##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended January 1, 2005                                                   
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             






Presstek, Inc.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 02-0415170                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

55 Executive Drive, Hudson, New Hampshire 03051-4903


(Address of principal executive offices including zip
code)


Registrants telephone number, including area code:


(603) 595-7000


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


None


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


Common Stock, $.01 par value


þ o


o


þ o






Documents Incorporated by Reference:












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TABLE OF CONTENTS



|                                                                                           |                                                                                                                       |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                                    
|                                                                                           | Item 1. Business                                                                                                     
|                                                                                           | Item 2. Properties                                                                                                   
|                                                                                           | Item 3. Legal Proceedings                                                                                            
|                                                                                           | Item 4. Submission of Matters to a Vote of Security Holders                                                          
|PART II                                                                                   
|                                                                                           | Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities
|                                                                                           | Item 6. Selected Financial Data                                                                                      
|                                                                                           | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                        
|                                                                                           | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                  
|                                                                                           | Item 8. Financial Statements and Supplementary Data                                                                  
|                                                                                           | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         
|                                                                                           | Item 9A. Controls and Procedures                                                                                     
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                   
|                                                                                           | Item 9B. Other Information                                                                                           
|PART III                                                                                  
|                                                                                           | Item 10. Directors and Executive Officers of the Registrant                                                          
|                                                                                           | Item 11. Executive Compensation                                                                                      
|                                                                                           | Item 12. Security Ownership of Certain Beneficial Owners and Management                                              
|                                                                                           | Item 13. Certain Relationships and Related Transactions                                                              
|                                                                                           | Item 14. Principal Accountant Fees and Services                                                                      
|PART IV                                                                                   
|                                                                                           | Item 15. Exhibits and Financial Statement Schedules                                                                  
|                                                                                           | Item 15(b) Filed Exhibits.                                                                                           
|                                                                                           | Item 15(c) Financial Statements Excluded from Annual Report to Shareholders.                                         
|SIGNATURES                                                                                
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                   
|CONSOLIDATED BALANCE SHEETS                                                               
|CONSOLIDATED STATEMENTS OF OPERATIONS                                                     
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                
|EX-21 Subsidiaries of the Presstek, Inc.                                                  
|EX-23.1 Consent of BDO Seidman, LLP                                                       
|EX-31.1 Section 302 Certification of CEO                                                  
|EX-31.2 Section 302 Certification of CFO                                                  
|EX-32.1 Section 906 Certification of CEO                                                  
|EX-32.2 Section 906 Certification of CFO                                                  



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As used in this report, the terms we,
us, our, Presstek and the
Company mean Presstek, Inc., and its subsidiaries,
unless the context indicates another meaning.





PART I







|        |         
|------- | --------
|Item 1. | Business

General








| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Develop and manufacture products that transfer digital images
    onto our proprietary chemistry free printing plates, or
    consumables, using digital laser imaging equipment, targeting
    primarily the small and medium sized commercial print providers;
|
| |  | Are a leading sales and services company delivering Presstek
    solutions and those from other manufacturing partners through
    our ABD International business unit, known as ABDick;                                                                        
|
| |  | Manufacture semiconductor solid state laser diodes for Presstek
    imaging applications and for use by external defense, industrial
    and medical applications; and                                                                                          
|
| |  | Manufacture and distribute both chemistry free, digitally imaged
    printing plates, and printing plates for conventional print
    applications at our Precision Lithograining business segment.                                                              









| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We use the direct sales and service operation of our ABDick
    business unit to deliver our solutions and those of other
    partner manufacturers primarily in the U.S., Canada and the
    United Kingdom;
|
| |  | We have a well developed graphic arts dealer network to deliver
    our products worldwide; and                                                                                                              
|
| |  | We also use original equipment manufacturers, or OEMs, to
    deliver our products to markets worldwide.                                                                                                    



www.presstek.com


1



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Business Overview














Our Business Segments


The Presstek Segment




2



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The Lasertel Segment




The Precision Segment




The ABDick Segment












3



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Strategy






Our primary focus is on the growth of our consumables
product.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The graphic arts industry is in the midst of a fundamental
    structural change from analog to digital operations.
    Presstek-manufactured digital consumable burning engines such as
    CTP systems and DI presses have allowed us to build a
    substantial installed base. One method of growing the market for
    consumables involves further expanding the base of our installed
    consumable burning engines (CBEs). We believe
    that the addition of the ABDick sales, service and distribution
    network will expand our customer base and assist customers in
    evolving from analog to digital processes, creating additional
    market opportunities for the CBEs that we manufacture. In
    addition to expanding our base of our CBEs, an element of
    our focus is to reach beyond our proprietary systems and
    penetrate the installed base of CTP devices in all market
    segments with our chemistry-free and process-free offerings.

We focus on select market segments.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | This digital transformation has been driven by large print
    providers, who have been the vanguard of adoption of digital
    technology. The small and medium-sized commercial print provider
    and in-plant print operations are now beginning the wholesale
    conversion to digital systems and processes. With the
    acquisition of ABDick and with our digital printing solutions,
    we believe that we can leverage the depth and breadth of our
    products, services, supplies, internal skills, and strategic
    partnerships to address these new and emerging market demands.

Because we compete on the basis of technology, we
deliver differentiated products.




| |                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Presstek has been a technology innovator since its inception,
    providing digital laser technology that is directly responsible
    for what is estimated to be over 90% of worldwide DI
    installations. As we expand and refine our product offerings, we
    will strive to lead the market with high performance products.

We provide environmentally responsible solutions
through our application of technology.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our thermal chemistry-free plate technologies provide both
    streamlined workflow and environmentally responsible solutions.
    Besides contributing to a cleaner planet, environmental
    responsibility is sound business practice in that our DI and CTP
    technology reduces labor needs, reduces space requirements,
    eliminates plate-oriented waste disposal, and results in fewer
    manufacturing process errors.

Technology and Products


Direct Imaging Technology






4



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FirePower laser diode system integrated motion system FireStation digital controller and data server




CTP Products






| |          
| | ---------
| | Dimension





| |       
| | ------
| | Vector



5



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Printing Plates




| |        
| | -------
| | General







| |         
| | --------
| | PEARLdry





| |       
| | ------
| | Anthem





| |         
| | --------
| | Applause





| |        
| | -------
| | Freedom



6



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| |       
| | ------
| | Aurora





| |        
| | -------
| | Publica





| |       
| | ------
| | Qualis





Lasertel Diode Products




Manufacturing










7



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Marketing, Distribution and Customer
Support








8



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| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We will employ multiple technologies to solve customer problems,
    many we will develop ourselves, and some we will acquire through
    partnerships.                                                                             
|
| |  | We intend to deliver those solutions through multiple channels.
    Our channels to market will include a high performing
    value-added dealer network, a complementary ABDick direct sales
    force, and strategic OEM partners.

Strategic Relationships












9



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Competition








10



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Patents, Trademarks and Proprietary
Rights




11



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Research and Development




12



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Backlog




Employees




Investor Information


www.presstek.com


Glossary






|                        |  |                                                                                                                                                                       
|----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A1 (8-page)             |  | a printing term referring to a standard paper size capable of
    printing eight 8.5 x 11 pages on a
    sheet of paper                                             
|                       
|A2 (4-page)             |  | a printing term referring to a standard paper size capable of
    printing four 8.5 x 11 pages on a
    sheet of paper                                              
|                       
|A3/B3 (2-page)          |  | a printing term referring to a standard paper size capable of
    printing two 8.5 x 11 pages on a
    sheet of paper                                               
|                       
|Ablation                |  | a controlled detachment/ vaporization caused by a thermal event,
    this process is used during the imaging of Pressteks PEARL
    and Anthem consumables           
|                       
|Anthem                  |  | Pressteks line of wet offset digital plates with a unique
    polymer-ceramic construction                                                                           
|                       
|Applause                |  | Pressteks new process-free wet offset digital plate                                                                                                                  
|                       
|Computer-to-plate (CTP) |  | a general term referring to the exposure of lithographic plate
    material from a digital database, off-press                                                        
|                       
|Direct Imaging (DI)     |  | Pressteks registered trademark for digital imaging systems
    that allow image carriers (film and plates) to be imaged from a
    digital database, on and off-press
|                       
|Dots per inch (dpi)     |  | a measurement of the resolving power or the addressability of an
    imaging device                                                                                   
|                       
|Heidelberg              |  | Heidelberger Druckmaschinen AG, one of the worlds largest
    printing press manufacturers, headquartered in Heidelberg,
    Germany                                 
|                       
|Infrared                |  | light lying outside of the visible spectrum beyond its red-end,
    characterized by longer wavelengths; used in our thermal imaging
    process                      

13



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|                                          |  |                                                                                                                                                                                                                                                         
|----------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|KBA                                       |  | Koenig & Bauer, AG, one of the worlds largest
    printing press manufacturers, headquartered in Wurzburg, Germany                                                                                                                                     
|                                         
|KPG                                       |  | Kodak Polychrome Graphics, a leading supplier of digital,
    conventional and business solutions for the graphic arts
    industry, headquartered in Norwalk, Connecticut                                                                              
|                                         
|Lithography                               |  | printing from a single plane surface under the principle that
    the image area carries ink and the non-image area does not, and
    that ink and water do not mix                                                                                     
|                                         
|Off-press                                 |  | making a printing plate from either an analog or digital source
    independent of the press on which it will be used                                                                                                                                   
|                                         
|On-press                                  |  | the use of Pressteks direct imaging technologies to make a
    plate directly from a digital file on the press                                                                                                                                         
|                                         
|PEARL                                     |  | the name associated with Pressteks first generation laser
    imaging technologies and related products and consumables                                                                                                                                
|                                         
|ProFire and ProFire Excel imaging systems |  | the Presstek components required to convert a conventional
    printing press into a direct imaging press, including laser
    diode arrays, computers, electronics                                                                                     
|                                         
|Dimension                                 |  | Pressteks product line of CTP off-press platemaking
    equipment                                                                                                                                                                                      
|                                         
|Platemaking                               |  | the process of applying a printable image to a printing plate                                                                                                                                                                                           
|                                         
|Prepress                                  |  | graphic arts operations and methodologies that occur prior to
    the printing process; typically these include photography,
    scanning, image assembly, color correction, exposure of image
    carriers (film and/or plate), proofing and processing
|                                         
|Quickmaster DI                            |  | the second generation of direct imaging, waterless presses,
    highly automated with roll-fed PEARLdry Plus plate material, a
    joint development effort between Heidelberg and Presstek                                                             
|                                         
|Ryobi                                     |  | Ryobi Limited of Japan, a printing press manufacturer
    headquartered in Japan                                                                                                                                                                        
|                                         
|Ryobi 3404DI                              |  | an A3 format size four-color sheet-fed press, incorporating
    Pressteks dual plate cylinder concept and PEARLdry Plus
    spooled plates, a joint development effort between Ryobi and
    Presstek                                                  
|                                         
|Semiconductor laser diode                 |  | a high-powered, infrared imaging technology employed in the DI
    imaging systems                                                                                                                                                                      
|                                         
|Short-run markets/printing                |  | a graphic arts classification used to denote an emerging trend
    for lower print quantities                                                                                                                                                           
|                                         
|Thermal                                   |  | a method of digitally exposing a material via the heat generated
    from a laser beam                                                                                                                                                                  
|                                         
|Vacuum deposition process                 |  | a technology to accurately, uniformly coat substrates in a
    controlled environment                                                                                                                                                                   
|                                         
|Waterless                                 |  | a lithographic printing method that uses dry offset printing
    plates and inks and does not require a dampening system                                                                                                                                

14



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Item 2.     Properties





















Item 3.     Legal
Proceedings








15



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|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of
    Security Holders






PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common
    Equity, Related Stockholder Matters and Issuer Purchasers of
    Equity Securities



|                                  |  |      |       |  |     |   |      | 
|--------------------------------- |  | ---- | ----- |  | --- | - | ---- | 
|Fiscal Year Ended January 1, 2005 |  | High |       |  | Low |  
|                                  |  |      |       |  |     |  
|First quarter                     |  | $    | 12.20 |  |     | $ | 7.25 | 
|Second quarter                    |  |      | 12.05 |  |     |   | 9.00 | 
|Third quarter                     |  |      | 10.24 |  |     |   | 8.15 | 
|Fourth quarter                    |  |      | 10.99 |  |     |   | 8.56 | 

|                                  |  |      |      |  |     |   |      | 
|--------------------------------- |  | ---- | ---- |  | --- | - | ---- | 
|Fiscal Year Ended January 3, 2004 |  | High |      |  | Low |  
|                                  |  |      |      |  |     |  
|First quarter                     |  | $    | 5.72 |  |     | $ | 4.15 | 
|Second quarter                    |  |      | 6.75 |  |     |   | 4.20 | 
|Third quarter                     |  |      | 8.78 |  |     |   | 5.86 | 
|Fourth quarter                    |  |      | 8.46 |  |     |   | 7.02 | 



Dividend Policy









|        |                            
|------- | ---------------------------
|Item 6. | Selected Financial
    Data



16



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|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |        |  
|---------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------------- | ------- | ------ | ------ | - | ------ | ------- | - | - | ------- | ------ | - | ------- | ------- | ------ | - | - | ------ | ------ | -
|                                                                 |                                            | For the Fiscal Years Ended                        |        
|                                                                 |                                            |                                                   |        
|                                                                 |                                            | Jan 1,                                            |         |        | Jan 3, |   |        | Dec 28, |   |   | Dec 29, |        |   | Dec 30, |        
|                                                                 |                                            | 2005                                              |         |        | 2004   |   |        | 2002    |   |   | 2001    |        |   | 2000    |        
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|                                                                 |                                            | (Amounts in thousands, except earnings per share) |        
|Revenue                                                          |                                            | $                                                 | 129,851 |        |        | $ | 87,232 |         |   | $ | 83,453  |        |   | $       | 102,303 |        |   | $ | 87,294 |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Costs and Expenses:                                              |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | Cost of revenue (1)                        |                                                   |         | 87,387 |        |   |        | 51,151  |   |   |         | 54,639 |   |         |         | 64,395 |   |   |        | 46,747 |  
|                                                                 | Research and product development           |                                                   |         | 6,460  |        |   |        | 7,061   |   |   |         | 9,303  |   |         |         | 11,719 |   |   |        | 15,897 |  
|                                                                 | Sales, marketing and customer support      |                                                   |         | 17,675 |        |   |        | 12,272  |   |   |         | 10,767 |   |         |         | 13,311 |   |   |        | 9,856  |  
|                                                                 | General and administrative (2)             |                                                   |         | 13,786 |        |   |        | 9,363   |   |   |         | 10,212 |   |         |         | 15,495 |   |   |        | 9,392  |  
|                                                                 | Special charges (credits) (3)              |                                                   |         | (392   | )      |   |        | 550     |   |   |         | 5,961  |   |         |         |       |   |   |        |       |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Total costs and expenses                                         |                                            |                                                   | 124,916 |        |        |   | 80,397 |         |   |   | 90,882  |        |   |         | 104,920 |        |   |   | 81,892 |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Income (Loss) From Operations                                    |                                            |                                                   | 4,935   |        |        |   | 6,835  |         |   |   | (7,429  | )      |   |         | (2,617  | )      |   |   | 5,402  |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Other Income (Expense):                                          |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | Interest, net                              |                                                   |         | (605   | )      |   |        | (376    | ) |   |         | (872   | ) |         |         | (1,136 | ) |   |        | (99    | )
|                                                                 | Other, net                                 |                                                   |         | (265   | )      |   |        | 209     |   |   |         | 21     |   |         |         | (63    | ) |   |        | 147    |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Other income (expense), net                                      |                                            |                                                   | (870    | )      |        |   | (167   | )       |   |   | (851    | )      |   |         | (1,199  | )      |   |   | 48     |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Income (Loss) From Continuing Operations Before Income
    Taxes |                                            |                                                   | 4,065   |        |        |   | 6,668  |         |   |   | (8,280  | )      |   |         | (3,816  | )      |   |   | 5,450  |       
|Provision for Income Taxes                                       |                                            |                                                   | 200     |        |        |   |       |         |   |   |        |        |   |         |        |        |   |   | 150    |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Income (Loss) From Continuing Operations                         |                                            |                                                   | 3,865   |        |        |   | 6,668  |         |   |   | (8,280  | )      |   |         | (3,816  | )      |   |   | 5,300  |       
|Discontinued Operations: (4)                                     |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | Income (loss) from discontinued operations |                                                   |         |       |        |   |        | 1,429   |   |   |         |       |   |         |         |       |   |   |        | 600    |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Income (Loss) From Discontinued Operations                       |                                            |                                                   |        |        |        |   | 1,429  |         |   |   |        |        |   |         |        |        |   |   | 600    |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Net Income (Loss)                                                |                                            | $                                                 | 3,865   |        |        | $ | 8,097  |         |   | $ | (8,280  | )      |   | $       | (3,816  | )      |   | $ | 5,900  |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Earnings (Loss) Per Share  Basic:                               |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | From continuing operations                 |                                                   | $       | 0.11   |        |   | $      | 0.20    |   |   | $       | (0.24  | ) |         | $       | (0.11  | ) |   | $      | 0.16   |  
|                                                                 | From discontinued operations               |                                                   | $       | 0.00   |        |   | $      | 0.04    |   |   | $       | 0.00   |   |         | $       | 0.00   |   |   | $      | 0.02   |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Earnings (Loss) Per Share  Basic                                |                                            | $                                                 | 0.11    |        |        | $ | 0.24   |         |   | $ | (0.24   | )      |   | $       | (0.11   | )      |   | $ | 0.18   |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Earnings (Loss) Per Share  Diluted:                             |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | From continuing operations                 |                                                   | $       | 0.11   |        |   | $      | 0.20    |   |   | $       | (0.24  | ) |         | $       | (0.11  | ) |   | $      | 0.15   |  
|                                                                 | From discontinued operations               |                                                   | $       | 0.00   |        |   | $      | 0.04    |   |   | $       | 0.00   |   |         | $       | 0.00   |   |   | $      | 0.02   |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Earnings (Loss) Per Share  Diluted                              |                                            | $                                                 | 0.11    |        |        | $ | 0.24   |         |   | $ | (0.24   | )      |   | $       | (0.11   | )      |   | $ | 0.17   |       
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Weighted Average Common Shares                                   |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | Outstanding  Basic                        |                                                   |         | 34,558 |        |   |        | 34,167  |   |   |         | 34,124 |   |         |         | 34,096 |   |   |        | 32,826 |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        
|Weighted Average Common Shares                                   |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |         |        |   |   |        |       
|                                                                 | Outstanding  Diluted                      |                                                   |         | 35,357 |        |   |        | 34,400  |   |   |         | 34,124 |   |         |         | 34,096 |   |   |        | 35,320 |  
|                                                                 |                                            |                                                   |         |        |        |   |        |         |   |   |         |        |   |         |        

|                          |  |                |         |  |        |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|------------------------- |  | -------------- | ------- |  | ------ | - | ------- | ------- |  | - | ------- |  |  | ------- | ------- |  |  | - | ------- | 
|                          |  | Jan 1,         |         |  | Jan 3, |   |         | Dec 28, |  |   | Dec 29, |  |  | Dec 30, |        
|Balance Sheet Data as of: |  | 2005           |         |  | 2004   |   |         | 2002    |  |   | 2001    |  |  | 2000    |        
|                          |  |                |         |  |        |   |         |         |  |   |         |  |  |         |        
|                          |  | (In thousands) |        
|Working capital           |  | $              | 40,997  |  |        | $ | 42,512  |         |  | $ | 28,572  |  |  | $       | 26,741  |  |  | $ | 32,287  | 
|Total assets              |  |                | 171,318 |  |        |   | 106,528 |         |  |   | 101,796 |  |  |         | 106,844 |  |  |   | 115,902 | 
|Total borrowings          |  |                | 41,822  |  |        |   | 14,464  |         |  |   | 16,707  |  |  |         | 16,398  |  |  |   | 18,470  | 
|Stockholders equity      |  |                | 89,402  |  |        |   | 80,183  |         |  |   | 71,766  |  |  |         | 79,985  |  |  |   | 83,143  | 






|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in 2002 was $3.7 million in cost of sales for
    inventory write-downs and other charges related to discontinued
    programs.                                                          
|   
|(2) | Includes a $2.1 million write-off recorded in fiscal 2001
    for pre-payments made as a result of a suppliers
    bankruptcy petition in 2002.                                                  
|   
|(3) | Special charges (credits) relates to repositioning activities
    and workforce reductions recorded in June 2002 and in May 2003.                                                                 
|   
|(4) | Relates to the operations of Delta V Technologies, Inc.,
    which were shutdown in fiscal 1999. See Note 2 to the
    companys consolidated financial statements appearing
    elsewhere herein.

17



---



##### Table of Contents






Item 7.     Managements
Discussion and Analysis of Financial Condition and Results of
Operations




Overview








| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Develop and manufacture products that transfer digital images
    onto our proprietary chemistry-free printing plates, or
    consumables, using digital laser imaging equipment, targeting
    primarily the small and medium sized commercial print providers;
|
| |  | Are a leading sales and services company delivering Presstek
    solutions and those from other manufacturing partners through
    our ABD International business unit, known as ABDick;                                                                        
|
| |  | Manufacture semiconductor solid state laser diodes for Presstek
    imaging applications and for use by external defense, industrial
    and medical applications; and                                                                                          
|
| |  | Manufacture and distribute both chemistry-free, digitally imaged
    printing plates, and printing plates for conventional print
    applications at our Precision Lithograining business segment.                                                              











18



---



##### Table of Contents









| |   |                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Presstek segment is primarily engaged in the development,
    manufacture and sale of our patented digital imaging systems and
    printing plate technologies for direct-to-press, or on-press,
    applications and CTP, or off-press, applications.
|
| |  | The Lasertel segment is primarily engaged in the development and
    manufacture of high-powered laser diodes for use by Presstek and
    for sale to external customers.                                                                                 
|
| |  | The Precision segment is primarily engaged in the manufacture
    and sale of our patented digital plates for development, as well
    as digital and analog plates for other customers.                                                                  
|
| |  | The ABDick segment is primarily engaged in the manufacturing,
    marketing, distribution and sale of offset analog and digital
    platemaking equipment, consumables and related services for the
    graphic arts and printing industries.             









19



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RESULTS OF OPERATIONS




|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |     |     |   |  |     |     |  
|---------------------------------------------------------------- | ------------------------------------------ | ------------- | --- | ---- | ----------------------- |  | ---- | ------- |  |  | -------- | -- | - | -------- | --- | --- | - |  | --- | --- | -
|                                                                 |                                            | Percentage of |     |      |                        
|                                                                 |                                            | Total Revenue |     |      | Period-to-Period Change | 
|                                                                 |                                            |               |     |      |                         | 
|                                                                 |                                            |               |     | 2004 |                         |  | 2003 |        
|                                                                 |                                            | Jan 1,        |     |      | Jan 3,                  |  |      | Dec 28, |  |  | Compared |    |   | Compared |    
|For the Fiscal Years Ended                                       |                                            | 2005          |     |      | 2004                    |  |      | 2002    |  |  | To 2003  |    |   | To 2002  |    
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Revenue                                                          |                                            |               | 100 | %    |                         |  | 100  | %       |  |  | 100      | %  |   |          | 49  | %   |   |  | 5   | %  
|Costs and Expenses                                               |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |     |     |   |  |     |    
|                                                                 | Cost of revenue                            |               |     | 67   |                         |  |      | 59      |  |  |          | 65 |   |          |     | 71  |   |  |     | (6  | )
|                                                                 | Research and product development           |               |     | 5    |                         |  |      | 8       |  |  |          | 11 |   |          |     | (9  | ) |  |     | (24 | )
|                                                                 | Sales, marketing and customer support      |               |     | 14   |                         |  |      | 14      |  |  |          | 13 |   |          |     | 44  |   |  |     | 14  |  
|                                                                 | General and administrative                 |               |     | 11   |                         |  |      | 11      |  |  |          | 12 |   |          |     | 47  |   |  |     | (8  | )
|                                                                 | Special charges                            |               |     | (1   | )                       |  |      | 1       |  |  |          | 7  |   |          |     | (71 | ) |  |     | *   |  
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Total costs and expenses                                         |                                            |               | 96  |      |                         |  | 92   |         |  |  | 109      |    |   |          | 55  |     |   |  | (12 | )  
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Income (Loss) From Operations                                    |                                            |               | 4   |      |                         |  | 8    |         |  |  | (9       | )  |   |          | (28 | )   |   |  | *   |    
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Other Income (Expense)                                           |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |     |     |   |  |     |    
|                                                                 | Interest, net                              |               |     | (1   | )                       |  |      | *       |  |  |          | (1 | ) |          |     | (61 | ) |  |     | (57 | )
|                                                                 | Other, net                                 |               |     | *    |                         |  |      | *       |  |  |          | *  |   |          |     | *   |   |  |     | *   |  
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Other income (expense), net                                      |                                            |               | (1  | )    |                         |  | *    |         |  |  | (1       | )  |   |          | *   |     |   |  | *   |    
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Income (Loss) From Continuing Operations Before Income
    Taxes |                                            |               | 3   |      |                         |  | 8    |         |  |  | (10      | )  |   |          | (39 | )   |   |  | 181 |    
|Provision for Income Taxes                                       |                                            |               | *   |      |                         |  |     |         |  |  |         |    |   |          |    |     |   |  | *   |    
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Income (Loss) From Continuing Operations                         |                                            |               | 3   |      |                         |  | 8    |         |  |  | (10      | )  |   |          | (42 | )   |   |  | 181 |    
|                                                                 | Income (loss) from discontinued Operations |               |     |     |                         |  |      | 1       |  |  |          |   |   |          |     | *   |   |  |     | *   |  
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Income (Loss) From Discontinued Operations                       |                                            |               |    |      |                         |  | 1    |         |  |  |         |    |   |          | *   |     |   |  | *   |    
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    
|Net Income (Loss)                                                |                                            |               | 3   |      |                         |  | 9    |         |  |  | (10      | )  |   |          | (52 | ))  |   |  | 198 |    
|                                                                 |                                            |               |     |      |                         |  |      |         |  |  |          |    |   |          |    






|  |               
|- | --------------
|* | not meaningful



| |                                   
| | ----------------------------------
| | Fiscal 2004 versus Fiscal
    2003



| |        
| | -------
| | Revenue







20



---



##### Table of Contents





















| |   |                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenue generated under the Companys agreements with
    Pitman Company and its distributors was $14.8 million for
    fiscal 2004, an decrease of $0.3 million or 2%, as compared
    to $15.1 million for fiscal 2003. Revenue from Pitman
    represented 11% and 17% of total revenue for fiscal 2004 and
    2003, respectively.                                                                
|
| |  | Revenue generated under the Companys agreements with
    Heidelberg and its distributors was $12.5 million for
    fiscal 2004, a decrease of $5.8 million or 32%, as compared
    to $18.3 million for fiscal 2003. Revenue from Heidelberg
    represented 9% and 21% of total revenue for fiscal 2004 and
    2003, respectively.                                                                 
|
| |  | Revenue generated under the Companys agreements with KBA
    and its distributors was $7.6 million for fiscal 2004, an
    decrease of $1.4 million or 16%, as compared to
    $9.0 million for fiscal 2003. Revenue from KBA represented
    6% and 10% of total revenue for both fiscal 2004 and 2003,
    respectively. This decrease is primarily the result of decreased
    press sales to KBA.
|
| |  | Revenue generated under the Companys agreements with KPG
    was $13.6 million for fiscal 2004, an increase of
    $9.9 million or 268%, as compared to $3.7 million for
    fiscal 2003. Revenue from KPG represented 10% and 4% of total
    revenue for fiscal 2004 and 2003, respectively.                                                                                                       



21



---



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| |                        
| | -----------------------
| | Cost of Product Revenue















| |                        
| | -----------------------
| | Cost of Service Revenue







22



---



##### Table of Contents





| |                                 
| | --------------------------------
| | Research and Product Development













| |                                      
| | -------------------------------------
| | Sales, Marketing and Customer Support













| |                           
| | --------------------------
| | General and Administrative



23



---



##### Table of Contents













| |                                          
| | -----------------------------------------
| | Special Charges and Discontinued Programs









| |                            
| | ---------------------------
| | Other Income (Expense), net







| |                           
| | --------------------------
| | Provision for Income Taxes



24



---



##### Table of Contents





| |                                         
| | ----------------------------------------
| | Income (Loss) from Continuing Operations





| |                                   
| | ----------------------------------
| | Fiscal 2003 versus Fiscal
    2002



| |        
| | -------
| | Revenue



















25



---



##### Table of Contents











| |                        
| | -----------------------
| | Cost of Product Revenue









| |                        
| | -----------------------
| | Cost of Service Revenue





| |                                 
| | --------------------------------
| | Research and Product Development







26



---



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| |                                      
| | -------------------------------------
| | Sales, Marketing and Customer Support









| |                           
| | --------------------------
| | General and Administrative









| |                                          
| | -----------------------------------------
| | Special Charges and Discontinued Programs







27



---



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| |                        
| | -----------------------
| | Discontinued Operations





| |                            
| | ---------------------------
| | Other Income (Expense), net







| |                           
| | --------------------------
| | Provision for Income Taxes





| |                                         
| | ----------------------------------------
| | Income (Loss) from Continuing Operations



Liquidity and Capital
Resources






28



---



##### Table of Contents

















|                                  |                               |       |        |        |                  |   |        |           |  |           |           |        |  |         |       |       |  |   |   |   | 
|--------------------------------- | ----------------------------- | ----- | ------ | ------ | ---------------- | - | ------ | --------- |  | --------- | --------- | ------ |  | ------- | ----- | ----- |  | - | - | - | 
|                                  |                               |       |        |        |                  |   |        |           |  | More Than
|                                  |                               | Total |        |        | Less Than 1 Year |   |        | 1-3 Years |  |           | 3-5 Years |        |  | 5 Years
|                                  |                               |       |        |        |                  |   |        |           |  |           |           |        |  |        
|Credit facilities                 |                               | $     | 41,822 |        |                  | $ | 12,322 |           |  | $         | 21,000    |        |  | $       | 8,500 |       |  | $ |  |  
|Royalty obligation                |                               |       | 10,027 |        |                  |   | 1,200  |           |  |           | 8,827     |        |  |         |      |       |  |   |  |  
|Executive contractual obligations |                               |       | 2,548  |        |                  |   | 1,463  |           |  |           | 1,085     |        |  |         |      |       |  |   |  |  
|Operating leases                  |                               |       | 4,209  |        |                  |   | 3,177  |           |  |           | 969       |        |  |         | 63    |       |  |   |  |  
|                                  |                               |       |        |        |                  |   |        |           |  |           |           |        |  |         |      
|                                  | Total contractual obligations |       | $      | 58,606 |                  |   | $      | 18,162    |  |           | $         | 31,881 |  |         | $     | 8,563 |  |   | $ |  | 
|                                  |                               |       |        |        |                  |   |        |           |  |           |           |        |  |         |      



29



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| |                    
| | -------------------
| | Effect of Inflation





| |                                     
| | ------------------------------------
| | Net Operating Loss
    Carryforwards



Critical Accounting Policies and
Estimates




| |        
| | -------
| | General







| |                    
| | -------------------
| | Revenue Recognition



30



---



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| |                                    
| | -----------------------------------
| | Allowance for Doubtful
    Accounts





| |                   
| | ------------------
| | Product Warranties





| |                    
| | -------------------
| | Inventory Valuation



31



---



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| |                                         
| | ----------------------------------------
| | Goodwill and Other Intangible
    Assets





| |                                
| | -------------------------------
| | Accounting for Income
    Taxes







| |                                         
| | ----------------------------------------
| | Recently Issued Accounting
    Standards





32



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Off-Balance Sheet
Arrangements




FORWARD-LOOKING STATEMENTS AND RISK
FACTORS








| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations for our financial and operating performance in
    2005 and beyond;                                                                                              
|
| |  | the adequacy of internal cash and working capital for our
    operations;                                                                                                         
|
| |  | our ability to supply sufficient product for anticipated demand
    and production delays associated with such demand;                                                            
|
| |  | availability of component materials;                                                                                                                                              
|
| |  | managements plans and goals with regard to our shipping
    and production capabilities, including the adequacy of our
    facilities for present and expected future operations;
|
| |  | the availability of alternative suppliers and manufacturers;                                                                                                                      
|
| |  | timing of product roll-out and acceptance by the market;                                                                                                                          
|
| |  | manufacturing constraints or difficulties;                                                                                                                                        
|
| |  | the introduction of competitive products into the marketplace;                                                                                                                    
|
| |  | managements plans and goals for our subsidiaries;                                                                                                                                
|
| |  | the ability of our subsidiaries to generate positive cash flows
    in the near term;                                                                                             
|
| |  | our subsidiaries ability to produce commercially
    competitive products;                                                                                                       
|
| |  | the strength of our various strategic partnerships both on
    manufacturing and distribution;                                                                                    
|
| |  | our ability to secure other strategic alliances and
    relationships;                                                                                                            
|
| |  | our expectations regarding the Companys strategy for
    growth, including statements regarding the Companys
    expectations for continued product mix improvement;            
|
| |  | the Companys expectations regarding the balance,
    independence and control of its business;                                                                                   
|
| |  | the resulting and expected effects and benefits from the
    Companys transformation efforts;                                                                                    
|
| |  | the Companys expectation regarding the strength and
    improvement of the Companys fundamentals, including
    management of its financial controls;                           
|
| |  | the Companys expectations relating to the Heidelberg
    overstock position;                                                                                                     

33



---



##### Table of Contents





| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations and plans regarding market penetration,
    including the strength and scope of our distribution channels
    and our expectations regarding sales of DI presses or CTP
    devices;
|
| |  | the expansion of our products and technology;                                                                                                                                                        
|
| |  | the status of the Companys technology leadership;                                                                                                                                                   
|
| |  | the commercialization and marketing of the Companys
    technology;                                                                                                                                 
|
| |  | our expectations regarding the sale of our products and use of
    our technology;                                                                                                                   
|
| |  | our current plans for product development and the expected
    market acceptance of recently introduced products and the likely
    acceptance of planned future products;                           
|
| |  | the expected growth in market share;                                                                                                                                                                 
|
| |  | our expectations regarding performance of existing, planned and
    recently introduced products;                                                                                                    
|
| |  | the effects, market acceptance, or pricing of competitive
    products, including the possibility of a competitive plate
    product being introduced by a strategic partner;                        
|
| |  | the placement of orders for direct imaging kits;                                                                                                                                                     
|
| |  | our expectations regarding reductions in warranty costs;                                                                                                                                             
|
| |  | statements regarding the profitability of process-free CTP;                                                                                                                                          
|
| |  | the adequacy of our intellectual property protections and our
    ability to protect and enforce our intellectual property rights;
    and                                                           
|
| |  | the expected effect of adopting recently issued accounting
    standards, among others.                                                                                                              



We are substantially dependent on Heidelberg for a portion
of our revenue and the loss of Heidelberg as a customer or a
significant reduction in revenue from sales to Heidelberg would
adversely affect our business.




34



---



##### Table of Contents



We are substantially dependent on our strategic alliance,
as well as our manufacturing and distribution relationships to
develop and grow our business. The loss or failure of one or
more of our strategic partners could significantly harm our
business.








Our acquisition of ABDick may affect our relationship with
our third-party distribution and service partners, which may
negatively affect our sales and distribution channels.


35



---



##### Table of Contents



Any failure by us to manage acquisitions successfully
could harm our financial results, business and
prospects.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The integration process could disrupt the activities of the
    businesses that are being combined. The combination of the
    businesses or plants may require, among other things,
    coordination of administrative and other functions and
    consolidation of production capacity. Plant consolidation may
    strain our ability to deliver products of acceptable quality in
    a timely manner from consolidated facilities. We may experience
    attrition among the skilled labor force at the companies
    acquired in reaction to being acquired and in reaction to our
    consolidation of plants.
|
| |  | The execution of our integration plans may divert the attention
    of our management from operating our existing business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | We may assume known and unanticipated liabilities and
    contingencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Future acquisitions could cause a reduction of our reported
    earnings because of the use of capital, the issuance of
    additional securities or debt, increased interest expense,
    goodwill write-offs and an increased income tax rate.                                                                                                                                                                                                                                                                                                                                                                     



Our lengthy and variable sales cycle makes it difficult
for us to predict when or if sales will occur and therefore we
may experience an unplanned shortfall in revenues.


We may not be able to increase revenues if we do not
expand our sales and distribution channels.


36



---



##### Table of Contents







Our growth strategy may include licenses or acquisitions
of technologies or businesses, which entail a number of
risks.


We face risks associated with our efforts to expand into
international market and such risks could result in diversion of
our managements attention from our existing business
and/or cause us to incur additional expected and unexpected
costs associated with penetrating, operating in and servicing
such markets, any of which could have a material adverse effect
on our financial condition and results of operation.


We have experienced losses in the past, could incur
substantial losses in the future, and may not be able to
maintain profitability.


37



---



##### Table of Contents





Our quarterly revenues and operating results are likely to
fluctuate significantly.




| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | A long and unpredictable sales cycle;                                                      
|
| |  | changes in demand for our products and consumables, including
    seasonal differences; and
|
| |  | changes in the mix of our products and consumables.                                        

We are dependent on third party suppliers for critical
components and our inability to maintain an adequate supply of
advanced laser diodes and other critical components could
adversely affect us.


Our manufacturing capabilities may be insufficient to meet
the demand for our products.


Recently introduced products that incorporate our
technology may not be commercially successful and may not gain
market acceptance.


38



---



##### Table of Contents





Recently introduced products that incorporate our
technology may result in substantial support costs and warranty
expenditures.


If the United States and global economies slow down, the
demand for our products could decrease and our revenue may be
materially adversely affected.


If we fail to maintain an effective system of internal
controls, we may not be able to accurately report our financial
results or prevent fraud. As a result, investors may lose
confidence in our financial reporting and the price of our
common stock may be negatively affected.


The expansion of Lasertel into areas other than the
production of laser diodes for our printing business may be
unsuccessful.


39



---



##### Table of Contents







Lasertel may require additional working capital infusions
from us, which may have a material adverse effect on our
business.


Our success is dependent on our ability to maintain and
protect our proprietary rights.






40



---



##### Table of Contents











We face substantial competition in the sale of our
products.




41



---



##### Table of Contents









We may not be able to adequately respond to changes in
technology affecting the printing industry.




| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | use leading technologies effectively;                                                                                                                                  
|
| |  | continue to develop our technical expertise and patented
    position;                                                                                                 
|
| |  | enhance our current products and develop new products that meet
    changing customer needs;                                                                           
|
| |  | time new product introductions in a way that minimizes the
    impact of customers delaying purchases of existing products in
    anticipation of new product releases;
|
| |  | adjust the prices of our existing products to increase customer
    demand;                                                                                            
|
| |  | successfully advertise and market our products; and                                                                                                                    
|
| |  | influence and respond to emerging industry standards and other
    technological changes.                                                                              



Ongoing litigation could have an adverse impact on our
business.


42



---



##### Table of Contents









The loss or unavailability of our key personnel would have
a material adverse effect on our business.




Our stock price has been and could continue to be
extremely volatile.




| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | actual or anticipated variations in our quarterly operating
    results;                                                                    
|
| |  | announcements by us or other industry participants;                                                                                         
|
| |  | changes in national or regional economic conditions;                                                                                        
|
| |  | changes in securities analysts estimates for us, our
    competitors or our industry or our failure to meet
    analysts expectations; and
|
| |  | general market conditions.                                                                                                                  






Item 7A.Quantitative
and Qualitative Disclosures About Market Risk




43



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##### Table of Contents










Item 8.     Financial
Statements and Supplementary Data







Item 9.     Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure







Item 9A.     Controls
and Procedures
















44



---



##### Table of Contents












REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM


















45



---



##### Table of Contents











| |                     
| | --------------------
| | /s/ BDO Seidman, LLP
| |                     
| | BDO Seidman, LLP    





46



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##### Table of Contents






Item 9B.     Other
Information







PART III





Item 10.     Directors
and Executive Officers of the Registrant











|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain
    Beneficial Owners and Management










|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions








|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services



47



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##### Table of Contents






PART IV







|         |                                               
|-------- | ----------------------------------------------
|Item 15. | Exhibits and Financial Statement
    Schedules

|       |  |                                                                                                                                                             |  |     
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|       |  |                                                                                                                                                             |  | Page
|       |  |                                                                                                                                                             |  |     
|(a)(1) |  | Consolidated Financial Statements (located herein after the
    signature page)                                                                             |  |     
|       |  | Report of Independent Registered Public Accounting Firm                                                                                                     |  | F-2 
|       |  | Consolidated Balance Sheets as of January 1, 2005 and
    January 3, 2004                                                                                   |  | F-3 
|       |  | Consolidated Statements of Operations for the fiscal years ended
    January 1, 2005, January 3, 2004, and
    December 28, 2002                            |  | F-4 
|       |  | Consolidated Statements of Changes in Stockholders Equity
    for the fiscal years ended January 1, 2005, January 3,
    2004, and December 28, 2002       |  | F-5 
|       |  | Consolidated Statements of Cash Flows for the fiscal years ended
    January 1, 2005, January 3, 2004, and
    December 28, 2002                            |  | F-6 
|       |  | Notes to Consolidated Financial Statements                                                                                                                  |  | F-7 
|(a)(2) |  | Financial Statement Schedule                                                                                                                                |  |     
|       |  | Schedule II  Valuation and Qualifying Accounts                                                                                                             |  | FS-1
|       |  | All other schedules are omitted because they are not applicable,
    or the required information is shown in the financial statements
    or notes thereto. |  |     
|(a)(3) |  | Exhibits                                                                                                                                                    |  |     

|        |    |     |             |                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | --- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|        | 3  | (a) |             | Amended and Restated Certificate of Incorporation of Presstek,
    Inc., as amended. (Previously filed as Exhibit 3 to
    Pressteks Quarterly Report on Form 10-Q for the
    Quarter ended June 29, 1996, hereby incorporated by
    reference.)                                                                                                              
|        | 3  | (b) |             | By-laws of Presstek, Inc. (Previously filed as an exhibit with
    Pressteks Form 10-K for the fiscal year ended
    December 30, 1995, filed March 29, 1996, hereby
    incorporated by reference.)                                                                                                                                                            
|        | 2  | (a) |             | Stock Purchase Agreement among Presstek, Inc., Precision
    Lithograining, Inc. and SDK Realty Co. dated June 2,
    2004 (Previously filed as Exhibit 2.1 to Pressteks
    Form 8-K filed on July 30, 2004, hereby incorporated
    by reference)                                                                                                             
|        | 2  | (b) |             | Asset Purchase Agreement among Presstek, Inc., Silver
    Acquisitions Corp., Paragon Corporate Holdings, Inc.,
    A.B. Dick Company, A.B. Dick Company of Canada, Ltd.
    And Interactive Media Group, Inc., dated July 13, 2004
    (Previously filed as Exhibit 2.1 to Pressteks
    Form 8-K filed on July 13, 2004, hereby incorporated
    by reference)
|        | 2  | (c) |             | Second Amendment to Asset Purchase Agreement between the Company
    and A.B. Dick Company dated November 5, 2004
    (Previously filed as Exhibit 2.1 to Pressteks
    Form 8-K filed on November 12, 2004, hereby
    incorporated by reference)                                                                                                              
|        | 2  | (d) |             | Amendment to Asset Purchase Agreement between the Company and
    A.B. Dick Company dated August 20, 2004 (Previously
    filed as Exhibit 2.2 to Pressteks Form 8-K filed
    on November 12, 2004, hereby incorporated by reference)                                                                                                                          
|        | 10 | (a) |             | Confidentiality Agreement between Presstek, Inc. and
    Heidelberger Druckmaschinen A.G., effective December 7,
    1989 as amended. (Previously filed as Exhibit 10(i) of
    Pressteks Annual Report on Form 10-K for the fiscal
    year ended December 31, 1989, hereby incorporated by
    reference.)                                                    
|        | 10 | (b) |             | Master Agreement effective January 1, 1991, by and between
    Heidelberger Druckmaschinen Aktiengesellschaft and Presstek,
    Inc. (Previously filed as an exhibit to Pressteks
    Form 8-K, dated January 1, 1991, hereby incorporated
    by reference.)                                                                                                   
|        | 10 | (c) |             | Technology License effective January 1, 1991, by and
    between Heidelberger Druckmaschinen Aktiengesellschaft and
    Presstek, Inc. (Previously filed as an exhibit to
    Pressteks Form 8-K, dated January 1, 1991,
    hereby incorporated by reference.)                                                                                                 

48



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##### Table of Contents



|        |    |       |             |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ----- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |            
|Number  |    |       | Description
|        |    |       |            
|        | 10 | (d)   |             | Memorandum of Performance No. 3 dated April 27, 1993,
    to the Master Agreement, Technology License, and Supply
    Agreement between Presstek, Inc. and Heidelberger Druckmaschinen
    Aktiengesellschaft. (Previously filed as an exhibit to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended June 30, 1993, hereby incorporated by
    reference.)                                                         
|        | 10 | (e)   |             | Modification to Memorandum of Performance No. 3 dated
    April 27, 1993, to the Master Agreement, Technology
    License, and Supply Agreement between Presstek, Inc. and
    Heidelberger Druckmaschinen Aktiengesellschaft. (Previously
    filed as an exhibit to Pressteks Annual report on
    Form 10-K for the fiscal year ended December 31, 1994,
    hereby incorporated by reference.)                                    
|        | 10 | (f)*  |             | Memorandum of Understanding No. 4 dated November 9,
    1995, to the Master Agreement and Technology License and Supply
    Agreement between Presstek, Inc. and Heidelberger Druckmaschinen
    Aktiengesellschaft. (Previously filed as Exhibit 10.k to
    Pressteks Form 10-K for the fiscal year ended
    December 30, 1995, filed March 29, 1996, hereby
    incorporated by reference.)                                       
|        | 10 | (g)** |             | 1991 Stock Option Plan. (Previously filed as an exhibit to
    Pressteks Annual report on Form 10-K for the fiscal
    year ended December 31, 1991, hereby incorporated by
    reference.)                                                                                                                                                                                                                                           
|        | 10 | (h)** |             | 1994 Stock Option Plan. (Previously filed as an exhibit to
    Pressteks Annual report on Form 10-K for the fiscal
    year ended December 31, 1994, hereby incorporated by
    reference.)                                                                                                                                                                                                                                           
|        | 10 | (i)** |             | Non-Employee Director Stock Option Plan. (Previously filed as
    Exhibit 10.0 to Pressteks Form 10-K for the
    fiscal year ended January 2, 1999, filed March 2,
    1999, hereby incorporated by reference.)                                                                                                                                                                                                                      
|        | 10 | (j)** |             | 1997 Interim Stock Option Plan. (Previously filed as
    Exhibit 10.1 to Pressteks Quarterly report on
    Form 10-Q for the quarter ended September 27, 1997,
    filed November 7, 1997, hereby incorporated by reference.)                                                                                                                                                                                                         
|        | 10 | (k)** |             | 1998 Stock Incentive Plan. (Previously filed as
    Exhibit A to Pressteks April 23, 1998 Proxy
    Statement, filed April 24, 1998, hereby incorporated by
    reference.)                                                                                                                                                                                                                                                           
|        | 10 | (l)*  |             | Memorandum of Understanding No. 5 dated March 7, 1997
    between Presstek, Inc. and Heidelberger Druckmaschinen
    Aktiengesellschaft. (Previously filed as Exhibit 10(T) to
    Pressteks Annual Report on Form 10-K for the fiscal
    year ended December 28, 1996 filed March 31, 1997,
    hereby incorporated by reference.)                                                                                                  
|        | 10 | (m)*  |             | Master Supply and Distribution Agreement by and between
    Presstek, Inc. and Xerox Corporation dated September 22,
    2000. (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2000, filed November 14, 2000, hereby
    incorporated by reference.)                                                                                                         
|        | 10 | (n)   |             | Amended Master Supply and Distribution Agreement by and between
    Presstek, Inc. and Xerox Corporation dated May 11, 2001.
    (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2001, filed August 14, 2001, hereby
    incorporated by reference.)                                                                                                              
|        | 10 | (o)*  |             | Agreement between Presstek, Inc. and Adamovski
    Strojírny a.s. dated as of April 24, 2001.
    (Previously filed as Exhibit 10.2 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2001, filed August 14, 2001 hereby
    incorporated by reference.)                                                                                                                                              
|        | 10 | (p)*  |             | Settlement Agreement made as of July 13, 2001 by and
    between Heidelberger Druckmaschinen Aktiengesellschaft and
    Presstek, Inc. (Previously filed as Exhibit 10.3 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 29, 2001, filed November 13,
    2001, hereby incorporated by reference.)                                                                                                 
|        | 10 | (q)*  |             | Letter Agreement dated September 19, 2001 between Xerox
    Corporation and Presstek, Inc. amending the Amended Master
    Supply and Distribution Agreement by and among, Presstek, Inc.
    and Xerox Corporation dated May 11, 2001. (Previously filed
    as Exhibit 10.1 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 29, 2001,
    filed November 13, 2001, hereby incorporated by reference.)

49



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##### Table of Contents



|        |    |       |             |                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |            
|Number  |    |       | Description
|        |    |       |            
|        | 10 | (r)** |             | Resignation Agreement and General Release by and between
    Presstek, Inc. and Neil M. Rossen, dated November 14,
    2001 and effective as of December 31, 2001. (Previously
    filed as Exhibit 10.1 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended March 30, 2002,
    filed May 14, 2002, hereby incorporated by reference.)                                        
|        | 10 | (s)** |             | Separation Agreement by and between Presstek, Inc. and
    Robert W. Hallman dated as of April 26, 2002, and
    effective as of April 30, 2002. (Previously filed as
    Exhibit 10.1 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended June 29, 2002, filed
    August 13, 2002, hereby incorporated by reference.)                                                        
|        | 10 | (t)*  |             | Agreement for Manufacture & Sale of Sun
    Press between Presstek, Inc. and Ryobi Limited, dated as
    of April 5, 2002. (Previously filed as Exhibit 10.4 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended June 29, 2002, filed on August 13, 2002,
    hereby incorporated by reference.)                                                                         
|        | 10 | (u)** |             | 2002 Employee Stock Purchase Plan of Presstek, Inc.
    (Previously filed as Exhibit 4.3 to Pressteks
    Registration Statement on Form S-8 filed with the
    Commission on August 9, 2002, hereby incorporated by
    reference.)                                                                                                                                                            
|        | 10 | (v)** |             | Description of Pressteks Non-Employee Director
    Compensation Arrangements approved by Pressteks Board of
    Directors on July 17, 2002 and amended by Pressteks
    Board of Directors on December 17, 2002. (Previously filed
    as Exhibit 10(hh) to Pressteks Form 10-K for the
    fiscal year ended December 28, 2002, filed March 28,
    2003, hereby incorporated by reference.)
|        | 10 | (w)** |             | Retirement Agreement by and between Presstek, Inc. and
    Richard A. Williams dated January 7, 2003. (Previously
    filed as Exhibit 10(ll) to Pressteks Form 10-K
    for the fiscal year ended December 28, 2002, filed
    March 28, 2003, hereby incorporated by reference.)                                                                                                              
|        | 10 | (x)   |             | Distribution Agreement by and between Presstek, Inc. and Kodak
    Polychrome Graphics LLC dated March 18, 2003. (Previously
    filed as Exhibit 10.1 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended March 29, 2003,
    filed May 13, 2003, hereby incorporated by reference.)                                                                                          
|        | 10 | (y)   |             | Restated Amended Master Supply and Distribution Agreement by and
    between Presstek, Inc. and Xerox Corporation dated
    March 18, 2003. (Previously filed as Exhibit 10.1 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended March 29, 2003, filed May 13, 2003,
    hereby incorporated by reference.)                                                               
|        | 10 | (z)** |             | 2003 Stock Option and Incentive Plan of Presstek, Inc.
    (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    June 28, 2003, filed August 12, 2003, hereby
    incorporated by reference.)                                                                                                                                              
|        | 10 | (aa)* |             | OEM Consumables Supply Agreement by and between Presstek,
    Inc. and Heidelberg Druckmaschinen, AG., dated July 1,
    2003. (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 27, 2003, filed November 12, 2003, hereby
    incorporated by reference.)                                                                   
|        | 10 | (bb)* |             | OEM Consumables Supply Agreement by and between Presstek,
    Inc. and Heidelberg U.S.A., Inc. dated July 1, 2003.
    (Previously filed as Exhibit 10.2 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 27, 2003, filed November 12, 2003, hereby
    incorporated by reference.)                                                                           
|        | 10 | (cc)  |             | Credit Agreement by and among Presstek, Inc., Lasertel Inc.,
    Citizens Bank New Hampshire and Keybank National Association
    dated October 15, 2003. (Previously filed as
    Exhibit 10.3 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                        
|        | 10 | (dd)  |             | Revolving Note dated October 15, 2003 made by Presstek,
    Inc. in favor of Citizens Bank New Hampshire. (Previously filed
    as Exhibit 10.4 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                        

50



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##### Table of Contents



|        |    |        |             |                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ------ | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        |            
|Number  |    |        | Description
|        |    |        |            
|        | 10 | (ee)   |             | Revolving Note dated October 15, 2003 made by Presstek,
    Inc. in favor of Keybank National Association. (Previously filed
    as Exhibit 10.5 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                        
|        | 10 | (ff)   |             | Term Note dated October 15, 2003 made by Presstek, Inc. in
    favor of Citizens Bank New Hampshire. (Previously filed as
    Exhibit 10.6 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                              
|        | 10 | (gg)   |             | Term Note dated October 15, 2003 made by Presstek, Inc. in
    favor of Keybank National Association. (Previously filed as
    Exhibit 10.7 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                             
|        | 10 | (hh)   |             | Swing Line Note dated October 15, 2003 made by Presstek,
    Inc. in favor of Citizens Bank New Hampshire. (Previously filed
    as Exhibit 10.8 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                        
|        | 10 | (ii)   |             | Security Agreement by and between Presstek, Inc. and Citizens
    Bank New Hampshire dated October 15, 2003. (Previously
    filed as Exhibit 10.9 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                      
|        | 10 | (jj)   |             | Security Agreement by and between Lasertel, Inc. and Citizens
    Bank New Hampshire dated October 15, 2003. (Previously
    filed as Exhibit 10.10 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                     
|        | 10 | (kk)   |             | Security Agreement (Intellectual Property) by and between
    Presstek, Inc. and Citizens Bank New Hampshire dated
    October 15, 2003. (Previously filed as Exhibit 10.11
    to Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 27, 2003, filed November 12,
    2003, hereby incorporated by reference.)                                                                         
|        | 10 | (ll)   |             | Security Agreement (Intellectual Property) by and between
    Lasertel, Inc. and Citizens Bank New Hampshire dated
    October 15, 2003. (Previously filed as Exhibit 10.12
    to Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 27, 2003, filed November 12,
    2003, hereby incorporated by reference.)                                                                         
|        | 10 | (mm)   |             | Mortgage and Security Agreement between Presstek, Inc. and
    Citizens Bank New Hampshire dated October 15, 2003.
    (Previously filed as Exhibit 10.13 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 27, 2003, filed November 12, 2003, hereby
    incorporated by reference.)                                                                                           
|        | 10 | (nn)   |             | Deed of Trust, Assignment of Rents, Security Agreement and
    Fixture Filing by and among Presstek, Inc., First American Title
    Insurance Company and Citizens Bank New Hampshire dated
    October 15, 2003. (Previously filed as Exhibit 10.14
    to Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 27, 2003, filed November 12,
    2003, hereby incorporated by reference.)
|        | 10 | (oo)** |             | Employment Agreement by and between Presstek, Inc. and
    Edward J. Marino dated November 19, 2003 (Previously
    filed as Exhibit 10(oo) to Pressteks Form 10-K
    for the fiscal year ended January 3, 2004, filed
    March 18, 2004, hereby incorporated by reference.)                                                                                                                                   
|        | 10 | (pp)** |             | Employment Agreement by and between Presstek, Inc. and
    Moosa E. Moosa dated December 31, 2003 (Previously
    filed as Exhibit 10(pp) to Pressteks Form 10-K
    for the fiscal year ended January 3, 2004, filed
    March 18, 2004, hereby incorporated by reference.)                                                                                                                                     
|        | 10 | (qq)   |             | Amendment to Employment Agreement by and between Pressteck, Inc.
    and Moosa E. Moosa dated January 10, 2004 (Previously
    filed as Exhibit 10(qq) to Pressteks Form 10-K
    for the fiscal year ended January 3, 2004, filed
    March 18, 2004, hereby incorporated by reference.)                                                                                                                        

51



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|        |      |        |             |                                                                                                                                                                                                                                                                                                                             
|------- | ---- | ------ | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        |            
|Number  |      |        | Description
|        |      |        |            
|        | 10   | (rr)   |             | Debtor-in-Possession Revolving Credit Agreement by and among
    A.B. Dick Company, Paragon Corporate Holdings, Inc.,
    RayBank National Association and Presstek, Inc. dated
    July 13, 2004 (Previously filed as Exhibit 10.1 to
    Pressteks Form 8-K filed on July 13, 2004,
    hereby incorporated by reference)
|        | 10   | (ss)   |             | Amended and Restated Credit Agreement among the Company, the
    Guarantors, Citizens Bank New Hampshire, KeyBank National
    Association and Bank North N.A. dated November 5, 2004
    (Previously filed as Exhibit 99.1 to Pressteks
    Form 8-K filed on November 12, 2004, hereby
    incorporated by reference)    
|        | 10   | (tt)** |             | Employment Agreement by and between Presstek, Inc. and
    Susan A. McLaughlin dated January 24, 2005 (Previously
    filed as Exhibit 99.1 to Pressteks Form 8-K,
    filed January 28, 2005, hereby incorporated by reference.)                                                                                          
|        | 10   | (uu)** |             | Employment Agreement by and between Presstek, Inc. and
    Edward J. Marino dated February 2, 2005 (Previously
    filed as Exhibit 99.1 to Pressteks Form 8-K ,
    filed February 8, 2005, hereby incorporated by reference.)                                                                                            
|        | 10   | (vv)** |             | Employment Agreement by and between Presstek, Inc. and
    Moosa E. Moosa dated February 2, 2005 (Previously
    filed as Exhibit 99.2 to Pressteks Form 8-K ,
    filed February 8, 2005, hereby incorporated by reference.)                                                                                              
|        | 21   |        |             | Subsidiaries of the Presstek, Inc. (filed herewith.)                                                                                                                                                                                                                                                                        
|        | 23.1 |        |             | Consent of BDO Seidman, LLP (filed herewith.)                                                                                                                                                                                                                                                                               
|        | 31.1 |        |             | Certification of Chief Executive Officer Pursuant to
    Section 240.13a-14 or Section 240.15d-14 of the
    Securities Exchange Act of 1934, as amended (filed and furnished
    herewith.)                                                                                                                                
|        | 31.2 |        |             | Certification of Chief Financial Officer Pursuant to
    Section 240.13a-14 or Section 240.15d-14 of the
    Securities Exchange Act of 1934, as amended (filed and furnished
    herewith.)                                                                                                                                
|        | 32.1 |        |             | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (filed and furnished herewith.)                                                                                                                                                              
|        | 32.2 |        |             | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (filed and furnished herewith.)                                                                                                                                                              






|   |                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------
|*  | The SEC has granted Pressteks request of confidential
    treatment with respect to a portion of this exhibit.
|  
|** | Denotes management employment contracts or compensatory plans.                                                 






|           |                
|---------- | ---------------
|Item 15(b) | Filed Exhibits.








|           |                                                                      
|---------- | ---------------------------------------------------------------------
|Item 15(c) | Financial Statements Excluded from
    Annual Report to Shareholders.



52



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##### Table of Contents






SIGNATURES






| |               
| | --------------
| | PRESSTEK, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ Edward J. Marino

| |                                      
| | -------------------------------------
| |                                      
| | Edward J. Marino                     
| | Chief Executive Officer and President





|                                                             |  |                                                                                                        |  |                |  | 
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                                    |  | Title                                                                                                  |  | Date          
|                                                             |  |                                                                                                        |  |               
|                                                            
|/s/ Edward J. MarinoEdward
    J. Marino                     |  | Chief Executive Officer, President, and Director (Principal
    Executive Officer)                     |  | March 17, 2005
|                                                            
|/s/ Moosa E. MoosaMoosa
    E. Moosa                         |  | Executive Vice President, and Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | March 17, 2005
|                                                            
|/s/ Dr. Lawrence
    HowardDr. Lawrence
    Howard           |  | Director                                                                                               |  | March 17, 2005
|                                                            
|/s/ John W. DreyerJohn
    W. Dreyer                         |  | Director                                                                                               |  | March 17, 2005
|                                                            
|/s/ Daniel S. Ebenstein,
    EsqDaniel
    S. Ebenstein, Esq |  | Director                                                                                               |  | March 17, 2005
|                                                            
|/s/ Michael D. MoffittMichael
    D. Moffitt                 |  | Director                                                                                               |  | March 17, 2005
|                                                            
|/s/ Donald C. Waite IIIDonald
    C. Waite III               |  | Director                                                                                               |  | March 17, 2005
|                                                            
|/s/ Steven N. RappaportSteven
    N. Rappaport               |  | Director                                                                                               |  | March 17, 2005

53



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##### Table of Contents






INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS


|                                                                                                                                                                                          |  |      |      | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                                                                                          |  | Page |     
|                                                                                                                                                                                          |  |      |     
|Report of Independent Registered Public Accounting Firm                                                                                                                                   |  |      | F-2  | 
|Consolidated Balance Sheets as of January 1, 2005 and
    January 3, 2004                                                                                                                 |  |      | F-3  | 
|Consolidated Statements of Operations for the fiscal years ended
    January 1, 2005, January 3, 2004, and
    December 28, 2002                                                          |  |      | F-4  | 
|Consolidated Statements of Changes in Stockholders Equity
    and Comprehensive Income (Loss) for the fiscal years ended
    January 1, 2005, January 3, 2004, and
    December 28, 2002 |  |      | F-5  | 
|Consolidated Statements of Cash Flows for the fiscal years ended
    January 1, 2005, January 3, 2004, and
    December 28, 2002                                                          |  |      | F-6  | 
|Notes to Consolidated Financial Statements                                                                                                                                                |  |      | F-7  | 
|Financial Statement Schedule:                                                                                                                                                             |  |      |      | 
|Schedule II  Valuation and Qualifying Accounts
    and Reserves                                                                                                                          |  |      | FS-1 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
















Internal Control 
Integrated Framework




| |                     
| | --------------------
| | /s/ BDO Seidman, LLP
| |                     
| | BDO Seidman, LLP    





F-2



---



##### Table of Contents



PRESSTEK, INC.







CONSOLIDATED BALANCE SHEETS




|                                       |                                                                                                                                                                          |                            |        |         |        |         |        |         |        |         | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | 
|                                       |                                                                                                                                                                          | Jan 1,                     |        |         | Jan 3, |        
|                                       |                                                                                                                                                                          | 2005                       |        |         | 2004   |        
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|ASSETS                                 |                                                                                                                                                                          |                            |        |         |        |         |        |        
|CURRENT ASSETS:                        |                                                                                                                                                                          |                            |        |         |        |         |        |        
|                                       | Cash and cash equivalents                                                                                                                                                |                            | $      | 8,739   |        |         | $      | 28,196  |       
|                                       | Accounts receivable, net of allowance for doubtful accounts of
    $2,444 and $1,892 in fiscal 2004 and 2003, respectively                                               |                            |        | 38,946  |        |         |        | 14,922  |       
|                                       | Inventories                                                                                                                                                              |                            |        | 44,229  |        |         |        | 12,354  |       
|                                       | Other current assets                                                                                                                                                     |                            |        | 1,499   |        |         |        | 1,064   |       
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                       |                                                                                                                                                                          | Total current assets       |        |         | 93,413 |         |        |         | 56,536 |        
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|PROPERTY, PLANT AND EQUIPMENT, NET     |                                                                                                                                                                          |                            | 47,372 |         |        |         | 45,732 |        
|OTHER ASSETS:                          |                                                                                                                                                                          |                            |        |         |        |         |        |        
|                                       | Patent application costs and license rights, net                                                                                                                         |                            |        | 2,839   |        |         |        | 3,419   |       
|                                       | Other amortizable intangibles, net                                                                                                                                       |                            |        | 7,621   |        |         |        |        |       
|                                       | Goodwill                                                                                                                                                                 |                            |        | 18,888  |        |         |        |        |       
|                                       | Other assets                                                                                                                                                             |                            |        | 1,185   |        |         |        | 841     |       
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                       |                                                                                                                                                                          | Total other assets         |        |         | 30,533 |         |        |         | 4,260  |        
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                       |                                                                                                                                                                          |                            | TOTAL  |         | $      | 171,318 |        |         | $      | 106,528 | 
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                      
|LIABILITIES AND STOCKHOLDERS EQUITY   |                                                                                                                                                                          |                            |        |         |        |         |        |        
|CURRENT LIABILITIES:                   |                                                                                                                                                                          |                            |        |         |        |         |        |        
|                                       | Line of credit                                                                                                                                                           |                            | $      | 6,822   |        |         | $      |        |       
|                                       | Current portion of long-term debt                                                                                                                                        |                            |        | 5,500   |        |         |        | 2,143   |       
|                                       | Accounts payable                                                                                                                                                         |                            |        | 13,514  |        |         |        | 4,750   |       
|                                       | Accrued expenses                                                                                                                                                         |                            |        | 16,000  |        |         |        | 6,442   |       
|                                       | Deferred revenue                                                                                                                                                         |                            |        | 10,580  |        |         |        | 689     |       
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                       |                                                                                                                                                                          | Total current liabilities  |        |         | 52,416 |         |        |         | 14,024 |        
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|LONG-TERM DEBT, NET OF CURRENT PORTION |                                                                                                                                                                          |                            | 29,500 |         |        |         | 12,321 |        
|COMMITMENTS AND CONTINGENCIES          |                                                                                                                                                                          |                            |        |         |        |         |        |        
|STOCKHOLDERS EQUITY:                  |                                                                                                                                                                          |                            |        |         |        |         |        |        
|                                       | Preferred stock, $.01 par value; authorized 1,000,000 shares, no
    shares issued or outstanding                                                                        |                            |        |        |        |         |        |        |       
|                                       | Common stock, $.01 par value; authorized 75,000,000 shares;
    issued and outstanding 34,896,985 shares at January 1, 2005
    and 34,202,175 shares at January 3, 2004 |                            |        | 349     |        |         |        | 342     |       
|                                       | Additional paid-in capital                                                                                                                                               |                            |        | 102,962 |        |         |        | 97,769  |       
|                                       | Accumulated deficit                                                                                                                                                      |                            |        | (14,016 | )      |         |        | (17,881 | )     
|                                       | Accumulated other comprehensive income (loss)                                                                                                                            |                            |        | 107     |        |         |        | (47     | )     
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                       |                                                                                                                                                                          | Total stockholders equity |        |         | 89,402 |         |        |         | 80,183 |        
|                                       |                                                                                                                                                                          |                            |        |         |        |        
|                                       |                                                                                                                                                                          |                            | TOTAL  |         | $      | 171,318 |        |         | $      | 106,528 | 
|                                       |                                                                                                                                                                          |                            |        |         |        |        



F-3



---



##### Table of Contents



PRESSTEK, INC.







CONSOLIDATED STATEMENTS OF
OPERATIONS




|                                                                 |                                       |                            |        |         |         |   |        |         |        |   |        |        |        |  
|---------------------------------------------------------------- | ------------------------------------- | -------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------ | - | ------ | ------ | ------ | -
|                                                                 |                                       | For the Fiscal Years Ended |       
|                                                                 |                                       |                            |       
|                                                                 |                                       | Jan 1,                     |        |         | Jan 3,  |   |        | Dec 28, |       
|                                                                 |                                       | 2005                       |        |         | 2004    |   |        | 2002    |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|REVENUE:                                                         |                                       |                            |        |         |         |   |        |         |        |   |        |       
|                                                                 | Product revenue                       |                            | $      | 116,276 |         |   | $      | 80,164  |        |   | $      | 75,809 |       
|                                                                 | Service revenue                       |                            |        | 13,063  |         |   |        | 4,379   |        |   |        | 3,179  |       
|                                                                 | Royalties and license fees            |                            |        | 512     |         |   |        | 2,689   |        |   |        | 4,465  |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|                                                                 |                                       | Total revenue              |        |         | 129,851 |   |        |         | 87,232 |   |        |        | 83,453 |  
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|COSTS AND EXPENSES:                                              |                                       |                            |        |         |         |   |        |         |        |   |        |       
|                                                                 | Cost of product revenue               |                            |        | 78,252  |         |   |        | 48,235  |        |   |        | 52,697 |       
|                                                                 | Cost of service revenue               |                            |        | 9,135   |         |   |        | 2,916   |        |   |        | 1,942  |       
|                                                                 | Research and product development      |                            |        | 6,460   |         |   |        | 7,061   |        |   |        | 9,303  |       
|                                                                 | Sales, marketing and customer support |                            |        | 17,675  |         |   |        | 12,272  |        |   |        | 10,767 |       
|                                                                 | General and administrative            |                            |        | 13,786  |         |   |        | 9,363   |        |   |        | 10,212 |       
|                                                                 | Special charges (credits)             |                            |        | (392    | )       |   |        | 550     |        |   |        | 5,961  |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|                                                                 |                                       | Total costs and expenses   |        |         | 124,916 |   |        |         | 80,397 |   |        |        | 90,882 |  
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|INCOME (LOSS) FROM OPERATIONS                                    |                                       |                            | 4,935  |         |         |   | 6,835  |         |        |   | (7,429 | )     
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|OTHER INCOME (EXPENSE):                                          |                                       |                            |        |         |         |   |        |         |        |   |        |       
|                                                                 | Interest income                       |                            |        | 318     |         |   |        | 331     |        |   |        | 186    |       
|                                                                 | Interest expense                      |                            |        | (923    | )       |   |        | (707    | )      |   |        | (1,058 | )     
|                                                                 | Other income (expense), net           |                            |        | (265    | )       |   |        | 209     |        |   |        | 21     |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|                                                                 |                                       | Total other expense, net   |        |         | (870    | ) |        |         | (167   | ) |        |        | (851   | )
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
    TAXES |                                       |                            | 4,065  |         |         |   | 6,668  |         |        |   | (8,280 | )     
|PROVISION FOR INCOME TAXES                                       |                                       |                            | 200    |         |         |   |       |         |        |   |       |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|INCOME (LOSS) FROM CONTINUING OPERATIONS                         |                                       |                            | 3,865  |         |         |   | 6,668  |         |        |   | (8,280 | )     
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|INCOME FROM DISCONTINUED OPERATIONS                              |                                       |                            |       |         |         |   | 1,429  |         |        |   |       |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|NET INCOME (LOSS)                                                |                                       | $                          | 3,865  |         |         | $ | 8,097  |         |        | $ | (8,280 | )     
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|EARNINGS (LOSS) PER SHARE  BASIC:                               |                                       |                            |        |         |         |   |        |         |        |   |        |       
|                                                                 | From continuing operations            |                            | $      | 0.11    |         |   | $      | 0.20    |        |   | $      | (0.24  | )     
|                                                                 | From discontinued operations          |                            | $      | 0.00    |         |   | $      | 0.04    |        |   | $      | 0.00   |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|EARNINGS (LOSS) PER SHARE  BASIC                                |                                       | $                          | 0.11   |         |         | $ | 0.24   |         |        | $ | (0.24  | )     
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|EARNINGS (LOSS) PER SHARE  DILUTED:                             |                                       |                            |        |         |         |   |        |         |        |   |        |       
|                                                                 | From continuing operations            |                            | $      | 0.11    |         |   | $      | 0.20    |        |   | $      | (0.24  | )     
|                                                                 | From discontinued operations          |                            | $      | 0.00    |         |   | $      | 0.04    |        |   | $      | 0.00   |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|EARNINGS (LOSS) PER SHARE  DILUTED                              |                                       | $                          | 0.11   |         |         | $ | 0.24   |         |        | $ | (0.24  | )     
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  BASIC               |                                       |                            | 34,558 |         |         |   | 34,167 |         |        |   | 34,124 |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  DILUTED             |                                       |                            | 35,357 |         |         |   | 34,400 |         |        |   | 34,124 |       
|                                                                 |                                       |                            |        |         |         |   |        |         |       



F-4



---



##### Table of Contents



PRESSTEK, INC.







CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY


AND COMPREHENSIVE INCOME
(LOSS)




|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   |        |       |     |  
|---------------------------------------------- | ---------------------------------- | ---------------------------------------------------------------------------------- | ------ | - | ---------- | ----------- | --- | -------- | - | - | ------------- | - | - | ------------- | ------- | ----- | ------ | - | --- | - | --- | - | ------ | ----- | --- | -
|                                               |                                    | For the Fiscal Years Ended January 1, 2005, January 3, 2004, and December 28, 2002 |       
|                                               |                                    |                                                                                    |       
|                                               |                                    |                                                                                    |        |   |            | Accumulated |     |          |  
|                                               |                                    | Common Stock                                                                       |        |   | Additional |             |     | Retained |   |   | Other         |   |   | Total         |        
|                                               |                                    |                                                                                    |        |   | Paid-in    |             |     | Earnings |   |   | Comprehensive |   |   | Stockholders |        
|                                               |                                    | Shares                                                                             |        |   | Amount     |             |     | Capital  |   |   | (Deficit)     |   |   | Income (Loss) |         |       | Equity |  
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|BALANCE AT DECEMBER 29, 2001                   |                                    |                                                                                    | 34,116 |   |            |             | 341 |          |   |   | 97,342        |   |   |               | (17,698 | )     |        |   |    |   |     |   | 79,985 |      
|Net loss and comprehensive loss for the year   |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               | (8,280  | )     |        |   |    |   |     |   | (8,280 | )    
|Net proceeds from the issuance of common stock |                                    |                                                                                    | 9      |   |            |             |    |          |   |   | 61            |   |   |               |        |       |        |   |    |   |     |   | 61     |      
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|BALANCE AT DECEMBER 28, 2002                   |                                    |                                                                                    | 34,125 |   |            |             | 341 |          |   |   | 97,403        |   |   |               | (25,978 | )     |        |   |    |   |     |   | 71,766 |      
|Comprehensive Income:                          |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   |        |      
|                                               | Net income for the year            |                                                                                    |        |  |            |             |     |         |   |   |               |  |   |               |         | 8,097 |        |   |     |  |     |   |        | 8,097 |    
|                                               | Other comprehensive income:        |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   |        |       |    
|                                               |                                    | Unrealized loss related to interest rate swaps                                     |        |   |           |             |     |          |  |   |               |   |  |               |         |       |       |   |     |   | (47 | ) |        |       | (47 | )
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|Comprehensive income for the year              |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   | 8,050  |      
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|Net proceeds from the issuance of common stock |                                    |                                                                                    | 77     |   |            |             | 1   |          |   |   | 366           |   |   |               |        |       |        |   |    |   |     |   | 367    |      
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|BALANCE AT JANUARY 3, 2004                     |                                    |                                                                                    | 34,202 |   |            |             | 342 |          |   |   | 97,769        |   |   |               | (17,881 | )     |        |   | (47 | ) |     |   | 80,183 |      
|Comprehensive Income:                          |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   |        |      
|                                               | Net income for the year            |                                                                                    |        |  |            |             |     |         |   |   |               |  |   |               |         | 3,865 |        |   |     |  |     |   |        | 3,865 |    
|                                               | Other comprehensive income (loss): |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   |        |       |    
|                                               |                                    | Realized loss related to interest rate swaps                                       |        |   |           |             |     |          |  |   |               |   |  |               |         |       |       |   |     |   | 47  |   |        |       | 47  |  
|                                               |                                    | Accumulated currency translation adjustment                                        |        |   |           |             |     |          |  |   |               |   |  |               |         |       |       |   |     |   | 107 |   |        |       | 107 |  
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|Comprehensive income for the year              |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |   |     |   |     |   | 4,019  |      
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|Net proceeds from the issuance of common stock |                                    |                                                                                    | 695    |   |            |             | 7   |          |   |   | 5,193         |   |   |               |        |       |        |   |    |   |     |   | 5,200  |      
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  
|BALANCE AT JANUARY 1, 2005                     |                                    |                                                                                    | 34,897 |   |            | $           | 349 |          |   | $ | 102,962       |   |   | $             | (14,016 | )     |        | $ | 107 |   |     | $ | 89,402 |      
|                                               |                                    |                                                                                    |        |   |            |             |     |          |   |   |               |   |   |               |         |       |        |  



F-5



---



##### Table of Contents



PRESSTEK, INC.





CONSOLIDATED STATEMENTS OF CASH
FLOWS




|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |        |        |        |        |   |        |  
|------------------------------------------------ | -------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------- | ------ | ------- | ------ | ------- | ------ | ------ | ------ | ------ | - | ------ | -
|                                                 |                                                                                  | For the Fiscal Years Ended                                                                                                                                 |                                               
|                                                 |                                                                                  |                                                                                                                                                            |                                               
|                                                 |                                                                                  | Jan 1,                                                                                                                                                     |                                                |         | Jan 3, |         |        | Dec 28, |       
|                                                 |                                                                                  | 2005                                                                                                                                                       |                                                |         | 2004   |         |        | 2002    |       
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|CASH FLOWS  OPERATING ACTIVITIES:               |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |        |        |        |       
|                                                 | Net income (loss)                                                                |                                                                                                                                                            | $                                              | 3,865   |        |         | $      | 8,097   |        |        | $      | (8,280 | )
|                                                 |                                                                                  | Less income from discontinued operations                                                                                                                   |                                                |         |       |         |        |         | (1,429 | )      |        |        |  |       
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|                                                 | Income (loss) from continuing operations                                         |                                                                                                                                                            |                                                | 3,865   |        |         |        | 6,668   |        |        |        | (8,280 | )
|                                                 |                                                                                  | Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by (used in) operating
    activities of continuing operations: |                                                |         |        |         |        |         |        |        |        |        |   |       
|                                                 |                                                                                  |                                                                                                                                                            | Special charges and discontinued programs      |         |        | (392    | )      |         |        | 550    |        |        |   | 9,646  |  
|                                                 |                                                                                  |                                                                                                                                                            | Depreciation and amortization                  |         |        | 9,106   |        |         |        | 8,867  |        |        |   | 9,422  |  
|                                                 |                                                                                  |                                                                                                                                                            | Provision for warranty and other costs         |         |        | 1,109   |        |         |        | 1,228  |        |        |   | 1,938  |  
|                                                 |                                                                                  |                                                                                                                                                            | Provision for losses on accounts receivable    |         |        | 1,949   |        |         |        | 1,358  |        |        |   | 901    |  
|                                                 |                                                                                  |                                                                                                                                                            | Other non-cash charge, net                     |         |        | 345     |        |         |        | 2      |        |        |   | 294    |  
|                                                 |                                                                                  | Changes in operating assets and liabilities, net of acquisitions:                                                                                          |                                                |         |        |         |        |         |        |        |        |        |   |       
|                                                 |                                                                                  |                                                                                                                                                            | Accounts receivable                            |         |        | (6,513  | )      |         |        | (1,172 | )      |        |   | 2,117  |  
|                                                 |                                                                                  |                                                                                                                                                            | Inventories                                    |         |        | (6,471  | )      |         |        | (639   | )      |        |   | 3,391  |  
|                                                 |                                                                                  |                                                                                                                                                            | Other current assets                           |         |        | 321     |        |         |        | (510   | )      |        |   | 564    |  
|                                                 |                                                                                  |                                                                                                                                                            | Accounts payable                               |         |        | (4,538  | )      |         |        | 1,419  |        |        |   | 1,264  |  
|                                                 |                                                                                  |                                                                                                                                                            | Accrued expenses                               |         |        | 6,892   |        |         |        | (3,510 | )      |        |   | (3,221 | )
|                                                 |                                                                                  |                                                                                                                                                            | Deferred service revenue                       |         |        | 992     |        |         |        | 300    |        |        |   | (68    | )
|                                                 |                                                                                  |                                                                                                                                                            | Other non-current assets                       |         |        | (691    | )      |         |        | (708   | )      |        |   | (1,016 | )
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|                                                 | Net cash provided by operating activities of continuing
    operations           |                                                                                                                                                            |                                                | 5,974   |        |         |        | 13,853  |        |        |        | 16,952 |  
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|CASH FLOWS  INVESTING ACTIVITIES:               |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |        |        |        |       
|                                                 |                                                                                  |                                                                                                                                                            | Property, plant and equipment purchases        |         |        | (2,194  | )      |         |        | (1,344 | )      |        |   | (1,497 | )
|                                                 |                                                                                  |                                                                                                                                                            | Proceeds from the disposal of equipment        |         |        | 5       |        |         |        |       |        |        |   | 213    |  
|                                                 |                                                                                  |                                                                                                                                                            | Precision acquisition, net of cash acquired    |         |        | (12,239 | )      |         |        |       |        |        |   |       |  
|                                                 |                                                                                  |                                                                                                                                                            | ABDick acquisition, net of cash acquired       |         |        | (43,229 | )      |         |        |       |        |        |   |       |  
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|                                                 | Net cash used in investing activities of continuing operations                   |                                                                                                                                                            |                                                | (57,657 | )      |         |        | (1,344  | )      |        |        | (1,284 | )
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|CASH FLOWS  FINANCING ACTIVITIES:               |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |        |        |        |       
|                                                 |                                                                                  |                                                                                                                                                            | Net proceeds from the issuance of common stock |         |        | 5,200   |        |         |        | 367    |        |        |   | 61     |  
|                                                 |                                                                                  |                                                                                                                                                            | Proceeds from term loan                        |         |        | 35,000  |        |         |        | 15,000 |        |        |   |       |  
|                                                 |                                                                                  |                                                                                                                                                            | Repayments of term loan                        |         |        | (14,464 | )      |         |        | (7,953 | )      |        |   | (1,063 | )
|                                                 |                                                                                  |                                                                                                                                                            | Net proceeds from line of credit               |         |        | 6,822   |        |         |        |       |        |        |   | 2,033  |  
|                                                 |                                                                                  |                                                                                                                                                            | Repayments of lease line of credit             |         |        |        |        |         |        | (9,290 | )      |        |   | (1,628 | )
|                                                 |                                                                                  |                                                                                                                                                            | Debt financing costs                           |         |        | (332    | )      |         |        |       |        |        |   |       |  
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|                                                 | Net cash provided by (used in) financing activities of
    continuing operations |                                                                                                                                                            |                                                | 32,226  |        |         |        | (1,876  | )      |        |        | (597   | )
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                  |                                                                                                                                                            | (19,457                                        | )       |        |         | 10,633 |         |        |        | 15,071 |       
|CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD    |                                                                                  |                                                                                                                                                            | 28,196                                         |         |        |         | 17,563 |         |        |        | 2,492  |       
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|CASH AND CASH EQUIVALENTS END OF PERIOD          |                                                                                  | $                                                                                                                                                          | 8,739                                          |         |        | $       | 28,196 |         |        | $      | 17,563 |       
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |        |        |        |       
|                                                 | Cash paid during the period for interest                                         |                                                                                                                                                            | $                                              | 923     |        |         | $      | 707     |        |        | $      | 1,057  |  
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       
|                                                 | Cash paid during the period for income taxes                                     |                                                                                                                                                            | $                                              |        |        |         | $      |        |        |        | $      |       |  
|                                                 |                                                                                  |                                                                                                                                                            |                                                |         |        |         |        |         |       



F-6



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##### Table of Contents



PRESSTEK, INC.







NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS




|   |                                                            
|-- | -----------------------------------------------------------
|1. | Business and Summary of Significant
    Accounting Policies

Nature of Business










Basis of Presentation


Fiscal Year


Use of Estimates


F-7



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##### Table of Contents





Significant Risks and Uncertainties






Revenue Recognition






F-8



---



##### Table of Contents







Fair Value of Financial Instruments


Cash Equivalents


Concentration of Credit Risk


Accounts Receivable and Allowance for Doubtful
Accounts




Inventories


Property, Plant and Equipment


|                               |  |              |                   | 
|------------------------------ |  | ------------ | ----------------- | 
|                               |  | Estimated    |                  
|                               |  | Useful Lives |                  
|                               |  |              |                  
|Buildings and improvements     |  |              | 25 - 30 years     | 
|Leasehold improvements         |  |              | Term of the lease | 
|Production equipment and other |  |              | 5 - 10 years      | 
|Office furniture and equipment |  |              | 3 - 7 years       | 

Goodwill and Other Intangible Assets


F-9



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##### Table of Contents







|                                         |  |                |        |  |              |   |       |             |  |  |            | 
|---------------------------------------- |  | -------------- | ------ |  | ------------ | - | ----- | ----------- |  |  | ---------- | 
|                                         |  | Gross Carrying |        |  | Accumulated  |   |       |            
|                                         |  | Amount         |        |  | Amortization |   |       | Useful Life | 
|                                         |  |                |        |  |              |   |       |             | 
|                                         |  | (In thousands) |       
|Amortized intangible assets:             |  |                |        |  |              |   |       |             |  |  |            | 
|Trade names                              |  |                | 2,360  |  |              |   | 171   |             |  |  | 2-3 years  | 
|Customer relationships                   |  |                | 4,700  |  |              |   | 117   |             |  |  | 7-10 years | 
|Software license                         |  |                | 1,203  |  |              |   | 778   |             |  |  | 3 years    | 
|Organizational fees                      |  |                | 339    |  |              |   | 7     |             |  |  | 5 years    | 
|Non-compete covenants                    |  |                | 245    |  |              |   | 153   |             |  |  | 5 years    | 
|                                         |  |                |        |  |              |   |       |             | 
|                                         |  | $              | 8,847  |  |              | $ | 1,226 |             |  |  |            | 
|                                         |  |                |        |  |              |   |       |             | 
|Intangible assets with indefinite lives: |  |                |        |  |              |   |       |             |  |  |            | 
|Goodwill                                 |  | $              | 18,984 |  |              | $ | 96    |             |  |  | Indefinite | 
|                                         |  |                |        |  |              |   |       |             | 



|           |  |                |       | 
|---------- |  | -------------- | ----- | 
|           |  | (In thousands) |      
|           |  |                |      
|2005       |  | $              | 1,573 | 
|2006       |  |                | 1,521 | 
|2007       |  |                | 1,304 | 
|2008       |  |                | 596   | 
|2009       |  |                | 584   | 
|Thereafter |  |                | 2,043 | 
|           |  |                |      
|           |  | $              | 7,621 | 
|           |  |                |      

Patent Application Costs and License Rights


F-10



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##### Table of Contents





|           |  |                |       | 
|---------- |  | -------------- | ----- | 
|           |  | (In thousands) |      
|           |  |                |      
|2005       |  | $              | 872   | 
|2006       |  |                | 827   | 
|2007       |  |                | 462   | 
|2008       |  |                | 356   | 
|2009       |  |                | 228   | 
|Thereafter |  |                | 94    | 
|           |  |                |      
|           |  | $              | 2,839 | 
|           |  |                |      

Long Lived Assets


Product Warranties




|                           |  |                |        |   |      |   |        |      |  |   |        |  
|-------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                           |  | 2004           |        |   | 2003 |   |        | 2002 | 
|                           |  |                |        |   |      |   |        |      | 
|                           |  | (In thousands) |       
|Balance, beginning of year |  | $              | 935    |   |      | $ | 1,089  |      |  | $ | 793    |  
|Warranties issued          |  |                | 1,109  |   |      |   | 1,228  |      |  |   | 1,938  |  
|Charges                    |  |                | (1,367 | ) |      |   | (1,382 | )    |  |   | (1,642 | )
|                           |  |                |        |   |      |   |        |      | 
|Balance, end of year       |  | $              | 677    |   |      | $ | 935    |      |  | $ | 1,089  |  
|                           |  |                |        |   |      |   |        |      | 

Shipping and Handling Costs


Research and Development Costs


Advertising Costs


Stock-Based Compensation


F-11



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##### Table of Contents







|                                                 |         |                           |        |     |      |   |        |      |  |   |         |       |  
|------------------------------------------------ | ------- | ------------------------- | ------ | --- | ---- | - | ------ | ---- |  | - | ------- | ----- | -
|                                                 |         | 2004                      |        |     | 2003 |   |        | 2002 | 
|                                                 |         |                           |        |     |      |   |        |      | 
|                                                 |         | (In thousands, except per |       
|                                                 |         | share data)               |       
|Net income (loss), as reported                   |         | $                         | 3,865  |     |      | $ | 8,097  |      |  | $ | (8,280  | )    
|Total stock-based employee compensation expense  |         |                           | (2,074 | )   |      |   | (2,942 | )    |  |   | (4,707  | )    
|                                                 |         |                           |        |     |      |   |        |      | 
|Pro forma net income (loss)                      |         | $                         | 1,791  |     |      | $ | 5,155  |      |  | $ | (12,987 | )    
|                                                 |         |                           |        |     |      |   |        |      | 
|Net income (loss) per common share, as reported: |         |                           |        |     |      |   |        |      |  |   |         |      
|                                                 | Basic   |                           | $      | .11 |      |   | $      | 0.24 |  |   | $       | (0.24 | )
|                                                 |         |                           |        |     |      |   |        |      | 
|                                                 | Diluted |                           | $      | .11 |      |   | $      | 0.24 |  |   | $       | (0.24 | )
|                                                 |         |                           |        |     |      |   |        |      | 
|Pro forma net income (loss) per common share:    |         |                           |        |     |      |   |        |      |  |   |         |      
|                                                 | Basic   |                           | $      | .05 |      |   | $      | 0.15 |  |   | $       | (0.38 | )
|                                                 |         |                           |        |     |      |   |        |      | 
|                                                 | Diluted |                           | $      | .05 |      |   | $      | 0.15 |  |   | $       | (0.38 | )
|                                                 |         |                           |        |     |      |   |        |      | 





|                        |  |      |       |   |      |  |       |      |  |  |       |  
|----------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                        |  | 2004 |       |   | 2003 |  |       | 2002 | 
|                        |  |      |       |   |      |  |       |      | 
|Dividend yield          |  |      | none  |   |      |  | none  |      |  |  | none  |  
|Expected volatility     |  |      | 63.38 | % |      |  | 69.00 | %    |  |  | 74.57 | %
|Risk free interest rate |  |      | 3.71  | % |      |  | 3.51  | %    |  |  | 3.43  | %
|Expected option life    |  |      | 5.10  |   |      |  | 5.49  |      |  |  | 6.45  |  

Comprehensive Income (Loss)




| |                             
| | ----------------------------
| | Foreign Currency Translation



F-12



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##### Table of Contents







| |            
| | -----------
| | Derivatives



Basic and Diluted Earnings (Loss) per Share




| |                                        
| | ---------------------------------------
| | Effect of New Accounting Pronouncements







2.     Discontinued
Operations




F-13



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##### Table of Contents



3.     Acquisitions




|                                       |                      |                       |        |        |  
|-------------------------------------- | -------------------- | --------------------- | ------ | ------ | -
|                                       |                      | Assets Acquired/      |       
|                                       |                      | (Liabilities Assumed) |       
|                                       |                      |                       |       
|                                       |                      | (In thousands)        |       
|Cash and accounts receivable           |                      | $                     | 2,725  |       
|Inventory                              |                      |                       | 2,529  |       
|Property, plant and equipment          |                      |                       | 6,065  |       
|Trade names                            |                      |                       | 260    |       
|Customer relationships                 |                      |                       | 900    |       
|Non-compete covenants                  |                      |                       | 100    |       
|Goodwill (deductible for tax purposes) |                      |                       | 5,422  |       
|Accounts payable and accrued expenses  |                      |                       | (5,697 | )     
|                                       |                      |                       |       
|                                       | Total purchase price |                       |        | 12,304 |  
|                                       | Less: cash acquired  |                       |        | (65    | )
|                                       |                      |                       |       
|                                       | Net cash paid        |                       | $      | 12,239 |  
|                                       |                      |                       |       





F-14



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##### Table of Contents





|                                       |                      |                       |        |        |  
|-------------------------------------- | -------------------- | --------------------- | ------ | ------ | -
|                                       |                      | Assets Acquired/      |       
|                                       |                      | (Liabilities Assumed) |       
|                                       |                      |                       |       
|                                       |                      | (In thousands)        |       
|Cash and accounts receivable           |                      | $                     | 17,066 |       
|Inventory                              |                      |                       | 22,705 |       
|Other current assets                   |                      |                       | 756    |       
|Property, plant and equipment          |                      |                       | 1,375  |       
|Trade names                            |                      |                       | 2,100  |       
|Customer relationships                 |                      |                       | 3,800  |       
|Software license                       |                      |                       | 450    |       
|Other long term assets                 |                      |                       | 109    |       
|Goodwill (deductible for tax purposes) |                      |                       | 13,466 |       
|Accounts payable and accrued expenses  |                      |                       | (9,433 | )     
|Deferred revenue                       |                      |                       | (8,899 | )     
|                                       |                      |                       |       
|                                       | Total purchase price |                       |        | 43,495 |  
|                                       | Less: cash acquired  |                       |        | (266   | )
|                                       |                      |                       |       
|                                       | Net cash paid        |                       | $      | 43,229 |  
|                                       |                      |                       |       





|                             |         |                                       |         |     |      |   |         |      |  |   |         |      |  
|---------------------------- | ------- | ------------------------------------- | ------- | --- | ---- | - | ------- | ---- |  | - | ------- | ---- | -
|                             |         | 2004                                  |         |     | 2003 |   |         | 2002 | 
|                             |         |                                       |         |     |      |   |         |      | 
|                             |         | (In thousands, except per share data) |        
|Pro forma revenue            |         | $                                     | 290,171 |     |      | $ | 304,655 |      |  | $ | 307,018 |     
|Pro forma net income         |         |                                       | 1,355   |     |      |   | 11,930  |      |  |   | (8,567  | )   
|Pro forma earnings per share |         |                                       |         |     |      |   |         |      |  |   |         |     
|                             | Basic   |                                       | $       | .04 |      |   | $       | .35  |  |   | $       | (.25 | )
|                             | Diluted |                                       | $       | .04 |      |   | $       | .35  |  |   | $       | (.25 | )

F-15



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##### Table of Contents



4.     Inventories




|                  |  |                |        |  |      |   |        | 
|----------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                  |  | 2004           |        |  | 2003 |  
|                  |  |                |        |  |      |  
|                  |  | (In thousands) |       
|Raw materials     |  | $              | 9,424  |  |      | $ | 2,782  | 
|Work in process   |  |                | 5,458  |  |      |   | 2,939  | 
|Finished goods    |  |                | 29,347 |  |      |   | 6,633  | 
|                  |  |                |        |  |      |  
|Total inventories |  | $              | 44,229 |  |      | $ | 12,354 | 
|                  |  |                |        |  |      |  

5.     Property,
Plant and Equipment, Net




|                                         |                               |                |        |         |      |   |        |         |  
|---------------------------------------- | ----------------------------- | -------------- | ------ | ------- | ---- | - | ------ | ------- | -
|                                         |                               | 2004           |        |         | 2003 |  
|                                         |                               |                |        |         |      |  
|                                         |                               | (In thousands) |       
|At cost:                                 |                               |                |        |         |      |   |        |        
|Land and improvements                    |                               | $              | 2,352  |         |      | $ | 2,038  |        
|Buildings and leasehold improvements     |                               |                | 27,695 |         |      |   | 24,518 |        
|Production equipment                     |                               |                | 52,024 |         |      |   | 46,931 |        
|Office furniture, equipment and other    |                               |                | 5,527  |         |      |   | 4,831  |        
|                                         |                               |                |        |         |      |  
|                                         |                               |                | 87,598 |         |      |   | 78,318 |        
|                                         | Less accumulated depreciation |                |        | (40,226 | )    |   |        | (32,586 | )
|                                         |                               |                |        |         |      |  
|Total property, plant and equipment, net |                               | $              | 47,372 |         |      | $ | 45,732 |        
|                                         |                               |                |        |         |      |  



6.     Accrued
Expenses




|                             |  |                |        |  |      |   |       | 
|---------------------------- |  | -------------- | ------ |  | ---- | - | ----- | 
|                             |  | 2004           |        |  | 2003 |  
|                             |  |                |        |  |      |  
|                             |  | (In thousands) |       
|Accrued payroll and benefits |  | $              | 6,141  |  |      | $ | 2,154 | 
|Accrued warranty             |  |                | 1,472  |  |      |   | 935   | 
|Accrued special charges      |  |                | 1,652  |  |      |   | 1,055 | 
|Accrued royalties            |  |                | 1,247  |  |      |   | 1,057 | 
|Other current liabilities    |  |                | 5,488  |  |      |   | 1,241 | 
|                             |  |                |        |  |      |  
|Total accrued expenses       |  | $              | 16,000 |  |      | $ | 6,442 | 
|                             |  |                |        |  |      |  



F-16



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##### Table of Contents



7.     Long-Term
Debt and Line of Credit




|                     |                      |                |        |         |      |   |        |        |  
|-------------------- | -------------------- | -------------- | ------ | ------- | ---- | - | ------ | ------ | -
|                     |                      | 2004           |        |         | 2003 |  
|                     |                      |                |        |         |      |  
|                     |                      | (In thousands) |       
|Term Loan            |                      | $              | 35,000 |         |      | $ | 14,464 |       
|Line of credit       |                      |                | 6,822  |         |      |   |       |       
|                     |                      |                |        |         |      |  
|                     |                      |                | 41,822 |         |      |   | 14,464 |       
|                     | Less current portion |                |        | (12,322 | )    |   |        | (2,143 | )
|                     |                      |                |        |         |      |  
|Total long-term debt |                      | $              | 29,500 |         |      | $ | 12,321 |       
|                     |                      |                |        |         |      |  











F-17



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##### Table of Contents





|                                |  |                |        | 
|------------------------------- |  | -------------- | ------ | 
|                                |  | (In thousands) |       
|2005                            |  | $              | 12,322 | 
|2006                            |  |                | 7,000  | 
|2007                            |  |                | 7,000  | 
|2008                            |  |                | 7,000  | 
|2009                            |  |                | 8,500  | 
|                                |  |                |       
|Total long-term debt maturities |  | $              | 41,822 | 
|                                |  |                |       

8.     Stockholders
Equity


Preferred Stock


Employee Stock Option Plans










F-18



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##### Table of Contents





Employee Stock Purchase Plan


Director Stock Option Plan




|                |  |                     |           |          |                     |  |          |          |  |             |          |          |         |          |           |  |  |   |       | 
|--------------- |  | ------------------- | --------- | -------- | ------------------- |  | -------- | -------- |  | ----------- | -------- | -------- | ------- | -------- | --------- |  |  | - | ----- | 
|                |  | Options Outstanding |           |          | Options Exercisable | 
|                |  |                     |           |          |                     | 
|                |  |                     |           | Weighted |                     |  | Weighted |          |  |             |          | Weighted |        
|                |  |                     |           | Average  |                     |  | Average  |          |  | Exercisable |          |          | Average |         
|Range of        |  | Outstanding         |           |          | Contractual         |  |          | Exercise |  |             | as of    |          |         | Exercise |          
|Exercise Prices |  | as of 01/01/05      |           |          | Years               |  |          | Price    |  |             | 01/01/05 |          |         | Price    |          
|                |  |                     |           |          |                     |  |          |          |  |             |          |          |         |          |          
|$0.00 - $5.22   |  |                     | 231,200   |          |                     |  | 6.6      |          |  | $           | 4.34     |          |         |          | 176,450   |  |  | $ | 4.29  | 
|$5.23 - $6.00   |  |                     | 661,750   |          |                     |  | 6.6      |          |  | $           | 5.28     |          |         |          | 513,187   |  |  | $ | 5.28  | 
|$6.01 - $6.75   |  |                     | 428,300   |          |                     |  | 7.2      |          |  | $           | 6.33     |          |         |          | 198,050   |  |  | $ | 6.33  | 
|$6.76 - $8.00   |  |                     | 338,425   |          |                     |  | 5.7      |          |  | $           | 7.22     |          |         |          | 264,925   |  |  | $ | 7.19  | 
|$8.01 - $13.70  |  |                     | 418,975   |          |                     |  | 5.7      |          |  | $           | 9.82     |          |         |          | 272,475   |  |  | $ | 9.77  | 
|$13.71 - $23.00 |  |                     | 674,576   |          |                     |  | 3.9      |          |  | $           | 14.57    |          |         |          | 670,076   |  |  | $ | 14.56 | 
|                |  |                     |           |          |                     |  |          |          |  |             |          |          |         |          |          
|                |  |                     | 2,753,226 |          |                     |  | 5.8      |          |  | $           | 8.57     |          |         |          | 2,095,163 |  |  | $ | 9.09  | 
|                |  |                     |           |          |                     |  |          |          |  |             |          |          |         |          |          

F-19



---



##### Table of Contents





|                                 |  |        |            |   |              |          |               |               |  |   |       | 
|-------------------------------- |  | ------ | ---------- | - | ------------ | -------- | ------------- | ------------- |  | - | ----- | 
|                                 |  |        |            |   |              | Weighted |              
|                                 |  | Option |            |   | Option Price |          |               | Average Price | 
|                                 |  | Shares |            |   | Per Share    |          |               | Per Share     | 
|                                 |  |        |            |   |              |          |               |               | 
|Outstanding at December 29, 2001 |  |        | 3,305,487  |   |              | $        | 5.50 - $26.94 |               |  | $ | 10.62 | 
|Granted                          |  |        | 1,508,900  |   |              | $        | 2.85 - $8.79  |               |  | $ | 5.72  | 
|Exercised                        |  |        | (9,575     | ) |              | $        | 6.88 - $7.78  |               |  | $ | 7.25  | 
|Cancelled/Expired                |  |        | (1,165,011 | ) |              | $        | 5.82 - $19.19 |               |  | $ | 9.87  | 
|                                 |  |        |            |   |              |          |               |               | 
|Outstanding at December 28, 2002 |  |        | 3,639,801  |   |              | $        | 2.85 - $26.94 |               |  | $ | 8.84  | 
|Granted                          |  |        | 385,000    |   |              | $        | 4.36 - $8.21  |               |  | $ | 5.84  | 
|Exercised                        |  |        | (20,200    | ) |              | $        | 6.30 - $6.88  |               |  | $ | 6.71  | 
|Cancelled/ Expired               |  |        | (552,125   | ) |              | $        | 2.85 - $26.94 |               |  | $ | 9.83  | 
|                                 |  |        |            |   |              |          |               |               | 
|Outstanding at January 3, 2004   |  |        | 3,452,476  |   |              | $        | 2.88 - $22.75 |               |  | $ | 8.36  | 
|                                 |  |        |            |   |              |          |               |               | 
|Granted                          |  |        | 76,750     |   |              | $        | 9.00 - $11.80 |               |  | $ | 10.08 | 
|Exercised                        |  |        | (663,450   | ) |              | $        | 2.88 - $10.75 |               |  | $ | 7.53  | 
|Cancelled/ Expired               |  |        | (112,550   | ) |              | $        | 3.09 - $16.31 |               |  | $ | 9.25  | 
|                                 |  |        |            |   |              |          |               |               | 
|Outstanding at January 1, 2005   |  |        | 2,753,226  |   |              | $        | 2.88 - $22.75 |               |  | $ | 8.57  | 
|                                 |  |        |            |   |              |          |               |               | 







F-20



---



##### Table of Contents





|                                 |  |        |           |   |              |          |              |               |  |   |      | 
|-------------------------------- |  | ------ | --------- | - | ------------ | -------- | ------------ | ------------- |  | - | ---- | 
|                                 |  |        |           |   |              | Weighted |             
|                                 |  | Option |           |   | Option Price |          |              | Average Price | 
|                                 |  | Shares |           |   | Per Share    |          |              | Per Share     | 
|                                 |  |        |           |   |              |          |              |               | 
|Outstanding at December 29, 2001 |  |        | 1,237,244 |   |              | $        | 0.10 - $1.00 |               |  | $ | 0.16 | 
|Granted                          |  |        | 89,500    |   |              | $        | 0.15 - $0.15 |               |  | $ | 0.15 | 
|Exercised                        |  |        | (496,119  | ) |              | $        | 0.10 - $1.00 |               |  | $ | 0.10 | 
|Cancelled/Expired                |  |        | (266,450  | ) |              | $        | 0.10 - $1.00 |               |  | $ | 0.21 | 
|                                 |  |        |           |   |              |          |              |               | 
|Outstanding at December 28, 2002 |  |        | 564,175   |   |              | $        | 0.10 - $1.00 |               |  | $ | 0.19 | 
|Granted                          |  |        | 46,550    |   |              | $        | 0.15 - $0.15 |               |  | $ | 0.15 | 
|Exercised                        |  |        | (12,500   | ) |              | $        | 0.10 - $0.25 |               |  | $ | 0.15 | 
|Cancelled/Expired                |  |        | (54,788   | ) |              | $        | 0.10 - $1.00 |               |  | $ | 0.32 | 
|                                 |  |        |           |   |              |          |              |               | 
|Outstanding at January 3, 2004   |  |        | 543,437   |   |              | $        | 0.10 - $1.00 |               |  | $ | 0.17 | 
|                                 |  |        |           |   |              |          |              |               | 
|Granted                          |  |        | 12,750    |   |              | $        | 0.15 - $0.15 |               |  | $ | 0.15 | 
|Exercised                        |  |        |          |   |              | $        |             |               |  | $ |     | 
|Cancelled/Expired                |  |        | (312,487  | ) |              | $        | 0.10 - $0.50 |               |  | $ | 0.13 | 
|                                 |  |        |           |   |              |          |              |               | 
|Outstanding at January 1, 2005   |  |        | 243,700   |   |              | $        | 0.10 - $1.00 |               |  | $ | 0.21 | 
|                                 |  |        |           |   |              |          |              |               | 





9.     Income
Taxes


Accounting for Income Taxes


F-21



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##### Table of Contents







|                                           |         |                |   |       |      |  |   |       |  |  |   |        |  
|------------------------------------------ | ------- | -------------- | - | ----- | ---- |  | - | ----- |  |  | - | ------ | -
|                                           |         | 2004           |   |       | 2003 |  |   | 2002  | 
|                                           |         |                |   |       |      |  |   |       | 
|                                           |         | (In thousands) |  
|Income (loss) before income tax provision: |         |                |   |       |      |  |   |       |  |  |   |       
|                                           | U.S.    |                | $ | 3,954 |      |  | $ | 8,097 |  |  | $ | (8,280 | )
|                                           | Foreign |                |   | 111   |      |  |   |      |  |  |   |       |  
|                                           |         |                |   |       |      |  |   |       | 
|                                           | Total   |                | $ | 4,065 |      |  | $ | 8,097 |  |  | $ | (8,280 | )



|                                        |                                                    |                                |         |        |        |   |         |        |        |   |         |        |        | 
|--------------------------------------- | -------------------------------------------------- | ------------------------------ | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                        |                                                    | 2004                           |         |        | 2003   |   |         | 2002   |       
|                                        |                                                    |                                |         |        |        |   |         |        |       
|                                        |                                                    | (In thousands)                 |        
|Deferred tax assets:                    |                                                    |                                |         |        |        |   |         |        |        |   |         |       
|                                        | Net operating loss carryforwards                   |                                | $       | 29,000 |        |   | $       | 30,400 |        |   | $       | 31,300 |       
|                                        | Tax credits                                        |                                |         | 4,900  |        |   |         | 5,100  |        |   |         | 4,600  |       
|                                        | Warranty provisions, litigation and other accruals |                                |         | 4,400  |        |   |         | 3,800  |        |   |         | 4,700  |       
|                                        |                                                    |                                |         |        |        |   |         |        |       
|                                        |                                                    | Gross deferred tax assets      |         |        | 38,300 |   |         |        | 39,300 |   |         |        | 40,600 | 
|                                        |                                                    |                                |         |        |        |   |         |        |       
|Deferred tax liabilities:               |                                                    |                                |         |        |        |   |         |        |        |   |         |       
|                                        | Amortizable and depreciable assets                 |                                |         | 320    |        |   |         | 100    |        |   |         |       |       
|                                        | Accumulated depreciation and amortization          |                                |         | 3,900  |        |   |         | 3,300  |        |   |         | 3,600  |       
|                                        |                                                    |                                |         |        |        |   |         |        |       
|                                        |                                                    | Gross deferred tax liabilities |         |        | 4,220  |   |         |        | 3,400  |   |         |        | 3,600  | 
|                                        |                                                    |                                |         |        |        |   |         |        |       
|                                        |                                                    |                                | 34,080  |        |        |   | 35,900  |        |        |   | 37,000  |       
|Less valuation allowance                |                                                    |                                | (34,200 | )      |        |   | (35,900 | )      |        |   | (37,000 | )     
|                                        |                                                    |                                |         |        |        |   |         |        |       
|Deferred tax assets (liabilities)  net |                                                    | $                              | (120    | )      |        | $ |        |        |        | $ |        |       
|                                        |                                                    |                                |         |        |        |   |         |        |       









F-22



---



##### Table of Contents









|               |         |                |     |    |      |   |      |   |   |   |   |   |   | 
|-------------- | ------- | -------------- | --- | -- | ---- | - | ---- | - | - | - | - | - | - | 
|               |         | 2004           |     |    | 2003 |   | 2002
|               |         |                |     |    |      |   |     
|               |         | (In thousands)
|Current:       |         |                |     |    |      |   |      |   |   |   |   |  
|               |         | Federal        |     | $  | 40   |   |      | $ |  |   |   | $ |  | 
|               |         | State          |     |    |     |   |      |   |  |   |   |   |  | 
|               |         | Foreign        |     |    | 40   |   |      |   |  |   |   |   |  | 
|               |         |                |     |    |      |   |      |   |  
|Total current  |         | $              | 80  |    |      | $ |     |   |   | $ |  |  
|               |         |                |     |    |      |   |      |   |  
|Deferred:      |         |                |     |    |      |   |      |   |   |   |   |  
|               | Federal |                | $   | 96 |      |   | $    |  |   |   | $ |  |  
|               | State   |                |     | 24 |      |   |      |  |   |   |   |  |  
|               | Foreign |                |     |   |      |   |      |  |   |   |   |  |  
|               |         |                |     |    |      |   |      |   |  
|Total deferred |         | $              | 120 |    |      | $ |     |   |   | $ |  |  
|               |         |                |     |    |      |   |      |   |  
|Total          |         | $              | 200 |    |      | $ |     |   |   | $ |  |  
|               |         |                |     |    |      |   |      |   |  



|                |                               |                |      |       |      |  |      |       |   |  |      |       |  
|--------------- | ----------------------------- | -------------- | ---- | ----- | ---- |  | ---- | ----- | - |  | ---- | ----- | -
|                |                               | 2004           |      |       | 2003 |  |      | 2002  |  
|                |                               |                |      |       |      |  |      |       |  
|                |                               | (In thousands) |     
|Statutory rate: |                               |                | 34.0 | %     |      |  | 34.0 | %     |   |  | 34.0 | %    
|                | Amortizable tax goodwill      |                |      | 3.1   |      |  |      |      |   |  |      |      |  
|                | Change in valuation allowance |                |      | (33.1 | )    |  |      | (34.0 | ) |  |      | (34.0 | )
|                | Other                         |                |      | 1.2   |      |  |      |      |   |  |      |      |  
|                |                               |                |      |       |      |  |      |       |  
|Effective rate  |                               |                | 5.2  | %     |      |  |     | %     |   |  |     | %    
|                |                               |                |      |       |      |  |      |       |  

F-23



---



##### Table of Contents



10.     Earnings
(Loss) Per Share




|                                                     |                              |                                       |        |      |      |   |        |      |  |   |        |       |  
|---------------------------------------------------- | ---------------------------- | ------------------------------------- | ------ | ---- | ---- | - | ------ | ---- |  | - | ------ | ----- | -
|                                                     |                              | 2004                                  |        |      | 2003 |   |        | 2002 | 
|                                                     |                              |                                       |        |      |      |   |        |      | 
|                                                     |                              | (In thousands, except per share data) |       
|Income (loss) from continuing operations             |                              | $                                     | 3,865  |      |      | $ | 6,668  |      |  | $ | (8,280 | )    
|Income from discontinued operations                  |                              |                                       |       |      |      |   | 1,429  |      |  |   |       |      
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Net income (loss)                                    |                              | $                                     | 3,865  |      |      | $ | 8,097  |      |  | $ | (8,280 | )    
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Weighted average common shares outstanding  Basic   |                              |                                       | 34,558 |      |      |   | 34,167 |      |  |   | 34,124 |      
|Effect of assumed conversion of stock options        |                              |                                       | 799    |      |      |   | 233    |      |  |   |       |      
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Weighted average common shares outstanding  Diluted |                              |                                       | 35,357 |      |      |   | 34,400 |      |  |   | 34,124 |      
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Earnings (loss) per share  Basic:                   |                              |                                       |        |      |      |   |        |      |  |   |        |      
|                                                     | From continuing operations   |                                       | $      | 0.11 |      |   | $      | 0.20 |  |   | $      | (0.24 | )
|                                                     | From discontinued operations |                                       |        | 0.00 |      |   |        | 0.04 |  |   |        | 0.00  |  
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Earnings (loss) per share  Basic                    |                              | $                                     | 0.11   |      |      | $ | 0.24   |      |  | $ | (0.24  | )    
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Earnings (loss) per share  Diluted:                 |                              |                                       |        |      |      |   |        |      |  |   |        |      
|                                                     | From continuing operations   |                                       | $      | 0.11 |      |   | $      | 0.20 |  |   | $      | (0.24 | )
|                                                     | From discontinued operations |                                       |        | 0.00 |      |   |        | 0.04 |  |   |        | 0.00  |  
|                                                     |                              |                                       |        |      |      |   |        |      | 
|Earnings (loss) per share  Diluted                  |                              | $                                     | 0.11   |      |      | $ | 0.24   |      |  | $ | (0.24  | )    
|                                                     |                              |                                       |        |      |      |   |        |      | 







11.     Related
Parties






F-24



---



##### Table of Contents











12.     Segment
Information, Major Customers and Concentrations of Credit
Risk






F-25



---



##### Table of Contents





|                                    |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |   |        |   |  |   |         |  
|----------------------------------- |  | -------------- | ------ |  | -------- | - | ------ | --------- |  | ------ | ------ | - |  | ------- | ------ | - | ----- | - | ------ | - |  | - | ------- | -
|                                    |  |                |        |  |          |   |        |           |  | Inter- |        |   | 
|                                    |  | Presstek       |        |  | Lasertel |   |        | Precision |  |        | ABDick |   |  | Segment |        |   | Total |  
|                                    |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |  
|                                    |  | (In thousands) |       
|Year ended January 1, 2005          |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |   |        |   |  |   |         |  
|                                    |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |  
|Total revenue                       |  | $              | 95,032 |  |          | $ | 7,765  |           |  | $      | 11,248 |   |  | $       | 24,292 |   |       | $ | (8,486 | ) |  | $ | 129,851 |  
|Income (loss) from operations       |  |                | 10,247 |  |          |   | (3,152 | )         |  |        | (720   | ) |  |         | (1,440 | ) |       |   |       |   |  |   | 4,935   |  
|Total assets                        |  |                | 70,866 |  |          |   | 14,260 |           |  |        | 18,555 |   |  |         | 67,637 |   |       |   |       |   |  |   | 171,318 |  
|Goodwill and other intangibles, net |  |                | 332    |  |          |   |       |           |  |        | 6,637  |   |  |         | 19,540 |   |       |   |       |   |  |   | 26,509  |  
|Depreciation and amortization       |  |                | 5,753  |  |          |   | 2,681  |           |  |        | 299    |   |  |         | 451    |   |       |   |       |   |  |   | 9,184   |  
|Capital expenditures                |  |                | 742    |  |          |   | 981    |           |  |        | 467    |   |  |         | 7      |   |       |   |       |   |  |   | 2,197   |  
|Year ended January 3, 2004          |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |   |        |   |  |   |         |  
|                                    |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |  
|Total revenue                       |  | $              | 85,497 |  |          | $ | 6,804  |           |  | $      |       |   |  | $       |       |   |       | $ | (5,069 | ) |  | $ | 87,232  |  
|Income (loss) from operations       |  |                | 10,285 |  |          |   | (3,450 | )         |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 6,835   |  
|Total assets                        |  |                | 92,484 |  |          |   | 14,044 |           |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 106,528 |  
|Depreciation and amortization       |  |                | 6,137  |  |          |   | 2,730  |           |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 8,867   |  
|Capital expenditures                |  |                | 1,044  |  |          |   | 300    |           |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 1,344   |  
|Year ended December 28, 2002        |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |   |        |   |  |   |         |  
|                                    |  |                |        |  |          |   |        |           |  |        |        |   |  |         |        |   |       |  
|Total revenue                       |  | $              | 83,417 |  |          | $ | 2,959  |           |  | $      |       |   |  | $       |       |   |       | $ | (2,923 | ) |  | $ | 83,453  |  
|Income (loss) from operations       |  |                | 397    |  |          |   | (7,826 | )         |  |        |       |   |  |         |       |   |       |   |       |   |  |   | (7,429  | )
|Total assets                        |  |                | 85,676 |  |          |   | 16,120 |           |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 101,796 |  
|Depreciation and amortization       |  |                | 6,797  |  |          |   | 2,625  |           |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 9,422   |  
|Capital expenditures                |  |                | 1,006  |  |          |   | 491    |           |  |        |       |   |  |         |       |   |       |   |       |   |  |   | 1,497   |  



|                    |                |                |         |        |      |   |        |        |  |   |        |        | 
|------------------- | -------------- | -------------- | ------- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                    |                | 2004           |         |        | 2003 |   |        | 2002   | 
|                    |                |                |         |        |      |   |        |        | 
|                    |                | (In thousands) |        
|Geographic Revenue: |                |                |         |        |      |   |        |        |  |   |        |       
|                    | United States  |                | $       | 91,230 |      |   | $      | 41,910 |  |   | $      | 33,211 | 
|                    | Canada         |                |         | 4,249  |      |   |        | 1,773  |  |   |        | 2,678  | 
|                    | Germany        |                |         | 13,541 |      |   |        | 19,276 |  |   |        | 25,083 | 
|                    | Japan          |                |         | 6,209  |      |   |        | 7,594  |  |   |        | 6,886  | 
|                    | United Kingdom |                |         | 7,747  |      |   |        | 3,583  |  |   |        | 3,948  | 
|                    | All other      |                |         | 6,875  |      |   |        | 13,096 |  |   |        | 11,647 | 
|                    |                |                |         |        |      |   |        |        | 
|Total revenue       |                | $              | 129,851 |        |      | $ | 87,232 |        |  | $ | 83,453 |       
|                    |                |                |         |        |      |   |        |        | 





F-26



---



##### Table of Contents









13.     Discontinued
Programs and Special Charges














F-27



---



##### Table of Contents





|                                                        |  |            |       |  |         |   |             |  |  |            |      |   |            |   |      |   |  |   |     | 
|------------------------------------------------------- |  | ---------- | ----- |  | ------- | - | ----------- |  |  | ---------- | ---- | - | ---------- | - | ---- | - |  | - | --- | 
|                                                        |  | Balance at |       |  | Fiscal  |   | Fiscal      |  |  | Fiscal     |      |   | Balance at |  
|                                                        |  | Jan 3      |       |  | 2004    |   | 2004        |  |  | 2004       |      |   | Jan 1      |  
|Fiscal 2004                                             |  | 2004       |       |  | Expense |   | Utilization |  |  | Adjustment |      |   | 2005       |  
|                                                        |  |            |       |  |         |   |             |  |  |            |      |   |            |  
|Accrued special charges:                                |  |            |       |  |         |   |             |  |  |            |      |   |            |   |      |   |  |   |     | 
|Executive contractual obligations                       |  | $          | 699   |  |         | $ |            |  |  | $          | (469 | ) |            | $ | (76  | ) |  | $ | 154 | 
|Severance and fringe benefits                           |  |            | 356   |  |         |   |             |  |  |            | (40  | ) |            |   | (316 | ) |  |   |    | 
|                                                        |  |            |       |  |         |   |             |  |  |            |      |   |            |   |     
|Total accrued special charges and discontinued programs |  | $          | 1,055 |  |         | $ |             |  |  | $          | (509 | ) |            | $ | (392 | ) |  | $ | 154 | 
|                                                        |  |            |       |  |         |   |             |  |  |            |      |   |            |   |     

|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |     |   |  |   |       | 
|------------------------------------------------------- |  | ---------- | ----- |  | ------- | - | --- | ----------- |  | - | ---------- | - |  | ---------- | --- | - |  | - | ----- | 
|                                                        |  | Balance at |       |  | Fiscal  |   |     | Fiscal      |  |   | Fiscal     |   |  | Balance at |    
|                                                        |  | Dec 28     |       |  | 2003    |   |     | 2003        |  |   | 2003       |   |  | Jan 3      |    
|Fiscal 2003                                             |  | 2002       |       |  | Expense |   |     | Utilization |  |   | Adjustment |   |  | 2004       |    
|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |    
|Cost of revenue:                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |     |   |  |   |       | 
|Discontinued programs                                   |  | $          | 1,501 |  |         | $ |    |             |  | $ | (1,501     | ) |  | $          |    |   |  | $ |      | 
|Deferred revenue associated with discontinued programs  |  |            | 120   |  |         |   |    |             |  |   | (120       | ) |  |            |    |   |  |   |      | 
|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |    
|Total cost of revenue                                   |  | $          | 1,621 |  |         | $ |    |             |  | $ | (1,621     | ) |  | $          |    |   |  | $ |      | 
|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |    
|Accrued special charges:                                |  |            |       |  |         |   |     |             |  |   |            |   |  |            |     |   |  |   |       | 
|Equipment and other asset write downs                   |  | $          | 39    |  |         | $ |    |             |  | $ |           |   |  | $          | (39 | ) |  | $ |      | 
|Executive contractual obligations                       |  |            | 1,257 |  |         |   |    |             |  |   | (558       | ) |  |            |    |   |  |   | 699   | 
|Severance and fringe benefits                           |  |            | 262   |  |         |   | 550 |             |  |   | (456       | ) |  |            |    |   |  |   | 356   | 
|Lease termination and other miscellaneous costs         |  |            | 167   |  |         |   |    |             |  |   | (167       | ) |  |            |    |   |  |   |      | 
|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |    
|Total accrued special charges                           |  | $          | 1,725 |  |         | $ | 550 |             |  | $ | (1,181     | ) |  | $          | (39 | ) |  | $ | 1,055 | 
|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |    
|Total accrued special charges and discontinued programs |  | $          | 3,346 |  |         | $ | 550 |             |  | $ | (2,802     | ) |  | $          | (39 | ) |  | $ | 1,055 | 
|                                                        |  |            |       |  |         |   |     |             |  |   |            |   |  |            |    

|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |        |   |  |   |       | 
|------------------------------------------------------- |  | -------------- | ----- |  | ------- | - | ------ | ----------- |  | - | ---------- | - |  | ---------- | ------ | - |  | - | ----- | 
|                                                        |  | Balance at     |       |  | Fiscal  |   |        | Fiscal      |  |   | Fiscal     |   |  | Balance at |       
|                                                        |  | Dec 29         |       |  | 2002    |   |        | 2002        |  |   | 2002       |   |  | Dec 28     |       
|Fiscal 2002                                             |  | 2001           |       |  | Expense |   |        | Utilization |  |   | Adjustment |   |  | 2002       |       
|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |       
|                                                        |  | (In thousands) |      
|Cost of revenue:                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |        |   |  |   |       | 
|Inventory write-downs                                   |  | $              |      |  |         | $ | 2,711  |             |  | $ | (2,711     | ) |  | $          |       |   |  | $ |      | 
|Discontinued programs                                   |  |                |      |  |         |   | 2,024  |             |  |   | (523       | ) |  |            |       |   |  |   | 1,501 | 
|Deferred revenue associated with discontinued programs  |  |                | 1,400 |  |         |   |       |             |  |   | (230       | ) |  |            | (1,050 | ) |  |   | 120   | 
|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |       
|Total cost of revenue                                   |  | $              | 1,400 |  |         | $ | 4,735  |             |  | $ | (3,464     | ) |  | $          | (1,050 | ) |  | $ | 1,621 | 
|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |       
|Accrued special charges:                                |  |                |       |  |         |   |        |             |  |   |            |   |  |            |        |   |  |   |       | 
|Equipment and other asset write downs                   |  | $              |      |  |         | $ | 3,017  |             |  | $ | (3,017     | ) |  | $          | 39     |   |  | $ | 39    | 
|Executive contractual obligations                       |  |                |      |  |         |   | 1,275  |             |  |   | (342       | ) |  |            | 324    |   |  |   | 1,257 | 
|Severance and fringe benefits                           |  |                |      |  |         |   | 944    |             |  |   | (682       | ) |  |            |       |   |  |   | 262   | 
|Lease termination and other miscellaneous costs         |  |                |      |  |         |   | 725    |             |  |   | (195       | ) |  |            | (363   | ) |  |   | 167   | 
|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |       
|Total accrued special charges                           |  | $              |      |  |         | $ | 5,961  |             |  | $ | (4,236     | ) |  | $          |       |   |  | $ | 1,725 | 
|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |       
|Total accrued special charges and discontinued programs |  | $              | 1,400 |  |         | $ | 10,696 |             |  | $ | (7,700     | ) |  | $          | (1,050 | ) |  | $ | 3,346 | 
|                                                        |  |                |       |  |         |   |        |             |  |   |            |   |  |            |       

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14.     Commitments
and Contingencies




|      |  |                |       | 
|----- |  | -------------- | ----- | 
|      |  | (In thousands) |      
|2005  |  | $              | 3,177 | 
|2006  |  |                | 786   | 
|2007  |  |                | 183   | 
|2008  |  |                | 35    | 
|2009  |  |                | 27    | 
|      |  |                |      
|Total |  | $              | 4,209 | 
|      |  |                |      







15.     Heidelberg
Agreements








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16.     Other
Information










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|    |                                                
|--- | -----------------------------------------------
|17. | Financial Statements and
    Supplementary Data

Selected Quarterly Financial Data (unaudited)


|                             |  |                                       |        |  |    |   |        |    |  |   |        |  |  |   |        |  
|---------------------------- |  | ------------------------------------- | ------ |  | -- | - | ------ | -- |  | - | ------ |  |  | - | ------ | -
|Fiscal 2004                  |  | Q1                                    |        |  | Q2 |   |        | Q3 |  |   | Q4     | 
|                             |  |                                       |        |  |    |   |        |    |  |   |        | 
|                             |  | (In thousands, except per share data) |       
|Total revenue                |  | $                                     | 23,314 |  |    | $ | 22,697 |    |  | $ | 29,750 |  |  | $ | 54,090 |  
|Gross profit                 |  | $                                     | 8,782  |  |    | $ | 9,144  |    |  | $ | 10,003 |  |  | $ | 14,535 |  
|Net income (loss)            |  | $                                     | 1,899  |  |    | $ | 1,447  |    |  | $ | 2,707  |  |  | $ | (2,188 | )
|Earnings per share  Basic   |  | $                                     | 0.06   |  |    | $ | 0.04   |    |  | $ | 0.08   |  |  | $ | (.06   | )
|Earnings per share  Diluted |  | $                                     | 0.05   |  |    | $ | 0.04   |    |  | $ | 0.08   |  |  | $ | (.06   | )

|                                        |                                  |                                       |        |      |    |   |        |      |  |   |        |      |  |   |        |      | 
|--------------------------------------- | -------------------------------- | ------------------------------------- | ------ | ---- | -- | - | ------ | ---- |  | - | ------ | ---- |  | - | ------ | ---- | 
|Fiscal 2003                             |                                  | Q1                                    |        |      | Q2 |   |        | Q3   |  |   | Q4     |     
|                                        |                                  |                                       |        |      |    |   |        |      |  |   |        |     
|                                        |                                  | (In thousands, except per share data) |       
|Total revenue                           |                                  | $                                     | 22,442 |      |    | $ | 22,519 |      |  | $ | 19,758 |      |  | $ | 22,513 |     
|Gross profit                            |                                  | $                                     | 9,490  |      |    | $ | 9,629  |      |  | $ | 7,653  |      |  | $ | 9,309  |     
|Income from continuing operations       |                                  | $                                     | 1,790  |      |    | $ | 1,825  |      |  | $ | 1,008  |      |  | $ | 2,045  |     
|Income from discontinued operations (1) |                                  |                                       |       |      |    |   |       |      |  | $ | 1,429  |      |  |   |       |     
|Net income                              |                                  | $                                     | 1,790  |      |    | $ | 1,825  |      |  | $ | 2,437  |      |  | $ | 2,045  |     
|Earnings per share  Basic              |                                  |                                       |        |      |    |   |        |      |  |   |        |      |  |   |        |     
|                                        | From continuing operations       |                                       | $      | 0.05 |    |   | $      | 0.05 |  |   | $      | 0.03 |  |   | $      | 0.06 | 
|                                        | From discontinued operations (1) |                                       |        |     |    |   |        |     |  |   |        | 0.04 |  |   |        |     | 
|Earnings per share  Basic              |                                  | $                                     | 0.05   |      |    | $ | 0.05   |      |  | $ | 0.07   |      |  | $ | 0.06   |     
|Earnings (loss) per share  Diluted     |                                  |                                       |        |      |    |   |        |      |  |   |        |      |  |   |        |     
|                                        | From continuing operations       |                                       | $      | 0.05 |    |   | $      | 0.05 |  |   | $      | 0.03 |  |   | $      | 0.06 | 
|                                        | From discontinued operations (1) |                                       |        |     |    |   |        |     |  |   |        | 0.04 |  |   |        |     | 
|Earnings per share  Diluted            |                                  | $                                     | 0.05   |      |    | $ | 0.05   |      |  | $ | 0.07   |      |  | $ | 0.06   |     






|    |                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the dismissal of a lawsuit filed by PPG against
    our subsidiary Delta V, whose operations were discontinued in
    1999, we reversed all previously recorded liabilities, resulting
    in income from discontinued operations of $1.4 million, in
    the third quarter of fiscal 2003.

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PRESSTEK, INC.


SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES


|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |   |        |      |  |   |       | 
|------ | ---- |  | ----------- | ------------------------------------------- | ------------ | - | ---------- | --------- |  | ---------- | ------------- |  | ----------- | -------- | -- | ---------- | ----------- | - | ------ | ---- |  | - | ----- | 
|       |      |  |             | Balance at                                  |              |   | Charged to |           |  | Charged to |               |  | Charges Add |          |    | Balance at |            
|Fiscal |      |  |             |                                             | Beginning of |   |            | Costs and |  |            | Other Account |  |             | (Deduct) |    |            | End of      |  
|Year   |      |  | Description |                                             | Fiscal Year  |   |            | Expenses  |  |            | Describe      |  |             | Describe |    |            | Fiscal Year |  
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  
|       |      |  |             | (In thousands)                              |             
|       | 2002 |  |             | Allowance for losses on accounts receivable |              | $ | 2,420      |           |  | $          | 945           |  |             | $        |   |            |             | $ | (1,198 | )(1) |  | $ | 2,167 | 
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  
|       |      |  |             | Warranty reserve                            |              |   | 793        |           |  |            | 1,938         |  |             |          |   |            |             |   | (1,642 | )(2) |  |   | 1,089 | 
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  
|       | 2003 |  |             | Allowance for losses on accounts receivable |              | $ | 2,167      |           |  | $          | 1,358         |  |             | $        |   |            |             | $ | (1,633 | )(1) |  | $ | 1,892 | 
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  
|       |      |  |             | Warranty reserve                            |              |   | 1,089      |           |  |            | 1,228         |  |             |          |   |            |             |   | (1,382 | )(2) |  |   | 935   | 
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  
|       | 2004 |  |             | Allowance for losses on accounts receivable |              | $ | 1,892      |           |  | $          | 1,935         |  |             | $        | 66 | (3)        |             | $ | (1,317 | )(1) |  | $ | 2,444 | 
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  
|       |      |  |             | Warranty reserve                            |              |   | 935        |           |  |            | 1,109         |  |             |          |   |            |             |   | 1,367  | (2)  |  |   | 677   | 
|       |      |  |             |                                             |              |   |            |           |  |            |               |  |             |          |    |            |             |  






|    |                                                    
|--- | ---------------------------------------------------
|(1) | Allowance for losses                               
|   
|(2) | Warranty expenditures                              
|   
|(3) | Adjustment to acquisition related beginning balance

FS-1