.3+(3)

The Registrants 2004 Equity Incentive Plan10
.4(6)

Lease, dated February 5, 2001 regarding the space located
    at 3510, 3544, 3560, 3570 and 3580 Bassett Street,
    Santa Clara, California, including the First through Sixth
    Amendments10
.5(2)

601 California Avenue LLC Limited Liability Operating Agreement,
    dated July 28, 199510
.6+(2)

The Registrants 401(k) Profit Sharing Plan10
.7+(5)

The Registrants Executive Incentive Plan 70




---



##### Table of Contents



ExhibitNumber

Description10
.8(7)

Loan Facility with Citigroup Global Markets, Inc.10
.9

Director and Officer Indemnification Agreement21
.1

Subsidiaries of the Registrant23
.1

Consent of Independent Registered Public Accounting Firm24
.1

Power of Attorney (see page 72)31
.1

Certification of President and Chief Executive Officer Pursuant
    to Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Vice-President, Finance and Administration,
    Chief Financial Officer, Treasurer and Secretary Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certifications Pursuant to U.S.C. 1350, adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed July 23, 2007(2)
    
    Previously filed as an exhibit to the Registration Statement on
    Form S-1
    (No. 33-97806)(3)
    
    Previously filed as an exhibit to the Companys Definitive
    Proxy Statement filed March 31, 2004(4)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed February 7, 2005(5)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed February 7, 2006(6)
    
    Previously filed as an exhibit to the Companys
    Form 10-K
    filed March 16, 2007(7)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed March 6, 2008+
    
    Management compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 15(c) of
    Form 10-K 71




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##### Table of Contents



SIGNATURES
    INTEVAC, INC.
  By:
    /s/  JEFFREY
    ANDRESON      
  POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  KEVIN
    FAIRBAIRN(Kevin
    Fairbairn)

President, Chief Executive Officer and Director (Principal
    Executive Officer)

March 14, 2008/s/  NORMAN
    H. POND(Norman
    H. Pond)

Chairman of the Board

March 14, 2008/s/  JEFFREY
    ANDRESON(Jeffrey
    Andreson)

Vice President, Finance and Administration, Chief Financial
    Officer Treasurer and Secretary (Principal Financial and
    Accounting Officer)

March 14, 2008/s/  DAVID
    DURY(David
    Dury)

Director

March 14, 2008/s/  STANLEY
    J. HILL(Stanley
    J. Hill)

Director

March 14, 2008/s/  ROBERT
    LEMOS(Robert
    Lemos)

Director

March 14, 2008/s/  PING
    YANG(Ping
    Yang)

Director

March 14, 2008  72




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##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  INTEVAC,
    INC.
  Additions (Reductions)Balance at


Charged (Credited)


Charged (Credited)





Balance atBeginning


to Costs and


to Other


Deductions 


EndDescription

of Period


Expenses


Accounts


Describe


of Period(In thousands)Year ended December 31, 2005:Deducted from asset accounts:Allowance for doubtful accounts

$
217


$
211


$
(268
)

$
6
(1)

$
154Inventory provisions


9,863



873



376



124
(2)


10,988Year ended December 31, 2006:Deducted from asset accounts:Allowance for doubtful accounts

$
154


$
(14
)

$
3


$



$
143Inventory provisions


10,988



1,527



(32
)


3,355
(2)


9,128Year ended December 31, 2007:Deducted from asset accounts:Allowance for doubtful accounts

$
143


$
(84
)

$



$
2
(1)

$
57Inventory provisions


9,128



862



155



2,395
(2)


7,750     (1)
    
    Write-offs of amounts deemed uncollectible.(2)
    
    Write-off of inventory having no future use or value to the
    Company 73