<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 OR

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

FOR THE TRANSITION PERIOD FROM ___________________ TO _______________________

                         COMMISSION FILE NUMBER 0-16182

                            AXSYS TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

               DELAWARE                                 11-1962029
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                Identification Number)



          910 SYLVAN AVENUE
      ENGLEWOOD CLIFFS, NEW JERSEY                         07632
  (Address of principal executive offices)               (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 871-1500

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
                                       ---    ---

3,988,245 SHARES OF COMMON STOCK, $.01 PAR VALUE, WERE OUTSTANDING AS OF AUGUST
3, 2000.


<PAGE>


                            AXSYS TECHNOLOGIES, INC.
                                      INDEX

                                                                         PAGE

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited):

  Condensed Consolidated Balance Sheets -
   June 30, 2000 and December 31, 1999                                    3

  Condensed Consolidated Statements of Operations -
   Three Months Ended June 30, 2000 and 1999                              4

 Condensed Consolidated Statements of Operations -
   Six Months Ended June 30, 2000 and 1999                                5

  Condensed Consolidated Statements of Cash Flows -
   Six Months Ended June 30, 2000 and 1999                                6

  Notes to Condensed Consolidated Financial Statements                    7


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                             12

Item 3.  Quantitative and Qualitative Disclosures about
         Market Risk                                                     16

PART II.  OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders             17

Item 5.  Exhibits and Reports on Form 8-K                                17

SIGNATURES                                                               17


                                       2
<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                            AXSYS TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (Dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                              (Unaudited)
                                                                                JUNE 30,        DECEMBER 31,
                                                                                  2000             1999
                                                                              ------------      ------------
<S>                                                                             <C>            <C>
                                                       ASSETS

CURRENT ASSETS:
  Cash and cash equivalents ................................................     $ 16,910      $    385
  Accounts receivable - net ................................................       13,335        11,537
  Inventories - net ........................................................       24,287        25,866
  Net assets held for sale .................................................         --           7,227
  Other current assets .....................................................        3,101         2,994
                                                                                 --------      --------
    TOTAL CURRENT ASSETS ...................................................       57,633        48,009

PROPERTY, PLANT AND EQUIPMENT - net ........................................       12,709        11,949

EXCESS OF COST OVER NET ASSETS ACQUIRED - net ..............................        3,813         3,883

OTHER ASSETS ...............................................................          301           309
                                                                                      ---           ---
    TOTAL ASSETS ...........................................................     $ 74,456      $ 64,150
                                                                                 ========      ========

                                        LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable .........................................................     $  6,256      $  6,207
  Accrued expenses and other liabilities ...................................        9,994         5,282
  Current portion of long-term debt and capital lease obligations ..........          930         5,125
                                                                                 --------      --------
    TOTAL CURRENT LIABILITIES ..............................................       17,180        16,614
LONG-TERM DEBT & CAPITAL LEASES, less current portion ......................        1,325         1,793
OTHER LONG-TERM LIABILITIES ................................................        2,242         2,042
SHAREHOLDERS' EQUITY:
  Common Stock, authorized 30,000,000 shares, issued 4,126,007 shares
    at June 30, 2000 and 4,122,767 at December 31, 1999 ....................           41            41
  Capital in Excess of Par .................................................       39,470        39,454
  Retained Earnings ........................................................       15,679         5,844
  Treasury Stock, at cost, 137,762 shares at June 30, 2000 and
    152,338 at December 31, 1999 ...........................................       (1,481)       (1,638)
                                                                                 --------      --------
    TOTAL SHAREHOLDERS' EQUITY .............................................       53,709        43,701
                                                                                 --------      --------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............................     $ 74,456      $ 64,150
                                                                                 ========      ========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>


                            AXSYS TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited, dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED JUNE 30,
                                                  ---------------------------
                                                     2000             1999
                                                 -----------      -----------

<S>                                             <C>              <C>
NET SALES ..................................     $    23,612      $    22,022

Cost of sales ..............................          18,208           15,947
Selling, general and administrative expenses           4,929            4,322
Research and development expenses ..........             924              933
Restructuring charge .......................             296             --
Amortization of intangible assets ..........              35              100
                                                 -----------      -----------
OPERATING (LOSS) INCOME ....................            (780)             720
Interest (income) expense, net .............            (234)             166
Other (income) expense .....................             (61)               1
                                                 -----------      -----------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES ...............................            (485)             553
(Benefit) provision for income taxes .......            (190)             223
                                                 -----------      -----------
(LOSS) INCOME FROM CONTINUING OPERATIONS ...            (295)             330
DISCONTINUED OPERATIONS:
 Income from operations, net of taxes ......            --                743
NET (LOSS) INCOME ..........................     $      (295)     $     1,073
                                                 ===========      ===========
BASIC EARNINGS (LOSS) PER SHARE:
  (Loss) income from continuing operations .     $     (0.07)     $      0.08
  Discontinued operations ..................            --               0.18
                                                 -----------      -----------
TOTAL ......................................     $     (0.07)     $      0.26
                                                 ===========      ===========
Weighted average common shares outstanding .       3,984,247        4,103,854
                                                 ===========      ===========
DILUTED EARNINGS (LOSS) PER SHARE:
  (Loss) income from continuing operations .     $     (0.07)     $      0.08
  Discontinued operations ..................            --               0.18
                                                 -----------      -----------
TOTAL ......................................     $     (0.07)     $      0.26
                                                 -----------      -----------
Weighted average common shares
   outstanding .............................       3,984,247        4,116,773
                                                 ===========      ===========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>


                            AXSYS TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited, dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      SIX MONTHS ENDED JUNE 30,
                                                      2000                1999
                                                  ----------      -----------

<S>                                              <C>             <C>
NET SALES ..................................     $    43,089      $    42,605

Cost of sales ..............................          36,904           31,283
Selling, general and administrative expenses          10,314            8,649
Research and development expenses ..........           1,694            1,905
Restructuring charge .......................           1,655             --
Amortization of intangible assets ..........              70              200
                                                  ----------      -----------
OPERATING (LOSS) INCOME ....................          (7,548)             568

Interest (income) expense, net .............            (129)             293
Special charge .............................            --              1,000
Other (income) expense .....................            (105)               2
                                                  ----------      -----------
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES          (7,314)            (727)

Benefit for income taxes ...................          (2,860)            (305)
                                                  ----------      -----------
LOSS FROM CONTINUING OPERATIONS ............          (4,454)            (422)

DISCONTINUED OPERATIONS:
  Income from operations, net of taxes .....             513            1,159
  Gain on disposal, net of taxes ...........          13,776             --
                                                  ----------      -----------
NET INCOME .................................     $     9,835      $       737
                                                 ===========      ===========
BASIC EARNINGS (LOSS) PER SHARE:
  (Loss) from continuing operations ........     $     (1.12)     $     (0.10)
  Discontinued operations ..................            3.59             0.28
                                                  ----------      -----------
TOTAL ......................................     $      2.47      $      0.18
                                                 ===========      ===========
Weighted average common shares
  outstanding ..............................       3,980,090        4,105,051
                                                 ===========      ===========
DILUTED EARNINGS (LOSS) PER SHARE:
  Loss from continuing operations ..........     $     (1.12)     $     (0.10)
  Discontinued operations ..................            3.59             0.28
                                                  ----------      -----------
TOTAL ......................................     $      2.47             0.18
                                                 ===========      ===========
Weighted average common shares
  outstanding ..............................       3,980,090        4,105,051
                                                 ===========      ===========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>


                            AXSYS TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (Unaudited, dollars in thousands)

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED JUNE 30,
                                                                   -------------------------
                                                                      2000          1999
                                                                    --------      --------
<S>                                                                <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ..................................................       9,835          737
  Adjustments to reconcile net income to cash used in operating
       activities:
  Gain on disposal of discontinued operations .................     (13,776)        --
  Deferred income taxes .......................................        --           (309)
  Depreciation and amortization ...............................       1,562        1,488
  Change in net assets of discontinued operations .............      (1,476)        (639)
  Increase in current assets, other than cash .................        (326)      (1,542)
  Decrease in current liabilities .............................      (3,342)        (314)
  Other-net ...................................................        (251)         (18)
                                                                    --------      --------
    NET CASH USED IN OPERATING ACTIVITIES .....................      (7,774)        (597)
                                                                    --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures ........................................      (2,271)        (387)
  Net proceeds from sale of discontinued operations ...........      31,223         --
  Advance to third party ......................................        --           (468)
                                                                    --------      --------
    NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .......      28,952         (855)
                                                                    --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from borrowings ................................        --          2,200
  Net repayment of borrowings .................................      (4,663)        (486)
  Purchases of Treasury Stock .................................        --           (251)
  Other .......................................................          10            8
                                                                    --------      --------
    NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES .......      (4,653)       1,471
                                                                    --------      --------
    NET INCREASE IN CASH ......................................      16,525           19
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..............         385           69
                                                                    --------      --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................      16,910           88
                                                                    ========      ========
Supplemental Cash Flow Information:
  Cash paid for:
    Interest ..................................................         (94)         232
    Income Tax ................................................       3,442          115
Non-Cash Investing and Financing Activities:
    Equipment acquired under capital leases ...................        --          1,226

</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>


                            AXSYS TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Axsys
Technologies, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and disclosures required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation (consisting of normal recurring accruals) have been included.
Operating results for the six-month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.

Certain reclassifications have been made to previously reported financial
statements to conform to current classifications.

NOTE 2 - DISCONTINUED OPERATIONS

On March 17, 2000, the Company sold the net assets of its Beau Interconnect
division ("Beau") for $31.2 million for cash, net of expenses, and recorded a
gain of $22.5 million, before a tax provision of $8.4 million in the first
quarter of 2000. Beau has been accounted for as a discontinued operation and the
related net assets and operating results have been reported separately from
continuing operations in all periods presented. Beau designs and manufactures
interconnect devices, barrier terminal blocks and connectors. Income from
discontinued operations was $846 thousand, before a tax provision of $333
thousand through the date of disposal on March 17,2000 and $1.5 million, before
a tax provision of $305 thousand through June 1999. Revenues applicable to Beau
during each period of the three months ended June 30, 2000 and 1999 were none
and $5.3 million, respectively. Through the date of disposal on March 17, 2000
and year to date 1999, revenues were $4.2 million and $9.5 million,
respectively. The net assets of Beau at December 31, 1999 have been included
in current assets. Proceeds from the sale were utilized to pay off the
Company's credit facility of $4.2 million at December 31, 1999 which
liabilities have been included in current liabilities.

In the first quarter of 2000, the Company was advised by environmental
consultants that the costs associated with the remediation of two previously
discontinued operation sites were estimated to be higher than originally
anticipated. The revised estimates to remediate these sites range from
approximately $1.1 million to $1.3 million. Actual costs may be different than
these estimates. Based on this information, the Company increased its reserve
relating to these sites in the first quarter of 2000 to approximately $1.2
million by recording a discontinued operation charge of $500 thousand, before a
tax benefit of $195 thousand.

NOTE 3 - INVENTORIES

Inventories have been determined generally by lower of cost (first-in, first-out
or average) or market. Inventories consist of (in thousands):

<TABLE>
<CAPTION>
                                 JUNE 30,        DECEMBER 31,
                                  2000              1999
                                --------         ------------
<S>                            <C>              <C>
Raw materials ................. $  7,043         $  9,411
Work-in-process................    8,990            8,245
Finished goods.................   11,316           11,669
                                --------         --------
                                  27,349           29,325
Less reserves ................    (3,062)          (3,459)
                                --------         --------
                                $ 24,287         $ 25,866
                                ========         ========

</TABLE>


                                       7
<PAGE>


                            AXSYS TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 - TREASURY STOCK

During July 1999, the Company's Board of Directors authorized an increase in the
share repurchase program from an aggregate of 200,000 shares of common stock to
an aggregate of 700,000 shares. The Company plans to use the repurchased shares
for general corporate purposes, including the satisfaction of commitments under
its employee benefit plans. As of June 30, 2000, the Company has repurchased
262,200 shares for an aggregate purchase price of $3.1 million.

NOTE 5 - INCOME TAXES

The Company has determined, based upon the level of its current taxable income,
it is more likely than not that it will realize the benefit of its deferred tax
assets which previously had been fully reserved with a valuation allowance.
Consequently, during the first quarter of 2000, the Company reversed $728
thousand of its valuation allowance related to net deferred tax assets of its
discontinued operations with the corresponding tax benefit included in the
results of discontinued operations.

As of June 30, 2000, the Company had no tax valuation allowance.

NOTE 6 - SEGMENT DATA

On February 11, 2000, the Company recently announced a strategic realignment
whereby the Company's structure is organized by market segment in two new
major groups. The strategic realignment has resulted in a change in the
composition of its reportable segments and, accordingly, the Company has
restated all periods reported. The Company classifies its businesses under
two major groups, the Aerospace and Defense Group ("ADG") and Commercial
Products Group ("CPG"). The ADG offers its capabilities in magnetics,
precision optics, precision machining and subsystems integration to aerospace
and defense original equipment manufacturers ("OEMs") enabling them to design
systems that meet leading-edge performance requirements. The ADG designs,
manufactures and sells high-end components such as precision sensors,
high-performance motors, precision metal optics and airbearings. These
products enable OEMs to improve measurement precision, positioning
performance (accuracy, speed and power) and weight requirements in their
systems. The CPG designs, manufactures and sells components, subsystems and
systems to high-performance OEMs and end users serving the electronic capital
equipment, data storage and digital imaging markets. These products enable
OEMs to improve the accuracy, throughput and yield of their equipment and
processes. The CPG also distributes precision ball bearings, acquired from
various domestic and international sources, to OEMs and Maintenance and
Repair Organization distributors supporting industrial and commercial markets.

As discussed in Note 2, the Company sold its Beau Interconnect division. The
disposal of this business has been accounted for as a discontinued operation
and, accordingly, its related operating results have been reported separately
from continuing operations. The segment data that follows excludes its results.


                                       8
<PAGE>

                            AXSYS TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 - SEGMENT DATA - CONT'D.

The following tables present financial data for each of the Company's segments
(in thousands).

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED JUNE 30,  SIX MONTHS ENDED JUNE 30,
                                             ------------------------------------------------------
                                                  2000          1999         2000          1999
                                               --------      --------      --------      --------
<S>                                           <C>           <C>           <C>           <C>
Net sales from continuing operations:
    ADG ..................................     $  9,345      $ 10,506      $ 15,363      $ 19,503
    CPG ..................................       14,267        11,516        27,726        23,102
                                               --------      --------      --------      --------
            Total Sales ..................       23,612        22,022        43,089        42,605
                                               ========      ========      ========      ========
(Loss) earnings from continuing operations
before amortization, interest and taxes:
    ADG ..................................         (450)        1,009        (4,940)        1,387
    CPG ..................................          905           591           940           968
Restructuring charge .....................         (296)         --          (1,656)         --
Non-allocated expenses ...................         (644)       (1,047)       (1,658)       (3,082)
                                               --------      --------      --------      --------
    (Loss) income  from continuing
       operations before taxes.......          $   (485)     $    553      $ (7,314)     $   (727)
                                               ========      ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                        JUNE 30,         DECEMBER 31,
                                         2000               1999
                                       ---------         ------------
<S>                                   <C>               <C>
Identifiable assets:
    ADG ....................           $ 25,157           $ 24,103
    CPG ....................             26,176             26,595
    Net assets held for sale               --                7,227
    Non-allocated assets ...             23,123              6,225
                                       --------           --------
          Total assets .....           $ 74,456           $ 64,150
                                       ========           ========
</TABLE>

Included in non-allocated expenses are the following: general corporate expense,
interest expense, amortization of goodwill, special charges and other income and
expense. Identifiable assets by segment consist of those assets that are used in
the segments' operations. Non-allocated assets are comprised primarily of cash
and cash equivalents, goodwill and net deferred tax assets.

NOTE 7 - OTHER INFORMATION (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     JUNE 30,         DECEMBER 31,
                                                      2000                1999
                                                     --------         ------------
<S>                                                  <C>              <C>
Allowance for doubtful accounts ..........           $    372         $        503
                                                     ========         ============
Accumulated depreciation and amortization
 Of property, plant and equipment ........           $ 10,322         $      9,793
                                                     ========         ============
Accumulated amortization of excess of cost
  Over net assets acquired ...............           $  1,104         $      1,034
                                                     ========         ============
</TABLE>


                                       9
<PAGE>

                            AXSYS TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 - RESTRUCTURING CHARGE AND SPECIAL CHARGE

RESTRUCTURING CHARGE-

On February 11, 2000, Axsys announced a strategic realignment of its businesses.
Specifically, Axsys adopted a plan to improve efficiency and enhance
competitiveness under two new major groups to better serve its markets and
customers. This plan anticipated a non-recurring charge of $5.5 million,
pre-tax, a workforce reduction of 50 employees from various locations,
relocation or consolidation of two of its facilities and the write down of
potentially obsolete inventory.

Expenses included costs directly related to the Company's plan of
reorganization, following specific Generally Accepted Accounting Principles
(GAAP) as to the appropriate recognition of costs associated with employee
termination benefits and other exit costs.

Through June 30, 2000, Axsys recorded the following amounts in the income
statement in connection with the restructuring plan:

<TABLE>
<CAPTION>
                                                 Selling, General
                               Cost of Goods     & Administrative     Restructuring
                                        Sold              Expense           Expense          Total
                               -------------     ----------------     -------------       --------
<S>                            <C>               <C>                  <C>                 <C>
Work force reductions          $     --          $      --            $         915       $    915
Facilities ..........                    260                  392               741          1,393
Inventory write-downs                  2,301            --                 --                2,301
Other costs .........                                         505          --                  505

Total ...............          $       2,561     $            897     $       1,656       $  5,114
                               =============     ================     =============       ========

</TABLE>

During the first quarter 2000, the Company charged $2.5 million to cost of goods
sold, $688 thousand to selling, general and administrative expenses and $1.4
million to restructuring costs. During the second quarter of 2000, the Company
charged $43 thousand to cost of goods sold, $209 thousand to selling, general
and administrative expenses and $296 thousand to restructuring costs.

As of June 30, 2000, Axsys had an accrued balance of $1.1 million for costs
related to the strategic realignment included in current liabilities.

Other costs directly related to the reorganization of the Company which are not
eligible for recognition at the commitment date, such as relocation and other
integration costs, are expensed as incurred. For the three months ended and the
year to date ended June 30, 2000, Axsys incurred $252 thousand and $655 thousand
of these other costs. The Company estimates third quarter expenses of $400
thousand to complete the restructuring plan.

Total cash expended year to date June 30, 2000 was $1.8 million.

SPECIAL CHARGE-

On November 20, 1998, the Company's Chairman and CEO (the "Chairman") and the
owner at that date of approximately 31% of the Company's common stock, submitted
an offer to purchase all of the common stock not owned by him for $15.00 per
share in cash (the "Chairman's Proposal"). Shortly thereafter, the Company's
Board of Directors formed a Special Committee to evaluate the Chairman's
Proposal. On January 11, 1999, the Company received an unsolicited offer to
purchase the Company for $20.00 per share in cash. In response to this
unsolicited offer, the Chairman withdrew his proposal, and on January 13, 1999,
the Company publicly announced that the Board of Directors had dissolved the
Special Committee and authorized the retention of investment bankers to


                                       10
<PAGE>


explore various strategic alternatives, including the potential sale of the
Company. On January 29, 1999, the Company publicly announced that the Board of
Directors had instructed its investment bankers to explore the potential sale of
the Company. During the first quarter of 1999, the Company recorded a pre-tax
special charge of $1.0 million for expenses related to a process of exploring
the potential sale of the Company. On June 15, 1999, the Company publicly
announced that its Board of Directors had determined not to pursue a sale of the
Company at that time. During the third quarter of 1999, the Company reduced its
first quarter pre-tax special charge by $216 thousand to reflect actual costs.

NOTE 9 - ENVIRONMENTAL CONCERNS

On June 9, 2000, the Company received notice from the United States District
Court for the Northern District of Alabama that it is considered a potentially
responsible third party at a site located in Alabama. While the Company does not
own the site, Axsys, dba Speedring, Inc., may be obligated under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA) for contributions towards response costs incurred as a result of
alleged releases of hazardous substances at a waste treatment facility in
Alabama.

The Company's policy is to accrue environmental cleanup related costs when those
costs are believed to be probable and can be reasonably estimated. The
quantification of environmental exposure requires an assessment of many factors,
including the quality of information available for the specific site, the
assessment stage of each investigation, preliminary findings and the length of
time involved in remediation. Currently, it is not possible for the Company to
estimate a meaningful range of exposure based on the limited amount of
information received.


                                       11
<PAGE>

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

RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of net
sales for the six month period ended June 30, 2000 and 1999. On March 17, 2000
the Company sold its Beau Interconnect division. This divestiture has been
accounted for as a discontinued operation. The results of the operations of Beau
Interconnect and the gain from the disposal are reflected in discontinued
operations.

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
                                                     -----------------------------------------------------
                                                             2000       1999       2000         1999
                                                           --------   --------   --------     --------
<S>                                                        <C>         <C>        <C>          <C>
Net sales:

    ADG .............................................        39.6%       47.7%       35.7%       45.8%
    CPG .............................................        60.4        52.3        64.3        54.2
                                                           --------   --------   --------     --------
            Total Company ...........................       100.0       100.0       100.0       100.0
                                                           --------   --------   --------     --------

Cost of sales .......................................        77.1        72.4        85.6        73.4
                                                           --------   --------   --------     --------

Gross profit ........................................        22.9        27.6        14.4        26.6
                                                           --------   --------   --------     --------
Operating expenses:
    Selling, general and administrative expenses ....        20.9        19.6        23.9        20.3
    Research and development expenses ...............         3.9         4.2         3.9         4.5
    Restructuring charge ............................         1.3          --         3.9          --
    Amortization of intangible assets ...............         0.1         0.5         0.2         0.5
                                                           --------   --------   --------     --------
                                                             26.2        24.3        31.9        25.3

Operating (loss) income .............................        (3.3)        3.3       (17.5)        1.3
    Interest income (expense), net ..................         1.0        (0.8)        0.3        (0.7)
    Special charge ..................................          --          --          --        (2.3)
    Other income ....................................         0.2          --         0.2          --
                                                           --------   --------   --------     --------

(Loss)/profit from continuing operations before taxes        (2.1)        2.5       (17.0)       (1.7)
  Benefit (expense) for income taxes ................         0.8        (1.0)        6.6         0.7
                                                           --------   --------   --------     --------
(Loss)/profit from continuing operations ............        (1.3)        1.5       (10.4)       (1.0)

Discontinued operations:
  Income from operations, net of taxes ..............      --             3.4         1.2         2.7
  Gain on disposal, net of taxes ....................      --          --            32.0      --
                                                           --------   --------   --------     --------
Net income (loss) ...................................        (1.3)%       4.9%       22.8%        1.7%
                                                           --------   --------   --------     --------
                                                           --------   --------   --------     --------

Gross profit (as a percentage of related net sales):
     ADG ............................................        11.2%       26.5%      (11.8)%      23.9%
     CPG ............................................        30.6        26.7        28.8        28.3

</TABLE>


                                       12
<PAGE>

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999

NET SALES. Net sales for the second quarter of 2000 were $23.6 million, an
increase of 7 percent, or $1.6 million over sales of $22.0 million in the
comparable quarter of 1999. Sales of the Company's Commercial Products Group
(CPG) were $14.3 million compared to sales of $11.5 million in 1999. The $2.8
million, or 24 percent increase was due to improved business conditions in the
market for precision ball bearings sold to industrial automation markets as well
as stronger orders for scanners sold to the digital imaging market. Sales for
positioning solutions in the electronics capital equipment market increased over
prior year levels while data storage markets remained weak compared to last
year.

Sales of the Aerospace & Defense Group (ADG) were $9.3 million compared to $10.5
million in 1999. The $1.2 million, or 11 percent decrease in sales versus last
year was principally due to the weaker backlog of orders entering this year.
Sales in the second quarter of 1999 also included one-time sales to replenish
customer inventory for motion control products on a major defense program. Sales
in the second quarter of 2000 were 55 percent ahead of first quarter 2000 sales
resulting from the shipment of two major programs that were completed during the
quarter.

GROSS PROFIT. Axsys' gross profit in the second quarter of 2000 was $5.4 million
compared to $6.1 million in the comparable quarter last year. As a percent of
sales, gross margin was 22.9 percent in the second quarter of 2000, compared to
27.6 percent last year. The primary factors leading to lower margins in 2000
were lower ADG shipments that resulted in underabsorbed overhead as well as cost
overruns on long-term programs which were recognized in the quarter. CPG's
margin percentages were lower due to a combination of factors, including product
mix which favored higher sales of the Company's precision bearings distribution
business (sales up 18 percent from last year) that carry lower than average
margins and due to costs associated with the startup of a new digital imaging
business unit in Connecticut.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses in the second
quarter of 2000 rose to $4.9 million from $4.3 million in 1999. Sales and
marketing expenses for commercial products increased in 2000 over 1999 levels as
the Company invested in resources to capture future growth opportunities.
Administrative costs for legal services, partially in connection with the
strategic realignment, increased over prior year levels. In addition, over $200
thousand of this increase was related to the strategic realignment of the
business that was substantially completed at the end of the second quarter.
These costs include certain relocation and integration costs that are expensed
as incurred. Management projects additional SG&A costs of approximately $400
thousand in the third quarter as the plan is completed.

RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses in 2000 were $924 thousand,
compared to $933 thousand in the second quarter of 1999. As the majority of the
Company's products are sold to original equipment manufacturers (OEM), most of
the development costs for new products and components are included in Cost of
sales as the design and development of these products begins once an order is
received from the OEM customer.

RESTRUCTURING EXPENSES. During the first quarter of 2000, Axsys announced a
strategic realignment of its businesses. A plan to improve efficiency and
enhance competitiveness under two new major groups was adopted to better serve
Axsys' customers and markets. As discussed in Note 8 to the Condensed
Consolidated Financial Statements, $296 thousand of expenses related to the
strategic realignment were charged to expense in the quarter.

INTEREST EXPENSE, NET. Net interest income amounted to $234 thousand in 2000
compared to net interest expense of $166 thousand in 1999. During 2000, as a
result of the divestment of Beau, Axsys has recorded income on it cash and
investments. In 1999, the Company paid interest on outstanding borrowings to
fund operations.

TAXES. Axsys' effective tax rate was 39.1 percent compared to 40.3 percent in
1999. The decrease in the effective rate is caused in part by the lower amount
of non-deductible amortization expense in 2000 versus 1999.

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999

NET SALES. Net sales were $43.1 million in the six month period ended June 30,
2000, compared to $42.6 million for the same period in 1999, an increase of $0.5
million, or 1 percent. CPG sales were $27.7 million, an increase of $4.6
million, or 20 percent higher than sales of $23.1 million in 1999. Sales of
precision ball bearings and digital imaging scanners were higher in 2000 than
last year. General economic strength has contributed to increased volume for
precision bearings sold to industrial automation applications, including
electronics capital equipment. In the digital imaging market, Axsys has


                                       13
<PAGE>


increased its market share for scanning products during the first six months of
this year. ADG sales were $15.4 million in the first six months of 2000,
compared to sales of $19.5 million last year, a decrease of $4.1 million or 21
percent. The decrease in ADG sales was due to a lower backlog of orders entering
2000 coupled with product returns related to products shipped more than one year
ago. The Company has taken aggressive steps to improve processes and overall
quality by making these processes the main focal point of lean manufacturing
programs.

GROSS PROFIT. Axsys' gross profit was $6.2 million for the six month period
ended June 30, 2000, compared to $11.3 million for the same period last year, a
decrease of $5.1 million. The decrease is primarily due to two factors:
non-recurring charges of $2.5 million related to slow moving and potentially
obsolete inventory recorded in the first quarter and lower sales of ADG products
including substantial product returns, most of which also occurred in the first
quarter of 2000. The decline in ADG sales volume was caused by lower orders in
1999 that translated into lower shipments in the following year. CPG's margin
percentages were lower due to higher sales of the Company's precision bearings
distribution business that carry lower than average margins, and due to costs
associated with the startup of a new digital imaging business unit in
Connecticut. Year to date gross profit was 14.4 percent of sales compared to
26.6 percent last year. Removing the effects of $2.5 million of one-time
charges, gross profit was 20.3 percent of sales in the first six months of 2000.
Gross profit margins rose to 23.1 percent in the second quarter of 2000 from
16.8 percent in the first quarter, excluding one-time charges.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $10.3 million
for the six month period ended June 30, 2000, increasing $1.7 million from the
comparable period last year. $897 thousand of the increase is directly
attributable to the strategic realignment and the one-time costs to implement
this program. Selling expenses have increased in 2000 over last years levels,
focused on CDG programs. Administrative salaries, legal expenses, and travel
costs also rose versus last year.

RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses were $1.7 million in 2000,
compared to $1.9 million in 1999. The decrease is due to a higher allocation of
development engineering resources in 2000 to production programs (charged to
cost of sales) versus R&D projects.

RESTRUCTURING EXPENSES. Cost categorized as Restructuring expenses were $1.7
million in the six month period ended June 30, 2000 including severance costs,
and cost to close or relocate certain facilities. These costs are discussed in
more detail in Note 8 to the Condensed Consolidated Financial Statements.

INTEREST EXPENSE, NET. Net interest income amounted to $129 thousand compared to
net interest expense of $293 thousand in 1999. The primary cause was the
proceeds from the divestment of Beau in March 2000, which were sufficient to
repay outstanding bank debt and invest excess cash in short term liquid
investments.

TAXES. Axsys' effective tax rate was 39.1 percent compared to 42.0 percent in
1999. The decrease in the effective rate is caused in part by lower levels of
non-deductible amortization expense in 2000 versus 1999.

DISCONTINUED OPERATIONS. In March 2000, Axsys sold its Beau Interconnect
division. Results of operations from the discontinued business have been
reported separately from continuing operations in all periods presented. The
sale of Beau resulted in a gain of $22.5 million, before a tax provision of $8.4
million. Axsys also recorded a discontinued operation charge of $0.5 million,
before a tax benefit of $0.2 million, to increase its environmental reserves for
the remediation of two former operating sites.

BACKLOG

A substantial portion of Axsys' business is of a build-to-order nature requiring
various engineering, manufacturing, testing and other processes to be performed
prior to shipment. As a result, Axsys generally has a significant backlog of
orders to be shipped. The total backlog of orders increased by 23% or $10.0
million, to $52.7 million at June 30, 2000 from $42.7 million at December 31,
1999. The increase is primarily in the backlog from the defense and space
markets although all segments reported increases. Significant new orders for
precision-machined components have been recorded this year.


                                       14
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Axsys funds its operations primarily from cash flow generated by operations and
cash on hand as a result of the divestment of Beau in the first quarter of 2000.
Prior to the Beau divestment, the Company also relied on bank credit facilities
and capital lease transactions as sources of funds.

For the six months ended June 30, 2000 and 1999 net cash used in operating
activities was $7.8 million and $0.6 million, respectively. The decrease in cash
in 2000 was caused by lower earnings from continuing operations, including the
effects of the one-time restructuring charges recorded and paid to date. Working
capital changes included an increase in receivables reflecting increased
billings on defense programs, lower inventories, and increased current
liabilities for taxes payable on the Beau gain. In 1999, negative cash flow from
operating activities was caused by increases in working capital balances, mostly
inventories, offset by modest earnings in the first six months of the year.

Net cash provided by (used in) investing activities for the six months ended
June 30, 2000 and 1999 was $29.0 million and ($0.9 million), respectively. Cash
generated from the sale of Beau was $29.7 million in the first quarter of 2000,
with additional cash received in the second quarter of $0.7 million for
post-closing purchase price adjustments. Capital expenditures were $2.3 million
for the first six months of 2000. During 1999, cash flow used in investing
activities included capital expenditures of $0.4 million and advances of $0.5
million to Westlake Technology Corporation in exchange for exclusive rights to
market and sell Westlake's electronic and electromechanical test equipment.

Cash flows from financing activities included net cash used by financing
activities in 2000 of $4.7 million, compared to net cash provided by financing
activities of $1.5 million in 1999. In 2000, Axsys repaid the outstanding
balance of its bank credit facilities out of proceeds from the Beau sale,
accounting for most of the $4.7 net cash usage. Financing activities in 1999
include net borrowings of $1.7 million from bank credit facilities that were
used to fund working capital requirements and purchases of Treasury Stock.

The Company believes that cash on hand and cash generated from operating
activities will be sufficient to support its ongoing programs, working capital
needs and capital expenditures for the foreseeable future. Significant potential
investment activities for matters such as acquisitions could be funded by cash
on hand, external credit facilities and issuance of Axsys common stock, or
combinations of these sources.

RESTRUCTURING

On February 11, 2000, Axsys announced a strategic realignment of its businesses.
Specifically, Axsys adopted a plan to improve efficiency and enhance
competitiveness under two new major groups to better serve its markets and
customers. In conjunction with the strategic realignment, Axsys recorded a
non-recurring charge to earnings as of June 30, 2000 of $5.1 million, before
taxes, including $1.7 million that was recorded as a restructuring charge, $2.5
million that was charged to cost of sales primarily relating to slow moving and
potentially obsolete inventory, and $897 thousand that was charged to selling,
general and administrative expenses. Included in the $1.7 million restructuring
charge was $915 thousand of severance costs related to personnel reductions and
$546 thousand of costs relating to the relocation of the Company's San Diego,
California facility. Of the $915 thousand in severance costs, $277 thousand has
been paid as of June 30, 2000, leaving accrued severance costs of $638 thousand
at June 30, 2000. Approximately 50 employees have been terminated mostly in
indirect labor and management positions. In addition, Axsys anticipates
additional restructuring charges up to $400 thousand to be recorded in the next
two quarters.

RECENTLY ISSUED ACCOUNTING STANDARDS

         Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued in
June 1998. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000. Management does not believe that the
implementation of the statement will have a material impact on the consolidated
financial position or consolidated results of operations of Axsys.


                                       15
<PAGE>


FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q provides certain forward-looking statements.
The Company's business is subject to a variety of risks and uncertainties,
including the effect of order backlog on operations, the impact of competition
in the aerospace and defense industry, the effects of legal proceedings and
regulatory matters on our business, and the impact of general economic
conditions, as well as other factors discussed in filings that Axsys makes with
the Securities and Exchange Commission. As a result, actual future results and
developments may be materially different from those expressed or implied in any
forward-looking statement. Disclosure regarding factors affecting the Company's
future results and developments is contained in the Company's public filings
with the Securities and Exchange Commission, including the Company's annual
report on Form 10-K for the fiscal year ended December 31, 1999.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's market risk sensitive instruments do not subject the Company to
material risk exposures.


                                       16
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The annual meeting of stockholders of the Company was held on May 22, 2000.
The following matters were submitted to a vote of security holders. The results
of the voting were as follows:

(1)      Election of Directors
         All four directors of the Company were elected by the stockholders.

<TABLE>
<CAPTION>
                                                 Votes             Votes
                                                  for             Withheld
                                               ---------          --------
<S>                                           <C>                <C>
     Stephen W. Bershad ...............        3,123,294          235,054
     Anthony J. Fiorelli, Jr...........        3,122,954          235,394
     Eliot M. Fried ...................        3,123,109          235,239
     Richard V. Howitt ................        3,123,309          235,039

</TABLE>

(2)      Approve certain amendments to the Company's Amended and Restated
         Long-Term Stock Incentive Plan (the "Plan"). The stockholders were
         asked to approve amendments to the Plan, (a) to increase the number of
         shares reserved for issuance thereunder by 200,000 and (b) to extend
         the term of the Plan by eight years to August 31, 2009. The
         stockholders approved this matter with 2,360,974 votes cast for,
         368,676 votes opposed, and 4,273 votes abstained.

(3)      Appointment of Independent Auditors
         The stockholders were asked to ratify the appointment of Arthur
         Andersen LLP as independent auditors for the Company for 1999. The
         stockholders approved this matter with 3,356,158 votes cast for, 1,385
         votes opposed, and 804 votes abstained.

ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K

a)       Exhibits:

         Exhibit 27 (1):     Financial Data Schedule (For SEC use only).
         Exhibit 27 (2):     Restated Financial Data Schedule (For SEC use
                             only).

b)       Reports on Form 8-K

         Not applicable.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated this 11th day of August, 2000.

Date: August 11, 2000                  AXSYS TECHNOLOGIES, INC.


                                       By: /s/ STEPHEN W. BERSHAD
                                           -------------------------------
                                           Stephen W. Bershad
                                           Chairman of the Board and Chief
                                           Executive Officer


                                           /s/ MARK J. BONNEY
                                           -------------------------------
                                           Mark J. Bonney
                                           President and Chief Operating Officer


                                           /s/ JOHN E. HANLEY
                                           -------------------------------
                                           John E. Hanley


                                       17
<PAGE>


                                           Vice President-Finance and Chief
                                           Financial Officer (Principal
                                           Financial Officer)


                                       18