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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------


                                    FORM 10-Q


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

                For the Quarterly Period Ended September 30, 2005
                                       OR
          [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934



                        Commission File Number 333-43089




                               THE GSI GROUP, INC.
             (Exact name of registrant as specified in its charter)


                             DELAWARE     37-0856587
                (State or other jurisdiction     (I.R.S. Employer
            of incorporation or organization)     Identification No.)

             1004 E. ILLINOIS STREET, ASSUMPTION, ILLINOIS     62510
             (Address of principal executive offices)     (Zip Code)


     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  [X]  No  [  ]

     Indicate by check mark whether the registrant is an accelerated filer:  Yes
[  ]  No  [X]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act.  [  ]  Yes  [X]  No

     Indicate  the  number  of  shares  outstanding  of each of the registrant's
classes  of  common stock, as of the latest practicable date.  Common stock, par
value  $0.01  per  share,  826,948  shares  outstanding as of November 21, 2005.

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                                        1
<PAGE>




                                                               TABLE OF CONTENTS
                                                                            PAGE
                                                                            ----
PART  I  -  FINANCIAL  INFORMATION
  Item  1.  Financial  Statements
                 Balance Sheets                                                4
                 Statements of Operations                                      5
                 Statements of Cash Flows                                      6
                 Notes to Financial Statements                                 7

  Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results  of  Operations                                            17
  Item 3.     Quantitative and Qualitative Disclosure About Market Risk       25
  Item 4.     Controls and Procedures                                         25

PART  II  -  OTHER  INFORMATION
  Item 1.     Legal Proceedings                                               27
  Item 2.     Changes in Securities and Use of Proceeds                        *
  Item 3.     Defaults Upon Senior Securities                                  *
  Item 4.     Submission of Matters to a Vote of Security Holders              *
  Item 5.     Other Information                                                *
  Item 6.     Exhibits                                                        27




*  No  response  to  this  item  is  included  herein  for the reason that it is
inapplicable.


                                        2
<PAGE>
FORWARD-LOOKING  STATEMENTS

     Certain  statements  contained  in  this  report  are  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and  Section  21E  of the Securities Exchange Act of 1934, as amended.
Forward-looking  statements  are statements other than historical information or
statements  of  current  condition.  Some  forward-looking  statements  may  be
identified  by the use of terms such as "believes," "anticipates," "intends," or
"expects."  Forward-looking  statements  are subject to risks, uncertainties and
other  factors  that could cause actual results to differ materially from future
results  expressed or implied by such statements, and such statements should not
be  regarded  as  a  representation that the stated objectives will be achieved.


                                        3
<PAGE>
<TABLE>
<CAPTION>

                                             ITEM 1 - FINANCIAL STATEMENTS
                                          THE GSI GROUP, INC. AND SUBSIDIARIES
                                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                                                            SUCCESSOR     PREDECESSOR
                                                                                            ---------     -----------
                                                                                           (UNAUDITED)     RESTATED
                                                                                        SEPTEMBER  30,    DECEMBER 31,
ASSETS                                                                                       2005             2004
-------------------------------------------------------------------------------------  ----------------  --------------
<S>                                                                                    <C>               <C>
Current Assets:
 Cash and cash equivalents                                                             $         3,913   $       2,304
 Accounts receivable (net of reserve for bad debts of $2,975 in 2005
   and $3,402 in 2004)                                                                          46,536          24,656
 Inventories (net of reserve for obsolescence of $3,270 in 2005 and $2,333 in 2004)             42,722          48,653
 Prepaid expenses                                                                                2,512           3,489
 Deferred tax current asset                                                                      7,002              --
 Other                                                                                             636           3,416
                                                                                       ----------------  --------------
     Total current assets                                                                      103,321          82,518
                                                                                       ----------------  --------------
Property, Plant and Equipment (net of accumulated depreciation of $960
 in 2005 and $51,323 in 2004)                                                                   34,512          32,548
                                                                                       ----------------  --------------
Other Assets:
 Goodwill                                                                                       40,118          10,264
 Other intangible assets (net of amortization of $2,962 in 2005 and $7,116 in   2004)           54,818           1,494
 Deferred tax asset                                                                                 --           1,309
 Deferred financing costs                                                                        5,289           2,449
 Other                                                                                             149              95
                                                                                       ----------------  --------------
     Total other assets                                                                        100,374          15,611
                                                                                       ----------------  --------------
     Total assets                                                                      $       238,207   $     130,677
                                                                                       ================  ==============
LIABILITIES AND  STOCKHOLDERS' DEFICIT
-------------------------------------------------------------------------------------
Current Liabilities:
 Accounts payable                                                                      $        21,489   $      16,629
 Accrued interest                                                                                5,097           1,708
 Payroll and payroll related expenses                                                           10,740           4,652
 Income taxes payable                                                                              551              --
 Accrued warranty                                                                                2,224           2,764
 Other accrued expenses                                                                          4,978           4,173
 Customer deposits                                                                               4,093           7,090
 Current maturities of long-term debt                                                              120           5,167
                                                                                       ----------------  --------------
     Total current liabilities                                                                  49,292          42,183

Long-Term Debt, less current maturities                                                        117,341         133,963
Deferred Tax Liability                                                                           2,082               -
Minority Interest                                                                                2,887           1,366

Stockholders' Equity (Deficit):
 Common stock, $.01 par value (authorized 6,900,000 shares; issued
   6,633,652 shares; outstanding 626,948 shares)                                                    16              16
 Common stock, $.01 par value, nonvoting (authorized 1,100,000 shares;
   issued 1,059,316 shares; outstanding 200,000 shares)                                              2               2
 Paid-in capital                                                                                97,881           5,821
 Accumulated other comprehensive loss (cumulative currency  translation
   adjustment)                                                                                   1,645         (10,124)
 Retained earnings (deficit)                                                                     8,620            (991)
 Treasury stock, at cost, voting (6,006,704 shares)                                            (41,550)        (41,550)
 Treasury stock, at cost, nonvoting (859,316 shares)                                                (9)             (9)
                                                                                       ----------------  --------------
     Total stockholders' equity (deficit)                                                       66,605         (46,835)
                                                                                       ----------------  --------------
     Total liabilities and stockholders' equity (deficit)                              $       238,207   $     130,677
                                                                                       ================  ==============
</TABLE>
PART  I  -  FINANCIAL  INFORMATION
The  accompanying  notes  to  condensed consolidated financial statements are an
integral  part  of  these  statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>


                                       THE GSI GROUP, INC. AND SUBSIDIARIES
                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                    (UNAUDITED)


                                                         SUCCESSOR                        PREDECESSOR
                                                   -----------------------    ------------------------------------
                                                     MAY 17,       THREE      RESTATED    JANUARY 1,    RESTATED
                                                      2005        FISCAL       THREE         2005         NINE
                                                     THROUGH      MONTHS       FISCAL      THROUGH       FISCAL
                                                    SEPT. 30,      ENDED       MONTHS      MAY 16,       MONTHS
                                                      2005       SEPT. 30,     ENDED         2005         ENDED
                                                                   2005       OCT. 1,                    OCT. 1,
                                                                                2004                      2004
<S>                                                <C>          <C>          <C>         <C>           <C>
Sales                                              $  155,901   $  107,723   $  89,692   $   114,635   $  227,759

Cost of sales                                         118,676       78,394      64,901        83,733      173,479
                                                   -----------  -----------  ----------  ------------  -----------

   Gross profit                                        37,225       29,329      24,791        30,902       54,280

Selling, general and administrative expenses           21,275       14,390      12,957        25,049       34,083
Amortization expense                                    2,912        1,950         163           166          487
                                                   -----------  -----------  ----------  ------------  -----------
 Total operating expenses                              24,187       16,340      13,120        25,215       34,570
                                                   -----------  -----------  ----------  ------------  -----------

Operating income                                       13,038       12,989      11,671         5,687       19,710

Other income (expense):
 Interest expense                                      (5,680)      (3,705)     (3,940)       (5,238)     (10,453)
 Other, net                                               369          282        (579)          707       (1,157)
                                                   -----------  -----------  ----------  ------------  -----------

Income from continuing operations before
 income tax expense and minority interest               7,727        9,566       7,152         1,156        8,100

Minority interest in net income of subsidiary            (174)        (119)        (23)         (105)         (69)
Income tax expense (benefit)                           (1,067)       4,075          95         1,115          415
                                                   -----------  -----------  ----------  ------------  -----------

Income (loss) from continuing operations                8,620        5,372       7,034           (64)       7,616

Gain from discontinued operations, net of income
 tax expense  taxes                                        --           --        (214)           --          (59)
                                                   -----------  -----------  ----------  ------------  -----------

Net income (loss)                                  $    8,620   $    5,372   $   6,820   $       (64)  $    7,557
                                                   ===========  ===========  ==========  ============  ===========


Basic and diluted earnings (loss) per share        $    10.42   $     6.50   $    8.25   $     (0.08)  $     5.17
Weighted average common shares outstanding            826,948      826,948     826,948       826,948    1,461,281
                                                   ===========  ===========  ==========  ============  ===========

COMPREHENSIVE INCOME
  Net income (loss)                                $    8,620   $    5,372   $   6,820   $       (64)  $    7,557
  Cumulative currency translation adjustment            1,645        1,061         916           536         (328)
                                                   -----------  -----------  ----------  ------------  -----------
  Comprehensive income                             $   10,265   $    6,433   $   7,736   $       472   $    7,229
                                                   ===========  ===========  ==========  ============  ===========
</TABLE>

   The accompanying notes to condensed consolidated financial statements are an
                       integral part of these statements.

                                        5
<PAGE>



<TABLE>
<CAPTION>

                                    THE GSI GROUP, INC. AND SUBSIDIARIES
                              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (IN THOUSANDS)
                                                (UNAUDITED)


                                                                        SUCCESSOR       PREDECESSOR
                                                                     -----------  ------------------------
                                                                                                  RESTATED
                                                                       MAY17,      JANUARY 1,       NINE
                                                                        2005          2005         MONTHS
                                                                       THROUGH       THROUGH       ENDED
                                                                      SEPT. 30,      MAY 16,      OCT. 1,
                                                                        2005          2005          2004
                                                                     -----------  -------------  ----------
<S>                                                                  <C>          <C>            <C>
Cash Flows From Operating Activities:
 Net income (loss)                                                   $    8,620   $        (64)  $   7,557
 Adjustments to reconcile net income (loss) to cash provided
   By operating activities:
     Depreciation and amortization                                        4,190          2,070       3,937
     Amortization of deferred financing costs and debt discount             279            572         931
     (Gain)loss on sale of property and equipment                           (20)           (84)        260
     Non-cash charges related to inventory fair value adjustment            661             --          --
     Deferred taxes                                                      (3,766)           (69)       (386)
     Minority interest in net income of subsidiaries                        174            105          69
     Minority interest compensation expense                                 463            779         431
     Stock-based compensation                                                --          2,842       1,793
     Changes in:
       Accounts receivable                                              (10,492)       (11,388)    (15,143)
       Inventories                                                       18,188         (6,968)     (1,073)
       Other current assets                                                (668)         5,159       2,188
       Accounts payable                                                    (528)         5,388         426
       Accrued expenses and payroll and payroll related expenses         10,066          3,130       8,519
       Customer deposits                                                 (1,548)        (1,449)       (261)
                                                                     -----------  -------------  ----------
         Net cash flows provided by operating activities                 25,619             23       9,248
                                                                     -----------  -------------  ----------

Cash Flows From Investing Activities:
 Capital expenditures                                                    (2,569)        (2,046)     (3,415)
 Proceeds from sale of property and equipment                                80            268         870
 Other                                                                      (68)           (48)         (7)
                                                                     -----------  -------------  ----------
         Net cash flows used in investing activities                     (2,557)        (1,826)     (2,552)
                                                                     -----------  -------------  ----------

Cash Flows From Financing Activities:
 Proceeds from stockholder loan                                              --             12       5,816
 Payments on stockholder loan                                            (5,012)            --        (970)
 Proceeds from issuance of long-term debt                               110,000             --       1,850
 Payments on long-term debt                                            (100,035)           (90)         --
 Proceeds under line of credit agreement                                103,529         10,369       1,711
 Payments under line of credit agreement                               (141,234)            --          --
 Net proceeds of equity contributed                                      15,326             --          --
 Payment of deferred financing costs                                     (5,568)          (485)       (659)
 Dividends paid                                                              --         (7,913)       (657)
 Other                                                                    1,477             50     (15,005)
                                                                     -----------  -------------  ----------
         Net cash flows provided by (used in) financing activities      (21,517)         1,943      (7,914)
                                                                     -----------  -------------  ----------

Effect of Exchange Rate Changes on Cash                                     (69)            (7)         18

Increase (decrease) In Cash and Cash Equivalents                     $    1,476   $        133   $  (1,200)
Cash and Cash Equivalents, beginning of period                            2,437          2,304       3,439
                                                                     -----------  -------------  ----------
Cash and Cash Equivalents, end of period                             $    3,913   $      2,437   $   2,239
                                                                     ===========  =============  ==========
</TABLE>


   The accompanying notes to condensed consolidated financial statements are an
                       integral part of these statements.

                                        6
<PAGE>
                      THE GSI GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

          The  financial  statements  have  been prepared by The GSI Group, Inc.
(the  "Company"),  without  audit,  pursuant to the rules and regulations of the
Securities  and  Exchange  Commission.  Certain  information  and  footnote
disclosures  normally  included  in  financial statements prepared in accordance
with  accounting  principles  generally accepted in the United States of America
have  been condensed or omitted pursuant to such rules and regulations, although
the  Company  believes that the disclosures are adequate to make the information
not  misleading.  The  condensed  and restated consolidated balance sheet of the
Company  as  of  December  31,  2004  has been derived from the audited restated
consolidated  balance sheet of the Company as of that date.  Certain information
and  note  disclosures  normally  included  in  the  Company's  annual financial
statements in accordance with generally accepted accounting principles have been
condensed  or omitted.  These financial statements should be read in conjunction
with  the  financial  statements  and  related  notes contained in the Company's
December  31,  2004  Form  10-K/A  as  filed  with  the  Securities and Exchange
Commission.  Other  than  as  indicated  herein,  there have been no significant
changes  from  the  data  presented  in  the  Company's  2004  Form  10-K/A.

     In  the  opinion  of  management,  the  financial  statements  contain  all
adjustments necessary to present fairly the financial position of the Company as
of  September  30,  2005  and  the  results of operations and cash flows for the
successor period of May 17 through September 30, 2005 and the three months ended
September  30,  2005  and  the  predecessor periods of January 1 through May 16,
2005, three months ended October 1, 2004, and nine months ended October 1, 2004.
Those  adjustments  consist  only  of  normal  recurring  adjustments.

     The  results  of  operations  for  the  successor  period of May 17 through
September  30,  2005  and  the  three  months  ended  September 30, 2005 and the
predecessor  periods  of  January  1  through  May  16, 2005, three months ended
October  1,  2004,  and  nine  months  ended October 1, 2004 are not necessarily
indicative  of  the  operating  results  for  the  full  year.

     The  accompanying  combined  financial  statements  are presented under two
different  ("Predecessor"  and "Successor") bases of accounting. The predecessor
and  successor  financial  statements  are  consolidated  and include all of the
accounts  of GSI Group, Inc. and its subsidiaries. All intercompany transactions
and  balances  have  been  eliminated.

2.    ACQUISITION  AND  FINANCING  TRANSACTIONS  (THE  TRANSACTION)
The  Acquisition
     On  April  6,  2005, all of the Company's stockholders entered into a stock
purchase  agreement  with  GSI  Holdings,  Inc. ("GSI Holdings"), a newly formed
holding  company  owned primarily by entities affiliated with Charlesbank Equity
Fund  V,  Limited Partnership, pursuant to which GSI Holdings purchased for cash
all  of  the issued and outstanding shares of the Company's common stock. On May
16,  2005,  under the "successor" basis of accounting, the closing of that stock
purchase  ("the Acquisition") occurred. Upon the closing of that stock purchase,
the  Company  became a direct, wholly owned subsidiary of GSI Holdings. The cash
costs  of  the  Acquisition  together  with  the  fees and expenses necessary to
consummate the transaction were financed by equity contributions of $56,340,000,
issuance  of $110,000,000 million of senior subordinated notes (the "Notes") due
May  15,  2013,  and  a  five  year  $60,000,000  revolving  credit  facility.

     Immediately  following the closing, the Company converted from a subchapter
"S"  corporation  to  a subchapter "C" corporation, which means that it became a
taxable entity for federal and state income tax purposes. For the portion of the
2005  fiscal year preceding the closing date, the Company made tax distributions
to its selling stockholders at the closing in an amount sufficient to allow them
to  pay  income  taxes  relating  to  such  period.

     The  Acquisition  of  the Company has been accounted for in accordance with
SFAS  No.  141  "Business  Combinations"  and  reflects  the  "push down" of GSI
Holdings'  basis  into  our  financial  statements.  The purchase price is being
allocated  to  the  assets  acquired  and  the  liabilities assumed based on the
estimates  of respective fair values at the date of acquisition. The fair values
are  being  determined  by  management  estimates and by independent third party
valuations.
                                        7
<PAGE>
     The  following  table  summarizes  the  estimated  fair value of the assets
acquired  and  of  the  liabilities  assumed at the date of the Acquisition. The
Company is in the process of finalizing the third party valuations of the assets
acquired  and liabilities assumed; accordingly the preliminary allocation of the
purchase  price  is  likely  to  change.
<TABLE>
<CAPTION>



<S>                                    <C>
Cash                                   $  2.4
Accounts receivable, net                 36.0
Inventories, net                         60.9
Property, plant and equipment            33.4
Other intangible assets                  57.8
Goodwill                                 40.0
Other assets                              2.8
                                       ------

Total assets acquired                   233.3

Accounts payable and accrued expenses    38.0
Customer deposits                         5.6
Long-term debt                          150.0
Minority interest                         2.2
Deferred income taxes                     0.2
                                       ------

Total liabilities assumed               196.0
                                       ------

Purchase price                         $ 37.3
                                       ======
</TABLE>


<TABLE>
<CAPTION>



ACQUISITION AND FINANCING                               AS OF MAY 17, 2005
-----------------------------------------------------

<S>                                                    <C>
Cash paid upon acquisition                             $            34,934
Repay old indebtedness                                             149,864
Bond repayment penalty                                               1,729
Repayment of interest                                                1,252
Estimate of acquisition expenses                                     2,371
                                                       --------------------
Acquisition Consideration                              $           190,150


Historical net book value of tangible assets acquired               86,678
                                                       --------------------
Excess purchase price to be allocated                              103,472

Inventory step-up                                                   (5,288)
Property, plant and equipment step-up                                 (561)
Other intangibles                                                  (57,780)
Deferred tax liability                                                 224
Goodwill                                                           (40,067)
                                                       --------------------

                                                       $                 0
                                                       ====================
</TABLE>



     The  aggregate  amortization  expense  for  the period May 17, 2005 through
September  30,  2005  for the identified intangible assets was $3.0 million. The
identified  intangible  assets are being amortized on a straight-line basis over
their  individual  estimated  useful  lives.

     The carrying value of inventory was increased by approximately $5.3 million
to  reflect  the  inventory  fair  value at May 16, 2005. The effect of the fair
value  adjustment is to increase the cost of goods sold and thereby reduce gross
profit  in  future  periods  when this inventory is sold. The Company expects to
                                        8
<PAGE>
sell all of the inventory by the end of the year. During the period May 17, 2005
through  September  30,  2005,  cost of goods sold included $4.6 million of this
fair  value  adjustment.

     The  carrying  value  of  property,  plant  and  equipment was increased by
approximately $0.6 million to reflect the fair value at May 16, 2005. The effect
of  the  fair  value adjustment is to increase costs and expenses for additional
depreciation  in  future  periods  over  the  useful  lives  of  the  assets.

     The  following  schedule  explains the changes in Stockholder's Equity as a
result  of  the  purchase:
<TABLE>
<CAPTION>


                     Common   Common   Paid-in     Other     Retained    Treasury    Treasury
                     Voting    Non-    Capital    Compre-    Earnings     Voting       Non-       Total
                              Voting              hensive                             Voting
<S>                  <C>      <C>      <C>       <C>        <C>         <C>         <C>         <C>
Predecessor as of
December 31,
2004 as restated     $    16  $     2  $  5,821  $(10,124)  $    (991)  $ (41,550)  $      (9)  $(46,835)

Predecessor
Income (loss)
Jan 1-May 16,
2005                                                  536         (64)                               472

Change in Equity
due to Acquisition
On May 16, 2005                          92,060     9,588       1,055                            102,703

Successor Income                                    1,645       8,620                             10,265

Successor Equity
at Sept. 30, 2005    $    16  $     2  $ 97,881  $  1,645   $   8,620   $ (41,550)  $      (9)  $ 66,605
</TABLE>




The  Financing  Transactions
     In  connection  with  the  closing  of the Acquisition on May 16, 2005, the
Company  entered  into  the  following  financing  transactions,  each  of which
occurred  prior  to  or  concurrently  with  the  closing  of  the  Acquisition:

-     the  closing  of  the  issuance  of  the  Notes;
-     the  closing  of our refinanced senior secured credit facility, consisting
of  a  $60.0  million revolving credit facility. Approximately $29.5 million was
drawn  on  the  revolving  credit  facility on the closing date, with additional
availability  of approximately $22.5 million under the revolving credit facility
on  the  closing  date;
-     the call for redemption of all of our existing 10 1/4% senior subordinated
notes  due 2007, the deposit of all amounts necessary to redeem those notes with
the trustee, and the subsequent retirement of all of those notes upon completion
of  the  redemption;
-     the repayment in full of all amounts outstanding under our existing credit
facility;
-     the repayment in full of all amounts outstanding under loans made to us by
our  founder  and  selling  majority  stockholder;  and
-     the  cash  equity  contribution  to  GSI  Holdings  by our equity sponsor,
Charlesbank Equity Fund V, Limited Partnership (a small amount of which was made
by  nonaffiliated  funds) of $56.3 million, of which approximately $43.8 million
(less  certain expenses and other amounts) was paid to our selling stockholders,
and  approximately  $12.5  million  was  contributed  to  our  common  equity.
                                        9
<PAGE>
Pro  Forma  Information
     The  unaudited, supplemental pro forma information reflects the Transaction
as  if  it  had  occurred  on  January  1,  2004.  Included  in  these pro forma
adjustments  are  the consideration of the fair value of the property, plant and
equipment;  intangibles; amortization of the deferred financing fees; income tax
expense  and  the  interest  expense  related  to  the  new debt.  The pro forma
information  does  not  reflect non-recurring charges that will be incurred with
the  amortization of approximately $5.3 million of cost of goods sold related to
the  write  up of inventory to fair value in purchase accounting.  The pro forma
net income for the three and nine month periods ended September 30, 2005 include
$2.0  million  and  $4.6  million  of  such  costs,  respectively.

<TABLE>
<CAPTION>



                                 Three months      Three months       Nine months       Nine months
                                    Ended              Ended             Ended             Ended
                                 September 30,      October 1,       September 30,      October 1,
                                     2005              2004               2005              2004
<S>                          <C>                   <C>            <C>                   <C>
Pro Forma Net Sales          $            107,723  $      89,692  $            270,536  $    227,759

Pro Forma Net Income         $              5,107  $       2,703  $              3,482  $      1,545

Earnings per share           $               6.18  $        3.27  $               4.21  $       1.06

</TABLE>


3.     RESTATEMENTS

First  Restatement

     During  the Company's 2004 year-end closing process, the Company discovered
unintentional  accounting  errors  in  prior  years'  financial statements.  The
errors  were  corrected  in the 2004 financial statements.  A description of the
errors  and related impact of each on the financial statements follows.  Amounts
are  stated  in  whole  dollars.

     At  the  end  of  2001,  the Company began the process of shutting down its
Mason City, Iowa plant, which served as the headquarters for its DMC subsidiary.
As  the  Company  began the revenue cycle process at its corporate headquarters,
cost  of  sales  estimates  were  understated during 2002, while cost accounting
records  were  being  developed for the products previously handled by the Mason
City  employees,  which  caused  the  remaining  inherited inventory costs to be
overstated  by  approximately  $6,470,000.  The  Company  became  aware  of  the
overstatement  in  early  2003, but erroneously assigned the overstated value to
inventory  that  would  flow  through the cost of sales over the next few years.
This  erroneous  correction  reduced  the  stated  value  of  the  inventory  by
approximately  $2,206,000  in  2003  and  $4,264,000  in  2004.  During the 2004
year-end closing process, this issue was re-examined, and the Company determined
that  it  would  be  appropriate  to restate the 2002 cost of sales and year-end
inventory,  the  period  when  the  overstatement  occurred.  This  adjustment
increased the previously reported net income by $628,000 in the third quarter of
2004  and  $1,522,000  for  the  first  nine  months  of  2004.

     In 1997, the Company's majority stockholder began selling non-voting shares
to  certain  employees.  The  Company's majority stockholder helped finance each
employee's  purchase  with  a  loan to each employee with the shares as the only
collateral  for  the notes.  APB Opinion 25 and its interpretations require that
these  transactions  be  imputed  to  the  Company's financial statements and be
accounted  for  as  variable  stock  awards,  which practice the Company had not
previously  followed.  Treatment  of  the  transaction as a variable stock award
requires  the  Company  to recognize as compensation expense the extent to which
the  fair  market  value  of the underlying shares exceeds the original purchase
price  for  such  shares. The fair value of the underlying shares first exceeded
the  price  paid  for the shares in 2002.  The effect of recording the resulting
compensation  expense  reduced previously reported net income by $729,000 in the
third  quarter  of  2004  and  $1,886,000  for  the  first  nine months of 2004.

     In  2002,  the  Company  entered  into an agreement with the manager of its
Brazilian  subsidiary  whereby  the  Company  agreed  to issue him shares of the
Brazilian subsidiary's stock primarily based on the financial performance of the
Brazilian  subsidiary.  This  agreement  constitutes  a  stock  compensation
arrangement  for  which  the  Company  did not previously recognize compensation
expense.  The  effect  of  recording  compensation  expense  related  to  this
arrangement  reduced  previously  reported  net  income by $188,000 in the third
quarter  of  2004  and  $500,000  for  the  first  nine  months  of  2004.


     Prior to the 2004 closing process, the Company had been using Mexican Pesos
as  the  functional currency of its Mexican subsidiary.  During the 2004 closing
process,  the  Company  determined  that  the correct functional currency of its
                                       10
<PAGE>
Mexican subsidiary should be U.S. Dollars rather than Mexican Pesos.  The effect
of  this  change  reduced previously reported net income by $10,000 in the third
quarter  of  2004  and  $26,000  for  the  first  nine  months  of  2004.

     The Company changed from a stop-loss workers' compensation insurance policy
to a high-deductible self-insured policy in 2000 and did not subsequently accrue
a  liability  for  claims incurred but not reported.  The effect of accruing for
such  claims  in  2004  reduced previously reported net income by $82,000 in the
third  quarter  of  2004  and  $219,000  for  the  first  nine  months  of 2004.

     The  Company also made adjustments in 2004 to correct previous reporting of
overhead  adjustments  in  overseas inventories and gain on inter-company sales.

Second  Restatement

     Subsequent  to the sale of all of the stock of the Company on May 16, 2005,
the  new  management  appointed  by  the  new  owner  of  the Company discovered
additional  accounting  errors  in prior years' financial statements. The errors
have  been  corrected  in the accompanying 2005 and 2004 financial statements. A
description of the errors and related impact on each of the financial statements
follows.  Amounts  are  stated  in  whole  dollars.

The  Company  made adjustments in the first fiscal quarter of 2005 and the first
three  fiscal  quarters  of  2004  to  correct its allowance for slow moving and
obsolete  inventory to conform to the Company's historical policy. The effect of
these  changes  reduced net income by $243,000 in the first three months of 2005
and  $140,000  and $420,000 in the third fiscal quarter and first nine months of
2004,  respectively.

The  Company  made  adjustments  in  2004  to  expense warranty and research and
development  costs,  which were erroneously included in inventory. The effect of
these  changes  increased  quarterly  net income by $164,000 in the third fiscal
quarter  of  2004  and  $491,000  in the first nine months of 2004.  The Company
reclassified  warranty  and  research and development costs out of cost of sales
and  into  operating  expenses  for  2005  and  2004, which had no effect on net
income.

     The  Company  made  adjustments  in  2005 and 2004 to correct the amount of
overhead  that  was  included  in  inventory. The previous inventory included an
excessive  amount of overhead. The effect of these changes reduced net income by
$998,000  in the first three months of 2005 and increased net income by $546,000
and  $1,639,000  in  the  third  fiscal  quarter  and first nine months of 2004,
respectively.

     The  combined  effect  of these changes reduced net income by $1,241,000 in
the  first  three  months  of  2005  and  increased  net  income by $570,000 and
$1,710,000  in  the  third  fiscal  quarter  and  first  nine  months  of  2004,
respectively.

     The  impact  of  the  above  noted  adjustments  on the Company's unaudited
financial  statements  for the first three months of 2005, the first nine months
of  2004  and  for  the third fiscal quarter of 2004 are summarized in the table
below.  Amounts  are  stated  in  thousands of dollars except for per share line
items.
<TABLE>
<CAPTION>

                                        AS
                                     PREVIOUSLY     FIRST       AS          SECOND         AS
                                      REPORTED   RESTATEMENT  RESTATED    RESTATEMENT   RESTATED
<S>                                   <C>        <C>          <C>        <C>            <C>
FIRST THREE  MONTHS OF
2005

Consolidated Balance Sheet:
     Inventory                        $  56,992               $  56,992  $     (5,389)  $  51,533
     Retained earnings                    7,620                   7,620        (5,389)      2,231

Consolidated Statement of Income:
     Cost of sales                       54,750                  54,750         1,241      55,991
     Operating income                     8,935                   8,935        (1,241)      7,694
     Net income (loss)                    5,214                   5,214        (1,241)      3,973
     Basic and diluted income (loss)
     per share                        $    6.31               $    6.31  $      (1.51)  $    4.80
</TABLE>
                                       11
<PAGE>

<TABLE>
<CAPTION>

                                          AS
                                      PREVIOUSLY     FIRST           AS          SECOND       AS
                                       REPORTED    RESTATEMENT    RESTATED    RESTATEMENT   RESTATED
<S>                                   <C>         <C>            <C>         <C>            <C>
FIRST NINE MONTHS OF 2004

Consolidated Balance Sheet:
     Inventory                        $  52,355                  $  52,355   $     (3,699)  $  48,656
     Retained earnings                   18,867                     18,867         (3,699)     15,168

Consolidated Statement of Income:
     Cost of sales                      181,654         (1,489)    180,165         (6,686)    173,479
     Selling, general and
     administrative expenses             26,885          2,222      29,107             --      29,107
     Warranty and R&D expenses               --             --          --          4,976       4,976
     Operating income                    19,319         (1,319)     18,000          1,710      19,710
     Other, net                          (1,331)           174      (1,157)
     Net income (loss)                    7,086         (1,239)      5,847          1,710       7,557
     Basic and diluted income (loss)
     per share                        $    4.85   $      (0.85)  $    4.00   $       1.17   $    5.17
</TABLE>


<TABLE>
<CAPTION>

                                         AS
                                      PREVIOUSLY     FIRST           AS          SECOND        AS
                                       REPORTED    RESTATEMENT    RESTATED    RESTATEMENT   RESTATED
<S>                                   <C>         <C>            <C>         <C>            <C>
THIRD FISCAL QUARTER OF  2004

Consolidated Balance Sheet:
     Inventory                        $  52,355                  $  52,355   $     (3,699)  $  48,656
     Retained earnings                   18,867                     18,867         (3,699)     15,168

Consolidated Statement of Income:
     Cost of sales                       68,315           (605)     67,710         (2,809)     64,901
     Selling, general and
     administrative expenses              9,832            886      10,718             --      10,718
     Warranty and R&D expenses               --             --          --          2,239       2,239
     Operating income                    11,546           (445)     11,101            570      11,671
     Other, net                            (822)           363        (459)
     Net income (loss)                    6,680           (430)      6,250            570       6,820
     Basic and diluted income (loss)
     per share                        $    8.08   $      (0.52)  $    7.56   $       0.69   $    8.25
</TABLE>


4.     DETAIL  OF  CERTAIN  ASSETS
<TABLE>
<CAPTION>


                                  SUCCESSOR      PREDECESSOR
                                 (UNAUDITED)      (RESTATED)
                                SEPTEMBER 30,    DECEMBER 31,
                                    2005             2004
                               ---------------  --------------
              (IN THOUSANDS)
<S>          <C>               <C>              <C>
Inventories
             Raw materials     $        16,933  $       22,876
             Work-in-process             5,167           7,581
             Finished goods             20,622          18,196
             Total             $        42,722  $       48,653
                               ---------------  --------------
</TABLE>



     Inventory  at  September  30,  2005 contains $661 of the fair value step-up
recorded  at  the  date  the  Company  was  purchased  by  GSI  Holdings.

                                       12
<PAGE>

5.   SUPPLEMENTAL  CASH  FLOW  INFORMATION

     The  Company paid approximately $0.5 million, $6.0 million and $6.9 million
in interest during the successor period of May 17 through September 30, 2005 and
the  predecessor periods of January 1 through May 16, 2005 and nine months ended
October  1, 2004, respectively.  The Company paid $1.9 million, $0.2 million and
$0.0  million  in  income  taxes  during  the successor period of May 17 through
September 30, 2005 and the predecessor periods of January 1 through May 16, 2005
and  nine  months  ended  October  1,  2004,  respectively.

6.     DEBT

REVOLVING  CREDIT  FACILITY

     On  May  16,  2005,  concurrently  with the issuance of $110,000,000 of 12%
Senior  Notes due 2013 and the closing of the acquisition of The GSI Group, Inc.
(the  "Company")  by  GSI  Holdings  Corp.  ("GSI  Holdings"),  an  affiliate of
Charlesbank  Equity  Fund  V,  Limited  Partnership,  the Company refinanced its
existing credit facility with a five-year asset-backed revolving credit facility
provided  by  lenders  led  by  Wachovia  Capital  Finance Corporation (Central)
("Wachovia"),  as  the  agent.  The maximum amount of revolving credit available
under  the Company's refinanced credit facility (the "Credit Facility") is $60.0
million and the Company has the option to increase the facility in increments of
$5.0  million  up  to a maximum of $75.0 million (subject to compliance with the
covenants  in the indenture). Up to $15 million of the facility is available for
issuances  of  letters  of  credit.

     The Credit Facility provides floating rate revolving loans bearing interest
at  a  rate  equal  to 0.0% to 0.5% over Wachovia's prime rate or 1.50% to 2.00%
over  LIBOR,  in  each case based on the excess availability under the borrowing
base  from  time  to  time.

     The  Company's obligations under its Credit Facility are secured by a first
priority  lien  on,  and  pledge of, substantially all of its and any subsidiary
guarantors'  current and future assets. In addition, GSI Holdings pledged all of
its shares of the Company's common stock, as well as any rights that it may have
under  the  stock purchase agreement with the Company's selling stockholders, as
additional  collateral  security.

     The  Credit  Facility  contains  certain  covenants  that are substantially
similar  to,  but  generally  no  more restrictive than, the covenants under the
Company's  existing  credit  facility.  The Company's ability to make borrowings
under  the  Credit  Facility is subject to customary representations, warranties
and  covenants.  The  Credit  Facility also contains various customary events of
default.

SENIOR  NOTES  DUE  2013

     On  May  16,  2005,  concurrently  with  the  refinancing  of  its existing
revolving  credit  facility  with  Wachovia  Capital Finance Corporation and the
closing  of  the  acquisition  of  The  GSI  Group,  Inc. (the "Company") by GSI
Holdings  Corp.  ("GSI  Holdings"),  an  affiliate of Charlesbank Equity Fund V,
Limited  Partnership,  the  Company  issued  and  sold  $110,000,000  aggregate
principal amount of Senior Notes due 2013 (the "Notes"). Payment on the Notes is
guaranteed  on  an  unsecured  basis by GSI Holdings and by all of the Company's
domestic  material subsidiaries. None of the Company's domestic subsidiaries are
currently  material subsidiaries. The Notes were issued under an Indenture among
the  Company, the Guarantors and U.S. Bank National Association, as trustee (the
"Indenture").

     The  Notes  have  a  fixed  annual interest rate of 12%, which will be paid
semiannually  in  arrears  on May 15 and November 15, commencing on November 15,
2005.

     Prior  to  May 15, 2008, the Company may redeem up to 35% of the Notes at a
redemption  price  of  112.000% of the principal amount, plus accrued and unpaid
interest  from  the  proceeds of certain equity offerings; provided that: (i) at
least 65% of the aggregate principal amount of Notes originally issued under the
Indenture  (excluding  Notes  held  by the Company and its subsidiaries) remains
outstanding  immediately  after  the  occurrence of such redemption and (ii) the
redemption  occurs  within  90  days  of  the date of the closing of such equity
offering.  Except  pursuant  to  the  preceding  sentence, the Notes will not be
redeemable  at  the  Company's  option  prior  to  May  15,  2009.

     On or after May 15, 2009, the Company may redeem all or a part of the Notes
upon  not  less  than 30 nor more than 60 days' notice, at the redemption prices
(expressed  as  percentages  of  principal amount) listed below plus accrued and
                                       13
<PAGE>
unpaid  interest  and  liquidated damages, if any, on the Notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on  May  15  of  the  years indicated below, subject to the rights of holders of
Notes  on  the relevant record date to receive interest on the relevant interest
payment date: 2009 at a redemption price of 106.000%; 2010 at a redemption price
of  103.000%;  and  2011  and  thereafter  at  a  redemption  price of 100.000%.

     Upon  a  change  of  control,  as  defined in the Indenture, the Company is
required to offer to purchase all of the Notes then outstanding for cash at 101%
of  the  aggregate principal amount thereof plus accrued and unpaid interest and
liquidated  damages,  if  any, on the Notes repurchased to the date of purchase,
subject to the rights of holders of Notes on the relevant record date to receive
interest  due  on  the  relevant  interest  payment  date.

     Also on May 16, 2005, the Company issued a call for redemption for all $100
million  principal  amount of its existing 10-1/4% senior subordinated notes due
2007  at  a price of 101.729% plus accrued interest from May 1, 2005 to the date
of  redemption.  These  notes  were  redeemed  on  June  15,  2005.

7.     INCOME  TAXES

     Upon  conversion  from  a  subchapter  "S"  corporation to a subchapter "C"
corporation,  the Company recorded a net deferred tax asset of $4,560 on May 17,
2005.  The following table represents the successor and predecessor income taxes
for  the  first  nine  months  of  2005  and  the  first  nine  months  of 2004.

<TABLE>
<CAPTION>

                                 SUCCESSOR                                PREDECESSOR
                      ----------------------------   ----------------------------------------------------------
                      May 17, 2005 - September 30,   January 1,  - May 16, 2005          Nine months ended
                                   2005                                                   October 1, 2004
                      ----------------------------   ----------------------------  ----------------------------
                       Income/(Loss)    Income Tax   Income/(Loss)    Income Tax   Income/(Loss)    Income Tax
                       --------------                                ------------
                           Before        Expense/        Before        Expense/        Before        Expense/
                        Income Taxes    (Benefit)     Income Taxes    (Benefit)     Income Taxes    (Benefit)
<S>                    <C>             <C>           <C>             <C>           <C>             <C>
U.S.                   $       4,952   $    (1,422)  $        (564)  $       495   $       4,638   $      (188)
Brazil                         1,541           393           1,051           336           2,048           514
Malaysia                         503             2            (317)          (10)            691            74
Mexico                           389            (3)            432           256             368            15
China                             (8)           --             242            --             (62)           --
Poland                           (30)           --              (2)           --            (535)           --
South Africa                     206           (37)            209            38             824            --
                       --------------  ------------  --------------  ------------  --------------  ------------

Total                  $       7,553   $    (1,067)  $       1,051   $     1,115   $       7,972   $       415
                       ==============  ============  ==============  ============  ==============  ============


Current income taxes                   $     2,699                   $     1,184                   $       801
Deferred income taxes                       (3,766)                          (69)                         (386)
                                       ------------                  ------------                  ------------

Total                                  $    (1,067)                  $     1,115                   $       415
                                       ============                  ============                  ============

</TABLE>



<TABLE>
<CAPTION>
                                 Successor                               Predecessor
                         ----------------------------  -----------------------------------------------
                         May 17, 2005 - September 30,   January 1, - May 16, 2005    Nine months ended
                                    2005                                            September 30, 2004
<S>                           <C>                    <C>                         <C>
Income taxes at U.S.
              statutory rate   $              2,644   $                      368  $             2,790
Effect of conversion to a
"C" corporation                              (4,560)                          --                   --
State income taxes                              551                           77                  582
Foreign rate differential
and other                                       298                          670               (2,957)
                                            --------  --------------------------  --------------------

Total                          $             (1,067)  $                    1,115  $               415
                                            ========  ==========================  ====================
</TABLE>
                                       14
<PAGE>
     The  following  table represents the successor and predecessor income taxes
for  the  third  quarter  of  2005  and  the  third  quarter  of  2004.
<TABLE>
<CAPTION>

                                        SUCCESSOR                          PREDECESSOR
                          July 2, - September 30, 2005          Three months ended October 1, 2004
                       --------------------------------------     ------------------------------
                             Income/(Loss)         Income Tax        Income/(Loss)    Income Tax
                                Before              Expense/              Before        Expense/
                             Income Taxes          (Benefit)           Income Taxes    (Benefit)
<S>                    <C>                        <C>           <C>             <C>
U.S.                   $                  7,763   $     3,827    $       6,014   $       (13)
Brazil                                    1,048           250              431            91
Malaysia                                    371             1               85            17
Mexico                                      171            (3)             197            --
China                                       (27)           --              (20)           --
Poland                                      (18)           --             (106)           --
South Africa                                139            --              314            --
                       -------------------------  ------------   --------------  ------------

Total                  $                  9,447   $     4,075    $       6,915   $        95
                       =========================  ============    =============  ============


Current income taxes                              $     2,199                    $       224
Deferred income taxes                                   1,876                           (129)
                                                  ------------                   ------------

Total                                             $     4,075                    $        95
                                                  ============                   ============
</TABLE>



<TABLE>
<CAPTION>
                                    SUCCESSOR                               PREDECESSOR
                              July 2, - September 30, 2005    Three months ended October 1, 2004
<S>                           <C>                            <C>
Income taxes at U.S.
              statutory rate  $                       3,306  $                             2,420
State income taxes                                      690                                  505
Foreign rate differential
and other                                                79                               (2,830)
                              -----------------------------  ------------------------------------

Total                         $                       4,075  $                                95
                              =============================  ====================================

</TABLE>

8.     COMMITMENTS  AND  CONTINGENCIES

     Sales  of  agricultural  equipment are seasonal, with farmers traditionally
purchasing  grain  storage  bins  and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and poultry
producers  purchasing equipment during prime construction periods in the spring,
summer  and  fall.  The  Company's  sales  and net income have historically been
lower  during the first and fourth fiscal quarters as compared to the second and
third  quarters.

9.     BUSINESS  SEGMENT

     The  Company  has  no  separately  reportable  segments  in accordance with
Statement  of  Financial Accounting Standard ("SFAS") No. 131, "Disclosure About
Segments  of  an Enterprise and Related Information."  Under the enterprise wide
disclosure  requirements  of SFAS 131, the Company reports sales by each product
line.  Amounts  for  the  first  nine  months  of  2005  and  2004, based on the
aggregation  of  historical  and successor accounting, are as shown in the table
below  (in  thousands).

                                       15
<PAGE>


<TABLE>
<CAPTION>


                           (UNAUDITED)     (UNAUDITED)     (RESTATED)
                            SUCCESSOR      PREDECESSOR
                                                              NINE
                                                             MONTHS
                            MAY 17 -       JANUARY 1, -      ENDED
                         ---------------  --------------  ------------
                          SEPTEMBER 30,      MAY 16,       OCTOBER 1,
                         ---------------  --------------  ------------
                              2005             2005           2004
                         ---------------  --------------  ------------
<S>                      <C>              <C>             <C>
Grain product line       $        93,125  $       67,234  $   146,737
Swine product line                29,590          20,789       34,207
Poultry product line              33,186          26,612       47,401
Discontinued operations               --              --         (586)
                         ---------------  --------------  ------------
     Sales               $       155,901  $      114,635  $   227,759
                         ===============  ==============  ============
</TABLE>


     For  the  first  nine  months  of 2005 and 2004, sales in Brazil were $27.4
million  and $20.2 million, respectively.  Long-lived assets in Brazil were $6.0
million  at  September  30,  2005.


                                       16
<PAGE>

ITEM  2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
        RESULTS  OF  OPERATIONS.

     The  following  discussion  of  the  financial  condition  and  results  of
operations  of  the  Company should be read in conjunction with the Consolidated
Financial  Statements  and  the  notes  included  in  Item  1  hereof.

GENERAL

     The  Company  is  a major worldwide manufacturer of agricultural equipment.
The  Company's  grain,  swine  and  poultry  products  are used by producers and
purchasers  of  grain,  and  by  producers  of swine and poultry. Demand for our
agricultural  equipment  is  driven  by  the  overall  level of grain, swine and
poultry  production,  the  level  of  net  farm income, agricultural real estate
values  and  producers'  increasing  focus  on  improving  productivity in their
operations. In addition, fluctuations in grain and feed prices affect our sales,
with  sustained  increases  in  grain  and feed prices increasing demand for our
grain  equipment  and  decreasing demand for our swine and poultry equipment. We
believe  that  our  diversified  product  offerings  mitigate  the  effects  of
fluctuations in the price of grain. Sales of our swine and poultry equipment are
also  affected  by long-term trends in consumer demand for pork and poultry both
domestically  and  internationally.

     Sales  of  agricultural  equipment are seasonal, with farmers traditionally
purchasing  grain  storage bins and grain conditioning and handling equipment in
the  summer  and  fall  in conjunction with the harvesting season, and swine and
poultry  producers purchasing equipment during prime construction periods in the
spring,  summer  and  fall. The Company's sales, operating income and net income
have  historically  been  lower  during  the first and fourth fiscal quarters as
compared  to  the  second and third quarters. Traditionally, this has caused the
Company  to  have  increased  working  capital needs during the second and third
quarters  as  material  is purchased and converted to inventory during the year.

     Although  the Company's sales are primarily denominated in U.S. dollars and
are  not  generally  affected  by currency fluctuations (except for transactions
from  the  Company's  Brazilian operation), the production costs, profit margins
and  competitive  position  are  affected  by  the  strength  of the U.S. dollar
relative  to  the strength of the currencies in countries where its products are
sold.

     The Company's international sales have historically comprised a significant
portion  of  our  total  sales.  In  the first nine months of 2005 and 2004, the
Company's  international  sales  accounted for 26% of total sales. International
operations  generally  are  subject  to  various  risks  that are not present in
domestic  operations,  including  restrictions  on  dividends,  restrictions  on
repatriation  of  funds, unexpected changes in tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, political instability,
fluctuations  in  currency  exchange  rates, reduced protection for intellectual
property  rights in some countries, seasonal reductions in business activity and
potentially  adverse  tax  consequences, any of which could adversely impact our
international  operations.

     The  primary raw materials we use to manufacture our products are steel and
polymers.  Fluctuations  in the prices of steel and, to a lesser extent, polymer
materials  can  impact  our  cost  of  sales.

     On  May  16, 2005, in connection with the closing of the purchase of all of
the  issued and outstanding shares of the Company's common stock by GSI Holdings
Corp.,  the  Company  was  converted  from  a  subchapter  "S"  corporation to a
subchapter "C" corporation, which means that it will now be a taxable entity for
federal  and state income tax purposes.  For the portion of the Company's fiscal
year  preceding  that  date,  the  Company  has  made  a tax distribution to its
stockholders in an amount sufficient to allow them to pay their resulting income
taxes  for  such  period.

ITEMS  AFFECTING  COMPARABILITY

     On  April  6,  2005, all of the Company's stockholders entered into a stock
purchase  agreement  with  GSI  Holdings,  Inc.  (GSI  Holdings), a newly formed
holding  company  owned  primarily by an affiliate of Charlesbank Equity Fund V,
Limited  Partnership,  pursuant  to which GSI Holdings purchased for cash all of
the  issued  and  outstanding  shares  of the Company's common stock. On May 16,
2005,  under the "successor" basis of accounting, the closing of the Acquisition
occurred.  Consequently,  our  financial  statements shown in Item 1 of this 10Q
have been presented under two different bases of accounting, with all historical
Company  activity  up to and including May 16, 2005 under the predecessor basis,
                                       17
<PAGE>
and  all  Company  activity  from  May  17, 2005 to September 30, 2005 under the
successor  basis.  The  following  discussion  and  analysis  is  based upon the
aggregation  of  these  two  bases  of  accounting for the three months and nine
months  ended  September 30, 2005, and our review of the business and operations
during  such  periods  as  compared  to  the  same  periods  of  2004.

     As  a  result  of  the  Acquisition,  our  assets and liabilities have been
adjusted  to  their  fair  value  as  of  the  closing  date.  Depreciation  and
amortization  expenses  are higher in successor accounting due to the fair value
assessments  resulting in increases to the carrying value of our property, plant
and  equipment  and  intangible  assets.  The financial statements for the three
months  and  nine months ended September 30, 2005 include the following expenses
related  to  purchase accounting:  cost of goods sold includes non-cash purchase
accounting  charges  related to inventory fair value adjustments of $2.0 million
for  the three months ended and $4.6 million for the nine months ended September
30,  2005.  Approximately  $0.7 million of inventory fair value adjustments will
be  charged  to  cost  of  sales  in  the  last  quarter  of  2005.

     We  believe  the discussion and analysis of The GSI Group, Inc.'s financial
condition  and combined results of operations set forth below are not indicative
nor  should  they  be  relied  upon  as  an indicator of our future performance.
Senior  management  appointed  by the board of directors of the purchaser in the
Acquisition is relatively new to the Company, and is still engaged in an ongoing
analysis  of  trends  and  operating  indicators  as  they  relate  to  future
performance.  Please refer to the footnotes to the Financial Statements included
in  Item  1  of  this  report,  including  "Summary  of  Significant  Accounting
Policies-Basis  of  Statement Presentation" for important additional information
concerning  the  basis of presentation of financial information included in this
report.

RESTATEMENTS

First  Restatement

     During  the Company's 2004 year-end closing process, the Company discovered
unintentional  accounting  errors  in  prior  years'  financial statements.  The
errors  were  corrected  in the 2004 financial statements.  A description of the
errors  and related impact of each on the financial statements follows.  Amounts
are  stated  in  whole  dollars.

     At  the  end  of  2001,  the Company began the process of shutting down its
Mason City, Iowa plant, which served as the headquarters for its DMC subsidiary.
As  the  Company  began the revenue cycle process at its corporate headquarters,
cost  of  sales  estimates  were  understated during 2002, while cost accounting
records  were  being  developed for the products previously handled by the Mason
City  employees,  which  caused  the  remaining  inherited inventory costs to be
overstated  by  approximately  $6,470,000.  The  Company  became  aware  of  the
overstatement  in  early  2003, but erroneously assigned the overstated value to
inventory  that  would  flow  through the cost of sales over the next few years.
This  erroneous  correction  reduced  the  stated  value  of  the  inventory  by
approximately  $2,206,000  in  2003  and  $4,264,000  in  2004.  During the 2004
year-end closing process, this issue was re-examined, and the Company determined
that  it  would  be  appropriate  to restate the 2002 cost of sales and year-end
inventory,  the  period  when  the  overstatement  occurred.  This  adjustment
increased the previously reported net income by $628,000 in the third quarter of
2004  and  $1,522,000  for  the  first  nine  months  of  2004.

     In 1997, the Company's majority stockholder began selling non-voting shares
to  certain  employees.  The  Company's majority stockholder helped finance each
employee's  purchase  with  a  loan to each employee with the shares as the only
collateral  for  the notes.  APB Opinion 25 and its interpretations require that
these  transactions  be  imputed  to  the  Company's financial statements and be
accounted  for  as  variable  stock  awards,  which practice the Company had not
previously  followed.  Treatment  of  the  transaction as a variable stock award
requires  the  Company  to recognize as compensation expense the extent to which
the  fair  market  value  of the underlying shares exceeds the original purchase
price  for  such  shares. The fair value of the underlying shares first exceeded
the  price  paid  for the shares in 2002.  The effect of recording the resulting
compensation  expense  reduced previously reported net income by $729,000 in the
third  quarter  of  2004  and  $1,886,000  for  the  first  nine months of 2004.

     In  2002,  the  Company  entered  into an agreement with the manager of its
Brazilian  subsidiary  whereby  the  Company  agreed  to issue him shares of the
Brazilian subsidiary's stock primarily based on the financial performance of the
Brazilian  subsidiary.  This  agreement  constitutes  a  stock  compensation
arrangement  for  which  the  Company  did not previously recognize compensation
expense.  The  effect  of  recording  compensation  expense  related  to  this
arrangement  reduced  previously  reported  net  income by $188,000 in the third
quarter  of  2004  and  $500,000  for  the  first  nine  months  of  2004.
                                       18
<PAGE>

     Prior to the 2004 closing process, the Company had been using Mexican Pesos
as  the  functional currency of its Mexican subsidiary.  During the 2004 closing
process,  the  Company  determined  that  the correct functional currency of its
Mexican subsidiary should be U.S. Dollars rather than Mexican Pesos.  The effect
of  this  change  reduced previously reported net income by $10,000 in the third
quarter  of  2004  and  $26,000  for  the  first  nine  months  of  2004.

     The Company changed from a stop-loss workers' compensation insurance policy
to a high-deductible self-insured policy in 2000 and did not subsequently accrue
a  liability  for  claims incurred but not reported.  The effect of accruing for
such  claims  in  2004  reduced previously reported net income by $82,000 in the
third  quarter  of  2004  and  $219,000  for  the  first  nine  months  of 2004.

     The  Company also made adjustments in 2004 to correct previous reporting of
overhead  adjustments  in  overseas inventories and gain on inter-company sales.

Second  Restatement

     Subsequent  to the sale of all of the stock of the Company on May 16, 2005,
the  new  management  appointed  by  the  new  owner  of  the Company discovered
additional  accounting  errors  in prior years' financial statements. The errors
have  been  corrected  in the accompanying 2005 and 2004 financial statements. A
description of the errors and related impact on each of the financial statements
follows.  Amounts  are  stated  in  whole  dollars.

The  Company  made adjustments in the first fiscal quarter of 2005 and the first
three  fiscal  quarters  of  2004  to  correct its allowance for slow moving and
obsolete  inventory to conform to the Company's historical policy. The effect of
these  changes  reduced net income by $243,000 in the first three months of 2005
and  $140,000  and $420,000 in the third fiscal quarter and first nine months of
2004,  respectively.

The  Company  made  adjustments  in  2004  to  expense warranty and research and
development  costs,  which were erroneously included in inventory. The effect of
these  changes  increased  quarterly  net income by $164,000 in the third fiscal
quarter  of  2004  and  $491,000  in the first nine months of 2004.  The Company
reclassified  warranty  and  research and development costs out of cost of sales
and  into  operating  expenses  for  2005  and  2004, which had no effect on net
income.

     The  Company  made  adjustments  in  2005 and 2004 to correct the amount of
overhead  that  was  included  in  inventory. The previous inventory included an
excessive  amount of overhead. The effect of these changes reduced net income by
$998,000  in the first three months of 2005 and increased net income by $546,000
and  $1,639,000  in  the  third  fiscal  quarter  and first nine months of 2004,
respectively.

     The  combined  effect  of these changes reduced net income by $1,241,000 in
the  first  three  months  of  2005  and  increased  net  income by $570,000 and
$1,710,000  in  the  third  fiscal  quarter  and  first  nine  months  of  2004,
respectively.

     The  impact  of  the  above  noted  adjustments  on the Company's unaudited
financial  statements  for the first three months of 2005, the first nine months
of  2004  and  for  the third fiscal quarter of 2004 are summarized in the table
below.  Amounts  are  stated  in  thousands of dollars except for per share line
items.
<TABLE>
<CAPTION>

                                         AS
                                     PREVIOUSLY     FIRST     AS            SECOND         AS
                                      REPORTED   RESTATEMENT  RESTATED    RESTATEMENT   RESTATED
<S>                                   <C>        <C>          <C>        <C>            <C>
FIRST THREE  MONTHS OF
2005
Consolidated Balance Sheet:
     Inventory                        $  56,992               $  56,992  $     (5,389)  $  51,533
     Retained earnings                    7,620                   7,620        (5,389)      2,231

Consolidated Statement of Income:
     Cost of sales                       54,750                  54,750         1,241      55,991
     Operating income                     8,935                   8,935        (1,241)      7,694
     Net income (loss)                    5,214                   5,214        (1,241)      3,973
     Basic and diluted income (loss)
     per share                        $    6.31               $    6.31  $      (1.51)  $    4.80
</TABLE>
                                       19
<PAGE>


<TABLE>
<CAPTION>

                                          AS
                                      PREVIOUSLY     FIRST           AS          SECOND        AS
                                       REPORTED    RESTATEMENT    RESTATED    RESTATEMENT   RESTATED
<S>                                   <C>         <C>            <C>         <C>            <C>
FIRST NINE MONTHS OF 2004

Consolidated Balance Sheet:
     Inventory                        $  52,355                  $  52,355   $     (3,699)  $  48,656
     Retained earnings                   18,867                     18,867         (3,699)     15,168

Consolidated Statement of Income:
     Cost of sales                      181,654         (1,489)    180,165         (6,686)    173,479
     Selling, general and
     administrative expenses             26,885          2,222      29,107             --      29,107
     Warranty and R&D expenses               --             --          --          4,976       4,976
     Operating income                    19,319         (1,319)     18,000          1,710      19,710
     Other, net                          (1,331)           174      (1,157)
     Net income (loss)                    7,086         (1,239)      5,847          1,710       7,557
     Basic and diluted income (loss)
     per share                        $    4.85   $      (0.85)  $    4.00   $       1.17   $    5.17
</TABLE>



<TABLE>
<CAPTION>

                                          AS
                                      PREVIOUSLY     FIRST           AS         SECOND         AS
                                       REPORTED    RESTATEMENT    RESTATED    RESTATEMENT   RESTATED
<S>                                   <C>         <C>            <C>         <C>            <C>
THIRD FISCAL QUARTER OF  2004

Consolidated Balance Sheet:
     Inventory                        $  52,355                  $  52,355   $     (3,699)  $  48,656
     Retained earnings                   18,867                     18,867         (3,699)     15,168

Consolidated Statement of Income:
     Cost of sales                       68,315           (605)     67,710         (2,809)     64,901
     Selling, general and
     administrative expenses              9,832            886      10,718             --      10,718
     Warranty and R&D expenses               --             --          --          2,239       2,239
     Operating income                    11,546           (445)     11,101            570      11,671
     Other, net                            (822)           363        (459)
     Net income (loss)                    6,680           (430)      6,250            570       6,820
     Basic and diluted income (loss)
     per share                        $    8.08   $      (0.52)  $    7.56   $       0.69   $    8.25
</TABLE>



HISTORICAL  PERFORMANCE

     Our  financial  statements  shown in Item 1 of this 10Q have been presented
under two different bases of accounting, with all historical Company activity up
to  and  including  May  16,  2005  under the predecessor basis, and all Company
activity from May 17, 2005 to September 30, 2005 under the successor basis.  The
following  discussion  and  analysis  is based upon the aggregation of these two
bases  of  accounting  for  the three months and nine months ended September 30,
2005,  and  our  review  of  the  business and operations during such periods as
compared  to  the  same  periods  of  2004.

RESULTS  OF  OPERATIONS  (AFTER  SECOND  RESTATEMENT)

     The  following  table  sets forth a summary of the Company's operations and
their  percentages  of  total  revenue  for  the  periods indicated based on the
aggregation  of  historical  predecessor  and  successor  accounting (dollars in
thousands):
                                       20
<PAGE>

<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED                      NINE MONTHS ENDED
                                          -------------------------------------   --------------------------------------
                                                                    RESTATED                              RESTATED
                                         SEPTEMBER 30,  2005   OCTOBER 1,  2004  SEPTEMBER 30,  2005   OCTOBER 1,  2004
                                              (UNAUDITED)         (UNAUDITED)      (UNAUDITED)            (UNAUDITED)
                                         --------------------  ----------------- ------------------ --------------------


<S>                                         <C>        <C>     <C>        <C>     <C>        <C>     <C>          <C>
                                            AMOUNT          %  AMOUNT          %  AMOUNT          %  AMOUNT            %
                                            ---------  ------  ---------  ------  ---------  ------  -----------  ------
Sales                                       $107,723   100.0   $ 89,692   100.0   $270,536   100.0   $  227,759   100.0

Cost of sales                                 78,394    72.8     64,901    72.4    202,409    74.8      173,479    76.2
                                            ---------          ---------          ---------          -----------

   Gross profit                               29,329    27.2     24,791    27.6     68,127    25.2       54,280    23.8

Selling, general and administrative
expenses                                      13,283    12.3     10,718    11.9     43,709    16.2       29,107    12.8
Amortization expense                           1,950     1.8        163     0.2      3,078     1.1          487     0.2
Warranty expense                                 280     0.3      1,348     1.5        103     0.0        2,327     1.0
R&D expense                                      827     0.8        891     1.0      2,512     0.9        2,649     1.2
                                            ---------          ---------          ---------          -----------
 Total operating expenses                     16,340    15.2     13,120    14.6     49,402    18.3       34,570    15.2

Operating income (loss)                       12,989    12.1     11,671    13.0     18,725     6.9       19,710     8.7

Other income (expense):
 Interest expense                             (3,705)   (3.4)    (3,940)   (4.4)   (10,918)   (4.0)     (10,453)   (4.6)
 Other, net                                      282     0.2       (579)   (0.7)     1,076     0.4       (1,157)   (0.5)
                                            ---------          ---------          ---------          -----------

Income (loss) before income tax expense
and minority interest                          9,566     8.9      7,152     8.0      8,883     3.3        8,100     3.6

Minority interest in net income of
subsidiary                                      (119)   (0.1)       (23)    0.0       (279)   (0.1)         (69)    0.0
Income tax provision(benefit)                  4,075     3.8         95     0.1         48     0.0          415     0.2
                                            ---------          ---------          ---------          -----------

Income (loss) before discontinued
operations                                     5,372     5.0      7,034     7.8      8,556     3.2        7,616     3.3

Gain (loss) from discontinued operations,
net of income taxes                               --     0.0       (214)   (0.2)        --     0.0          (59)    0.0
                                            ---------          ---------          ---------          -----------

Net income (loss)                           $  5,372     5.0   $  6,820     7.6   $  8,556     3.2   $    7,557     3.3
                                            =========          =========          =========          ===========


Basic and diluted earnings (loss) per
share                                       $   6.50           $   8.25           $  10.35           $     5.17

Weighted average common shares
Outstanding                                  826,948            826,948            826,948            1,461,281
</TABLE>


Three  Months Ended September 30, 2005 Compared to Three Months Ended October 1,
2004

     Sales  increased  20.1%  or  $18.0  million  to $107.7 million in the third
quarter  of  2005 compared to $89.7 million in the third quarter of 2004.  Grain
equipment  dollar  sales  increased  by 7.1% during the third quarter of 2005 as
compared  to  the  third  quarter  2004 driven by higher pricing offset by lower
volume.  Swine  equipment  sales  increased  57.8% to $20.2 million in the third
quarter of 2005 compared to $12.8 million in the third quarter of 2004 due to an
improved  swine  production  market  that allows producers to upgrade equipment.
Poultry equipment sales increased 36.0% to $23.4 million in the third quarter of
2005  compared  to  $17.2  million in the third quarter of 2004 primarily due to
increased  volume  in  Brazil  and  South  Africa.

     Cost  of  goods  sold  increased 20.8% or $13.5 million to $78.4 million or
72.8%  of  sales in the third quarter of 2005 compared to $64.9 million or 72.4%
of  sales  in  the  third  quarter of 2004.  This increase is due in part to the
amortization  of  the  inventory  step  up  of  fair value of $2.0 million.  The
improvement  in  margins  is due to increased pricing partially offset by higher
material  costs,  particularly  steel  costs.

     Gross  profit  increased  to  $29.3 million in the third quarter of 2005 or
27.2%  of sales from $24.8 million or 27.6% of sales in the same period of 2004.
This  increase  was  primarily  due  to  the  reasons  cited  above.
                                       21
<PAGE>

     Operating  expenses increased 24.5% or $3.2 million to $16.3 million in the
third  quarter  of  2005  from  $13.1  million  in the same period of 2004.  The
increase  was  primarily due to the increase in amortization expense and selling
expenses  incurred  due  to  increased  revenues.

     Operating  income  increased  to $13.0 million in the third quarter of 2005
from  $11.7  million  in  the  third  quarter of 2004.  Operating income margins
decreased  to  12.1%  of  sales  in  2005  from  13.0%  in  2004.

     Interest  expense  decreased  $0.2  million in the third quarter of 2005 as
compared  to  the  third  quarter  of  2004  due  to  lower  debt  balances.

     Net  income decreased by $1.4 million to $5.4 million for the third quarter
of  2005  from  $6.8  million  in  the  same  period  of  2004.

Nine  Months  Ended  September 30, 2005 Compared to Nine Months Ended October 1,
2004

     Sales  increased 18.8% or $42.8 million to $270.5 million in the first nine
months  of  2005  compared  to  $227.8 million in the first nine months of 2004.
Grain  sales  increased  9.3% in the first nine months of 2005 to $160.4 million
primarily  as a result of pricing increases in grain storage products and market
share  penetration of new products such as grain transportation equipment offset
by lower volumes in grain storage.  Swine equipment sales increased 47.3% due to
an  improved swine production market that allows producers to upgrade equipment.
Poultry  equipment  sales  increased  26.2% primarily due to increased volume in
Brazil  and  South  Africa.

     Cost  of  goods  sold increased 16.7% or $28.9 million to $202.4 million or
74.8%  of  sales  in the first nine months of 2005 compared to $173.5 million or
76.2%  of  sales in the first nine months of 2004.  This increase is due in part
to the amortization of the inventory step up of fair value of $4.6 million.  The
improvement  in  margins  is due to increased pricing partially offset by higher
material  costs,  particularly  steel  costs.

     Gross profit increased to $68.1 million in the first nine months of 2005 or
25.2%  of sales from $54.3 million or 23.8% of sales in the same period of 2004.
This  increase  was  primarily  due  to  the  reasons  cited  above

     Operating expenses increased 42.9% or $14.8 million to $49.4 million in the
first  nine  months  of 2005 from $34.6 million in the same period of 2004.  The
table  below  outlines  the  significant  increases  in  operating  expenses.
<TABLE>
<CAPTION>



                                        AMOUNT OF
<S>                                     <C>
                                        INCREASE

Selling expenses                        $    3,406
Non-cash compensation expense                4,756
Minority interest compensation expense         690
Seller transaction expenses                  3,966
Bad debt reserve for YCII                      627
Amortization                            $    2,591
</TABLE>



     The  increase  in  selling  expenses  related  to  the  increased  revenue.

     The  non-cash  compensation  expense  relates  to  the  dividends  paid  to
non-voting  stockholders  and  the  change in the market value of the non-voting
shares  for the stock that was sold to members of management and is treated as a
variable  stock  award.  According  to  APB  Opinion 25, this increase in market
value  must  be  recorded  as  compensation  expense.  The  minority  interest
compensation  expense is the market value of the portion of Brazil that is owned
by  a  member of management.  The seller transaction expenses relate to the sale
of  the Company on May 16, 2005 to GSI Holdings. All of the expenses so recorded
related  only  to  the  predecessor  period  ending  May  16,  2005.

     Operating  income  decreased  to  $18.7 million in the first nine months of
2005  from  $19.7  million  in  the first nine months of 2004.  Operating income
margins  decreased  to  6.9%  of  sales  in  2005  from  8.7%  in  2004.
                                       22
<PAGE>

     Interest expense increased $0.5 million in the first nine months of 2005 as
compared  to  the  first  nine  months  of  2004  due to higher borrowing costs.

     Upon  conversion  from  a  subchapter  "S"  corporation to a subchapter "C"
corporation  the Company recorded a net deferred tax asset of $4.6 million.  The
conversion  of  tax  status significantly impacted net income for the first nine
months  of  2005.

     Net  income  increased  by  $1.0 million to $8.6 million for the first nine
months  of  2005  from  $  7.6  million  in  the  same  period  of  2004.

LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company  has historically funded capital expenditures, working capital
requirements,  debt  service,  stockholder  dividends and stock repurchases from
cash  flow from its operations, augmented by borrowings made under the Company's
credit  facility  and  the  sale  of  the  Company's  notes.

     The Company's working capital requirements for its operations are seasonal,
with  investments  in working capital typically building in the second and third
quarters  and  then  declining  in  the  first and fourth quarters.  The Company
defines  working  capital  as  current  assets  less current liabilities.  As of
September  30,  2005,  the  Company  had  $54.0  million  of working capital, an
increase  of  $13.7  million  from working capital as of December 31, 2004.  The
increase  in  working  capital  was primarily due to increases in cash, accounts
receivable  and  deferred  taxes  and decreases in customer deposits and current
maturities  of long-term debt of $38.5 million, partially offset by decreases in
inventory,  prepaids and other current assets and increases in accounts payable,
payroll  and payroll related expenses, accrued interest and income taxes payable
of  $24.6  million.

     Operating  activities  provided $25.6 million and $9.2 million in cash flow
in  the  first  nine  months of 2005 and 2004, respectively.  This $16.4 million
increase  in  cash  flow  was  primarily  the result of increases in net income,
depreciation and amortization, non-cash charges related to inventory fair value,
stock  based  compensation,  minority  interest  compensation, accounts payable,
accrued expenses, inventory and other current assets of $29.5 million, partially
offset by decreases in deferred taxes, accounts receivable and customer deposits
of  $12.9  million  compared  to  the  first  nine  months  of  2004.

     Investing activities used $4.4 million and $2.6 million in cash flow in the
first  nine  months of 2005 and 2004, respectively.  The cash was used primarily
for  the  purchase  of  property,  plant  and  equipment.

     Financing  activities  used  $19.6 million and $7.9 million in cash flow in
the  first  nine  months  of  2005  and  2004,  respectively.  The cash was used
primarily  to  pay  down  debt.

     The  Company  believes  that  existing  cash, cash flow from operations and
available  borrowings  under  its  refinanced  revolving credit facility will be
sufficient to support its working capital, capital expenditures and debt service
requirements  for  the  foreseeable  future.

REVOLVING  CREDIT  FACILITY

     On  May  16,  2005,  concurrently  with the issuance of $110,000,000 of 12%
Senior  Notes due 2013 and the closing of the acquisition of The GSI Group, Inc.
(the  "Company")  by  GSI  Holdings  Corp.  ("GSI  Holdings"),  an  affiliate of
Charlesbank  Equity  Fund  V,  Limited  Partnership,  the Company refinanced its
existing credit facility with a five-year asset-backed revolving credit facility
provided  by  lenders  led  by  Wachovia  Capital  Finance Corporation (Central)
("Wachovia"),  as  the  agent.  The maximum amount of revolving credit available
under  the Company's refinanced credit facility (the "Credit Facility") is $60.0
million and the Company has the option to increase the facility in increments of
$5.0  million  up  to a maximum of $75.0 million (subject to compliance with the
covenants  in the indenture). Up to $15 million of the facility is available for
issuances  of  letters  of  credit.

     The Credit Facility provides floating rate revolving loans bearing interest
at  a  rate  equal  to 0.0% to 0.5% over Wachovia's prime rate or 1.50% to 2.00%
over  LIBOR,  in  each case based on the excess availability under the borrowing
base  from  time  to  time.

     The  Company's obligations under its Credit Facility are secured by a first
priority  lien  on,  and  pledge of, substantially all of its and any subsidiary
                                       23
<PAGE>
guarantors'  current and future assets. In addition, GSI Holdings pledged all of
its shares of the Company's common stock, as well as any rights that it may have
under  the  stock purchase agreement with the Company's selling stockholders, as
additional  collateral  security.

     The  Credit  Facility  contains  certain  covenants  that are substantially
similar  to,  but  generally  no  more restrictive than, the covenants under the
Company's  existing  credit  facility.  The Company's ability to make borrowings
under  the  Credit  Facility is subject to customary representations, warranties
and  covenants.  The  Credit  Facility also contains various customary events of
default.

SENIOR  NOTES  DUE  2013

     On  May  16,  2005,  concurrently  with  the  refinancing  of  its existing
revolving  credit  facility  with  Wachovia  Capital Finance Corporation and the
closing  of  the  acquisition  of  The  GSI  Group,  Inc. (the "Company") by GSI
Holdings  Corp.  ("GSI  Holdings"),  an  affiliate of Charlesbank Equity Fund V,
Limited  Partnership,  the  Company  issued  and  sold  $110,000,000  aggregate
principal amount of Senior Notes due 2013 (the "Notes"). Payment on the Notes is
guaranteed  on  an  unsecured  basis by GSI Holdings and by all of the Company's
domestic  material subsidiaries. None of the Company's domestic subsidiaries are
currently  material subsidiaries. The Notes were issued under an Indenture among
the  Company, the Guarantors and U.S. Bank National Association, as trustee (the
"Indenture").

     The  Notes  have  a  fixed  annual interest rate of 12%, which will be paid
semiannually  in  arrears  on May 15 and November 15, commencing on November 15,
2005.

     Prior  to  May 15, 2008, the Company may redeem up to 35% of the Notes at a
redemption  price  of  112.000% of the principal amount, plus accrued and unpaid
interest  from  the  proceeds of certain equity offerings; provided that: (i) at
least 65% of the aggregate principal amount of Notes originally issued under the
Indenture  (excluding  Notes  held  by the Company and its subsidiaries) remains
outstanding  immediately  after  the  occurrence of such redemption and (ii) the
redemption  occurs  within  90  days  of  the date of the closing of such equity
offering.  Except  pursuant  to  the  preceding  sentence, the Notes will not be
redeemable  at  the  Company's  option  prior  to  May  15,  2009.

     On or after May 15, 2009, the Company may redeem all or a part of the Notes
upon  not  less  than 30 nor more than 60 days' notice, at the redemption prices
(expressed  as  percentages  of  principal amount) listed below plus accrued and
unpaid  interest  and  liquidated damages, if any, on the Notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on  May  15  of  the  years indicated below, subject to the rights of holders of
Notes  on  the relevant record date to receive interest on the relevant interest
payment date: 2009 at a redemption price of 106.000%; 2010 at a redemption price
of  103.000%;  and  2011  and  thereafter  at  a  redemption  price of 100.000%.

     Upon  a  change  of  control,  as  defined in the Indenture, the Company is
required to offer to purchase all of the Notes then outstanding for cash at 101%
of  the  aggregate principal amount thereof plus accrued and unpaid interest and
liquidated  damages,  if  any, on the Notes repurchased to the date of purchase,
subject to the rights of holders of Notes on the relevant record date to receive
interest  due  on  the  relevant  interest  payment  date.

     Also on May 16, 2005, the Company issued a call for redemption for all $100
million  principal  amount of its existing 10-1/4% senior subordinated notes due
2007  at  a price of 101.729% plus accrued interest from May 1, 2005 to the date
of  redemption.

INFLATION

     The  Company  believes  that inflation has not had a material effect on its
results  of  operations  or  financial  condition  during  recent  periods.

CRITICAL  ACCOUNTING  POLICIES

     There  have  been  no  material changes to the critical accounting policies
since  December  31,  2004.

                                       24
<PAGE>

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     The  Company  is  subject to market risk associated with adverse changes in
interest  rates  and foreign currency exchange rates.  The Company does not hold
any  market  risk  sensitive instruments for trading purposes.  At September 30,
2005,  principal  exposed  to  interest rate risk was limited to $7.5 million in
variable  rate  debt.  The  interest  rates  on  the  Company's  various  debt
instruments  range  from  4.5% to 12.0%.  The Company measures its interest rate
risk  by  estimating the net amount by which potential future net earnings would
be  impacted  by  hypothetical  changes  in market interest rates related to all
interest  rate  sensitive assets and liabilities.  A 1% change in interest rates
would  have  a  $0.1  million  impact  on  the  Company's results of operations.

     At  September  30,  2005,  approximately  11.7%  of sales were derived from
international  operations  with exposure to foreign currency exchange rate risk.
The  Company  mitigates  its  foreign currency exchange rate risk principally by
establishing  local  production  facilities  in  the  markets  it  serves and by
invoicing  customers  in  the  same currency as the source of the products.  The
Company  also  monitors  its  foreign  currency  exposure  in  each  country and
implements  strategies  to  respond  to  changing  economic  and  political
environments.  The  Company's  exposure  to  foreign currency exchange rate risk
relates primarily to the financial position and the results of operations of its
Brazilian  and  South  African  subsidiaries.  The  Company's  exposure  to such
exchange rate risk as it relates to the Company's financial position and results
of  operations  would be adversely impacted by devaluation of the Brazilian Real
per  U.S.  dollar and the South African Rand per U.S. dollar.  These amounts are
difficult to accurately estimate due to factors such as the inherent fluctuation
of  inter-company  account  balances,  balance  sheet  accounts and the existing
economic  uncertainty  and  future  economic  conditions  in  the  international
marketplace.


ITEM  4.  CONTROLS  AND  PROCEDURES

OVERVIEW

     In  connection  with  the preparation of its Annual Report on Form 10-K for
the  fiscal  year  ended  December 31, 2004, the Company's management identified
material weaknesses in the Company's internal controls over financial reporting.
As  defined  by  the  Public  Company  Accounting  Oversight  Board ("PCAOB") in
Auditing  Standard  No.  2,  a material weakness is a significant deficiency, or
combination  of  significant  deficiencies,  that  result  in more than a remote
likelihood  that  a  material  misstatement  of  the annual or interim financial
statements  will  not  be  prevented  or  detected.

     The  identified material weaknesses in the Company's internal controls over
financial reporting have resulted in insufficient controls relating to inventory
accounting,  the  treatment  of  foreign  currency  matters,  accounting matters
relating  to  differences  between  U.S.  and  foreign accounting principles and
practices,  accounting  for  non-operating expenses, the accounting treatment of
purchases  and  sales of the Company's debt securities, executive salary accrual
methodology,  the identification and treatment of relevant workers' compensation
reserves  and  minority  interest  reserves  and  the  treatment  of stock based
compensation  expense  issues.  In addition, the Company has determined that the
Company's  control  environment  at  December  31,  2004 lacked certain controls
related  to  the  prevention  of  improper  accounting  entries.  These material
weaknesses  resulted  in  restatements being recorded in the Company's financial
statements  for  the  fiscal  quarters  ended July 2, 2004 and July 1, 2005. The
Company's  management has discussed the material weaknesses with its independent
registered  public  accounting  firm,  BKD  LLP,  and  the  Company's  Board  of
Directors,  and more recently the Audit Committee of the Board of Directors. BKD
LLP  issued  a  "material  weakness"  letter in connection with its audit of the
Company's  financial  statements  for  the  fiscal year ended December 31, 2004.

DISCLOSURE  CONTROLS  AND  PROCEDURES

     The  Company maintains disclosure controls and procedures that are designed
to  ensure  that information required to be disclosed in the reports it files or
submits  under  the  Securities  Exchange  Act of 1934, as amended, is recorded,
processed,  summarized  and  reported,  within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to  our  management,  including  the Company's Chief Executive Officer and Chief
Financial  Officer,  as  appropriate,  to  allow  timely  decisions  regarding
disclosure.  The  Company's  management,  with  the  participation  of its Chief
Executive  Officer  and  Chief Financial Officer, has performed an evaluation of
                                       25
<PAGE>
the  Company's  disclosure controls and procedures as of September 30, 2005, the
end  of  the period covered by this Quarterly Report on Form 10-Q. Based on that
evaluation,  which  included  a  review  of  the  matters  discussed  above, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were not effective as of the end of
the  period  covered by this Quarterly Report on Form 10-Q, but they are working
diligently  to  improve  them.

CHANGES  IN  INTERNAL  CONTROLS

During  the  quarter ended September 30, 2005 the following changes were made to
the  Company's  internal  controls.
a)     An  Audit  Committee  of  the  Board  of  Directors  was  formed
b)     The  Company purchased and began planning the implementation of a new ERP
computer  system.  As  part  of  this  implementation the Company began a formal
process  of  documentation  of  accounting  processes.
c)     The  Company  began  distributing  a  series  of questionnaires to senior
management  prior  to  the  reporting  of  quarterly  financial  results.  The
questionnaires  are  aimed specifically at discovering any required disclosures.
d)     The  Company  began  the  first  company  wide  Operating Plan and budget
process  to  guide  the  Company's  operation  during  2006.
e)     The  Company established and began to staff a manufacturing and inventory
accounting  function.  This function has the primary responsibility of analyzing
and reporting manufacturing activities to management and has a secondary focused
responsibility  for  inventory  accounting.

     In  addition,  the Company believes that the material weaknesses identified
above  resulted  in  part  from  inadequate  staffing  and  training  within the
Company's  finance and accounting group.  The Company's new management continues
in  the  process  of  reviewing  whether  additional  accounting  and  financial
management  staff  should  be  retained, and continues to review the question of
whether  it should utilize additional, or different, outside resources. Although
the  Company  believes  that  progress  has been made in addressing the material
weaknesses in its internal controls as discussed above, the Company's management
believes  that  significant weaknesses remain and intends to continue to work to
improve  its  internal  controls.

                                       26
<PAGE>
                                     PART II
                                OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS.

     There  are  no legal proceedings pending against the Company, which, in the
opinion  of  management,  would  have a material adverse affect on the Company's
business,  financial  position  or  results  of  operations.


ITEM  6.  EXHIBITS.

     (a)  EXHIBITS:

      A  list of the exhibits included as part of this Form 10-Q is set forth in
the  Index  to  Exhibits  that  immediately  precedes  such  exhibits,  which is
incorporated  herein  by  reference.


                                       27
<PAGE>
                                   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.

                                   The  GSI  Group,  Inc.

                                   By:/s/  Randall  Paulfus
                                      ---------------------
                                         Interim  Chief  Financial  Officer


                            DATE:  NOVEMBER 21, 2005


                                       28
<PAGE>
EXHIBIT  31.1

                                 CERTIFICATIONS

I,  Richard  Christman,  certify  that:

1.  I  have  reviewed this Quarterly Report on Form 10-Q of The GSI Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material  fact or omit to state a material fact necessary to make the statements
made,  in  light of the circumstances under which such statements were made, not
misleading  with  respect  to  the  period  covered  by  this  report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of,  and  for,  the  periods  presented  in  this  report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for  the  registrant and have:

a)  Designed  such disclosure controls and procedures, or caused such disclosure
controls  and  procedures  to  be designed under our supervision, to ensure that
material  information  relating  to  the  registrant, including its consolidated
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  report  is  being  prepared;

b)  [Paragraph  omitted  pursuant  to  SEC  Release  nos. 33-8392 and 34-49313.]

c)  Evaluated  the  effectiveness  of  the  registrant's disclosure controls and
procedures  and presented in this report our conclusions about the effectiveness
of  the  disclosure controls and procedures, as of the end of the period covered
by  this  report  based  on  such  evaluation;  and

d) Disclosed in this report any change in the registrant's internal control over
financial  reporting  that  occurred  during the registrant's most recent fiscal
quarter  that  has  materially  affected,  or is reasonably likely to materially
affect,  the  registrant's  internal  control  over  financial  reporting;  and

5.  The registrant's other certifying officer and I have disclosed, based on our
most  recent  evaluation  of  internal  control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or  persons  performing  the  equivalent  functions):

a)  All  significant  deficiencies  and  material  weaknesses  in  the design or
operation  of  internal  control  over  financial reporting which are reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize  and  report  financial  information;  and

b)  Any  fraud,  whether  or  not  material,  that  involves management or other
employees  who have a significant role in the registrant's internal control over
financial  reporting.

Date:  November  21,  2005


/s/Richard  Christman
---------------------
Chief  Executive  Officer


                                       29
<PAGE>



EXHIBIT  31.2

                                 CERTIFICATIONS

I,  Randall  Paulfus,  certify  that:

1.  I  have  reviewed this Quarterly Report on Form 10-Q of The GSI Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material  fact or omit to state a material fact necessary to make the statements
made,  in  light of the circumstances under which such statements were made, not
misleading  with  respect  to  the  period  covered  by  this  report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of,  and  for,  the  periods  presented  in  this  report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for  the  registrant and have:

a)  Designed  such disclosure controls and procedures, or caused such disclosure
controls  and  procedures  to  be designed under our supervision, to ensure that
material  information  relating  to  the  registrant, including its consolidated
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  report  is  being  prepared;

b)  [Paragraph  omitted  pursuant  to  SEC  Release  nos. 33-8392 and 34-49313.]

c)  Evaluated  the  effectiveness  of  the  registrant's disclosure controls and
procedures  and presented in this report our conclusions about the effectiveness
of  the  disclosure controls and procedures, as of the end of the period covered
by  this  report  based  on  such  evaluation;  and

d) Disclosed in this report any change in the registrant's internal control over
financial  reporting  that  occurred  during the registrant's most recent fiscal
quarter  that  has  materially  affected,  or is reasonably likely to materially
affect,  the  registrant's  internal  control  over  financial  reporting;  and

5.  The registrant's other certifying officer and I have disclosed, based on our
most  recent  evaluation  of  internal  control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or  persons  performing  the  equivalent  functions):

a)  All  significant  deficiencies  and  material  weaknesses  in  the design or
operation  of  internal  control  over  financial reporting which are reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize  and  report  financial  information;  and

b)  Any  fraud,  whether  or  not  material,  that  involves management or other
employees  who have a significant role in the registrant's internal control over
financial  reporting.

Date:  November  21,  2005


/s/  Randall  Paulfus
---------------------
Interim  Chief  Financial  Officer




                                       30
<PAGE>


EXHIBIT  32.1

                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002


     In  connection  with  the accompanying Quarterly Report on Form 10-Q of The
GSI  Group,  Inc., a Delaware corporation (the "Company"), for the quarter ended
September  30, 2005, as filed with the Securities and Exchange Commission on the
date  hereof  (the "Report"), and pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Richard Christman, as
Chief  Executive  Officer  of the Company, and Randall Paulfus, as Interim Chief
Financial  Officer  of  the  Company,  hereby  certify  that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the  Securities  Exchange  Act  of  1934;  and

(2)  The  information  contained  in the Report fairly presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.

Dated:  November  21,  2005

     /s/RICHARD  CHRISTMAN
     ---------------------
     Richard  Christman
Chief  Executive  Officer


/s/  RANDALL  PAULFUS
---------------------
Randall  Paulfus
Interim  Chief  Financial  Officer





     This  certification shall not be deemed "filed" by the Company for purposes
of  Section  18  of  the  Securities  Exchange  Act  of 1934.  In addition, this
certification  shall  not  be  deemed  to  be incorporated by reference into any
filing  under the Securities Act of 1933 or the Securities Exchange Act of 1934.

A  signed  original  of  this  written  statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained
by  the  Company  and furnished to the Securities and Exchange Commission or its
staff  upon  request.

                                       31
<PAGE>
<TABLE>
<CAPTION>


                                                 INDEX TO EXHIBITS



EXHIBIT
  NO.    DOCUMENT DESCRIPTION
         ---------------------------------------------------------------------------------------------------------
<S>      <C>


   3.1*  Amended and Restated Articles of Incorporation of The GSI Group, Inc., as amended as of October 23, 1997.

   3.2*  By-Laws of The GSI Group, Inc, as adopted on September 4, 2001.

   31.1  Certification of Chief Executive Officer.

   31.2  Certification of Interim Chief Financial Officer.

   32.1  Section 906 Certification.

</TABLE>


____________

*     Incorporated  by  reference  from  the Company's Registration Statement of
Form  S-4  (Reg.  No.  333-43089)  filed  with  the  Commission  pursuant to the
Securities  Act  of  1933,  as  amended.


                                       32
<PAGE>