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Published: 2021-07-30 00:00:00 ET

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number

0-18277

VICOR CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		04-2742817
(State of Incorporation)		(I.R.S. Employer Identification No.)

25 Frontage Road, Andover, Massachusetts 01810

(Address of Principal Executive Office)

(978)

470-2900

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	VICR	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the issuer’s classes of Common Stock as of July 20, 2021 was:


Common Stock, $.01 par value		31,839,578
Class B Common Stock, $.01 par value		11,758,218

VICOR CORPORATION

INDEX


	Page
Part I — Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020		1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020		2
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020		3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020		4
Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2021 and 2020		5
Notes to Condensed Consolidated Financial Statements		7
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3 - Quantitative and Qualitative Disclosures About Market Risk		32
Item 4 - Controls and Procedures		32
Part II — Other Information:
Item 1 - Legal Proceedings		34
Item 1A - Risk Factors		34
Item 6 - Exhibits		34
Signature(s)		35

EX-31.1 SECTION 302 CERTIFICATION OF CEO

EX-31.2 SECTION 302 CERTIFICATION OF CFO

EX-32.1 SECTION 906 CERTIFICATION OF CEO

EX-32.2 SECTION 906 CERTIFICATION OF CFO

VICOR CORPORATION

Part I – Financial Information

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)


	June 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	159,763		$	161,742
Short-term investments		70,469			50,166
Accounts receivable, less allowance of $82 in 2021 and 2020		55,012			40,999
Inventories, net		57,129			57,269
Other current assets		6,657			6,756

Total current assets		349,030			316,932
Long-term deferred tax assets, net		221			226
Long-term investments, net		2,561			2,517
Property, plant and equipment, net		92,956			74,843
Other assets		1,608			1,721

Total assets	$	446,376		$	396,239

Liabilities and Equity
Current liabilities:
Accounts payable	$	22,081		$	14,121
Accrued compensation and benefits		15,794			14,094
Accrued expenses		3,618			2,624
Short-term lease liabilities		1,559			1,629
Sales allowances		1,919			597
Income taxes payable		890			139
Short-term deferred revenue and customer prepayments		3,916			7,309

Total current liabilities		49,777			40,513
Long-term deferred revenue		573			733
Contingent consideration obligations		46			227
Long-term income taxes payable		649			643
Long-term lease liabilities		2,439			2,968

Total liabilities		53,484			45,084
Commitments and contingencies (Note 10)
Equity:
Vicor Corporation stockholders’ equity:
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2021 and 2020		118			118
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized
43,452,740 shares issued and 31,817,934 shares outstanding in 2021;
43,204,671 shares issued and 31,569,865 shares outstanding in 2020		436			433
Additional paid-in capital		336,278			328,392
Retained earnings		195,494			161,008
Accumulated other comprehensive loss		(813	)		(204	)
Treasury stock at cost: 11,634,806 shares in 2021 and 2020		(138,927	)		(138,927	)

Total Vicor Corporation stockholders’ equity		392,586			350,820
Noncontrolling interest		306			335

Total equity		392,892			351,155

Total liabilities and equity	$	446,376		$	396,239

See accompanying notes.

-1-

VICOR CORPORATION

Condensed Consolidated Statements

Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net revenues	$	95,376		$	70,761		$	184,172		$	134,162
Cost of revenues		45,505			40,443			89,601			76,513

Gross margin		49,871			30,318			94,571			57,649
Operating expenses:
Selling, general and administrative		16,589			15,455			33,543			31,824
Research and development		13,273			12,830			26,299			26,165

Total operating expenses		29,862			28,285			59,842			57,989

Income (loss) from operations		20,009			2,033			34,729			(340	)
Other income (expense), net:
Total unrealized gains (losses) on available-for-sale securities, net		20			(2	)		44			45
Less: portion of (gains) losses recognized in other comprehensive income		(19	)		3			(42	)		(43	)

Net credit gains recognized in earnings		1			1			2			2
Other income (expense), net		372			232			603			379

Total other income (expense), net		373			233			605			381

Income before income taxes		20,382			2,266			35,334			41
Provision (benefit) for income taxes		999			(406	)		856			(900	)

Consolidated net income		19,383			2,672			34,478			941
Less: Net (loss) income attributable to noncontrolling interest		(11	)		5			(8	)		9

Net income attributable to Vicor Corporation	$	19,394		$	2,667		$	34,486		$	932

Net income per common share attributable to Vicor Corporation:
Basic	$	0.45		$	0.06		$	0.79		$	0.02
Diluted	$	0.43		$	0.06		$	0.77		$	0.02
Shares used to compute net income per common share attributable to Vicor Corporation:
Basic		43,553			41,643			43,504			41,140
Diluted		44,841			43,385			44,841			42,980

See accompanying notes.

-2-

VICOR CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Consolidated net income	$	19,383		$	2,672		$	34,478		$	941
Foreign currency translation (losses) gains, net of tax (1)		(10	)		(15	)		(271	)		26
Unrealized (losses) gains on available-for-sale securities, net of tax (1)		(231	)		(3	)		(359	)		43

Other comprehensive (loss) income		(241	)		(18	)		(630	)		69

Consolidated comprehensive income		19,142			2,654			33,848			1,010
Less: Comprehensive (loss) income attributable to noncontrolling interest		(12	)		3			(29	)		11

Comprehensive income attributable to Vicor Corporation	$	19,154		$	2,651		$	33,877		$	999

(1)

The deferred tax assets associated with foreign currency translation (losses) gains and unrealized (losses) gains on

available-for-sale

securities are completely offset by a tax valuation allowance as of June 30, 2021 and 2020. Therefore, there is no income tax benefit (provision) recognized for the three and six months ended June 30, 2021 and 2020.

See accompanying notes.

-3-

VICOR CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2021			2020
Operating activities:
Consolidated net income	$	34,478		$	941
Adjustments to reconcile consolidated net income to net cash provided by (used for) operating activities:
Depreciation and amortization		5,618			5,439
Stock-based compensation expense, net		3,138			2,646
Decrease in long-term deferred revenue		(160	)		(160	)
Loss (gain) on disposal of equipment		106			(6	)
Decrease in contingent consideration obligations		(74	)		—
Decrease in other assets		37			95
Increase in long-term income taxes payable		6			4
Deferred income taxes		5			17
Credit gain on available-for-sale securities		(2	)		(2	)
Provision for doubtful accounts		—			23
Change in current assets and liabilities, net		(13,037	)		(5,233	)

Net cash provided by operating activities		30,115			3,764

Investing activities:
Purchases of short-term investments		(50,706	)		—
Sales or maturities of short-term investments		30,000			—
Additions to property, plant and equipment		(15,782	)		(8,724	)
Other		(106	)		6

Net cash used for investing activities		(36,594	)		(8,718	)

Financing activities:
Proceeds from employee stock plans		4,751			7,385
Payment of contingent consideration obligations		(107	)		(144	)
Proceeds from public offering of Common Stock		—			109,732

Net cash provided by financing activities		4,644			116,973

Effect of foreign exchange rates on cash		(144	)		17

Net (decrease) increase in cash and cash equivalents		(1,979	)		112,036
Cash and cash equivalents at beginning of period		161,742			84,668

Cash and cash equivalents at end of period	$	159,763		$	196,704

See accompanying notes.

-4-

VICOR CORPORATION

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)


	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Three months ended June 30, 2021
Balance on March 31, 2021	$	118	$	435	$	333,011	$	176,100	$	(573	)	$	(138,927	)	$	370,164		$	318		$	370,482
Issuance of Common Stock under employee stock plans				1		1,700										1,701						1,701
Stock-based compensation expense						1,567										1,567						1,567
Components of comprehensive income, net of tax:
Net income								19,394								19,394			(11	)		19,383
Other comprehensive loss										(240	)					(240	)		(1	)		(241	)

Total comprehensive income (loss)																19,154			(12	)		19,142

Balance on June 30, 2021	$	118	$	436	$	336,278	$	195,494	$	(813	)	$	(138,927	)	$	392,586		$	306		$	392,892


	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Six months ended June 30, 2021
Balance on December 31, 2020	$	118	$	433	$	328,392	$	161,008	$	(204	)	$	(138,927	)	$	350,820		$	335		$	351,155
Issuance of Common Stock under employee stock plans				3		4,748										4,751						4,751
Stock-based compensation expense						3,138										3,138						3,138
Components of comprehensive income, net of tax:
Net income								34,486								34,486			(8	)		34,478
Other comprehensive loss										(609	)					(609	)		(21	)		(630	)

Total comprehensive income (loss)																33,877			(29	)		33,848

Balance on June 30, 2021	$	118	$	436	$	336,278	$	195,494	$	(813	)	$	(138,927	)	$	392,586		$	306		$	392,892


	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Vicor Corporation Stockholders’ Equity			Noncontrolling Interest			Total Equity
Three months ended June 30, 2020
Balance on March 31, 2020	$	118	$	407	$	204,020	$	141,363	$	(300	)	$	(138,927	)	$	206,681		$	316		$	206,997
Issuance of Common Stock under employee stock plans				6		5,318										5,324						5,324
Issuances of Common Stock in public offering				18		109,714										109,732						109,732
Stock-based compensation expense						1,936										1,936						1,936
Components of comprehensive income, net of tax:
Net income								2,667								2,667			5			2,672
Other comprehensive loss										(16	)					(16	)		(2	)		(18	)

Total comprehensive income																2,651			3			2,654

Balance on June 30, 2020	$	118	$	431	$	320,988	$	144,030	$	(316	)	$	(138,927	)	$	326,324		$	319		$	326,643

-5-

VICOR CORPORATION

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)


	Class B Common Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Vicor Corporation Stockholders’ Equity		Noncontrolling Interest		Total Equity
Six months ended June 30, 2020
Balance on December 31, 2019	$	118	$	405	$	201,251	$	143,098	$	(383	)	$	(138,927	)	$	205,562	$	308	$	205,870
Issuance of Common Stock under employee stock plans				8		7,377										7,385				7,385
Issuances of Common Stock in public offering				18		109,714										109,732				109,732
Stock-based compensation expense						2,646										2,646				2,646
Components of comprehensive income, net of tax:
Net income								932								932		9		941
Other comprehensive income										67						67		2		69

Total comprehensive income																999		11		1,010

Balance on June 30, 2020	$	118	$	431	$	320,988	$	144,030	$	(316	)	$	(138,927	)	$	326,324	$	319	$	326,643

See accompanying notes.

-6-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

1.	Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Vicor Corporation and its consolidated subsidiaries (collectively, the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2021. The balance sheet at December 31, 2020 presented herein has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2020 filed by the Company with the SEC on March 1, 2021 (“2020 Form

10-K”).

2.	Inventories

Inventories are valued at the lower of cost (determined using the

first-in,

first-out

method) or net realizable value. Fixed production overhead is allocated to the inventory cost per unit based on the normal capacity of the production facilities. Abnormal production costs, including fixed cost variances from normal production capacity, if any, are charged to cost of revenues in the period incurred. All shipping, handling and customs (e.g., tariff) costs incurred in connection with the sale of products are included in cost of revenues.

Inventory that is estimated to be excess, obsolete or unmarketable is written down to net realizable value. The Company’s estimation process for assessing net realizable value is based upon management’s estimate of expected future utility which is derived based on backlog, historical consumption and expected market conditions. If the Company’s estimated demand and/or market expectation were to change or if product sales were to decline, the Company’s estimation process may cause larger inventory reserves to be recorded, resulting in larger charges to cost of revenues.

Inventories were as follows (in thousands):


	June 30, 2021		December 31, 2020
Raw materials	$	42,530	$	42,556
Work-in-process		10,101		7,424
Finished goods		4,498		7,289

	$	57,129	$	57,269

3.	Short-Term and Long-Term Investments

As of June 30, 2021, the Company held $70,469,000 of short-term investments, consisting of obligations of the U.S. Treasury, all of which were debt securities with original maturities greater than three months but less than one year at the time of purchase.

As of June 30, 2021 and December 31, 2020, the Company held one auction rate security with a par value of $3,000,000, purchased through and held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions (the “Failed Auction Security”) since February 2008. The Failed Auction Security held by the Company is Aaa/AA+ rated by major credit rating agencies, is collateralized by student loans, and is guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe the issuer of the Failed Auction

-7-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

Security is presently at risk of default. Through June 30, 2021, the Company has continued to receive interest payments on the Failed Auction Security in accordance with the terms of its indenture. Management believes the Company ultimately should be able to liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held and the collateral securing the substantial majority of the underlying obligation. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-term as of June 30, 2021.

Details of our investments are as follows (in thousands):


	June 30, 2021
	Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Measured at fair value:
Available-for-sale debt securities:
Money market funds	$	68,978	$	—	$	—
U.S. Treasury Obligations		—		70,469		—
Failed Auction Security		—		—		2,561

Total		68,978		70,469		2,561

Other measurement basis:
Cash on hand		90,785		—		—

Total	$	159,763	$	70,469	$	2,561


	December 31, 2020
	Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Measured at fair value:
Available-for-sale debt securities:
Money market funds	$	69,493	$	—	$	—
U.S. Treasury Obligations		19,998		50,166		—
Failed Auction Security		—		—		2,517

Total		89,491		50,166		2,517

Other measurement basis:
Cash on hand		72,251		—		—

Total	$	161,742	$	50,166	$	2,517

-8-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

The following is a summary of the

available-for-sale

securities (in thousands):


June 30, 2021	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Treasury Obligations	$	70,470	$	—	$	1	$	70,469
Failed Auction Security		3,000		—		439		2,561

December 31, 2020	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Treasury Obligations	$	70,172	$	—	$	8	$	70,164
Failed Auction Security		3,000		—		483		2,517

As of June 30, 2021, the Failed Auction Security had been in an unrealized loss position for greater than 12 months.

The amortized cost and estimated fair value of the

available-for-sale

securities on June 30, 2021, by type and contractual maturities, are shown below (in thousands):


	Cost		Estimated Fair Value
U.S. Treasury Obligations:

Maturities greater than three months but less than one year	$	70,470	$	70,469

	$	70,470	$	70,469


	Cost		Estimated Fair Value
Failed Auction Security:

Due in twenty to forty years	$	3,000	$	2,561

Based on the fair value measurements described in Note 4, the fair value of the Failed Auction Security on June 30, 2021, with a par value of $3,000,000, was estimated by the Company to be approximately $2,561,000. The gross unrealized loss of $439,000 on the Failed Auction Security consists of two types of estimated loss: an aggregate credit loss of $31,000 and an aggregate temporary impairment of $408,000. In determining the amount of credit loss, the Company compared the present value of cash flows expected to be collected to the amortized cost basis of the security, considering credit default risk probabilities and changes in credit ratings as significant inputs, among other factors.

-9-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

The following table represents a rollforward of the activity related to the credit loss recognized in earnings on the Failed Auction Security for the six months ended June 30 (in thousands):


	2021			2020
Balance at the beginning of the period	$	33		$	37
Reductions in the amount related to credit gain for which other-than- temporary impairment was not previously recognized		(2	)		(2	)

Balance at the end of the period	$	31		$	35

At this time, the Company has no intent to sell the impaired Failed Auction Security and does not believe it is more likely than not the Company will be required to sell this security. If current market conditions deteriorate further, the Company may be required to record additional unrealized losses. If the credit rating of the security deteriorates, the Company may be required to adjust the carrying value of the investment through impairment charges recorded in the Condensed Consolidated Statements of Operations, and any such impairment adjustments may be material.

Based on the Company’s ability to access cash and cash equivalents, its short-term investments and its expected operating cash flows, management does not anticipate the current lack of liquidity associated with the Failed Auction Security held will affect the Company’s ability to execute its current operating plan.

4.	Fair Value Measurements

The Company accounts for certain financial assets at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment used to estimate fair value measurements.

Assets and liabilities measured at fair value on a recurring basis included the following as of June 30, 2021 (in thousands):


	Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value as of June 30, 2021
Cash equivalents:
Money market funds	$	68,978	$	—	$	—		$	68,978
Short-term investments:
U.S. Treasury Obligations		70,469		—		—			70,469
Long-term investment:
Failed Auction Security		—		—		2,561			2,561
Liabilities:
Contingent consideration obligations		—		—		(46	)		(46	)

-10-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

Assets and liabilities measured at fair value on a recurring basis included the following as of December 31, 2020 (in thousands):


	Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value as of December 31, 2020

Cash equivalents:
Money market funds	$	69,493	$	—	$	—		$	69,493
U.S. Treasury Obligations		19,998		—		—			19,998
Short-term investments:
U.S. Treasury Obligations		50,166		—		—			50,166
Long-term investment:
Failed Auction Security		—		—		2,517			2,517
Liabilities:
Contingent consideration obligations		—		—		(227	)		(227	)

As of June 30, 2021, there was insufficient observable auction rate security market information available to determine the fair value of the Failed Auction Security using Level 1 or Level 2 inputs. As such, the Company’s investment in the Failed Auction Security was deemed to require valuation using Level 3 inputs. Management, after consulting with advisors, valued the Failed Auction Security using analyses and pricing models similar to those used by market participants (i.e., buyers, sellers, and the broker-dealers responsible for execution of the Dutch auction pricing mechanism by which each issue’s interest rate was set). Management utilized a probability weighted discounted cash flow (“DCF”) model to determine the estimated fair value of this security as of June 30, 2021. The major assumptions used in preparing the DCF model were similar to those described in Note 5—Fair Value Measurements in the Notes to the Consolidated Financial Statements contained in the Company’s 2020 Form

10-K.

Quantitative information about Level 3 fair value measurements as of June 30, 2021 is as follows (dollars in thousands):


	Fair Value		Valuation Technique	Unobservable Input	Weighted Average

Failed Auction Security	$	2,561	Discounted cash flow	Cumulative probability of earning the maximum rate until maturity		0.15	%
				Cumulative probability of principal return prior to maturity		94.27	%
				Cumulative probability of default		5.58	%
				Liquidity risk premium		5.00	%
				Recovery rate in default		40.00	%

-11-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

The change in the estimated fair value calculated for the investment valued on a recurring basis utilizing Level 3 inputs (i.e., the Failed Auction Security) for the six months ended June 30, 2021 was as follows (in thousands):


Balance at the beginning of the period	$	2,517
Credit gain on available-for-sale security included in Other income (expense), net		2
Gain included in Other comprehensive income		42

Balance at the end of the period	$	2,561

The Company has classified its contingent consideration obligations as Level 3 because the fair value for these liabilities was determined using unobservable inputs. The liabilities were based on estimated sales of legacy products over the period of royalty payments at the royalty rate, discounted using the Company’s estimated cost of capital.

The change in the estimated fair value

alculated for the liabilities valued on a recurring basis utilizing Level 3 inputs

(i.e., the Contingent consideration obligations) for the six months ended June 30, 2021 was as follows (in thousands):


Balance at the beginning of the period	$	227
Payments		(107	)
Decrease in contingent consideration obligations		(74	)

Balance at the end of the period	$	46

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2021.

-12-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

Revenues

The following tables present the Company’s net revenues disaggregated by geography based on the location of the customer, by product line (in thousands):


	Three Months Ended June 30, 2021

	Brick Products		Advanced Products		Total

United States	$	19,708	$	14,356	$	34,064
Europe		10,224		1,285		11,509
Asia Pacific		24,045		25,339		49,384
All other		375		44		419

	$	54,352	$	41,024	$	95,376


	Six Months Ended June 30, 2021

	Brick Products		Advanced Products		Total

United States	$	38,291	$	22,905	$	61,196
Europe		18,420		2,280		20,700
Asia Pacific		51,373		49,992		101,365
All other		727		184		911

	$	108,811	$	75,361	$	184,172


	Three Months Ended June 30, 2020

	Brick Products		Advanced Products		Total

United States	$	15,005	$	5,217	$	20,222
Europe		9,427		2,289		11,716
Asia Pacific		21,383		16,774		38,157
All other		613		53		666

	$	46,428	$	24,333	$	70,761


	Six Months Ended June 30, 2020

	Brick Products		Advanced Products		Total

United States	$	40,975	$	12,814	$	53,789
Europe		13,995		3,168		17,163
Asia Pacific		35,039		26,150		61,189
All other		1,936		85		2,021

	$	91,945	$	42,217	$	134,162

-13-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

The following tables present the Company’s net revenues disaggregated by the category of revenue, by product line (in thousands):


	Three Months Ended June 30, 2021

	Brick Products		Advanced Products		Total

Direct customers, contract manufacturers and non-stocking distributors	$	37,614	$	32,644	$	70,258
Stocking distributors, net of sales allowances		16,634		4,634		21,268
Non-recurring engineering		104		3,726		3,830
Royalties		—		3		3
Other		—		17		17

	$	54,352	$	41,024	$	95,376


	Six Months Ended June 30, 2021

	Brick Products		Advanced Products		Total

Direct customers, contract manufacturers and non-stocking distributors	$	81,422	$	61,701	$	143,123
Stocking distributors, net of sales allowances		27,181		8,772		35,953
Non-recurring engineering		208		4,797		5,005
Royalties		—		56		56
Other		—		35		35

	$	108,811	$	75,361	$	184,172


	Three Months Ended June 30, 2020

	Brick Products		Advanced Products		Total

Direct customers, contract manufacturers and non-stocking distributors	$	39,472	$	20,044	$	59,516
Stocking distributors, net of sales allowances		6,814		1,576		8,390
Non-recurring engineering		142		2,695		2,837
Other		—		18		18

	$	46,428	$	24,333	$	70,761

-14-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)


	Six Months Ended June 30, 2020

	Brick Products		Advanced Products		Total

Direct customers, contract manufacturers and non-stocking distributors	$	75,211	$	34,811	$	110,022
Stocking distributors, net of sales allowances		16,436		4,638		21,074
Non-recurring engineering		298		2,732		3,030
Other		—		36		36

	$	91,945	$	42,217	$	134,162

The following table presents the changes in certain contract assets and (liabilities) (in thousands):


	June 30, 2021			December 31, 2020			Change

Accounts receivable	$	55,012		$	40,999		$	14,013
Short-term deferred revenue and customer prepayments		(3,916	)		(7,309	)		3,393
Long-term deferred revenue		(573	)		(733	)		160
Deferred expenses		980			1,650			(670	)
Sales allowances		(1,919	)		(597	)		(1,322	)

The increase in accounts receivable was primarily due to an increase in net revenues of approximately $15,381,000 in

May-June

2021 compared to November-December 2020. The decrease in short-term deferred revenue and customer prepayments was primarily due to the recognition of the associated revenue in the second quarter of 2021, as noted below. The increase in sales allowances was primarily due to the increase in the net revenues for the six months ended June 30, 2021.

Deferred expenses are included in Other current assets in the accompanying Condensed Consolidated Balance Sheets.

The Company records deferred revenue, which represents a contract liability, when cash payments are received or due in advance of performance under a contract with a customer. The Company recognized revenue of approximately $2,410,000 and $3,081,000 for the three and six months ended June 30, 2021, respectively, and $1,700,000 and $1,736,000 for the three and six months ended June 30, 2020, respectively, that was included in deferred revenue at the beginning of each respective period.

-15-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

6.	Stock-Based Compensation

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards, whether they possess time-based vesting provisions or performance-based vesting provisions, and awards granted under the Vicor Corporation 2017 Employee Stock Purchase Plan (“ESPP”), as of

heir

grant date.

Stock-based compensation expense was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Cost of revenues	$	252	$	277	$	480	$	396
Selling, general and administrative		779		1,030		1,632		1,467
Research and development		536		629		1,026		783

Total stock-based compensation	$	1,567	$	1,936	$	3,138	$	2,646

Compensation expense by type of award was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Stock options	$	1,336	$	1,737	$	2,667	$	2,243
ESPP		231		199		471		403

Total stock-based compensation	$	1,567	$	1,936	$	3,138	$	2,646

The increase in stock option compensation expense for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, was primarily due to an increase in the number of stock options granted and higher stock-based compensation expense associated with June 2020 stock option awards.

7.	Rental Income

Income, net under the Company’s operating lease agreement, for its owned facility leased to a third party in California, was approximately $198,000 and $396,000 for the three and six months ended June 30, 2021 and 2020, respectively.

8.	Income Taxes

The provision (benefit) for income taxes is based on the estimated annual effective tax rate for the year, which includes estimated federal, state and foreign income taxes on the Company’s projected

pre-tax

income.

-16-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

The provision (benefit) for income taxes and the effective income tax rates were as follows (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Provision (benefit) for income taxes	$	999		$	(406	)	$	856		$	(900	)
Effective income tax rate		4.9	%		(17.9	)%		2.4	%		(2,195.1	)%

The effective tax rates were lower than the statutory tax rates for the three and six months ended June 30, 2021 and 2020 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets. The provision (benefit) for income taxes for the three and six months ended June 30, 2021 and 2020 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes to fully offset taxable income.

As of June 30, 2021, the Company had a valuation allowance of approximately $37,856,000 against all net domestic deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. While recent positive operating results, as a result of increases in bookings, caused the Company to be in a cumulative income position as of June 30, 2021, the Company faces uncertainties in forecasting its operating results due to continued negative impacts on the Company’s supply chain, certain process issues with the production of Advanced Products and the unpredictability in certain markets. This operating uncertainty also makes it difficult to predict the availability and utilization of tax benefits over the next several years. As a result, management has concluded, at this time, it is more likely than not the Company’s net domestic deferred tax assets will not be realized, and a full valuation allowance against all net domestic deferred tax assets was still warranted as of June 30, 2021. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If the positive quarterly earnings and increases in bookings continue, and the Company’s concerns about industry uncertainty and world events, including continued negative impacts on the Company’s supply chain, and process issues with the production of Advanced Products are resolved, and the amount of tax benefits the Company is able to utilize to the point that the Company believes future taxable income can be more reliably forecasted, the Company may release all or a portion of the valuation allowance in the near-term. However, the valuation allowance against certain state tax credits will likely never be released due to uncertainty on the utilization of these credits. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income.

-17-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

9.	Net Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Numerator:
Net income attributable to Vicor Corporation	$	19,394	$	2,667	$	34,486	$	932

Denominator:
Denominator for basic net income per share-weighted average shares (1)		43,553		41,643		43,504		41,140
Effect of dilutive securities:
Employee stock options (2)		1,288		1,742		1,337		1,840

Denominator for diluted net income per share – adjusted weighted-average shares and assumed conversions		44,841		43,385		44,841		42,980

Basic net income per share	$	0.45	$	0.06	$	0.79	$	0.02

Diluted net income per share	$	0.43	$	0.06	$	0.77	$	0.02

(1)	Denominator represents weighted average number of shares of Common Stock and Class B Common Stock outstanding.

(2)

Options to purchase 138,125 and 90,339 shares of Common Stock for the three and six months ended June 30, 2021, respectively, and options to purchase 54,551 and 47,375 shares of Common Stock for the three and six months ended June 30, 2020, respectively, were not included in the calculations of net income per share as the effect would have been antidilutive.

10.	Commitments and Contingencies

At June 30, 2021, the Company had approximately $21,524,000 of capital expenditure commitments, principally for manufacturing equipment, and approximately

$8,476,000 of capital expenditures

items

which have been received and reflected in the accompanying Condensed Consolidated Balance Sheets, but not yet paid for. In addition to these commitments, the Company had, in the aggregate, approximately $28,000,000 of remaining budgeted capital expenditures in 2021 associated with the construction of a 90,000 sq. ft. addition to the Company’s existing manufacturing facility and the installation of new production equipment.

The Company is the defendant in a patent infringement lawsuit originally filed on January 28, 2011 by SynQor, Inc. (“SynQor”) in the U.S. District Court for the Eastern District of Texas (the “Texas Action”). The complaint, as amended, alleges that the Company’s products, including but not limited to, unregulated bus converters used in intermediate bus architecture power supply systems, infringe SynQor’s U.S. patent numbers 7,072,190, 7,272,021, 7,564,702, and 8,023,290 (“the ‘190 patent”, “the ‘021 patent”, “the ‘702 patent”, and “the ‘290 patent”, respectively). SynQor’s complaint sought an injunction against further infringement and an award of unspecified compensatory and enhanced damages, interest, costs and attorney fees. The Company has denied that its products infringe any of the SynQor patents, and has asserted that the SynQor patents are invalid and/or unenforceable. The Company has also asserted counterclaims seeking damages from SynQor for deceptive trade practices and tortious interference with prospective economic advantage arising from SynQor’s attempted enforcement of its patents against the Company.

-18-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

On May 23, 2016, after extensive discovery, the Texas Action was stayed by the court pending completion of certain inter partes reexamination (“IPRx”) proceedings at the United States Patent and Trademark Office (“USPTO”) (including any appeals from such proceedings to the Federal Circuit (as defined below)) concerning the SynQor patents, which are described below. That stay remains in force. On March 17, 2021, SynQor filed a motion to lift the stay in the Texas Action. The Company has opposed that motion, which remains pending.

In 2011, in response to the filing of the Texas Action, the Company initiated IPRx proceedings at the USPTO challenging the validity of all claims that were asserted against the Company by SynQor. The current status of these proceedings is as follows. Regarding the ‘190 patent IPRx, the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) issued a decision on March 13, 2015, determining that certain claims were invalid and remanding the matter to the Patent Trial and Appeal Board (“PTAB”) of the USPTO for further proceedings. On February 20, 2019, the PTAB issued a decision finding that all of the remaining challenged claims were unpatentable. SynQor appealed that decision. On February 22, 2021, the Federal Circuit issued a decision in that appeal. In a

2-1

ruling, the Federal Circuit vacated and remanded the PTAB’s decision, finding that the reasoning the PTAB had relied on in reaching its decision was precluded by certain prior PTAB rulings regarding the ‘290 and ‘702 patents. On April 7, 2021, the Company filed a petition for panel rehearing and rehearing

en banc

of the Federal Circuit’s February 22, 2021 decision. The Federal Circuit denied that petition on June 7, 2021.

On August 30, 2017, the Federal Circuit issued rulings with regard to the IPRx proceedings for the ’021, ‘702 and ‘290 patents. With respect to the ‘021 patent, the Federal Circuit affirmed the PTAB’s determination that all of the challenged claims of the ‘021 patent were invalid. The Federal Circuit remanded the case to the PTAB for further consideration of the patentability of certain claims that had been added by amendment during the reexamination. On February 20, 2019, the PTAB issued a decision affirming the examiner’s rejections of all challenged claims. SynQor has filed an appeal of that decision in the Federal Circuit. That appeal has been stayed pending resolution of the pending appeal regarding the ‘190 patent IPRx. On June 29, 2021, the Federal Circuit issued an order lifting the stay and setting a briefing scheduling for the appeal.

With respect to the ‘702 patent, the Federal Circuit affirmed the PTAB’s determination that all of the challenged claims of the ‘702 patent were patentable. With respect to the ‘290 patent, the Federal Circuit vacated the PTAB’s decision upholding the patentability of the ‘290 patent claims, and remanded the case to the PTAB for further consideration. On February 20, 2019, the PTAB issued a decision reversing its prior affirmance of the examiner’s

non-adoption

of rejections with respect to the ‘290 patent, and entering rejections of all of the claims of the ‘290 patent. On May 20, 2019, as permitted by USPTO rules, SynQor requested the USPTO to reopen prosecution of this proceeding to address the new rejections made by the PTAB. On September 28, 2020, the examiner issued a decision reaffirming the PTAB’s rejection of all of the claims of the ‘290 patent. On March 18, 2021, SynQor appealed this decision to the PTAB. On June 16, 2021, the PTAB issued a decision affirming the examiner’s rejection of all of the claims of the ‘290 patent.

On October 31, 2017, the Company filed a request with the USPTO for ex parte reexamination (“EPRx”) of the asserted claims of the ‘702 patent, based on different prior art references than had been at issue in the previous IPRx of the ‘702 patent. On August 6, 2018, the Company filed a similar request with the USPTO for EPRx of the asserted claims of the ‘190 patent, based on different prior art references than had been at issue in the previous IPRx of the ‘190 patent. On December 18, 2020, the PTAB issued rulings upholding the validity of the asserted claims in the EPRx proceedings for both the ‘702 and ‘190 patents. Accordingly, both of those proceedings are now terminated.

On January 23, 2018, the

20-year

terms of the ‘190 patent, the ‘021 patent, the ‘702 patent and the ‘290 patent expired. As a consequence of these expirations, the Company cannot be liable under any of the SynQor patents for allegedly infringing activities occurring after that date. In addition, any amended claims that may issue as a result of any of the still-pending reexamination proceedings will have no effective term and cannot be the basis for any liability by the Company.

-19-

VICOR CORPORATION

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(unaudited)

The Company continues to believe none of its products, including its unregulated bus converters, infringe any valid claim of the asserted SynQor patents, either alone or when used in an intermediate bus architecture implementation. The Company believes SynQor’s claims lack merit and, therefore, it continues to vigorously defend itself against SynQor’s patent infringement allegations. The Company does not believe a loss is probable for this matter. If a loss were to be incurred, however, the Company cannot estimate the amount of possible loss or range of possible loss at this time.

In addition to the SynQor matter, the Company is involved in certain other litigation and claims incidental to the conduct of its business. While the outcome of lawsuits and claims against the Company cannot be predicted with certainty, management does not expect any current litigation or claims will have a material adverse impact on the Company’s financial position or results of operations.

11.	Impact of Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance designed to simplify the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740, Income Taxes, and also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This new guidance was effective for the Company for its fiscal year beginning after December 15, 2020, with early adoption permitted. The Company adopted the new guidance as of January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements and disclosures.

Other new pronouncements issued but not effective until after June 30, 2021 are not expected to have a material impact on the Company’s consolidated financial statements.

-20-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2020. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, and operating results, and the share price of its Common Stock. This document and other documents filed by the Company with the Securities and Exchange Commission (“SEC”) include forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbor afforded under the Private Securities Litigation Reform Act of 1995 and other safe harbors afforded under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are based on our current beliefs, expectations, estimates, forecasts, and projections for the future performance of the Company and are subject to risks and uncertainties. Forward-looking statements are identified by the use of words denoting uncertain, future events, such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “goal,” “if,” “intend,” “may,” “plan,” “potential,” “project,” “prospective,” “seek,” “should,” “target,” “will,” or “would,” as well as similar words and phrases, including the negatives of these terms, or other variations thereof. Forward-looking statements also include, but are not limited to, statements regarding: our expectations that the Company has adequate resources to respond to financial and operational risks associated with the novel coronavirus

“COVID-19,”

and our ability to effectively conduct business during the pandemic; our ongoing development of power conversion architectures, switching topologies, materials, packaging, and products; the ongoing transition of our business strategically, organizationally, and operationally from serving a large number of relatively

low-volume

customers across diversified markets and geographies to serving a small number of relatively large volume customers; our intent to enter new market segments; the levels of customer orders overall and, in particular, from large customers and the delivery lead times associated therewith; anticipated new and existing customer wins; the financial and operational impact of customer changes to shipping schedules; the derivation of a portion of our sales in each quarter from orders booked in the same quarter; our intent to expand the percentage of revenue associated with licensing our intellectual property to third parties; our plans to invest in expanded manufacturing capacity, including the expansion of our Andover facility and the introduction of new manufacturing processes, and the timing, location, and funding thereof; our belief that cash generated from operations together with our available cash and cash equivalents and short-term investments will be sufficient to fund planned operational needs, capital equipment purchases, and planned construction, for the foreseeable future; our outlook regarding tariffs and the impact thereof on our business; our belief that we have limited exposure to currency risks; our intentions regarding the declaration and payment of cash dividends; our intentions regarding protecting our rights under our patents; and our expectation that no current litigation or claims will have a material adverse impact on our financial position or results of operations. These forward-looking statements are based upon our current expectations and estimates associated with prospective events and circumstances that may or may not be within our control and as to which there can be no assurance. Actual results could differ materially from those implied by forward-looking statements as a result of various factors, including but not limited to those described above, as well as those described in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2020 under Part I, Item 1 — “Business,” under Part I, Item 1A — “Risk Factors,” under Part I, Item 3 — “Legal Proceedings,” and under Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those described in this Quarterly Report on Form

10-Q,

particularly under Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The discussion of our business contained herein, including the identification and assessment of factors that may influence actual results, may not be exhaustive. Therefore, the information presented should be read together with other documents we file with the SEC from time to time, including our Annual Reports on Form

10-K,

our Quarterly Reports on Form

10-Q

and our Current Reports on Form

8-K,

which may supplement, modify, supersede, or update the factors discussed in this Quarterly Report on Form

10-Q.

Any forward-looking statement made in this Quarterly Report on Form

10-Q

is based on information currently available to us and speaks only as of the date on which it is made. We do not undertake any obligation to update any forward-looking statements as a result of future events or developments, except as required by law.

-21-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Overview

We design, develop, manufacture, and market modular power components and power systems for converting electrical power for use in electrically-powered devices. Our competitive position is supported by innovations in product design and achievements in product performance, largely enabled by our focus on the research and development of advanced technologies and processes, often implemented in proprietary semiconductor circuitry, materials, and packaging. Many of our products incorporate patented or proprietary implementations of high-frequency switching topologies enabling power system solutions that are more efficient and much smaller than conventional alternatives. Our strategy emphasizes demonstrable product differentiation and a value proposition based on competitively superior solution performance, advantageous design flexibility, and a compelling total cost of ownership. While we offer a wide range of alternating current (“AC”) and direct current (“DC”) power conversion products, we consider our core competencies to be associated with 48V DC distribution, which offers numerous inherent cost and performance advantages over lower distribution voltages. However, we also offer products addressing other DC voltage standards (e.g., 380V for power distribution in data centers, 110V for rail applications, 28V for military and avionics applications, and 24V for industrial automation).

Based on design, performance, and form factor considerations, as well as the range of evolving applications for which our products are appropriate, we categorize our product portfolios as either “Advanced Products” or “Brick Products.” The Advanced Products category consists of our more recently introduced products, which are largely used to implement our proprietary Factorized Power Architecture

™

(“FPA”), an innovative power distribution architecture enabling flexible, rapid power system design using individual components optimized to perform a specific conversion function.

The Brick Products category largely consists of our broad and well-established families of integrated power converters, incorporating multiple conversion stages, used in conventional power systems architectures. Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a

low-mix,

high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a

high-mix,

low-volume

operational model.

The applications in which our Advanced Products and Brick Products are used are typically in the higher-performance, higher-power segments of the market segments we serve. With our Advanced Products, we generally serve large Original Equipment Manufacturers (“OEMs”), Original Design Manufacturers (“ODMs”), and their contract manufacturers, with sales currently concentrated in the data center and hyperscaler segments of enterprise computing, in which our products are used for voltage distribution on server motherboards, in server racks, and across datacenter infrastructure. We have established a leadership position in the emerging market segment for powering high-performance processors used for acceleration of applications associated with artificial intelligence (“AI”). Our customers in the AI market segment include the leading innovators in processor and accelerator design, as well as early adopters in cloud computing and high performance computing. We also target applications in aerospace and aviation, defense electronics, industrial automation, instrumentation, test equipment, solid state lighting, telecommunications and networking infrastructure, and vehicles (notably in the autonomous driving, electric vehicle, and hybrid vehicle niches of the vehicle segment). With our Brick Products, we generally serve a fragmented base of large and small customers, concentrated in aerospace and defense electronics, industrial automation, industrial equipment, instrumentation and test equipment, and transportation (notably in rail and heavy equipment applications). With our strategic emphasis on larger, high-volume customers, we expect to experience over time a greater concentration of sales among relatively fewer customers.

Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations. We plan our production and inventory levels based on management’s estimates of customer demand, customer forecasts, and other information sources. Customer forecasts, particularly those of OEM, ODM, and contract manufacturing customers to which we supply Advanced Products in high volumes, are subject to scheduling changes on short notice, contributing to operating inefficiencies and excess costs. In addition, external factors such as supply chain uncertainties, which are often associated with the cyclicality of the electronics industry, regional macroeconomic and trade-related circumstances, and

force majeure

events (most recently evidenced by the

COVID-19

pandemic), have caused our operating results to vary meaningfully. Our quarterly gross margin as a percentage of net revenues may vary, depending on production volumes, average selling prices, average unit costs, the mix of products sold during that quarter, and the level of importation of raw materials subject to tariffs. Our quarterly operating margin as a percentage of net revenues also may vary with changes in revenue and product level profitability, but our operating costs are largely associated with compensation and related employee costs, which are not subject to sudden or significant changes.

-22-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Ongoing / Potential Impacts of the

COVID-19

Pandemic on the Company

As of the date of this report, the number of employees diagnosed with

COVID-19

and the corresponding absenteeism due to

COVID-19

are negligible. While the productivity of our factory is not currently impacted by

COVID-19,

productivity may be reduced if quarantine rates increase or if the number of employees diagnosed with

COVID-19

requires further implementation of restrictive health and safety measures, including factory closure. We continue to operate with three shifts in our factory, and, with very few exceptions, our engineering, sales, and administrative personnel are working from the Company’s offices.

We are closely monitoring the operating performance and financial health of our customers, business partners, and suppliers, but an extended period of operational constraints brought about by the pandemic could cause financial hardship within our customer base and supply chain. Such hardship may continue to disrupt customer demand and limit our customers’ ability to meet their obligations to us. Similarly, such hardship within our supply chain could continue to restrict our access to raw materials or services. Additionally, restrictions or disruptions of transportation, such as reduced availability of cargo transport by ship or air, could result in higher costs and inbound and outbound delays. During 2020, we took steps to address certain supply chain risks, and we believe our actions mitigated those risks, particularly for the second half of 2020; however, there are no assurances that those steps will continue to mitigate risks in 2021 and beyond.

Although there is uncertainty regarding the extent to which the pandemic will continue to impact our operational and financial results in the future, the Company’s high level of liquidity, flexible operational model, existing raw material inventories, and increased use of second sources for critical manufacturing inputs together support management’s belief the Company will be able to effectively conduct business until the pandemic passes.

We are monitoring the rapidly changing circumstances, and may take additional actions to address

COVID-19

risks as they evolve and/or increase again. Because much of the potential negative impact of the pandemic is associated with risks outside of our control, we cannot estimate the extent of such impact on our financial or operational performance, or when such impact might occur.

Summary of Second Quarter 2021 Financial Performance Compared to First Quarter 2021 Financial Performance

The following summarizes our financial performance for the second quarter of 2021, compared to the first quarter of 2021:

•

Net revenues increased 7.4% to $95,376,000 for the second quarter of 2021, from $88,796,000 for the first quarter of 2021, as total bookings for the quarter increased 51.0% as compared to the first quarter of 2021, primarily due to a 99.3% increase in Advanced Products bookings in the second quarter of 2021 compared to the first quarter of 2021. Advanced Products revenue rose 19.7% sequentially compared to the first quarter of 2021. This growth, though, continued to be constrained by limited component availability due to global semiconductor supply allocation issues experienced during the quarter, along with certain internal processing and testing constraints.

•

Export sales represented approximately 64.3% of total net revenues in the second quarter of 2021 as compared to 69.4% in the first quarter of 2021.

•

Gross margin increased to $49,871,000 for the second quarter of 2021 from $44,700,000 for the first quarter of 2021, and gross margin, as a percentage of net revenues, increased to 52.3% for the second quarter of 2021 from 50.3% for the first quarter of 2021. Both the increase in gross margin dollars and the increased gross margin percentage were primarily due to the increase in net revenues, an improved product mix, a reduction in cost variances and process yield improvements.

•

Backlog, which represents the total value of orders for products for which shipment is scheduled within the next 12 months, was approximately $210,565,000 at the end of the second quarter of 2021, as compared to $157,134,000 at the end of the first quarter of 2021. The increase in backlog was primarily due to the increased bookings, discussed above.

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VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

•

Operating expenses for the second quarter of 2021 decreased $118,000, or 0.4%, to $29,862,000 from $29,980,000 for the first quarter of 2021, due to a decrease in selling, general, and administrative expenses of $365,000, partially offset by an increase in research and development expenses of $247,000.

•

We reported net income for the second quarter of 2021 of $19,394,000, or $0.43 per diluted share, compared to net income of $15,092,000 or $0.34 per diluted share, for the first quarter of 2021.

•

For the second quarter of 2021, depreciation and amortization totaled $2,812,000, and capital additions totaled $14,994,000, as compared to depreciation and amortization of $2,806,000 and $9,264,000 of capital additions, for the first quarter of 2021.

•

Inventories increased by approximately $2,873,000, or 5.3%, to $57,129,000 at June 30, 2021, compared to $54,256,000 at March 31, 2021.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Net revenues for the second quarter of 2021 were $95,376,000, an increase of $24,615,000, or 34.8%, as compared to $70,761,000 for the second quarter of 2020. Net revenues, by product line, for the three months ended June 30, 2021 and 2020 were as follows (dollars in thousands):


					Increase
	2021		2020		$		%

Brick Products	$	54,352	$	46,428	$	7,924		17.1	%
Advanced Products		41,024		24,333		16,691		68.6	%

Total	$	95,376	$	70,761	$	24,615		34.8	%

The increase in net revenues for Advanced Products was primarily the result of growth in the data center and high performance computing business, while the Brick Products increase was primarily due to continued favorable market conditions. The increases in net revenues for both product lines are also reflected in the bookings patterns of the second quarter of 2021. Total bookings for the second quarter of 2021 increased 70.8% from the second quarter of 2020, primarily due to an increase of Advanced Products and Brick Products bookings of 181.6% and 4.6%, respectively. The increase in bookings largely reflected our customers’ response to the 20% to 30% increase in lead-times for our Brick Products and Advanced Products, respectively, plus growth in our data center business, for Advanced Products.

Gross margin for the second quarter of 2021 increased $19,553,000, or 64.5%, to $49,871,000, from $30,318,000 for the second quarter of 2020. Gross margin, as a percentage of net revenues, increased to 52.3% for the second quarter of 2021, compared to 42.8% for the second quarter of 2020. The increase in gross margin dollars and gross margin percentage was primarily due to the increase in net revenues, an improved product mix and process yield improvements.

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VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Selling, general, and administrative expenses were $16,589,000 for the second quarter of 2021, an increase of $1,134,000, or 7.3%, from $15,455,000 for the second quarter of 2020. Selling, general, and administrative expenses as a percentage of net revenues decreased to 17.4% for the second quarter of 2021 from 21.8% for the second quarter of 2020, primarily due to the overall increase in net revenues. The components of the $1,134,000 increase in selling, general and administrative expenses for the second quarter of 2021 from the second quarter of 2020 were as follows (dollars in thousands):


	Increase (decrease)

Legal fees	$	510		213.6	%	(1	)
Advertising		307		44.2	%	(2	)
Compensation		191		1.8	%	(3	)
Travel expense		89		53.0	%	(4	)
Depreciation and amortization		63		8.1	%
Commissions		(92	)	(10.6	)%	(5	)
Other, net		66		3.0	%

	$	1,134		7.3	%

(1)	Increase primarily attributable to an increase in activity related to the SynQor litigation (see Note 10) and certain corporate legal matters.

(2)	Increase primarily attributable to increases in sales support expenses, direct mailings, and advertising in trade publications.

(3)	Increase primarily attributable to annual compensation adjustments in May 2021, partially offset by a decrease in stock-based compensation expense compared to the second quarter of 2020.

(4)	Increase primarily attributable to a resumption of travel by the Company’s sales and marketing personnel.

(5)	Decrease primarily attributable to the decline in net revenues subject to commissions.

-25-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Research and development expenses were $13,273,000 for the second quarter of 2021, an increase of $443,000, or 3.5%, compared to $12,830,000 for the second quarter of 2020. As a percentage of net revenues, research and development expenses decreased to 13.9% for the second quarter of 2021 from 18.1% for the second quarter of 2020, primarily due to the overall increase in net revenues. The components of the $443,000 increase in research and development expenses were as follows (dollars in thousands):


	Increase (decrease)

Compensation	$	375		4.1	% (1)
Project and pre-production materials		321		16.6	% (2)
Supplies		79		24.7	%
Facilities allocations		55		9.4	%
Freight		40		153.3	%
Overhead absorption		(523	)	(200.2	)% (3)
Other, net		96		8.7	%

	$	443		3.5	%

(1)	Increase primarily attributable to annual compensation adjustments in May 2021, partially offset by a decrease in stock-based compensation expense compared to the second quarter of 2020.

(2)	Increase primarily attributable to increased prototype development costs for Advanced Products.

(3)	Decrease primarily attributable to an increase in research and development (“R&D”) personnel incurring time on production activities, compared to R&D activities.

The significant components of ‘‘Other income (expense), net’’ for the three months ended June 30, and the changes between the periods were as follows (in thousands):


	2021			2020		Increase (decrease)

Interest income	$	276		$	17	$	259
Rental income		198			198		—
Foreign currency (losses) gains, net		(12	)		3		(15	)
(Losses) gains on disposals of equipment		(106	)		6		(112	)
Other, net		17			9		8

	$	373		$	233	$	140

Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of Vicor Japan Company, Ltd. (“VJCL”), for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These other subsidiaries in Europe and Asia have experienced more unfavorable foreign currency exchange rate fluctuations in the second quarter of 2021 compared to the second quarter of 2020. Interest income increased due to an increase in interest bearing investments in the second quarter of 2021 compared to the second quarter of 2020, due to the net proceeds of approximately $109.7 million from our underwritten public offering of our Common Stock completed in June 2020.

Income before income taxes was $20,382,000 for the second quarter of 2021, as compared to $2,266,000 for the second quarter of 2020.

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VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

The provision (benefit) for income taxes and the effective income tax rates for the three months ended June 30, 2021 and 2020 were as follows (dollars in thousands):


	2021			2020
Provision (benefit) for income taxes	$	999		$	(406	)
Effective income tax rate		4.9	%		(17.9	)%

The effective tax rates were lower than the statutory tax rates for the three months ended June 30, 2021 and 2020 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets. The provision (benefit) for income taxes for the three months ended June 30, 2021 and 2020 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes to fully offset taxable income.

See Note 8 to the Condensed Consolidated Financial Statements for disclosure regarding our current assessment of the valuation allowance against all domestic deferred tax assets, and the possible release (i.e., reduction) of the allowance in the future.

We reported net income for the second quarter of 2021 of $19,394,000, or $0.43 per diluted share, compared to $2,667,000, or $0.06 per diluted share, for the second quarter of 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Net revenues for the six

months ended June 30, 2021 were $184,172,000, an increase of $50,010,000, or 37.3%, from $134,162,000 for the six months ended June 30, 2020. Net revenues, by product line, for the six months ended June 30, 2021 and the six months ended June 30, 2020 were as follows (dollars in thousands):


					Increase
	2021		2020		$		%

Brick Products	$	108,811	$	91,945	$	16,866		18.3	%
Advanced Products		75,361		42,217		33,144		78.5	%

Total	$	184,172	$	134,162	$	50,010		37.3	%

The increases in net revenues for Brick Products and Advanced Products were principally due to increases in new orders for Advanced Products of 126.9% and Brick Products of 13.9% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in bookings largely reflected our customers’ response to the 20% to 30% increase in lead-times for our Brick Products and Advanced Products, respectively, plus growth in our data center business, for Advanced Products.

Gross margin for the six months ended June 30, 2021 increased $36,922,000, or 64.0%, to $94,571,000 from $57,649,000 for the six months ended June 30, 2020. Gross margin, as a percentage of net revenues, increased to 51.3% for the six month period ended June 30, 2021, as compared to 43.0% for the six month period ended June 30, 2020. The increase in gross margin dollars and gross margin percentage was primarily due to the increase in net revenues, an improved product mix, process yield improvements and lower tariff charges.

-27-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Selling, general and administrative expenses were $33,543,000 for the six months ended June 30, 2021, an increase of $1,719,000, or 5.4%, compared to $31,824,000 for the six months ended June 30, 2020. Selling, general and administrative expenses as a percentage of net revenues decreased to 18.2% for the six months ended June 30, 2021 from 23.7% for the six months ended June 30, 2020, primarily due to the overall increase in net revenues. The components of the $1,719,000 increase in selling, general and administrative expenses for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 were as follows (dollars in thousands):


	Increase (decrease)

Compensation	$	1,196		5.7	% (1)
Advertising expense		251		18.6	% (2)
Legal fees		188		16.3	% (3)
Depreciation and amortization		102		6.7	% (4)
Facilities allocations		95		13.3	%
Travel expense		(205	)	(30.0	)% (5)
Other, net		92		1.6	%

	$	1,719		5.4	%

(1)	Increase primarily attributable to annual compensation adjustments in May 2021 and higher stock-based compensation expense associated with stock options awarded in June 2021.

(2)	Increase primarily attributable to increases in sales support expenses, direct mailings, and advertising in trade publications.

(3)	Increase primarily attributable to an increase in activity related to the SynQor litigation (see Note 10) and certain corporate legal matters.

(4)	Increase attributable to net additions of furniture and fixtures and capitalization of building improvements.

(5)	Decrease primarily attributable to reduced travel by our sales and marketing personnel, due to travel restrictions caused by the COVID-19 pandemic.

-28-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

Research and development expenses were $26,299,000 for the six months ended June 30, 2021, an increase of $134,000, or 0.5%, from $26,165,000 for the six months ended June 30, 2020 As a percentage of net revenues, research and development expenses decreased to 14.3% for the six month period ended June 30, 2021 from 19.5% for the six month period ended June 30, 2020, primarily due to the overall increase in net revenues. The components of the $134,000 increase in research and development expenses for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 were as follows (dollars in thousands):


	Increase (decrease)

Compensation	$	968		5.4	% (1)
Facilities allocations		198		17.0	% (2)
Freight		66		115.5	%
Computer expense		60		19.0	%
Project and pre-production materials		(354	)	(7.9	)% (3)
Overhead absorption		(830	)	(174.2	)% (4)
Other, net		26		1.0	%

	$	134		0.5	%

(1)	Increase primarily attributable to annual compensation adjustments in May 2021 and higher stock-based compensation expense associated with stock options awarded in June 2021.

(2)	Increase primarily attributable to an increase in utilities and building maintenance expenses.

(3)	Decrease primarily attributable to lower prototype development costs for Advanced Products.

(4)	Decrease primarily attributable to an increase in R&D personnel incurring time on production activities, compared to R&D activities.

The significant components of ‘‘Other income (expense), net’’ for the six months ended June 30, 2021 and the six months ended June 30, 2020 and the changes from period to period were as follows (in thousands):


							Increase
	2021			2020			(decrease)

Interest income	$	469		$	70		$	399
Rental income		396			396			—
(Losses) gains on disposals of equipment		(106	)		6			(112	)
Foreign currency losses, net		(174	)		(117	)		(57	)
Other, net		20			26			(6	)

	$	605		$	381		$	224

Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of VJCL, for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These other subsidiaries in Europe and Asia have experienced more unfavorable foreign currency exchange rate fluctuations in 2021 compared to 2020. Interest income increased due to an increase in interest bearing investments in 2021 compared to 2020, due to the net proceeds of approximately $109.7 million from our underwritten public offering of our Common Stock completed in June 2020.

Income before income taxes was $35,334,000 for the six months ended June 30, 2021, as compared to $41,000 for the six months ended June 30, 2020.

-29-

VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

The provision (benefit) for income taxes and the effective income tax rates for the six months ended June 30, 2021 and 2020 were as follows (dollars in thousands):


	2021			2020
Provision (benefit) for income taxes	$	856		$	(900	)
Effective income tax rate		2.4	%		(2,195.1	)%

The effective tax rates were lower than the statutory tax rates for the six months ended June 30, 2021 and 2020 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets. The provision (benefit) for income taxes for the six months ended June 30, 2021 and 2020 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes to fully offset taxable income.

We reported net income for the six months ended June 30, 2021 of $34,486,000, or $0.77 per diluted share, as compared to $932,000, or $0.02 per diluted share, for the six months ended June 30, 2020.

Liquidity and Capital Resources

As of June 30, 2021, we had $159,763,000 in cash and cash equivalents and $70,469,000 of highly liquid short-term investments. The ratio of total current assets to total current liabilities was 7.0:1 as of June 30, 2021 and 7.8:1 as of December 31, 2020. Working capital, defined as total current assets less total current liabilities, increased $22,834,000 to $299,253,000 as of June 30, 2021 from $276,419,000 as of December 31, 2020.

The changes in working capital from December 31, 2020 to June 30, 2021 were as follows (in thousands):


	Increase (decrease)

Cash and cash equivalents	$	(1,979	)
Short-term investments		20,303
Accounts receivable		14,013
Inventories, net		(140	)
Other current assets		(99	)
Accounts payable		(7,960	)
Accrued compensation and benefits		(1,700	)
Accrued expenses		(994	)
Sales allowances		(1,322	)
Short-term lease liabilities		70
Income taxes payable		(751	)
Short-term deferred revenue		3,393

	$	22,834

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VICOR CORPORATION

Management’s Discussion and Analysis of

Financial Condition and Results of Operation

June 30, 2021

The primary sources of cash for the six months ended June 30, 2021 were $30,115,000 of cash generated through operating activities, $30,000,000 from the sale or maturities of short-term investments and $4,751,000 of cash received in connection with the exercise of options to purchase our Common Stock awarded under our stock option plans and the issuance of Common Stock under our 2017 Employee Stock Purchase Plan. The primary uses of cash during the six months ended June 30, 2021 were $50,706,000 for the purchases of short-term investments and $15,782,000 for the purchase of property and equipment.

In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common Stock (the “November 2000 Plan”). The November 2000 Plan authorizes us to make such repurchases from time to time in the open market or through privately negotiated transactions. The timing and amounts of Common Stock repurchases are at the discretion of management based on its view of economic and financial market conditions. We did not repurchase shares of Common Stock under the November 2000 Plan during the six months ended June 30, 2021. As of June 30, 2021, we had approximately $8,541,000 remaining available for repurchases of our Common Stock under the November 2000 Plan.

As of June 30, 2021, we had approximately $21,524,000 of capital expenditure commitments, principally for manufacturing equipment, which we intend to fund with existing cash, and approximately $8,476,000 of capital expenditures items which have been received and reflected in the accompanying Condensed Consolidated Balance Sheets, but not yet paid for. In addition to these commitments, we had, in aggregate, approximately $28,000,000 of remaining budgeted capital expenditures in 2021 associated with the construction of a 90,000 sq. ft. addition to the Company’s existing manufacturing facility and the installation of new production equipment. Our primary needs for liquidity are for making continuing investments in manufacturing equipment and for funding the construction of the additional manufacturing space adjoining our existing Andover manufacturing facility, noted above, including architectural and construction costs. We believe cash generated from operations together with our available cash and cash equivalents and short-term investments will be sufficient to fund planned operational needs, capital equipment purchases, and the planned construction, for the foreseeable future.

-31-

Vicor Corporation

June 30, 2021

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and cash equivalents, our short-term investments and fluctuations in foreign currency exchange rates. As our cash and cash equivalents and short-term investments consist principally of cash accounts, money market securities, and U.S. Treasury securities, which are short-term in nature, we believe our exposure to market risk on interest rate fluctuations for these investments is not significant. As of June 30, 2021, our long-term investment portfolio, recorded on our Condensed Consolidated Balance Sheet as “Long-term investments, net”, consisted of a single auction rate security with a par value of $3,000,000, purchased through and held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions (the “Failed Auction Security”) since February 2008. While the Failed Auction Security is Aaa/AA+ rated by major credit rating agencies, collateralized by student loans and guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program, continued failure to sell at its periodic auction dates (i.e., reset dates) could negatively impact the carrying value of the investment, in turn leading to impairment charges in future periods. Periodic changes in the fair value of the Failed Auction Security attributable to credit loss (i.e., risk of the issuer’s default) are recorded through earnings as a component of “Other income (expense), net”, with the remainder of any periodic change in fair value not related to credit loss (i.e., temporary

“mark-to-market”

carrying value adjustments) recorded in “Accumulated other comprehensive loss”, a component of Stockholders’ Equity. Should we conclude a decline in the fair value of the Failed Auction Security is other than temporary, such losses would be recorded through earnings as a component of “Other income (expense), net”. We do not believe there was an “other-than-temporary” decline in value in this security as of June 30, 2021.

Our exposure to market risk for fluctuations in foreign currency exchange rates relates to the operations of VJCL, for which the functional currency is the Japanese Yen, and changes in the relative value of the Yen to the U.S. Dollar. The functional currency of all other subsidiaries in Europe and other subsidiaries in Asia is the U.S. Dollar. While we believe the risk of fluctuations in foreign currency exchange rates for these subsidiaries is generally not significant, they can be subject to substantial currency changes, and therefore foreign exchange exposures.

Item 4 — Controls and Procedures

(a)	Disclosure regarding controls and procedures.

As required by

Rule 13a-15

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), management, with the participation of our Chief Executive Officer (“CEO”) (who is our principal executive officer) and Chief Financial Officer (“CFO”) (who is our principal financial officer), conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the last fiscal quarter (i.e., June 30, 2021). The term “disclosure controls and procedures,” as defined in

Rules 13a-15(e)

and

15d-15(e)

under the Exchange Act, means controls and other procedures of a company that are designed to ensure information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by a company in the reports it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our CEO and CFO concluded, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Accordingly, management, including the CEO and CFO, recognizes our disclosure controls or our internal control over financial reporting may not prevent or detect all errors and all fraud. The design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the

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Vicor Corporation

June 30, 2021

likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any control’s effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

(b)	Changes in internal control over financial reporting.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

-33-

Vicor Corporation

Part II – Other Information

June 30, 2021

Item 1 — Legal Proceedings

See Note 10.

Commitments and Contingencies

in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 – “Financial Statements.”

Item 1A — Risk Factors

There have been no material changes in the risk factors described in Part I, Item 1A – “Risk Factors” of the Company’s Annual Report on

Form10-K

for the year ended December 31, 2020.

Item 6 — Exhibits


Exhibit Number		Description

3.1		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 (2)

10.1		Form of Stock Option Award Agreement under the Vicor Corporation Amended and Restated 2000 Stock Option and Incentive Plan, as amended and restated (3)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.

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.

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.

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 29, 2001 (File No. 000-18277) and incorporated herein by reference.

(2)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 4, 2020 (File No. 000-18277) and incorporated herein by reference.

(3)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 13, 2021 (File No. 000-18277) and incorporated herein by reference.

-34-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	VICOR CORPORATION

Date: July 30 , 2021	By:	/s/ Patrizio Vinciarelli
		Patrizio Vinciarelli
		Chairman of the Board, President and
		Chief Executive Officer
		(Principal Executive Officer)

Date: July 30 , 2021	By:	/s/ James F. Schmidt
		James F. Schmidt
		Vice President, Chief Financial Officer
		(Principal Financial Officer)

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