SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-K/A


   
                          Amendment No. 4 to Form 10-K
    



      |X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934 for the fiscal year ended December 30, 1995

                                       OR

      | |   Transition Report Pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934 for the transition period from _____ to _____.

                                     0-17541

                              (Commission File No.)

                                 PRESSTEK, INC.

             (Exact name of registrant as specified in its charter)

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

            8 Commercial Street, Hudson, New Hampshire 03051
           (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

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  |X|

The  aggregate   market  value  of  the   registrant's   Common  Stock  held  by
non-affiliates as of March 12, 1996 was approximately $1,279,000,000.

As of March 12, 1996 there were  15,074,246  shares of the  registrant's  Common
Stock outstanding.

                  Documents Incorporated by Reference:  None

<PAGE>

                                    PART I

Item 1.  Business.

General

Set forth below is a glossary of certain terms used in this report:


A2-(4-up)                               a printing term referring to a standard
                                        paper size capable of printing four
                                        8.5" x 11" pages on sheet of paper

A3-(2-up)                               a printing term referring to a standard
                                        paper size capable of printing two
                                        8.5" x 11" pages on sheet of paper


Ablation                                a controlled detachment/vaporization,
                                        this process is used during the imaging
                                        of the Company's PEARL(R) consumables

Bitmap                                  a rasterized computer file containing
                                        picture elements that define whether to
                                        image or not, a map of laser sites

Color service bureaus                   a printing industry classification
                                        denoting prepress functions


Commercial printers                     a printing industry classification
                                        denoting print providers offering a
                                        general printing services


Computer-to-plate                       a general term referring to the exposure
   (direct-to-plate)                    of lithographic plate material from a  
                                        digital database, off-press           
                                        
Dampening solution                      traditional lithographic printing
                                        chemical bath used to coat the non-image
                                        areas of a printing plate

Direct Imaging (DI)                     digital imaging systems that allow    
   technologies                         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

Effluents                               waste materials that flow from
                                        photographic processing equipment, which
                                        are often toxic in nature

                                      -2-
<PAGE>


Electrophotography                      an imaging and reproduction method
                                        similar to xerography in which a corona
                                        charges and attracts a toner-based
                                        material to image areas and then
                                        transfers the image to paper

GTO-DI                                  the first generation of direct imaging,
                                        waterless presses available in two, four
                                        and five printing station configuration,
                                        a joint effort between Heidelberg and
                                        Presstek

Heidelberg                              Heidelberger Druckmaschinen AG,
                                        the world's largest printing press
                                        manufacturer headquartered in
                                        Heidelberg, Germany

Imagesetter                             a graphic arts term referring to digital
                                        exposure of an image carrier, most 
                                        often used when referring to film

Imposition                              a graphic arts term referring to the
                                        positioning of pages on a press sheet
                                        to ensure the correct order after the
                                        printed sheet is folded and trimmed

Infrared                                lying outside of the visible spectrum at
                                        its red-end longer wavelengths used in
                                        the Company's thermal imaging process

Ink density                             a numerical reading from the 
                                        densitometer (light measuring tool) 
                                        used to determine the proper ink coating
                                        on a printed sheet

Large format                            a printing term referring to printing
                                        layouts that include four or more pages
                                        on a single sheet of paper

Lithographic                            printing from a single plane surface
                                        under the principle that image area
                                        carries ink and the nonimage area does
                                        not and that ink and water do not mix

On-demand                               a manufacturing philosophy when applied
                                        to printing provides faster service,
                                        shorter run lengths and less inventory

Quickmaster 46-4;                       the second generation of direct imaging,
Quickmaster DI                          waterless presses, highly automated with
                                        roll-fed PEARL plate material, a joint
                                        effort between Heidelberg and Presstek


PEARL(R)                                the name associated with Presstek's
                                        current laser imaging technologies and
                                        related products and consumables

PEARLsetter(TM)                         the Company's product line of
                                        computer-to-plate, off-press plate
                                        making equipment



                                      -3-
<PAGE>


PEARL kits                              the Presstek components required to
                                        convert a conventional printing press
                                        into a direct imaging press, including
                                        laser diode arrays, computers,
                                        electronics

Photosensitive                          silver halide emulsions exposed by a
                                        reaction to light requiring a subsequent
                                        chemical development and stabilization
                                        process

Platemaking                             the process of applying a printable
                                        image to a printing plate

PostScript(R)                           a page description programming language
                                        developed by Adobe Systems, Inc., a
                                        de facto standard in the printing
                                        industry

Prepress                                graphic arts operations and
                                        methodologies that occur prior to the
                                        printing process; typically these
                                        include camera work, scanning, image
                                        assembly, exposure of image carriers
                                        (film and/or plate), proofing

Semiconductor,                          a high-powered, infrared imaging     
laser diode                             technology employed in the PEARL imaging
                                        system                         

Separations                             the division of hues into discrete
                                        images with the standing method being
                                        four-color process separations of cyan,
                                        magenta, yellow and black

Short-run                               a graphic arts classification used to   
markets/printing                        denote an emerging trend for lower print
                                        qualities  
                                       
Spark Discharge                         the company's first direct imaging   
Technology                              technology in which a proprietary    
                                        printing plate was imaged by means of
                                        discharging an electrical spark       
                                        
Subtractive primary                     yellow, magenta, and cyan; the hues used
colors                                  for process color printing inks     
                                        
Thermally-based                         a method of digitally exposing a
                                        material via the heat generated from a
                                        laser beam
                                        
Vapor disposition                       a technology to accurately, uniformly  
process                                 coat substrates in a controlled        
                                        environment                            
                                        
Waterless                               a lithographic printing method that uses
                                        dry offset printing plates and inks
                                        thus it does not require a dampening
                                        system


                                      -4-
<PAGE>


     Presstek, Inc. (the "Company"), which was incorporated in the State of
Delaware in September 1987, continues to further develop and market its
proprietary, digital imaging technologies and system architectures (the "Direct
Imaging" technologies), and non-photographic consumables primarily to the
graphic arts and related imaging industries. The Company's current Direct
Imaging technologies, referred to as PEARL(R) permit the direct digital imaging
of printing plates and films which eliminates the need for photosensitive
materials and the hazardous waste by-products usually associated with these
processes. The Company's system accepts digital PostScript(R)* compatible files
from digitally based electronic prepress systems and images the color separated
pages directly on to the Company's proprietary non-photographic based
consumables.

     PEARL, is a high resolution, high powered semiconductor laser diode imaging
technology and is the result of significant past development efforts by the
Company. The Company believes that PEARL represents a technological breakthrough
for the worldwide printing and publishing industry and has several applications
for it and its consumables in the graphic arts industry: a printing press (the
"Direct Imaging Printing Press") and a stand-alone computer-to-plate imaging
device (the "PEARLsetterTM"), both of which incorporate the Company's PEARL
Direct Imaging technology. PEARL uses its precision, high powered semiconductor
laser diode to ablate, or remove the materials from the surface of the Company's
plates to produce precisely positioned and formed laser dots at resolutions up
to 2540 dots per inch. When these laser dots are combined by the Company's
proprietary system (software, firmware and hardware) they form printers' dots
from which high quality, lithographic color print images are printed. The
graphic arts industry recognizes that the automation and simplification of the
color printing process resulting from the use of these types of computer
direct-to-plate and direct-to-press devices, will provide significant reductions
in the time and cost of multi-color lithographic printing. Therefore, the
Company believes the graphic arts industry will move with ever increasing speed
towards computer-to-plate imaging devices and computer-to-press printing
systems. The Company also believes that its PEARL laser ablation imaging
technology's ability to produce high quality

----------

*  PostScript is a registered trademark of Adobe Systems, Inc.



                                      -5-
<PAGE>



printed materials, with freedom from environmental concerns, represents a
breakthrough in the expanding market for computer-to-plate/press products. As a
result, the Company believes its past investments in its proprietary PEARL
Direct Imaging technology and its years of experience in developing digital
imaging systems (software, firmware and hardware) places the Company in a
significant position in the markets it has chosen to serve.

Strategic Alliances/Proposed New Products


     The Company continues to pursue a strategy based on alliances and
relationships with major corporations in the graphic arts and other industries
encompassing licensing, product development and commercialization,
manufacturing, marketing, distribution, sales and services. The Company and
Heidelberger Druckmaschinen AG ("Heidelberg"), the world's largest manufacturer
of printing presses and printing equipment, based in Germany, have jointly
developed the first Heidelberg Direct Imaging Printing Press (the "GTO-DI"). The
Company and Heidelberg experienced a wider range of market applications, and
greater market acceptance due to the improved image quality of a PEARL equipped
GTO-DI press. As a result, the Company's relationship with Heidelberg has been
expanded to include a new, four color, fully automated lithographic press, the
Quickmaster DI 46-4 ("Quickmaster DI") which was jointly designed by the Company
and Heidelberg to take full advantage of the Company's improved implementation
of its Direct Imaging Technology. The Quickmaster DI press, which was introduced
by Heidelberg in May 1995 to replace the GTO-DI which is no longer being
produced has a smaller "footprint" than existing four color presses and employs
the Company's recently developed automatic plate changing cylinder which
eliminates the need for manually changing plates between jobs. This press also
employs many other innovations which will result in reduced costs per printed
page and contains or employs nine of the Company's patented technologies, some
of which have been licensed to Heidelberg. The Company believes that the
Quickmaster-DI will be able to compete on jobs requiring as few as 200 sheets
per job, while also being able to produce runs in excess of 20,000 sheets at a
cost that cannot be equalled by any existing "on demand" four color printing
system. Both Heidelberg and the Company believe the Quickmaster-DI will greatly
expand the use of the Company's Direct Imaging technology and allow a much
broader cross section of the graphic arts market to experience the productivity
and lower cost benefits of direct-to-press digital, high quality lithographic
printing. The Company also has an agreement with the Adast-Adamov Company, a
manufacturer of offset lithographic presses. This agreement will result in the
use of Company's direct imaging technologies on a larger format (19" x 26")
multicolor press. This new, large format direct imaging press is being publicly
displayed for the first time at the Graphic Communications Tradeshow in
Philadelphia on March 28-30, 1996. The Company believes the availability of a




                                      -6-
<PAGE>



larger format direct imaging press will provide a greater number of market
applications and will strengthen the Company's position in the direct-to-press
market. Currently, the Company is engaged in discussions relating to additional
strategic relationships and/or arrangements focused principally on the
PEARLsetter, other Direct Imaging Printing Presses and the manufacture and
distribution of the Company's consumables, for these and other applications.

Background

     The Company believes that thermally based computer-to-press imaging devices
and computer-to-plate printing systems, free of environmental concerns, will
eventually replace photo chemically based imaging systems as the preferred
method for providing printing plates in the graphic arts industry. The most
current and widely used method for producing color printing plates for the
full-color printing process employs desktop computers, which outputs PostScript
compatible digital data to a film imaging device, known as a film recorder, or
imagesetter. The film recorder is used to expose four pieces of film, each
representing a corresponding color separation for yellow, cyan, magenta and
black, the subtractive primary colors used in combination to produce process
color printing. Each of these unprocessed films must then be developed utilizing
photographic chemical developing systems which generate waste effluents that are
difficult to dispose of in an environmentally sound manner. The four processed
films are then delivered to the printer for imposition, platemaking, and
printing. Imposition is a costly, time and labor intensive process preceding
platemaking, in which all of the image elements required to maximize the
available imaging area of the plate are manually assembled to make the most
efficient use of the plate material. Once the components of the press sheet are
imposed for each of the four separations, each is then exposed onto separate
plates, typically using ultra-violet light sources and vacuum frames to hold the
imposed image tightly against the plate material during its exposure cycle. To
produce the final printing plates, the exposed plates must then go through a
chemical development process similar to that which is used to develop the
separation films. This process also produces chemical wastes which must be
disposed of in an environmentally sound manner at an ever increasing cost to the
printer. The printer then brings the plates to the press, mounts the plates on
the press, registers or precisely aligns all four plates one to another, adjusts
the ink density and settings, and then, begins the actual printing process on
the press. The complex nature of color printing utilizing a conventional press
is such that the quality of the printed materials are very dependent on the
press operators performing these highly skilled functions.

     In response to perceived market opportunities for more time and
cost-effective color printing; (an opportunity that would encompass taking


                                      -7-
<PAGE>

better advantage of the growing use of PostScript based digital prepress
systems; one that would be less reliant on operator skills and that would be
free from chemical processes and environmental concerns,) the Company undertook
development of its proprietary Direct Imaging technologies.

     The original implementation of the Company's Direct Imaging technology
employed a complex system of software and hardware. This first generation
process imaged or etched the Company's proprietary printing plates by means of
discharging an electrical spark (the "spark discharge" technology). The spark
discharge technology, while lacking in some aspects, was viable enough to allow
the Company to develop a business relationship with Heidelberg and apply the
spark discharge technology on an initial product offering introduced in
September 1991, the Heidelberg GTO-DI. The GTO-DI was initially introduced by
Heidelberg at Print '91. In 1992, the Company began shipping to Heidelberg spark
discharge based DI Kits for integration into GTO presses. The resultant GTO-DI's
were used by Heidelberg distributors for customer sales as well as for shows and
demonstrations worldwide.

     The Company realized that the use of a laser based imaging concept as a
replacement for its spark discharge technology held the promise of significantly
improved image quality. In response to the market's demand for higher quality
printed materials, even in the short-run markets, the Company developed its high
resolution semiconductor laser diode based imaging technology, PEARL. In 1993,
the Company introduced its PEARL Direct Imaging Technology. This second
generation technology is based on the same concept as the spark discharge
technology which, under computer control, burns away the surface of the plate
material except that it employs the use of an infrared semiconductor laser in
place of the spark discharge. This second generation PEARL technology completely
replaced the Company's prior spark discharge technology.

     The GTO-DI was reintroduced by Heidelberg with PEARL in September 1993. The
Company began shipping initial kits necessary to install the PEARL Imaging
System on the GTO-DI to Heidelberg in September 1993, with full production
commencing in February 1994. The Company believes that its PEARL Direct Imaging
technologies as implemented on the GTO-DI has been well accepted by the market,
which includes commercial printers, color service bureaus, digital on-demand
print shops and corporate in-house plants.

     The Company believes the radically different press design of the
Quickmaster-DI, in concert with the Company's third generation of Direct Imaging
technology targeted towards the growing short run process color print market has
been well received by the print industry. The product won the 1995 Intertech New
Technology award and in February 1996 two Seybold Editors' Awards at Seybolds



                                      -8-
<PAGE>



16th Annual Boston Seminars Conference oriented towards the printing and
publishing market. One award was made to the Company for it PEARL Direct Imaging
Technology and one to Heidelberg for the Quickmaster DI. The Company also
received the National Association of Printers and Lithographers Award for the
contribution its Direct Imaging Technology has made to the printing industry.

The Company's PEARL Direct Imaging Technology System and
Consumables

     The Company's PEARL Direct Imaging technology is part of the PEARL imaging
system for producing imaged color printing plates and nonphotosensitive films in
a simple one-step process (the "PEARL Imaging System"). The primary elements of
the PEARL Imaging System are:

            (i) DI Server Computer - which accepts, stores and allows for
viewing the bitmapped files of the digital page and then transmits that data to
implement the imaging function. The DI Server consists of either a Pentium(R)*
or a DEC Alpha(R)** based computer, image capture software, viewing software and
memory.

            (ii) The Imaging Computer - communicates with the DI Server to
receive, store and implement the imaging function.

            (iii) Imaging heads - consist of the semi-conductor laser diodes and
drivers, lens assembly, precision carriage assembly and chiller systems.

            (iv) Consumables - consist of wet and dry aluminum based printing
plates and wet and dry polyester based printing plates.

The Direct Imaging Press

     The Direct Imaging Printing Press automates or eliminates most of the
intermediate processes and steps necessary for full color printing, including
many of the highly skilled functions required to prepare the press. The plates
are imaged in register directly on the press. After the plates are wiped either
automatically or manually, an operator can begin the printing process. The use
of dry offset plates in the printing process eliminates the need for the
chemical dampening solution and its required balancing. Proper ink density is
automatically pre-set by the computer. The Company and its licensees typically
jointly develop and/or work together on the development of the press. The
Company, as more fully described below, supplies hardware components and
subassemblies and software necessary for

----------
*    Pentium is a registered trademark of Intel Corp.

**   Alpha is a registered trademark of Digital Equipment Corporation.


                                      -9-
<PAGE>

installation of PEARL Imaging Systems (the "PEARL Kits") into two, four and five
color presses. The advantages and features of the direct imaging presses
include:

     o    the ability to accept and buffer the bitmapped image data of fully
          composed pages, particularly those utilizing postscript interpreters;

     o    imaging on-press of all two, four or five plates simultaneously;

     o    imaging of the plates directly on the plate cylinders, in register
          (i.e., the fitting of two or more printing images in precise alignment
          with each other);

     o    elimination of the need for plate development processes, by-products
          of which cause environmental concerns;

     o    the imaged plates are waterless, therefore eliminating the need of the
          chemical dampening solution and its required balancing; and

     o    automatic pre-setting of the ink keys from the bitmap already resident
          in the computer.

     As a result, process color offset lithographic printing can be produced
with fewer complex steps and at a lower cost than in the case of other
conventional color printing methods. The time savings in producing four color
work would permit a printer to perform a greater number of printing jobs per day
more cost effectively with less waste.

     Further, by accepting the digital data directly from a prepress page layout
system, the user of a press equipped with the Company's direct imaging benefits
from the efficiency and cost advantages of electronic page make up and, by
extending the use of digital data to the printing process, permits a closure of
the digital loop in the production of color printing.


     The Company believes that its PEARL based direct imaging computer-to-press
technology with PEARL has been well received by the industry. By the end of 1995
the Company had shipped 211 of its PEARL Imaging Kits, 115 of which were for the
new Heidelberg Quickmaster DI introduced in May 1995.


Presstek Consumables

     The Company has and continues to develop its proprietary, thermally based
consumables that are imaged by its PEARL semiconductor laser diode imaging
technology. As part of the PEARL laser diode development process the Company has



                                      -10-
<PAGE>


increased the number, types and functional characteristics of its
consumable products. These consumables currently include a polyester based dry
printing plate, a polyester based wet printing plate, an aluminum based dry
printing plate and an aluminum based wet printing plate. There are additional
consumable products in various stages of development including a
non-photosensitive film which may, in the future, provide new sources of
consumable revenues.

     The Company has developed and is currently having manufactured by Rexham
Industries Corp ("Rexham"), a custom maker of precision films based in North
Carolina, both the polyester- and aluminum-based dry and wet offset printing
plates. The Company believes that wet offset plates imaged by its PEARL Direct
Imaging technology have applications for use on the large installed base of
existing printing presses. This population of printing presses operates with a
dampening system which requires wet offset printing plates. The Company has also
developed a prototype non-photosensitive film that it believes has market
applications imaged by its PEARL Direct Imaging technology. Although the Company
believes that it can complete the development and commercialization of the
polyester and aluminum based wet offset printing plates and its
non-photosensitive film and other consumable products, there can be no
assurances that it can do so.

     The Company, realizing that sources for the Company's requirements for
current and new PEARL consumables, plates and films, would have to be found, in
February 1996 acquired 90% of the outstanding common stock (the "Purchased
Shares") of Catalina Coatings, Inc. ("Catalina"), an Arizona corporation engaged
in the development, manufacture and sale of vacuum deposition coating equipment
and the licensing and sublicensing of patent rights with respect to a vapor
deposition process to coat moving webs of materials at high speeds. The
aggregate consideration paid by the Company pursuant to the Stock Purchase
Agreement was $8,400,000, of which $8,200,000 represented the purchase price of
the Purchased Shares and $200,000 represented consideration for the
non-competition and confidentiality covenants of two of the principal
shareholders of Catalina who sold their shares to the Company. During the fiscal
year ended December 31, 1995, Catalina, a Subchapter S corporation, achieved net
income of approximately $1,542,000 on revenues of approximately $5,400,000.

     The Company intends that Catalina, which operates as a subsidiary of the
Company, will develop the equipment the Company needs to manufacture its PEARL
thermal printing plates and films in a more cost effective manner than using
currently available conventional technology. Even if Catalina commences
manufacturing of PEARL thermal printing plates and films the Company may still
need to enter into manufacturing arrangements with third parties. The Company is
currently engaged in discussions with certain other parties relating to entering



                                      -11-
<PAGE>


into strategic alliances, arrangements or relationships with respect
to the manufacture and/or the distribution of the Company's PEARL consumables.
There can be no assurance that the Company will be able to enter into any
arrangements for the manufacturing of its consumables, or that such arrangements
will result in successful commercial products. Additionally, there can be no
assurance that the Company through Catalina will be able to successfully
complete the development and undertake the manufacture of the PEARL consumables.

Direct Imaging Printing Press

     In January 1991, the Company entered into a master agreement (the "Master
Agreement"), a technology license agreement (the "Technology License") and a
supply agreement (the "Supply Agreement") (the foregoing agreements being
sometimes collectively referred to herein as the "Heidelberg Agreements")with
Heidelberg. Pursuant to this series of related agreements, the Company and
Heidelberg agreed to certain terms relating to the integration of the Direct
Imaging technology into various presses manufactured by Heidelberg and certain
of its related parties (the "Heidelberg Presses") and the manufacture of
components for and the commercialization of such presses. The Master Agreement
supersedes certain prior agreements between the Company and Heidelberg.

     Pursuant to the Heidelberg Agreements, the Company granted Heidelberg
certain exclusive rights, relating to the Company's spark discharge technology
subject to the satisfaction of certain conditions, for use of the Direct Imaging
Technology in Heidelberg Presses. In consideration for such rights, Heidelberg
agreed to pay to the Company royalties on the net sales prices of various
specified types of Heidelberg Presses. Heidelberg's exclusive rights with
respect to the different categories of Heidelberg Presses are conditioned upon
Heidelberg undertaking specified development efforts on a timely basis, paying
certain minimum royalties during specified initial periods and satisfying
continuing product sale conditions. These original agreements have been modified
by the parties from time to time.

     The Heidelberg Agreements further provided for the Company to supply D.I.
Kits to Heidelberg at specified rates. The terms of the Heidelberg agreements
are for periods ending in December 2011 in the case of each of the Master
Agreement and Technology License and December 1995 in the case of the Supply
Agreement. The Supply Agreement related primarily to the GTO-DI which is no
longer manufactured. The Heidelberg Agreements also contain, among other things,
certain early termination provisions and extension provisions.

     On September 3, 1992, the Company and Heidelberg signed a contract
modification agreement that details arrangements with


                                      -12-
<PAGE>


respect to the development of additional products planned to be introduced in
the future.

     On April 27, 1993, the Company and Heidelberg signed a contract
modification agreement that details the arrangements with respect to
Heidelberg's licensing of the Company's PEARL Direct Imaging technology, which
was not otherwise encompassed within the prior arrangements.

     The Company has also subsequently granted Heidelberg a forty-five month
exclusive license for the manufacture and sale of the Quickmaster -DI which uses
PEARL technology. Certain other modifications have been made to the exclusive
arrangements under the previous agreements between Heidelberg and the Company
which provide for a non-exclusive license for the balance of the term of the
original agreement.

     On February 4, 1994, the Company announced an agreement with Heidelberg
that provided for the Company to receive $4,180,000 during 1994 for engineering
services performed by the Company for joint development projects during 1994.
This agreement was subsequently modified and resulted in increasing the
engineering services performed by the Company. This change resulted in
Heidelberg agreeing to pay an additional $1,499,400 through June 1995 for these
incremental services related to these joint development projects. PEARL Imaging
Systems manufactured by the Company for Heidelberg, for the GTO-DI and the
Quickmaster DI, represent additional revenue to the Company. Additionally, the
Company receives a royalty payment for certain presses shipped by Heidelberg
which contains Presstek's PEARL imaging technology.


     In November 1995 the Company and Heidelberg agreed (the "November
Agreement") to certain other arrangements whereby the Company was provided with
incremental engineering revenue, certain price increases, and modifications of
the Quickmaster DI royalty billing and payment terms by Heidelberg. The Master
Agreement was also modified by the November Agreement to provide Heidelberg with
a fixed royalty rate on the Quickmaster DI. These arrangements were made as a
result of a schedule change requested by Heidelberg in November 1995 to reduce
the number of PEARL imaging systems being manufactured by the Company each month
for Heidelberg from the amount then being produced.


The PEARL Platesetter

     The PEARL Platesetter, now referred to as the PEARLsetterTM is an
additional application of the Company's PEARL Direct Imaging technology and
consumables. The PEARLsetter is a computer-to-plate imaging device that will be
able to image both the Company's wet and dry offset plates. The Company also
anticipates that the PEARLsetter will have applications in the larger format


                                      -13-
<PAGE>

size markets as well and provides the product in both an A3 (2-up) and A2 (4-up)
format size.

     The PEARLsetter directly accepts the digital page layout data from a
prepress system and utilizing its high powered semiconductor laser diodes,
produces a precisely shaped and located laser dot. The imaged plates require no
further processing, other than wiping the ablated debris from the imaging
process off the plates, and accordingly, do not create chemical waste which must
be disposed of. The plates can then be immediately mounted and registered on the
press.

     The Company has entered into distribution agreements with the Pitman
Company in the United States, KNP-BT in certain European countries and
Heidelberg Australia in Australia and New Zealand. Those agreements provide for
the exclusive distribution of the Company's PEARLsetter product line and its
PEARL based consumables. The Company has also entered into OEM relationships
with Sakurai Machinery Company and Heath Custom Press for the resale of its
PEARLsetter product under private label by these companies. The Company is also
currently engaged in additional discussions with certain other parties relating
to entering into strategic alliances and OEM arrangements or relationships with
respect to the PEARLsetter product line and its PEARL based consumables. To
maximize the anticipated beneficial effects to it, the Company has continued
independent development and commercialization of one or more PEARLsetter
products. There can be no assurance that the Company will be able to enter into
any additional arrangements with respect to, or that any such arrangements will
result in, the successful commercialization of additional PEARLsetter products.
Additionally, there can be no assurance that the Company will have the resources
or otherwise be able to successfully complete development and undertake the
manufacture of, or successfully commercialize, additional PEARLsetter products.

Manufacturing, Marketing Component Procurement

     The Company engages in certain manufacturing, as described below, and also
is engaged in the distribution and sales of PEARL based offset printing plates,
which are manufactured exclusively for the Company by third parties. In
addition, the Company engages in certain marketing activities which include
informing the industry of the Company's products and capabilities; contacting
potential strategic partners; establishing relationships with potential
resellers including both OEM partners and dealers; establishing liaisons with
companies which manufacture and/or market products which may incorporate the
Company's PEARL Direct Imaging Technology, or jointly develop new applications
of the Company's vast intellectual property portfolio. The Company also provides
Heidelberg and its other licensees and distribution partners with worldwide
marketing and sales support.


                                      -14-
<PAGE>


     The Company's agreements provide, among other things, for it to supply its
PEARL Imaging Systems for integration into certain printing presses. In November
1994, the Company announced the start of operations in a new 36,000 square foot
manufacturing facility located adjacent to its existing headquarters and
engineering offices. These increased facilities, which have now been completed,
were required based on both existing and projected manufacturing requirements
for PEARL Imaging Systems or other similar items which are or may be
manufactured by the Company in the future. Given sufficient time, the Company
believes that it has the available resources and personnel with the knowledge
and experience to further increase its manufacturing capacity to satisfy any
future product demand.

     The Company obtains certain components and supplies used in production of
PEARL Imaging Systems from a number of suppliers. Although the Company believes
that there are available various sources for necessary components, parts and
disposable items (including printing plates and inks) for both the Company's
manufacturing activities and to support the market for products incorporating
the Company's PEARL Direct Imaging technology, sources for certain of such items
are limited and there can be no assurance that procurement or supply
arrangements will be available on satisfactory terms; any inability to establish
satisfactory manufacturing or procurement or supply arrangements or significant
delays in establishing such arrangements could have an adverse effect on the
Company and/or cause delays in the Company's ability to deliver products
incorporating its PEARL Imaging Technology.


     The PEARL laser diode system includes semiconductor laser diodes. Although
the Company currently uses only one source for the laser diode devices, it
believes that there will be several sources available to manufacture the laser
diodes to the Company's specification, if required, in the future. Additionally,
the Company has "in-house", limited laser diode manufacturing capabilities. The
Company would still require the surmounted "diode chips," a component of the
laser diode, to be supplied by a third party. The Company believes that several
sources are available to supply this component, if required. The Company's laser
diode manufacturing capabilities currently function principally for research and
development, quality assurance and manufacturing engineering. However, the
Company believes that, if required, it could expand these facilities in the
future as a primary or secondary source.


     The Company has developed and continues to develop proprietary consumables
that are imaged or ablated by its PEARL semiconductor laser diode imaging
technology as well as other thermally based direct-to plate systems. As part of
the PEARL laser diode development process the Company has increased the number,
types and functional characteristics of the consumable products it has under



                                      -15-
<PAGE>


development or which are currently being manufactured. These consumables
currently include a polyester based dry printing plate, a polyester based wet
printing plate, an aluminum based dry printing plate, an aluminum based wet
printing plate and a non-photosensitive film. There are additional consumable
products in various stages of development which may, in the future, provide new
sources of consumable revenues. The Company's PEARL offset printing plates, both
aluminum and polyester based are being supplied by Rexham. The Company,
realizing that sources for the Company's requirements for current and new PEARL
consumables, plates and films, would have to be found, in February 1996 acquired
Catalina. The Company anticipates that Catalina, which operates as a subsidiary
of the Company, will develop the equipment the Company needs to manufacture its
PEARL thermal printing plates and films [which are currently manufactured by
third parties] in a more cost effective manner than using currently available
conventional technology. However, even if Catalina commences manufacture of
PEARL thermal printing plates and consummables, additional sources to satisfy
all of the Company's requirements for current and new consumables, printing
plates and films, may have to be found. Therefore, the Company is actively
pursuing these additional sources at this time. However, there can be no
assurance that the Company will be able to enter into any arrangements for the
volume manufacturing of its consumables, or that any such arrangement will
result in successful commercial products.

     The Company currently anticipates that the PEARLsetter will continue to be
marketed through traditional graphic arts distribution sales channels and will
be positioned as an alternative to existing imagesetter or platesetter products.

     Market acceptance for any products incorporating the Company's technology
will require substantial marketing efforts and expenditure of significant sums,
either by the Company, its strategic partners or both. There can be no assurance
that any existing products will continue to achieve market acceptance or that
any new product that may be introduce will achieve market acceptance or be
commercially viable.

Development Program

     During the years ended December 31, 1993, 1994, and December 30, 1995, the
Company expended $5,647,000, $5,123,000 and $6,155,000 respectively, on
engineering and product development. The Company is currently concentrating its
development efforts on refining and improving the performance of its current and
future technologies, and proprietary printing plates and anticipates that it
will continue to do so, both independently and in conjunction with strategic
partners. The Company is also engaged in continuing development efforts with
respect to its PEARLsetter product line. There can be no assurance that the



                                      -16-
<PAGE>


Company, in conjunction with a strategic partner or independently, will
successfully complete development of any additional marketable products, or that
technical or other problems will not occur in connection with the Company's
development program, products or technology.

Patents and Proprietary Rights


     As of March 1, 1996, the Company has been issued forty-three (43) U.S.
patents, five (5) Canadian patents, one (1) European patent registered in the
following nine countries (Austria, Belgium, France, Germany, Great Britain,
Italy, the Netherlands, Sweden and Switzerland) and two (2) Great Britain
patents, and has received notice of allowance for an additional three (3)
European patents. The Company intends to register these additional European
patents in one or more of the following countries: Austria, Belgium, France,
Germany, Great Britain, Italy, the Netherlands, Switzerland and Sweden. The
Company has applied for and is pursuing its applications for twenty-two (22)
additional U.S. patents and seventy-two (72) foreign patents (consisting of 21
Japan, 16 Canada, 14 Europe, 12 Australia, 2 in each of Belgium, France, Germany
and Italy and one in the United Kingdom) and anticipates that it will apply for
additional patents and for copyrights, as deemed appropriate. There can be no
assurance as to the issuance of any such patents or the breadth or degree of
protection which the Company's patents or copyrights may afford the Company.
There is rapid technological development in the computer and image reproduction
industries, resulting in extensive patent filings and a rapid rate of issuance
of new patents. Although the Company believes that its technology has been
independently developed and that the products it markets and proposes to market
will not infringe the patents or violate other proprietary rights of others, it
is possible that such infringement of existing or future patents or violation of
proprietary rights may occur. In such event the Company may be required to
modify its design or obtain a license. No assurance can be given that the
Company will be able to do so in a timely manner, upon acceptable terms and
conditions, or at all. The failure to do any of the foregoing could have a
material adverse effect on the Company. Furthermore, there can be no assurance
that the Company will have the financial or other resources necessary to
successfully defend a patent infringement or proprietary rights violation
action. Moreover, the Company may be unable, for financial or other reasons, to
enforce its rights under any of its patents.


     The Company also intends to rely on proprietary know-how and to employ
various methods to protect the source codes, concepts, ideas and documentation
of its proprietary software, which methods may include copyrights. However, such
methods may not afford complete protection and there can be no assurance that
others will not independently develop such know-how or obtain access to the
Company's know-how or software codes, concepts, ideas and documentation.
Furthermore, although the Company has and expects to have confidentiality
agreements with its employees and appropriate vendors, there can be no assurance
that such arrangements will adequately protect the Company's trade secrets.

Competition

     The Company believes that its developed and proprietary technologies, its
alliance with Heidelberg, the world's largest printing press manufacturer; and

 
                                      -17-
<PAGE>

other press manufacturing companies and graphic arts distribution organizations
and its established presence in the direct imaging market provide the Company
with a competitive advantage.

     The Company is aware of several companies employing electrophotography as
their imaging technology. Electrophotography, sometimes referred to as
xerography, is a technology which historically has been used primarily in black
and white copiers. Canon was the first company to successfully employ
electrophotography in a full color copier product, the CLC 500.

     Indigo N.V., a company with research and development, and manufacturing
operations in Israel, introduced their digital, sheet-fed offset color press,
the E-Print 1000 in September 1993. The E-Print 1000 utilizes an
electrophotographic imaging technology, with a liquid toner, and prints at 800
dots per inch. The E-Print 1000 sells for approximately $450,000. Xeikon, N.V.
of Belgium also introduced their digital, web-(roll)fed color printing product,
the Xeikon DCP-1 in September, 1993. The Xeikon DCP-1, a version of which is
also being marketed by Agfa Gevaert as the Chromopress, also utilizes an
electrophotographic imaging technology with a dry toner and prints a variable
dot density of 600 dots per inch. The Chromopress is reported to sell for
between $350,000 and $400,000.

     Canon and Xerox Corp. are two major corporations which have also developed
and introduced color electrophotographic copier products that could impact the
very short-run digital color printing markets. Canon has at least two color
copier products which it claims provide improved print quality even at their
resolution limitation of 400 dots per inch. They also claim faster speeds. Xerox
also has a color copier which it is currently marketing. Additionally, the
Company is aware of two companies, XMX Corporation and Delphax that have
publicly announced their intentions of developing their own proprietary
technological solutions for digital color printing. Scitex Corp. has also
introduced its Spontane xerographic based color imaging system which uses a
xerographic color copier engine supplied by Fuji Xerox.

     The Company is also aware that there is a direction in the graphic arts
industry to create stand-alone computer-to-plate imaging devices for single and
multi-color applications. The Company anticipates that most of the major
corporations in the graphic arts industry have or are considering a
computer-to-plate imaging device. To date, these devices, for the most part,
utilize printing plates that require a post imaging photochemical developing
step, and in some cases, also require a heating process. This is, nonetheless,
an important step in the printing industry, as it eliminates the use of films.
Potential competitors in this area would include, among others, Creo Products,
Gerber Scientific Inc., Misomex, Optronics, a Division of Intergraph 
Corporation, Komori, Krause, Scitex Corporation


                                      -18-
<PAGE>


Ltd., Linotype-Hell, Kodak, Dai Nippon Screen, Crosfield, a Division of Dupont,
Agfa-Gevaert, Polaroid Corp. and Sony Corp. The Company's stand-alone
computer-to-plate imagesetter is, in the Company's opinion, a further
technological advancement. The Company's computer-to-plate imagesetter
eliminates not only the films, but also the post-imaging photochemical
developing steps. The Company believes that other graphic arts companies, such
as those stated above, are likely to be working on similar plate imaging
processes that would also eliminate the production of the hazardous materials
associated with the photochemical developing process.

     The Company also anticipates competition from printing plate manufacturing
companies that either manufacture, or have the potential to manufacture digital
plates. Such companies include Agfa-Gevaert N.V. ("Agfa"), Polychrome Corp., a
Division of Dai Nippon Ink & Chemicals, Inc., Toray, Howson, a Division of
Dupont, Horsell/Anitec, a Division of International Paper, Kodak, Polaroid
Corp., Mitsubishi, Fuji Photo Film Co., Ltd. and Minnesota Mining & Mfg. Co.

     Products incorporating Direct Imaging technology can also be expected to
face competition from conventional presses and products utilizing existing
platemaking technology, as well as presses and other products utilizing new
technologies. Leading press manufacturers include Heidelberg, Komori Printing
Machinery Co., Ltd., Mitsubishi, and MAN Roland, and, in the single color and
two color press market, Ryobi Limited, Hamada and AB Dick. Companies marketing
conventional imagesetter equipment include Agfa, Linotype-Hell, ECRM, Optronics,
Crosfield and Scitex Corporation Ltd. Other companies, which may include such
major corporations as International Business Machines Corporation, Xerox
Corporation, Polaroid Corp., Canon and Kodak, are considered by the Company to
have the type of electronic and image reproduction expertise which could
encourage them to attempt to develop and market competitive products.


     Most of the companies marketing competitive products or with the potential
to do so are well established, have substantially greater financial and other
resources than the Company and have established records in the development, sale
and service of products. There can be no assurance that the Company, any Company
product or any products incorporating the Company's technology will be able to
compete successfully in the future.

Backlog

     As of February 29, 1996 the Company had a backlog of products under
contract aggregating approximately $16,822,000 (including royalties payable to


                                      -19-
<PAGE>


the Company) compared to a backlog of $2,800,000 as of February 28, 1995
(including royalties payable to the Company). Substantially all of the backlog
of products under contract is expected be shipped by the Company in 1996.


Employees

     As of February 29, 1996, the Company had one hundred and five (105)
employees, fifty four (54) of whom, including Richard A. Williams and Robert E.
Verrando, the Company's Chief Executive Officer and President, respectively, are
engaged primarily in engineering, service and marketing; forty (40) of whom are
engaged primarily in manufacturing, manufacturing engineering and quality
control; and eleven (11) of whom are engaged primarily in corporate management,
administration and finance. The Company considers its relationship with its
employees to be good.

Item 2. Properties.

     The Company leases approximately 24,000 square feet of space at 8
Commercial Street, Hudson, New Hampshire. The lease of these premises, which
expires in March 1996, subject to three one-year renewal options, provides for
rent at the rate of $8,693 per month plus a pro rata share of real estate taxes,
utilities and certain other expenses. During May 1994, the Company entered into
a three year lease agreement (which was amended in December 1994, effective
January 1, 1995) for approximately 36,000 square feet to accommodate its
manufacturing facilities. The lease, as amended, specifies a fixed base monthly
rent of $11,250, plus a pro rata share of real estate taxes, utilities, and
certain other expenses. The lease contains an option to renew for an additional
three years and a right of first refusal to purchase the property.

     The Company believes that its existing facilities are adequate for its
existing operations. To the extent that the Company is required to increase its
manufacturing capacity, the Company believes that additional space is readily
available in the vicinity of its existing facilities.

Item 3. Legal Proceedings.

     In April 1995 the Company commenced an action against Agfa-Gevaert, N.V.
("Agfa") in the U.S. District Court for the District of New Hampshire alleging
that Agfa violated provisions of a confidentiality agreement and a manufacturing
agreement (the "Manufacturing Agreement") between the parties and
misappropriated certain trade secrets of the Company. In June 1995, Agfa
commenced an arbitration proceeding against the Company in the International
Chamber of Commerce in which it sought arbitration of the disputes between the
parties arising from the Manufacturing Agreement and also sought to have the
trade secret issues determined in arbitration. In its request for arbitration
Agfa, among other things, charged the Company with breaches of the Manufacturing
Agreement, good faith and fair dealing, and sought damages in an amount alleged
to be $2,000,000.

     On October 15, 1996, the Company was notified that an arbitration panel of
the International Chamber of Commerce issued its Award in the arbitration
between the Company and Agfa. The Award directs Agfa to transfer to the Company
Agfa's U.S. Patent No. 5,378,580 including its underlying applications, return
to the Company all copies of confidential information that the Company provided
to Agfa, and pay the Company's legal expenses in the arbitration in the amount
of $769,140. Agfa has complied with the financial terms of the Award and has
assigned to the Company the foregoing patent and underlying applications. Agfa
has agreed to return to the Company the confidential material as required by the
Award. The arbitrators rejected the request for affirmative relief sought by
Agfa.

     The Company has been advised that the Securities and Exchange Commission
(the "Commission") has entered a formal order of private investigation with
respect to certain activities by certain unnamed persons and entities in
connection with the securities of the Company. In that connection, the Company
has received subpoenas duces tecum requesting it to produce certain documents
and certain of its officers, directors and employees have received subpoenas
requesting them to give testimony before the staff of the Commission and the
Company and said officers, directors and employees have complied with the
requests. The Company has not been advised by the Staff of the Commission that
the Staff intends to recommend to the Commission that it initiate a proceeding
against the Company in connection with the foregoing investigation.

                                      -20-


<PAGE>


   
     On June 28, 1996 Tonia Alfonso and Dick Ruestman filed a class action
lawsuit in the United States District Court, District of New Hampshire, against
the Company, Robert Howard and Lawrence Howard, who are both directors of the
Company, Richard Williams and Robert Verrando, who are both officers and
directors of the Company, Cabot Heritage Corp.,("Heritage"), Cabot Market Letter
("Market"), Carlton Lutts, Timothy Lutts and Robert Lutts (Carlton Lutts,
Timothy Lutts and Robert Lutts are sometimes hereinafter collectively referred
to as the "Lutts Defendants") and Cabot Money Management ("CabotMM"). The
plaintiffs allege that the defendants engaged in a plan and scheme and unlawful
courses of conduct to artificially inflate, maintain and otherwise manipulate
the value of the Company's common stock in order to cause individual defendants
to profit from their sales of the Company's common stock and to induce
plaintiffs' and other members of the purported class to purchase securities of
the Company at artificially inflated prices. The plaintiffs also allege that (i)
all defendants except CabotMM violated Section 10(b) ("Sect. 10(b)") of the
Securities Exchange Act of 1934, (the "Exchange Act") and Rule 10b-5 ("Rule
10b-5") promulgated thereunder, (ii) that all individual defendants and Heritage
violated Section 20(a) ("Sect. 20(a)") of the Exchange Act and (iii) that all
defendants except CabotMM committed common law fraud and deceit. The basis for
the action against the Company and its officers and directors include, among
other things, the Company's alleged issuance of false and misleading reports or
failure to disclose material facts including a misstatement of earnings in the
Company's financial statements for the quarter ended March 30, 1996, the failure
to disclose to the public certain alleged adverse information concerning the
Company's patents and its proprietary technology including that certain United
States patents previously issued to the Company were the subject of a
reexamination or reissuance procedure by the U.S. Patent Office and that the
Company was facing formidable competition as a result of technological advances
made by other companies and the failure to disclose that the investigation into
trading in the securities of the Company being conducted by the Securities and
Exchange Commission (the "SEC Investigation") included the service of a subpoena
upon the Lutts Defendants. The plaintiffs also allege that the Company conspired
with the Lutts Defendants to have false reports issued about the Company in
order to drive up the market price of the Company's common stock. The plaintiffs
seek unspecified compensatory damages, attorney and accountant fees and other
costs and expenses incurred by the plaintiffs in connection with the action and
the imposition of a constructive trust on, and disgorgement of, profits made by
defendants who were allegedly unjustly enriched as a result of the purported
artificial inflation of the Company's common stock.

     On June 28, 1996 Bill Berke ("Berke") filed a class action lawsuit in the
United States District Court, District of New Hampshire, against the Company,
Richard Williams, Glenn DiBenedetto, the Company's Chief Financial Officer,
Lawrence
    

                                      -21-


<PAGE>


   
Howard, Robert Howard, Robert Verrando, Bert DePamphilis (a director of the
Company), Harold Sparks (a director of the Company) and BDO Seidman LLP, the
Company's independent auditors. The plaintiff alleges that the defendants
violated Sect. 10(b) and Rule 10b-5 by issuing financial statements for the
fiscal year ended December 30, 1995 and the fiscal quarter ended March 30, 1996
and corresponding financial press releases that overstated net income in the
Statements of Operations for those periods as a result of the improper
application of certain accounting principles relating to the tax benefits
received upon exercise of certain stock options previously granted by the
Company. The plaintiff seeks unspecified damages and reimbursement of the
plaintiff's costs and expenses incurred in connection with the action.

     On July 9, 1996 Sidney Gellman and Robert Ehrenreich filed a class action
lawsuit in the United States District Court, District of New Hampshire, against
the Company and Robert Verrando, Richard Williams, Robert Howard, Lawrence
Howard, Glenn DiBenedetto, Bert DePamphilis, Frank Pensavecchia, the Company's
Senior V.P.-Engineering, Harold Sparks and John Dreyer (a director of the
Company), the Lutts Defendants, Heritage and CabotMM. The plaintiffs' allege
that the Company and the individual officers and directors named as defendants
violated Sect. 10(b) and Rule 10b-5, that the individual officer and director
defendants and CabotMM violated Sect. 20(a) and committed acts of common law
negligent misrepresentation and fraud by causing an artificial inflation in the
price of the Company's common stock and helping maintain such increase at a time
when certain of the Company's officers and directors were selling such stock by,
among other things, failing to adequately disclose certain alleged adverse
information concerning certain Company patents and its proprietary technology,
failing to timely disclose claims made against the Company by Agfa-Gevaert, N.V.
in an arbitration proceeding, failing to disclose stock sales by certain of the
defendants at alleged artificially increased prices while they were in
possession of material non-public information concerning the Company, issuing a
misleading financial statement that overstated earnings for the quarter ended
March 30, 1996 and failing to adequately disclose the scope of the SEC
Investigation. The plaintiffs also allege that the Lutts Defendants, Heritage
and CabotMM violated Sect. 10b and Rule 10b-5. The plaintiffs' seek unspecified
compensatory damages and reimbursement for costs and expenses incurred in
connection with the action.

     On July 10, 1996 Joseph C. Barton filed a class action lawsuit in the
United States District Court, Southern District of New York against the Company,
Robert Howard, Lawrence Howard, Richard Williams, Robert Verrando, Glenn
DiBenedetto, Frank Pensavecchia, Harold Sparks, Bert DePamphilis, Market,
CabotMM, Heritage and Carlton Lutts. The plaintiff alleges that the defendants
violated Sect. 10(b) and Rule 10b-5 and Sect. 20(a) by
    

                                       -22-


<PAGE>


   
issuing false and misleading information concerning the Company's financial
results for its quarter ended March 30, 1996, and by failing to disclose that
the SEC had broadened the scope of the SEC Investigation and that adverse
competitive factors undermined the Company's PEARL(R) technology. The plaintiff
also claims that certain of the defendants sold shares of the Company's common
stock at artificially high prices while in possession of material non-public
information regarding the Company. The plaintiff is seeking to recover
unspecified compensatory damages together with interest, costs of the action and
such other extraordinary, equitable and/or injunctive relief as permitted by law
or equity.

     On July 12, 1996 F. Brock Walter ("Walter") filed a class action lawsuit in
the United States District Court, District of New Hampshire, against the same
defendants as the lawsuit filed by Berke on June 28, 1996. The Walter suit
contains the same allegations against the defendants as those contained in the
Berke action. Walter seeks to recover unspecified damages against the defendants
and the costs and expenses of the action.

     On July 16, 1996 Richard Strauss commenced a derivative suit on behalf of
the Company in the Court of Chancery of the State of Delaware, New Castle
County, against Robert Howard, Lawrence Howard, Richard Williams, Robert
Verrando, Bert DePamphilis and Harold Sparks. The plaintiff alleges that the
defendants breached the fiduciary duties they each owed to the Company and its
other shareholders and wasted corporate assets by making false and misleading
statements of fact or concealing material facts concerning the viability of the
Company's "key" patent and its proprietary interest in its PEARL(R) technology,
its failure to properly disclose the scope of the SEC Investigation, and its
misstatement of its financial results for the first quarter of 1996, and that
they used this information for their personal use by selling common stock of the
Company at artificially inflated prices. The plaintiff also alleges that these
actions by the defendants resulted in breaches of Sect. 10(b) and Rule 10b-5
which resulted in other lawsuits being commenced against the Company which will
require the Company to expend resources to defend. The plaintiff seeks to
recover against the defendants, on behalf of the Company, unspecified damages
allegedly sustained by the Company as a result of the defendants' alleged
breaches of fiduciary duty, a return to the Company of all salaries and the
value of other remuneration paid to the defendants by the Company during the
time they were in breach of their fiduciary duties, an accounting of and/or
constructive trust on the proceeds of defendants' trading activities in the
Company's common stock and recovery of costs and disbursements of the action.

     On July 31, 1996, a class action lawsuit was filed by Multi-Measurements
Inc., Multi-Measurements Inc. Pension Plan, John LaReddola, Trustee, and Albert
Schlessinger, Attorney in
    

                                       -23-


<PAGE>


   
Fact for Andrew Schlessinger, in the United States District Court, District of
New Hampshire, against the Company, Robert Howard and Lawrence Howard, Richard
Williams and Robert Verrando, Heritage, Market, the Lutts Defendants and
CabotMM. The plaintiffs allege that the defendants engaged in a plan and scheme
and unlawful courses of conduct to artificially inflate, maintain and otherwise
manipulate the value of the Company's common stock in order to cause individual
defendants to profit from their sales of the Company's common stock and to
induce plaintiffs' and other members of the purported class to purchase
securities of the Company at artificially inflated prices. The plaintiffs also
allege that (i) all defendants except CabotMM violated Sect. 10(b) and Rule
10b-5, (ii) that all individual defendants and Heritage violated Sect. 20(a),
and (iii) that all defendants except CabotMM committed common law fraud and
deceit. The basis for the action against the Company and its officers and
directors include, among other things, the Company's alleged issuance of false
and misleading reports or failure to disclose material facts including a
misstatement of earnings in the Company's financial statements for the quarter
ended March 30, 1996, the failure to disclose to the public certain alleged
adverse information concerning the Company's patents and its proprietary
technology including that certain United States patents previously issued to the
Company were, at the request of the Company, the subject of a reexamination or
reissuance procedure in the U.S. Patent Office and that the Company was facing
substantial competition as a result of technological advances currently being
made by other companies, and the failure to disclose that the SEC Investigation
included the service of a subpoena upon the Lutts Defendants. The plaintiffs
also allege that the Lutts Defendants promoted the Company's common stock in
order to drive up the market price, without disclosing the fact that certain of
the Lutts Defendants had substantial holdings of the Company's common stock. The
plaintiffs also claim that certain of the defendants sold shares of the
Company's common stock at artificially high prices while in possession of
material non-public information regarding the Company, and that defendants acted
to curtail short-selling in the Company's common stock. The plaintiffs seek
unspecified compensatory damages, attorney and accountant fees and other costs
and expenses incurred by the plaintiffs in connection with the action and the
imposition of a constructive trust on, and disgorgement of, profits made by all
defendants except CabotMM who were allegedly unjustly enriched as a result of
the purported artificial inflation of the Company's common stock.

     On September 9, 1996, a class action lawsuit was filed by Neil Fradin in
the United States District Court, District of New Hampshire, against the
Company, Richard Williams, Glenn DiBenedetto, Bert DePamphilis, Lawrence Howard,
Robert Howard, Harold Sparks, Robert Verrando and BDO Seidman, LLP. The
plaintiff alleges that the defendants violated Sect. 10(b) and Rule 10b-5 and
that the individual defendants violated Sect.
    

                                       -24-


<PAGE>


20(a) of the Exchange Act by issuing financial statements for the fiscal year
ended December 30, 1995 and the fiscal quarter ended March 30, 1996 and
corresponding financial press releases that overstated net income in the
Statements of Operations for those periods as a result of the improper
application of certain accounting principles relating to the tax benefits
received upon exercise of certain stock options previously granted by the
Company. The plaintiff seeks unspecified damages and reimbursement of the
plaintiff's costs and expenses incurred in connection with the action.

   
     The purported class action brought by Joseph Barton in New York was
transferred to the District of New Hampshire where it will be consolidated with
the six purported class actions initially commenced in New Hampshire identified
above by order of the Judicial Panel on Multi-District Litigation dated December
9, 1996.

     The Company intends to vigorously defend all of the foregoing eight
actions. However, the outcome of any litigation is subject to uncertainty and a
successful claim against the Company, in any of the foregoing actions, could
have a material adverse effect on the Company.
    



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

            Not Applicable.

                                    PART II

Item 5. Market for Registrant's Common Equity and Related
        Stockholder Matters.

     The Company's Common Stock has traded in the over-the-counter market on the
NASDAQ National Market System under the symbol PRST since July 18, 1990 and,
prior thereto, from May 11, 1990 to July 17, 1990, traded on the NASDAQ System.
Prior thereto, from the Company's initial public offering until May 11, 1990,
the principal redemption date of the Warrants, the Company's Units, Common Stock
and Warrants were traded on the NASDAQ System. The following table sets forth,
for the periods indicated, the high and low sales prices of the Company's Common
Stock as reported by NASDAQ and retroactively adjusted for the Company's five
for four stock split effected in the form a 25% stock dividend paid in September
1994 and the Company's two for one stock split effected in the form of a 100%
stock divided paid in May 1995.


                                      -25-
<PAGE>

Year Ended                            High                        Low
December 31, 1994                     ----                        ---
-----------------

First Quarter                       $14 5/8                     $10 5/8

Second Quarter                         13                        7 3/8

Third Quarter                          25                        12 3/4

Fourth Quarter                       25 7/8                        16



Year Ended
December 31, 1995
-----------------

First Quarter                       $37 1/8                     $21 1/2

Second Quarter                       62 1/2                      23 1/2

Third Quarter                          63                        49 1/2

Fourth Quarter                        100                        38 1/2


     As of March 13, 1996, there were approximately 1,200 holders of record of
the Company's Common Stock. The Company believes that, in addition, there are in
excess of 500 beneficial owners of its Common Stock whose shares are held in
"street name."

Dividend Policy

     To date, the Company has not paid any cash dividends on its Common Stock.
The payment of cash dividends, if any, in the future is within the discretion of
the Company's Board of Directors and will depend upon the Company's earnings,
its capital requirements and financial condition and other relevant factors. The
Board of Directors does not intend to declare any cash dividends in the
foreseeable future, but instead intends to retain all earnings, if any, for use
in the Company's business operations.


                                      -26-
<PAGE>

Item 6.  Selected Financial Data.

     The following selected financial data of the Company has been derived from
the financial statements of the Company appearing elsewhere herein (except for
the statement of operations data for the years ended December 31, 1991 and 1992
and the balance sheet data at December 31, 1991, 1992 and 1993 which is not
included in such financial statements). All references to average number of
shares outstanding and per share data have been restated retroactively to
reflect the five-for-four and two-for-one stock splits effected in the form of
stock dividends.

<TABLE>
Statements of
Operations Data:
<CAPTION>
                                                                                 Year Ended
                                               ------------------------------------------------------------------------------------
                                                   DEC 31            DEC 31            DEC 31            DEC 31            DEC 30
                                                    1991              1992              1993              1994              1995
                                               ------------      ------------      ------------      ------------      ------------

<S>                                            <C>               <C>               <C>               <C>               <C>         
Revenues                                       $  3,619,364      $ 12,558,434      $ 11,682,154      $ 16,517,858      $ 27,611,456
                                               ------------      ------------      ------------      ------------      ------------

Costs and Expenses:

  Costs of products sold                            476,000         1,762,688           754,700         6,944,268        14,923,968
  Engineering and product
    development                                   5,898,673         4,695,370         5,647,562         5,123,439         6,155,421
  Marketing                                       1,567,813         1,268,311         1,147,926         1,225,756         1,727,301
  General and administrative                      1,335,513         1,459,911         1,535,289         1,603,729         2,050,075
  Nonrecurring charge                                  --                --           1,948,878              --                --
                                               ------------      ------------      ------------      ------------      ------------
    Total costs and expense                       9,277,999         9,186,280        11,034,355        14,897,192        24,856,765
                                               ------------      ------------      ------------      ------------      ------------

Other Income (Expense):
  Dividend and interest income                      627,342           359,361           412,025           407,977           327,213
  Interest expense                                     --                --                --                --                --
  Other                                             880,988            34,844              --                 166            (2,276)
                                               ------------      ------------      ------------      ------------      ------------
    Other income (expense)                        1,508,330           394,205           412,025           408,143           324,937
                                               ------------      ------------      ------------      ------------      ------------

Income (Loss)Before Income Taxes                 (4,150,305)        3,766,359         1,059,824         2,028,809         3,079,628
Provision for Income Taxes                             --            (160,000)         (100,000)         (186,600)         (220,000)
                                               ------------      ------------      ------------      ------------      ------------
Net Income (Loss)                              $ (4,150,305)     $  3,606,359      $    959,824      $  1,842,209      $  2,859,628
                                               ============      ============      ============      ============      ============

Net Income (Loss) per Common
  and Common Equivalent Share                  $       (.33)     $        .25      $        .07      $        .12      $        .18
                                               ============      ============      ============      ============      ============


Weighted Average Number of Common
  and Common Equivalent Shares                   12,716,892        14,216,666        14,222,574        14,865,344        15,855,076
                                               ============      ============      ============      ============      ============
</TABLE>


                                      -27-
<PAGE>

Balance Sheet Data:
<TABLE>
<CAPTION>
                                                   DEC 31            DEC 31            DEC 31            DEC 31            DEC 30
                                                    1991              1992              1993              1994              1995
                                               ------------      ------------      ------------      ------------      ------------

<S>                                            <C>               <C>               <C>               <C>               <C>         
Working Capital                                $  3,985,407      $  7,647,449      $  9,916,103      $  7,675,713      $ 16,836,997
Total Assets                                      9,738,124        13,230,844        13,802,718        18,324,030        26,668,618
Short-Term Debt                                        --                --                --                --                --
Long-Term Debt                                         --                --                --                --                --
Stockholders' Equity                              6,453,882        10,627,896        12,145,410        16,472,920        22,726,436
Cash Dividends                                         --                --                --                --                --
</TABLE>



                                      -28-
<PAGE>



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

Results of Operations

     The Company was organized as a Delaware corporation on September 3, 1987
and was a development stage company through 1991. In September 1991,
Heidelberger Druckmaschinen A.G. ("Heidelberg"), the world's largest printing
press manufacturer introduced the Company's initial spark discharge based
imaging technology, in a jointly developed product, the Heidelberg GTO-DI. In
1993, after investing substantial effort and resources, the Company completed
the development of PEARL, a patented, proprietary, nonphotographic, toxic-free,
digital imaging and printing plate technology for the printing and graphic arts
industries. PEARL's laser diode technology is capable of imaging various types
of Presstek printing plates either off-press or on-press which may then be used
to produce high-quality, full-color lithographic printed materials at what the
Company believes is a lower cost than competitive processes. PEARL has
completely replaced the Company's spark discharge technology. The GTO-DI was
re-introduced in September 1993, utilizing PEARL as its Direct Imaging
technology and the Company is now building an installed base of customers which
utilizes its proprietary consumable printing plates on PEARL equipped Heidelberg
presses. The Company's relationship with Heidelberg has been expanded to include
the development and manufacture of Direct Imaging Kits to be utilized in
Heidelberg's new four color, fully automated lithographic press, the Quickmaster
DI 46-4. This press was introduced in May of 1995 at DRUPA '95, the industry's
largest trade show, and was well received. Shipments of production kits to
Heidelberg for use in the Quickmaster commenced in the second quarter of 1995.
This new press incorporates certain improvements to the Company's PEARL Direct
Imaging technologies and employs the Company's recently developed automatic
plate changing cylinder which eliminates the need for manually changing plates
between jobs. The Company is also engaged in the development of additional
products and applications that incorporate the use of its proprietary
technologies and consumables, including both computer-to-plate and
computer-to-press applications. Some of these additional activities have
resulted in an agreement with the Adast Adamov Company, another manufacturer of
sheet fed offset presses. This new agreement will result in the availability of
the Company's PEARL Direct Imaging Technology on a larger format Omni-Adast (19"
x 26") multicolor press, the first showing of which will occur at an industry
trade show to be held on March 28, 1996.

     On June 19, 1995, the Company's Board of Directors determined to change its
fiscal year from a calendar year ending December 31 to a fiscal year ending on
the Saturday closest to


                                      -29-
<PAGE>

December 31; accordingly, the 1995 fiscal year ended on December 30. Fiscal
1993, 1994, and 1995 each reflect 52 week periods.

     On August 2, 1994, the Company's Board of Directors authorized a
five-for-four stock split, effected in the form of a 25% stock dividend, during
the third quarter of 1994. The split resulted in the issuance of 1,410,235 new
shares of common stock.

     On April 19, 1995, the Company's Board of Directors authorized a
two-for-one stock split, effected in the form of a 100% stock dividend, during
the second quarter of 1995. The split resulted in the issuance of 7,275,972 new
shares of common stock.

Revenues


     Revenues for the years ended December 30, 1995, and December 31, 1994 and
1993 of approximately $27,611,000, $16,518,000 and $11,682,000, respectively,
consisted primarily of product sales, royalties, fees and other reimbursements
earned under the Company's agreements with Heidelberg. Revenues increased
$11,093,000 (67%) comparing 1995 with 1994. Product sales increased $10,567,000
over 1994, principally as a result of increased sales volume of the Company's
PEARL on-press direct imaging technology, used in Heidelberg's GTO-DI and
Quickmaster DI 46-4, and consumable printing plates. Revenues from royalty and
fees for the year ended December 30, 1995 increased $527,000 compared to 1994 as
a result of an increase of $3,595,000 in royalties earned on product sales and a
decrease of $3,068,000 in engineering fees and other revenues which are based
primarily on amounts annually agreed upon between the Company and Heidelberg.
Revenues from royalties and fees for the year ended December 31, 1994 decreased
$3,499,000 compared to 1993, as a result of modifications to the Company's
agreements with Heidelberg and in part because the majority of the early
shipments of PEARL systems were to retrofit existing spark discharge technology
GTO-DI machines which did not result in additional royalties to the Company. At
this time, the Company relies on Heidelberg to generate substantially all of its
revenues.


Costs of Products Sold

     Costs of products sold for the years ended December 30, 1995, December 31,
1994 and 1993 of approximately $14,924,000, $6,944,000, $755,000, respectively,
consisted of the material, labor, and overhead costs associated with product
sales, as well as anticipated future warranty costs.

Engineering and Product Development

     Engineering and product development expenses were $6,155,000 for the year
ended December 30, 1995, as compared to


                                      -30-
<PAGE>

$5,123,000 for the year ended December 31, 1994. The increase in such expenses
of $1,032,000 (20%) resulted principally from increased expenditures for parts,
supplies and labor related to the Company's PEARL technology as well as other
product development efforts and matters relating to the Company's technologies.

     Engineering and product development expenses totaled $5,123,000 for the
year ended December 31, 1994, compared to $5,648,000 for 1993. This decrease in
such expenses of $525,000 (9%) resulted principally from the reassignment of
personnel from engineering and development functions to manufacturing functions
in response to the commencement of shipments of the PEARL laser imaging systems.

Marketing

     Marketing expenses were $1,727,000 for the year ended December 30, 1995, as
compared to $1,226,000 for the year ended December 31, 1994, an increase of
$501,000 (41%). The increase related principally to increased expenditures for
additional personnel and related costs as well as various promotional activities
which included one time DRUPA '95 trade show expenses incurred principally
during the second quarter of 1995.

     Marketing expenses of $1,226,000 for 1994 increased by 7% when compared
with 1993 primarily due to increased travel and related expenses of marketing
personnel.

General and Administrative

     For the year ended December 30, 1995, general and administrative expenses
were $2,050,000, an increase of 28% over 1994. For the year ended December 31,
1994, general and administrative expenses increased by 5% over 1993 to
$1,604,000. The increased expenses in 1995 and 1994 related principally to
increased expenditures for salaries and other costs required to conduct various
general and administrative functions for the Company.

Nonrecurring Charge

     The 1993 results include a $1,949,000 nonrecurring charge associated with
the Company's fundamental change from spark discharge technology to its newly
developed PEARL technology. The termination of shipments of units incorporating
the spark discharge technology dictated that certain assets associated with the
earlier imaging process be written off, and that reserves be established for the
transition to PEARL technology. The individual elements making up the charge
consisted of write offs of property and equipment, inventory, and


                                      -31-
<PAGE>

patent application costs of $613,000, $546,000, and $294,000, respectively, and
a reserve of $496,000 for certain estimated costs required to retrofit existing
customer equipment. The reserve was fully utilized as of December 30, 1995.

Net Income

     As a result of the foregoing, the Company had net income of $2,860,000 for
the year ended December 30, 1995 compared to net income of $1,842,000 and
$960,000 for the years ended December 31, 1994 and 1993, respectively.

Liquidity and Capital Resources

     At December 30, 1995, the Company had working capital of $16,837,000, an
increase of $9,161,000 as compared to working capital of $7,676,000 at December
31, 1994. This increase was primarily attributable to net income from operations
of $2,860,000; noncash items of depreciation and amortization of $998,000, and
the state tax benefit of disposition of stock options of $176,000; sales,
maturities and reclassifications of noncurrent marketable securities of
$5,004,000 and proceeds from issuances of common stock and sales of equipment of
$3,022,000 and $76,000, respectively, offset by additions to property and
equipment and other assets of $2,387,000 and $561,000, respectively. In February
1996 the Company raised $20,200,000 through the sale of approximately 283,000
shares of common stock, of which approximately $8,200,000 was used to acquire
the Catalina Shares, $200,000 was used to pay for the non-compete and
confidentiality covenants of two of Catalina's selling stockholders.

     Net cash used for operating activities of $234,000 for the year ended
December 30, 1995, resulted principally from increases in accounts receivable
and inventory of $3,759,000 and $3,165,000, respectively, offset by net income
from operations of $2,860,000 plus noncash items of depreciation and
amortization, the provision for warranty costs and the tax benefit of
disposition of stock options of $998,000, $916,000, and $176,000, respectively,
a decrease in other current assets of $407,000 and increases in accounts payable
and accrued expenses totaling $1,333,000.

     Net cash used for investing activities of $693,000 for the year ended
December 30, 1995, resulted principally from the additions to property and
equipment used in the Company's business of $2,387,000 and increases in other
assets of $561,000, offset by proceeds from the sales and maturities of
marketable securities of $2,180,000 and the proceeds from the sale of equipment
of $76,000.


                                      -32-
<PAGE>

     Net cash provided by financing activities during the year ended December
30, 1995, consisted of $3,022,000 received from the sale of common stock
incident to the exercise of various stock options and warrants.

     The Company's agreements with Heidelberg provide that during 1996 the
Company will receive certain royalty payments and be reimbursed for certain
engineering and development work provided to Heidelberg.

     The Company estimates that existing funds and the funds generated under its
agreements with Heidelberg will be sufficient to satisfy its anticipated cash
requirements for the foreseeable future.

Effect of Inflation

     Inflation has not had, and is not expected to have, a material impact upon
the Company's operations.

Recently Issued Accounting Standards

     The Financial Accounting Standards Accounting Board ("FASB") has issued
Statement of Financial Accounting Standards No. 121: "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of" ("SFAS 121") which is
effective for fiscal years beginning after December 15, 1995. No write down of
assets have been necessary through the fiscal year ended December 30, 1995 as a
result of the Company's adoption of SFAS 121. See Note 2 of Notes to the
Financial Statements.


     The FASB has also issued Financial Accounting Standards No. 123 (""SFAS
123"): "Accounting for Stock-Based Compensation" which is effective for
transactions entered into in fiscal years beginning after December 15, 1995. The
Company currently does not intend to adopt the fair value method of accounting
for stock options granted to employees as permitted by SFAS 123. Accordingly,
the adoption of SFAS 123 will have no effect on the Company's Balance Sheet,
Statement of Operations and Statement of Cash Flow. The required pro forma
disclosure will be provided when required by the statement.


Net Operating Loss Carryforwards

     As of December 30, 1995, the Company had net operating loss carryforwards
totaling approximately $16,500,000 resulting from compensation deductions
relative to stock option plans. To the extent net operating losses resulting
from stock option plan compensation deductions become realizable, the benefit
will be credited directly to additional paid in capital. The amount of the net
operating loss carryforwards which may be utilized in any future period may be
subject to certain limitations, based upon changes in the ownership of the
Company's common stock.


                                      -33-
<PAGE>

Item 8.  Financial Statements and Supplementary Data.

SELECTED QUARTERLY FINANCIAL DATA (unaudited)
(in thousands except share and per share data)

QUARTER ENDED
1994                            MARCH 31      JUNE 30     SEPT. 30   DECEMBER 31
                               ----------   ----------   ----------  -----------

Total revenues                 $    3,007   $    3,887   $    4,440   $    5,184
Total costs & expenses              2,784        3,707        3,976        4,430
Net income                            320          265          511          746
Net income per share           $     0.02   $     0.02   $     0.03   $     0.05
Weighted average number of
common and common equivalent
shares                         14,670,986   14,370,622   15,217,694   15,377,404

QUARTER ENDED
1995                            MARCH 31       JULY 1     SEPT. 30   DECEMBER 30
                               ----------   ----------   ----------  -----------

Total revenues                 $    5,084   $    5,503   $    7,629   $    9,395
Total costs & expenses              4,972        5,435        6,740        7,709
Net income                            160          177          872        1,650
Net income per share           $      .01   $      .01   $      .05   $      .10
Weighted average number of
common and common equivalent
shares                         15,532,688   15,933,563   16,066,947   16,121,561


      The per share data has been restated retroactively to reflect
      five-for-four and two-for-one stock splits effected in the form of stock
      dividends.

     The audited financial statements appear in a separate section of this
report following Part IV.

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

     As previously reported by the Company on Forms 8-K, in January 1996 the
Company engaged BDO Seidman LLP as its principal independent accountants to
audit and report on the financial statements of the Company for the fiscal year
ended December 30, 1995, replacing Deloitte & Touche LLP, the Company's former
independent accountants whose services were terminated on December 28, 1995.


                                      -34-
<PAGE>

                                   PART III

Item 10. Directors and Executive Officers of the Registrant.

     The current directors and executive officers of the Company and their ages
and positions are as follows:

            Name                    Age               Position
            ----                    ---               --------

Robert Howard                       72          Chairman of the Board 
                                                and Director

Dr. Lawrence Howard                 43          Director

Richard A. Williams                 61          Chief Executive Officer,
                                                Secretary, Vice Chairman of 
                                                the Board and Director

Robert E. Verrando                  62          President, Chief
                                                Operating Officer and
                                                Director

Frank G. Pensavecchia               61          Senior Vice President -
                                                Engineering

Glenn J. DiBenedetto                46          Chief Financial Officer

Harold N. Sparks(1)                 74          Director

Bert DePamphilis(1)                 63          Director

John W. Dreyer                      58          Director

----------
(1)   Member of the Company's Audit Committee and 1991 and 1994
      Stock Option Plan Committees.



     Robert Howard, a founder of the Company, has been Chairman since June 1988
and a director since September 1987. Mr. Howard served as President and
Treasurer of the Company from October 1987 until June 1988. Mr. Howard was the
founder of Howtek, Inc. ("Howtek"), a publicly-held company engaged in the
manufacture of electronic prepress equipment, and has served as Chairman of the
Board of Howtek since August 1984. Mr Howard served as the President of Howtek
from August 1984 through November 1987 and as its Chief Executive Officer from
August 1984 to December 1993. Mr. Howard, the inventor of the first impact dot
matrix printer, was the founder of Centronics Data Computer Corporation
("Centronics"), a manufacturer of printers. From 1969 to April 1980, he served
as President and Chairman of the Board of Directors of Centronics, and he
resigned from Centronics' Board of Directors in 1983. From April 1980 until
1983, Mr. Howard was principally engaged in the management of his personal
investments. Mr. Howard devotes only a limited portion of his



                                      -35-
<PAGE>

business time to consulting with management concerning the Company's affairs. In
February 1994, Mr. Howard entered into a settlement agreement in the form of a
consent decree with the Securities and Exchange Commission (the "Commission") in
connection with the Commission's investigation covering trading in the common
stock of Howtek by an acquaintance of Mr. Howard and a business associate of
such acquaintance. Mr. Howard, without admitting or denying the Commission's
allegations of securities laws violations, agreed to pay a fine and to the entry
of a permanent injunction against future violations of Section 10(b) and Rule
10b-5 of the Securities Exchange Act of 1934.

     Dr. Lawrence Howard, a founder of the Company, has been a director of the
Company since November 1987 and served as Vice Chairman of the Company from
November 1992 to February 1996. He served as Chief Executive Officer and
Treasurer of the Company from June 1988 to June 1993; served as President from
June 1988 to November 1992; and was Vice President from October 1987 to June
1988. From July 1995 to the present Dr. Howard has been President of Howard
Capital Partners, Inc., an investment and merchant banking firm. From July 1994
to July 1995 Dr. Howard was Senior Managing Director of Whale Securities Co.
L.P., an NASD registered broker-dealer. From October 1992 through June 1994 Dr.
Howard was President and Chief Executive Officer of LH Resources, Inc., a
management and financial consulting firm. From July 1986 until June 1988, Dr.
Howard was primarily engaged in the management of his personal investments. Dr.
Howard was the Assistant Medical Director of the Pride of Judea mental health
clinic in New York City from July 1985 to July 1986. Dr. Howard is a director of
Resurgence Properties, Inc., a public company engaged in investments in and
management of real estate and Cellular Technical Services Company, Inc. a public
company engaged in the design, development marketing, installation and support
of integrated billing and data processing for the cellular telephone industry.
Dr. Howard is the son of Robert Howard.

     Richard A. Williams has been Chief Executive Officer and Vice Chairman of
the Board of the Company since February 1996. He has been Secretary of the
Company since June 1988 and a director of the Company since November 1987. From
June 1988 to February 1996 Mr. Williams served as Executive Vice President and
Chief Operating Officer of the Company. From November 1987 to June 1988, Mr.
Williams served as Vice President of the Company. From June 1985 to February
1987, Mr. Williams served as Vice President of Engineering for Centronics, where
he was responsible for line matrix, and laser printer development and
introduction.


                                      -36-
<PAGE>

     Robert E. Verrando has been President and Chief Operating Officer of the
Company since February 1996 and a director of the Company since November 1994.
From October 1994 to February 1996 he served as Executive Vice President of the
Company. From July 1993 to October 1994 Mr. Verrando was employed as a
consultant to the graphic arts industry. From October 1986 through July 1993 he
was employed in a variety of executive positions with Compugraphic
Corporation/Agfa Compugraphic/Agfa Division, Miles, Inc; most recently as Vice
President, General Manager Business Imaging Systems Group. From April 1981
through September 1986 he was employed as Vice President-Business Development of
A.B. Dick Company.

     Frank G. Pensavecchia has served as Senior Vice President Engineering since
October 1991 and was the Company's Vice President - Engineering from August 1988
to October 1991. From September 1987 to August 1988, he served as the Company's
Director of Engineering. From October 1983 to September 1987, Mr. Pensavecchia
served as Director of Laser Printer Engineering for Centronics.

     Glenn J. DiBenedetto has served as Chief Financial Officer since November
1990. Mr. DiBenedetto has been a principal with the firm of DiBenedetto &
Company, P.A., certified public accountants, since July 1989. From 1984 to July
1989, Mr. DiBenedetto was a principal with the firm of Newton & DiBenedetto,
P.A., certified public accountants. Under his arrangement with the Company, Mr.
DiBenedetto engages in other activities and is not required to devote his full
business time to the affairs of the Company.

     Harold N. Sparks has been a director since February 1989. From 1971 to
September 1995, Mr. Sparks was the President and Chief Executive Officer of
Fashion Neckwear Co., Inc., a manufacturer of men's neckties. Mr. Sparks has
served as a consultant to Fashion Neckwear Co., Inc. since September 1995.

     Bert DePamphilis has been a director since June 1990. Mr. DePamphilis has
been an independent consultant to the graphic arts industry since May 1995. From
September 1994 through April 1995 he was a consultant to Applied Graphics
Technology ("AGT"), the world's largest prepress service. Mr. DePamphilis was
the founder, and from 1976 through August 1994, a principal of PDR Royal, Inc.,
a color prepress service for advertising agencies


                                      -37-
<PAGE>

and Fortune 100 companies that ceased independent operations when it became a
division of AGT in September 1994.

     John Dreyer has been a director since February 1996. Mr. Dreyer has been
employed by Pitman Corporation ("Pitman"), the largest graphic arts and image
supplier in the United States, since 1965. He has served as Pitman's President
since 1977 and has also served as its Chief Executive Officer since 1978.

     Directors are elected annually by the stockholders. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board.

Item 11. Executive Compensation.

     The following table discloses the compensation for the person who served as
the Company's principal executive officer during the fiscal year ended December
30, 1995 and for the only other executive officers of the Company whose salaries
exceeded $100,000 for the Company's fiscal year ended December 30, 1995. The
number of securities underlying options has been adjusted to give retroactive
effect to the Company's five-for-four common stock split in the form of a 25%
stock dividend effected in September 1994 and a two-for-one split in the form of
a 100% split dividend effected in May 1995.

                                Summary Compensation Table

                                                              Long-Term
                                              Annual         Compensation
                                           Compensation        Awards
                                                             Securities
Name and Principal                            Salary         Underlying
     Position                    Year           ($)          Options (#)
------------------               ----         ------         -----------
                                                           
                                                           
Richard A. Williams              1995         134,000             --
Chief Executive Officer          1994         125,000          40,000
                                 1993         115,000          50,000
                                                           
                                                           
Robert E. Verrando               1995         179,000             --
President and                    1994          28,000         100,000
Chief Operating Officer                                    
                                                           
Frank G. Pensavecchia            1995         114,000             --
Senior Vice President-           1994         105,000          40,000
Engineering                      1993          95,000          37,500
                                                     

     No stock options were granted during fiscal 1995 to any of the named
executive officers indicated in the Summary Compensation Table.


                                      -38-
<PAGE>

     The following table sets forth information concerning the value of
unexercised stock options held by the named executive officers as of December
30, 1995 and the options exercised during the fiscal year ended December 30,
1995.

<TABLE>
<CAPTION>
                  Aggregated Option Exercises for Fiscal Year-Ended December 30, 1995
                                   and Fiscal Year-End Option Values


                                                        Number of Securities Underlying       Value of Unexercised
                                                             Unexercised Options              In-the-Money Options
                                                             at December 30, 1995            at December 30, 1995*
                                                             --------------------            ---------------------
                            Shares Acquired    Value
Name                          on Exercise    Realized+    Exercisable      Unexercisable    Exercisable    Unexercisable
----                          -----------    ---------    -----------      -------------    -----------    -------------
<S>                             <C>          <C>            <C>                 <C>         <C>              <C>        
Richard A. Williams             62,500       $2,331,063     146,250             18,750      $12,585,187       $1,480,313
Robert E. Verrando                   -                -      20,000             80,000       $1,500,000       $6,000,000
Frank G. Pensavecchia           15,000         $747,500      88,750             18,750      $ 8,897,062       $1,480,313
                                       
------------
<FN>
+ Value realized  represents  the positive  spread between the exercise price of
such options and the market value of the Common Stock on date of exercise.

* Year-end values for unexercised  in-the-money  options  represent the positive
spread between the exercise price of such options and the year-end  market value
of the Common Stock which was $94.50 on December 29, 1995.
</FN>
</TABLE>


Compensation of Directors

      Directors received no cash compensation for serving on the Board during
the year ended December 30, 1995. However, during such year, the Company paid
Mr. Robert Howard, the Chairman of the Board, $110,000 for consulting services
rendered to the Company.

      Effective December 1993 the Company adopted its Non-Employee Director
Stock Option Plan (the "Director Plan"). Only non-employee directors of the
Company (other than Robert Howard or Dr. Lawrence Howard) are eligible to
receive grants under the Director Plan. The Director Plan provides that eligible
directors automatically receive a grant of options to purchase 5,000 shares of
Common Stock at fair market value upon first becoming a director and,
thereafter, an annual grant, in January of each year, of 2,500 options at fair
market value.

      Under each of the Company's 1988 Stock Option Plan ("1988 Plan"), 1991
Stock Option ("1991 Plan") and 1994 Stock Option Plan ("1994 Plan"), directors
who are not employees of the Company (other than directors who are members of
the Stock Option Committee of the particular plan) are eligible to be granted
nonqualified options under such plan. The Board of Directors or the Stock Option
Committee (the "Committee") of each plan, as the case may be, has discretion to
determine the number of shares subject to each nonqualified option (subject to
the number of shares available for grant under the particular plan), the
exercise price thereof (provided such price is not less than the par value of
the underlying shares of Common Stock), the term thereof (but not in excess of
10 years from the date of grant,


                                      -39-
<PAGE>

subject to earlier termination in certain circumstances), and the manner in
which the option becomes exercisable (amounts, intervals and other conditions).
Directors who are employees of the Company (but not members of the Committee of
the particular plan) are eligible to be granted incentive stock options or
nonqualified options under such plans. The Board or Committee of each plan, as
the case may be, also has discretion to determine the number of shares subject
to each incentive stock option ("ISO"), the exercise price and other terms and
conditions thereof, but their discretion as to the exercise price, the term of
each ISO and the number of ISOs that may vest may be in any year is limited by
the Internal Revenue Code of 1986, as amended. As of February 29, 1996, there
were 4,382 shares of Common Stock available for grant under the 1988 Plan, 6,016
shares of Common Stock available for grant under the 1991 Plan, 438,126 shares
available for grant under the 1994 Plan and 92,500 shares of Common Stock
available for grant under the Director Plan.

Employment Arrangements

     The Company has an employment agreement dated August 23, 1988 with Mr.
Richard A. Williams, which provides for an annual salary which is subject to
periodic review by the Company's Board of Directors. The employment agreement
expires on March 31, 1997 and contains certain non-disclosure provisions. In
February 1996, the Board increased Mr. Williams' annual salary to $155,000.

Compensation Committee Interlocks and Insider Participation in
Compensation Decisions

     The Company does not have a Compensation Committee of its Board of
Directors. Decisions as to compensation are made by the Company's Board of
Directors. Mr. Richard A. Williams, and Mr. Robert E. Verrando, in their
capacity as a director, participated in the Board's deliberations concerning
compensation of executive officers for the Company's fiscal year ended December
30, 1995. During the fiscal year ended December 30, 1995, none of the executive
officers of the Company has served on the board of directors or the compensation
committee of any other entity, any of whose officers has served on the Board of
Directors of the Company.

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

     The following table sets forth information at February 29, 1996, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each of the persons named in response to Item
11 (Executive Compensation) that are currently employed by the


                                      -40-
<PAGE>

Company, and (iv) all executive officers and directors of the Company as a
group.

                                 Amount and Nature            Percentage
     Name of                       of Beneficial            of Outstanding
Beneficial Owner (1)               Ownership (2)             Shares Owned
--------------------             -----------------          -------------

Robert Howard (3)                     1,469,224                     9.5
Dr. Lawrence Howard (4)               1,397,736                     9.2
Richard A. Williams (5)                 321,250                     2.1
Robert E. Verrando (6)                   20,000                     (7)
Harold N. Sparks (8)                     48,500                     (7)
Bert DePamphilis (9)                     15,550                     (7)
Frank Pensavecchia (10)                  88,750                     (7)
John W. Dreyer                             --                       --
John T. Oxley (11)                    1,070,000                     7.1

All executive officers
and directors as a
group (nine persons) (12)             3,371,010                    21.2

----------

(1)  The address of Dr. Lawrence Howard is 120 East End Avenue, New York, New
     York 10028. The address of Robert Howard is 303 East 57th Street, New York,
     New York 10022.

(2)  The Company believes that except as set forth herein, all persons referred
     to in the table have sole voting and investment power with respect to all
     shares of Common Stock reflected as beneficially owned by them.

(3)  Includes options to purchase 352,500 shares of Common Stock held by Mr.
     Howard which are currently exercisable. Also includes 12,000 shares owned
     by Mr. Howard's wife. Does not include shares owned by the son of Mr.
     Howard's wife, with respect to which Mr. Howard disclaims any beneficial
     interest.

(4)  Includes options to purchase 175,000 shares of Common Stock held by Dr.
     Howard which are currently exercisable. Also includes 17,500 shares owned
     by Dr. Howard's wife, 26,892 shares owned by Dr. Howard's wife as custodian
     for Dr. Howard's children and 22,500 shares owned by Dr. Howard as
     custodian for his children.


(5)  Includes options to purchase 146,250 shares of Common Stock held by Mr.
     Williams which are currently exercisable.


(6)  Represents options held by Mr. Verrando which are currently exercisable.

(7)  Less than 1%.


                                      -41-
<PAGE>

(8)  Includes options to purchase 11,250 shares of Common Stock held by Mr.
     Sparks which are currently exercisable.

(9)  Includes options to purchase 11,250 shares of Common Stock held by Mr.
     DePamphilis which are currently exercisable.


(10) Represents shares issuable upon exercise of options held by Mr.
     Pensavecchia which are currently exercisable.

(11) The address of Mr. Oxley is One West 3rd Street, William Center Tower,
     Suite 1305, Tulsa, Oklahoma 74103. Includes 181,000 shares of Common Stock
     owned by the Oxley Foundation for which Mr. Oxley is Co-Trustee. The
     information with respect to Mr. Oxley's share ownership were based upon
     information contained in Amendment No. 3 to Mr. Oxley's Schedule 13D.

(12) Includes options to purchase 352,500, 175,000, 146,250, 20,000, 88,750,
     11,250, 11,250, and 10,000 shares held by Robert Howard, Dr. Lawrence
     Howard, Richard A. Williams, Robert E. Verrando, Frank Pensavecchia, Bert
     DePamphilis, Harold Sparks and Glenn J. DiBenedetto, respectively, which
     are currently exercisable. Does not include options to purchase 18,750,
     80,000, 18,750, 2,500, 2,500 and 10,000 shares of Common Stock held by
     Richard Williams, Robert E. Verrando, Frank Pensavecchia, Harold Sparks,
     Bert Depamphilis and John W. Dreyer, respectively, none of which are
     exercisable within 60 days from the date hereof.


     Dr. Lawrence Howard and Robert Howard may be deemed "parents" and
"promoters" of the Company, as such terms are defined under the federal
securities laws.

Item 13. Certain Relationships and Related Transactions.

     The Company paid Mr. Howard $110,000 during 1995 for consulting services
rendered to the Company.


                                      -42-
<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
         Form 8-K.

(a)(1)      Financial Statements

                                                                        Page

            Report of Independent Certified Public

            Accountants                                                 F-2

            Independent Auditors' Report                                F-3

            Balance Sheets as of December 31, 1994 and                  F-4
            December 30, 1995

            Statements of Operations for the Years Ended
            December 31, 1993 and 1994 and December 30, 1995            F-5

            Statement of Changes in Stockholders' Equity
            for the three years ended December 30, 1995                 F-6-7

            Statements of Cash Flows for the Years Ended
            December 31, 1993 and 1994 and December 30, 1995            F-8

            Notes to Financial Statements                               F-9

(a)(2)      Financial Statement Schedules

            Schedule II-Valuation and Qualifying Accounts and
            Reserves.

            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
------            -----------

2(a)              Stock Purchase Agreement dated and effective as of
                  January 1, 1996, among the Company and David G.
                  Shaw, Marc G. Langlois and David G. Shaw and Lynn
                  R. Shaw, as Trustees of the David and Lynn Shaw
                  Charitable Remainder Unitrust, dated February 12,
                  1996 and John E. Madocks and Catalina.  **

2(b)              Put and Call Option Agreement by and among the
                  Company, David G. Shaw, Marc G. Langlois and John
                  E. Madocks.  **


                                      -43-
<PAGE>

2(c)              Confidentiality and Non-Competition Agreement by
                  and among the Company, David G. Shaw and Catalina.
                  **

2(d)              Confidentiality and Non-Competition Agreement by
                  and among the Company, Marc G. Langlois and
                  Catalina.  **

2(e)              Confidentiality and Non-Competition Agreement by
                  and among the Company, John E. Madocks and
                  Catalina.  **

2(f)              Special Option Agreement, among the Company,
                  Catalina, David G. Shaw, Marc G. Langlois and John
                  E. Madocks.  **

3(a)(1)           Amended and Restated Certificate of Incorporation of the
                  Company, incorporated by reference to Exhibit 3(a)(1) of
                  Registration Statement 33-27112, effective March 28, 1989.

3(a)(2)           Certificate of Amendment to the Amended and Restated
                  Certificate of Incorporation of the Company, incorporated by
                  reference to Exhibit 3(a)(2) of Registration Statement
                  33-27112, effective March 28, 1989.

3(a)(3)           Certificate of Amendment to the Amended and
                  Restated Certificate of Incorporation of the
                  Company filed June 3, 1994.+


3(b)              By-laws of the Company.***


10(a)             Employment Agreement dated August 23, 1988, by and
                  between the Company and Richard Williams, incorpo-
                  rated by reference to Exhibit 10(b) of Registra-
                  tion Statement 33-27112, effective March 28, 1989.

10(b)             1988 Stock Option Plan, incorporated by reference
                  to Exhibit 10(c) of Registration Statement 33-
                  27112, effective March 28, 1989.

10(c)             1988 Restricted Stock Purchase Plan, incorporated
                  by reference to Exhibit 10(d) of Registration
                  Statement 33-27112, effective March 28, 1989.

10(d)             Confidentiality Agreement between the Company and
                  Heidelberger Druckmaschinen A.G., effective
                  December 7, 1989 as amended, incorporated by
                  reference to Exhibit 10(i) of the Company's Annual
                  Report on Form 10-K for the year ended December
                  31, 1989.

10(e)             Development and Supply Agreement dated July 23,
                  1991, by and between the Company and Inx


                                      -44-
<PAGE>

                  Incorporated, incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the Quarter Ended June 30,
                  1991.

10(f)             Master Agreement effective January 1, 1991 by and
                  between Heidelberger Druckmaschinen
                  Aktiengesellschaft and the Company, incorporated
                  by reference to the Company's Form 8-K, dated
                  January 1, 1991.

10(g)             Technology License effective January 1, 1991 by
                  and between Heidelberger Druckmaschinen
                  Aktiengesellschaft and the Company, incorporated
                  by reference to the Company's Form 8-K, dated
                  January 1, 1991.

10(h)             Supply Agreement effective January 1, 1991 by and
                  between Heidelberger Druckmaschinen
                  Aktiengesellschaft and the Company, incorporated
                  by reference to the Company's Form 8-K, dated
                  January 1, 1991.

10(i)             Memorandum of Performance No. 3 dated April 27,
                  1993 to the Master Agreement, Technology License,
                  and Supply Agreement between the Company and
                  Heidelberger Druckmaschinen Aktiengesellschaft,
                  incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the Quarter
                  Ended June 30, 1993.

10(j)             Modification to Memorandum of Performance No. 3
                  dated April 27, 1993 to the Master Agreement,
                  Technology License, and Supply Agreement between
                  the Company and Heidelberger Druckmaschinen
                  Aktiengesellschaft.+



10(k)             Memorandum of Understanding No. 4 dated November
                  9, 1995 to the Master Agreement and Technology
                  License and Supply Agreement between the Company
                  and Heidelberger Druckmaschinen
                  Aktiengesellschaft.****



10(l)             Lease dated as of September 10, 1987, relating to
                  real property located at 8 Commercial Street,
                  Hudson, New Hampshire, incorporated by reference
                  to Exhibit 10(e) of Registration Statement 33-
                  27112, effective March 28, 1989.

10(m)             Amendment to Lease relating to real property
                  located at 8 Commercial Street, Hudson, New
                  Hampshire, incorporated by reference to Exhibit
                  10(k) of the Company's Annual Report on Form 10-K
                  for the year ended December 31, 1989.


                                      -44-
<PAGE>

10(n)             Third Amendment to Lease, dated September 15,
                  1990, relating to real property located at 8
                  Commercial Street, Hudson, New Hampshire,
                  incorporated by reference to Exhibit 10(o) of the
                  Company's Annual Report on Form 10-K for the year
                  ended December 31, 1990.

10(o)             Fourth Amendment to Lease, dated as of March 16,
                  1993, relating to real property located at 8
                  Commercial Street, Hudson, New Hampshire,
                  Incorporated by reference to Exhibit 10(m) of the
                  Company's Annual Report on Form 10-K for the year
                  ended December 31, 1993.

10(p)             Development and Supply Agreement dated November
                  13, 1991 by and between the Company and Gans Ink &
                  Supply Co., Inc.*

10(q)             Amendment to Employment Agreement between the
                  Company and Richard Williams.*

10(r)             1991 Stock Option Plan.*

10(s)             1994 Stock Option Plan.+

10(t)             Non Employee Director Stock Option Plan.+

10(u)             Lease dated as of May 9, 1994, as amended,
                  relating to facilities located at 9 Commercial
                  Street, Hudson, New Hampshire.+

   
23(a)             Consent of BDO Seidman LLP.***

23(b)             Consent of Deloitte & Touche LLP.***
    


27                Financial Data Schedule***


(b)   During the quarter ended December 30, 1995 no reports on Form 8-K were
      filed. However, during January 1996 the Company filed a Form 8-K with
      respect to the termination of its former independent accountants on
      December 28, 1995.

(c)   See Item 14(a)(3) above.

(d)   See Item 14(a)(2) above.

--------------------

*     Incorporated by reference to the Company's Annual report on Form 10-K for
      the year ended December 31, 1991.

**    Incorporated by reference to the exhibit filed with the Company's Form 8-K
      for the event dated February 15, 1996.


***   Previously filed as an exhibit with the Company's Form 10-K for the fiscal
      year ended December 30, 1995.


****  The Company has requested that the SEC grant it confidential treatment 
      with respect to a portion of this exhibit.




                                      -46-
<PAGE>



+    Incorporated by reference to the exhibit filed with the Company's Annual
     report on Form 10-K for the year ended December 31, 1994



                                      -47-
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


                                                                     Page
                                                                     ----

Report of Independent Certified Public Accountants                   F-2

Independent Auditors' Report                                         F-3

Balance Sheets as of December 31, 1994
  and December 30, 1995                                              F-4

Statements of Operations for the Years Ended
  December 31, 1993 and 1994, and December 30, 1995                  F-5

Statements of Changes in Stockholders' Equity
  for the Three Years Ended December 30, 1995                        F-6-7

Statements of Cash Flows for the Years Ended
  December 31, 1993 and 1994, and December 30, 1995                  F-8

Notes to Financial Statements                                        F-9

Financial Statement Schedule:

  Schedule II - Valuation and qualifying accounts
   and reserves                                                      FS-1

                                       F-1

<PAGE>

                              REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors
Presstek, Inc.
Hudson, New Hampshire


We have audited the accompanying balance sheet of Presstek, Inc. as of December
30, 1995 and the related statements of operations, changes in stockholders'
equity, and cash flows for the year then ended. We have also audited the
financial statement schedule listed in the accompanying index. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.


We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and schedule are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and schedule.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and schedule. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Presstek, Inc. at December 30,
1995 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.



/s/ BDO SEIDMAN, LLP
    BDO SEIDMAN, LLP


    New York, New York
    February 16, 1996, 
    except for Note 12(b) 
    for which the date 
    is September 3, 1996


                                       F-2

<PAGE>

INDEPENDENT AUDITORS' REPORT

PRESSTEK, INC.:


We have audited the accompanying balance sheet of Presstek, Inc. as of December
31, 1994, and the related statements of operations, changes in stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit and to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such financial statements present fairly, in all material
respects the financial position of Presstek, Inc. as of December 31, 1994, and
the results of its operations and its cash flows for each of the two years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.

As discussed in Note 3 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities,
effective January 1, 1994, to conform with Statement of Financial Accounting
Standards No. 115.

/s/ DELOITTE & TOUCHE LLP
    DELLOITE & TOUCHE LLP

    Bedford, New Hampshire
    March 15, 1995



                                       F-3

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>
                                 PRESSTEK, INC.

                                 BALANCE SHEETS
<CAPTION>
                                                                           December 31,                 December 30,
                                                                               1994                         1995
                                                                           ------------                 ------------
   ASSETS

<S>                                                                        <C>                         <C>         
CURRENT ASSETS:
   Cash and cash equivalents                                               $  1,532,636                $  3,628,021
   Marketable securities                                                        254,381                   3,050,825
   Accounts receivable                                                        4,187,049                   7,888,559
   Inventory                                                                  2,796,165                   5,861,743
   Other current assets                                                         756,592                     350,031
                                                                             ----------                  ----------
         Total current assets                                                 9,526,823                  20,779,179
                                                                             ----------                  ----------

MARKETABLE SECURITIES - NON CURRENT                                           4,807,821                           -
                                                                             ----------                  ----------

PROPERTY AND EQUIPMENT:
   Machinery and equipment                                                    3,820,160                   5,659,211
   Furniture and fixtures                                                       281,844                     372,889
   Leasehold improvements                                                       956,574                   1,247,803
   Other                                                                         38,184                      34,498
                                                                             ----------                  ----------
         Total                                                                5,096,762                   7,314,401
   Less accumulated depreciation
    and amortization                                                        ( 2,322,770)                ( 3,023,089)
                                                                             ----------                  ----------

         Property and equipment, net                                          2,773,992                   4,291,312
                                                                             ----------                  ----------


OTHER ASSETS:
   Patent application costs, net                                                685,044                   1,012,147
   Software development costs                                                   530,350                     585,980
                                                                             ----------                  ----------
         Total other assets                                                   1,215,394                   1,598,127
                                                                             ----------                  ----------

            TOTAL                                                          $ 18,324,030                $ 26,668,618
                                                                             ==========                  ==========

   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                        $  1,275,492                $  2,392,846
   Accrued expenses                                                             226,834                   1,091,036
   Accrued salaries and employee benefits                                       348,784                     458,300
                                                                             ----------                  ----------
         Total current liabilities                                            1,851,110                   3,942,182
                                                                             ----------                  ----------

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
    25,000,000 shares; issued and outstanding
    7,194,020 shares at December 31, 1994;
    14,765,300 shares at December 30, 1995                                       71,940                     147,653
   Additional paid-in capital                                                18,437,839                  21,559,856
   Unrealized loss on investments
    available for sale                                                      (   199,334)                (     3,176)
   Retained earnings (deficit)                                              ( 1,837,525)                  1,022,103
                                                                             ----------                  ----------

         Stockholders' equity                                                16,472,920                  22,726,436
                                                                             ----------                  ----------

              TOTAL                                                        $ 18,324,030                $ 26,668,618
                                                                             ==========                  ==========
</TABLE>

                        See notes to financial statements

                                       F-4

<PAGE>

<TABLE>
                                                           PRESSTEK, INC.

                                                      STATEMENTS OF OPERATIONS
                                                         For the Years Ended
<CAPTION>
                                                     December 31,            December 31,             December 30,
                                                         1993                    1994                     1995
                                                     ------------            ------------             ------------
     
<S>                                                  <C>                    <C>                       <C>         
REVENUES:
   Product sales                                     $  1,126,818           $   9,462,032             $ 20,028,548
   Royalties and fees from licensees                   10,555,336               7,055,826                7,582,908
                                                       ----------              ----------               ----------
         Total revenues                                11,682,154              16,517,858               27,611,456
                                                       ----------              ----------               ----------

COSTS AND EXPENSES:
   Cost of products sold                                  754,700               6,944,268               14,923,968
   Engineering and product development                  5,647,562               5,123,439                6,155,421
   Marketing                                            1,147,926               1,225,756                1,727,301
   General and administrative                           1,535,289               1,603,729                2,050,075
   Nonrecurring charge                                  1,948,878                       -                        -
                                                       ----------              ----------               ----------
         Total costs and expenses                      11,034,355              14,897,192               24,856,765
                                                       ----------              ----------               ----------

OTHER INCOME (EXPENSE):
   Dividend and interest income                           412,025                 407,977                  327,213
   Other - net                                                  -                     166              (     2,276)
                                                       ----------              ----------               ----------
         Other income - net                               412,025                 408,143                  324,937
                                                       ----------              ----------               ----------

INCOME BEFORE INCOME TAXES                              1,059,824               2,028,809                3,079,628

PROVISION FOR INCOME TAXES                            (   100,000)            (   186,600)             (   220,000)
                                                       ----------              ----------               ----------

NET INCOME                                           $    959,824           $   1,842,209             $  2,859,628
                                                       ==========              ==========               ==========

WEIGHTED AVERAGE NUMBER OF COMMON AND
 COMMON EQUIVALENT SHARES                              14,222,574              14,865,344               15,855,076
                                                       ==========              ==========               ==========

NET INCOME PER COMMON AND
 COMMON EQUIVALENT SHARE                                    $ .07                   $ .12                    $ .18
                                                              ===                     ===                      ===
</TABLE>

                        See notes to financial statements

                                       F-5

<PAGE>

<TABLE>
                                                            PRESSTEK, INC.

                                                      STATEMENTS OF CHANGES IN
                                                 STOCKHOLDERS' EQUITY For the Three
                                                    Years Ended December 30, 1995
<CAPTION>
                                                                      Common Stock           Additional
                                                                      ------------            Paid-in
                                                                  Shares         Amount       Capital
                                                                  ------         ------       -------  
<S>                                                              <C>             <C>       <C>        
BALANCE AT DECEMBER 31, 1992                                     5,260,248       $52,602   $15,214,852
January through December, 1993:
  Issuances of common stock relative to the exercise
  of incentive stock options at $1.50 per share                     91,000           910       135,590
  Issuances of common stock relative to the exercise
  of nonqualified stock options at $5.00 - $14.75
  per share                                                         34,300           343       320,327
November, 1993:
  Issuances of common stock relative to the exercise
  of underwriter's warrants and unit warrants for
  cash at $5.75 and $6.25 per share, respectively                    3,420            35        20,485
Tax benefit of disposition of stock options                                                     80,000
Net income for the year
                                                               -----------    ----------   -----------

BALANCE AT DECEMBER 31, 1993                                     5,388,968        53,890    15,771,254
February through March 1994:
  Issuance of common stock relative to the exercise
  of warrants at $12.50 and $14.25 per share                        50,000           500       668,250
August, 1994:
  Five for four stock split, effected in
  the form of a 25% stock dividend, net of
  fractional shares                                              1,410,235        14,102       (17,782)
January through December, 1994:
  Issuances of common stock relative to the
  exercise of incentive stock options at:
  $1.50 per share                                                   54,361           544       341,126
  $1.20 per share                                                   62,500           625        74,375
  Issuances of common stock relative to the
  exercise of nonqualified stock options at
  $5.00 - $16.75 per share                                          74,856           748       612,963
  Issuances of common stock relative to the
  exercise of underwriters' warrants and unit
  warrants for cash at:
  $5.75 and $6.25 per share, respectively                           95,254           953       570,571
  $4.60 and $5.00 per share, respectively                           57,846           578       277,082
Tax benefit of disposition of stock options                        
Unrealized loss on marketable securities                                                       140,000
Net income for the year
                                                               -----------    ----------   -----------

BALANCE AT DECEMBER 31, 1994                                     7,194,020        71,940    18,437,839
January through December, 1995:
  Issuance of common stock relative to the
  exercise of incentive stock options at
  $10.00 - $15.55 per share                                        112,877         1,129     1,628,242
  Issuance of common stock relative to the
  exercise of non-qualified stock options at
  $4.00 - $19.20 per share                                         159,931         1,599     1,282,760
January through March, 1995:
  Issuance of common stock relative to the exercise 
  of underwriters' warrants
  and unit warrants for cash at $4.60 and $5.00
  per share, respectively                                           22,500           225       107,775
May, 1995:
  Two for One stock split effected in
  the form of a 100% stock dividend                              7,275,972        72,760       (72,760)
Tax benefit of disposition of stock options                                                    176,000
Unrealized gain on investments available for sale
Net income for the year                          
                                                               -----------    ----------   -----------

BALANCE AT DECEMBER 30, 1995                                    14,765,300      $147,653   $21,559,856
                                                               ===========    ==========   ===========

                                                         Unrealized Loss                                        
                                                          On Investments        Retained                            
                                                             Available           Earning          Stockholders'  
                                                             For Sale           (Deficit)            Equity      
                                                             --------           ---------            ------      
<S>                                                          <C>              <C>                 <C>        
BALANCE AT DECEMBER 31, 1992                                 $    --          $(4,639,558)        $10,627,896
January through December, 1993:
  Issuances of common stock relative to the exercise
  of incentive stock options at $1.50 per share                                                       136,500
  Issuances of common stock relative to the exercise
  of nonqualified stock options at $5.00 - $14.75
  per share                                                                                           320,670
November, 1993:          
  Issuances of common stock relative to the exercise
  of underwriter's warrants and unit warrants for
  cash at $5.75 and $6.25 per share, respectively                                                      20,520
Tax benefit of disposition of stock options                                                            80,000
Net income for the year                                                           959,824             959,824
                                                               -----------     ----------         -----------

BALANCE AT DECEMBER 31, 1993                                          --       (3,679,734)         12,145,410
February through March 1994:
  Issuance of common stock relative to the exercise
  of warrants at $12.50 and $14.25 per share                                                          668,750
August, 1994:
  Five for four stock split, effected in
  the form of a 25% stock dividend, net of
  fractional shares                                                                                    (3,680)
January through December, 1994:
  Issuances of common stock relative to the
  exercise of incentive stock options at:
  $1.50 per share                                                                                     341,670
  $1.20 per share                                                                                      75,000
  Issuances of common stock relative to the
  exercise of nonqualified stock options at
  $5.00 - $16.75 per share                                                                            613,711
  Issuances of common stock relative to the
  exercise of underwriters' warrants and unit
  warrants for cash at:
  $5.75 and $6.25 per share, respectively                                                             571,524
  $4.60 and $5.00 per share, respectively                                                             277,660
Tax benefit of disposition of stock options                                                           140,000
Unrealized loss on marketable securities                          (199,334)                          (199,334)
Net income for the year                                                         1,842,209           1,842,209
                                                               -----------     ----------          ----------

BALANCE AT DECEMBER 31, 1994                                     
January through December, 1995:                                   (199,334)    (1,837,525)         16,472,920
  Issuance of common stock relative to the
  exercise of incentive stock options at
  $10.00 - $15.55 per share                                                                         1,629,371
  Issuance of common stock relative to the
  exercise of non-qualified stock options at
  $4.00 - $19.20 per share                                                                          1,284,359
January through March, 1995:
  Issuance of common stock relative to the exercise of 
  underwriters' warrants
  and unit warrants for cash at $4.60 and $5.00
  per share, respectively                                                                             108,000
May, 1995:
  Two for One stock split effected in
  the form of a 100% stock dividend                                 
Tax benefit of disposition of stock options                                                           176,000
Unrealized gain on investments available for sale                   196,158                           196,158
Net income for the year                                                         2,859,628           2,859,628
                                                                -----------    ----------         -----------

BALANCE AT DECEMBER 30, 1995                                       $(3,176)    $1,022,103         $22,726,436
                                                                ===========    ==========         ===========

</TABLE>

                        See notes to financial statements

                                       F-6-7

<PAGE>

<TABLE>
<CAPTION>
                                                           PRESSTEK, INC.

                                                      STATEMENTS OF CASH FLOWS
                                                         For the Years Ended

                                                                              December 31,         December 31,         December 30,
                                                                                  1993                 1994                 1995
                                                                              ------------         ------------         ------------
<S>                                                                           <C>                  <C>                  <C>        
CASH FLOWS - OPERATING ACTIVITIES:
   Net income                                                                 $   959,824          $ 1,842,209          $ 2,859,628
   Adjustments to reconcile net income
    to net cash provided by (used for)
    operating activities:
      Noncash elements of nonrecurring charge                                   1,453,101                 --                   --
      State tax benefit of disposition of
       stock options                                                               80,000              140,000              176,000
      Depreciation                                                                657,475              601,197              819,507
      Amortization                                                                   --                 55,639              178,529
      Provision for warranty and other costs                                       20,000              215,000              916,242
      (Gain) on disposal of equipment                                              (3,617)             (28,388)             (25,748)
      Loss on sale of marketable securities                                          --                   --                 28,024
   (Increase) decrease in:
      Accounts receivable                                                         655,483           (3,384,070)          (3,759,012)
      Inventory                                                                  (821,546)          (1,562,606)          (3,165,578)
      Other current assets                                                       (191,674)            (532,375)             406,561

   Increase (decrease) in:
      Accounts payable and accrued expenses                                       987,149             (126,332)           1,222,816
      Accrued salaries and employee benefits                                       55,672              105,134              109,516
      Accrued state income taxes                                                 (160,000)                --                   --
      Deferred income                                                          (1,811,664)                --                   --
                                                                              -----------          -----------          -----------

            Net cash provided by (used for)
             operating activities                                               1,880,203           (2,674,592)            (233,515)
                                                                              -----------          -----------          -----------

CASH FLOWS - INVESTING ACTIVITIES:
   Purchases of property and equipment                                           (599,898)          (1,746,470)          (2,387,379)
   Proceeds from sale of equipment                                                   --                 31,017               76,300
   Increase in other assets                                                      (210,194)            (674,200)            (561,261)
   Sales and maturities of
    marketable securities                                                         175,000            5,157,394            2,179,510
   Purchases of marketable securities                                          (3,224,743)          (2,095,152)                --
                                                                              -----------          -----------          -----------

            Net cash provided by (used for)
             investing activities                                              (3,859,835)             672,589             (692,830)
                                                                              -----------          -----------          -----------

CASH FLOWS - FINANCING ACTIVITIES:
   Net proceeds from sale of common
    stock and warrants                                                            477,690            2,544,635            3,021,730
                                                                              -----------          -----------          -----------

INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                                                              (1,501,942)             542,632            2,095,385
CASH AND CASH EQUIVALENTS -
 BEGINNING OF PERIOD                                                            2,491,946              990,004            1,532,636
                                                                              -----------          -----------          -----------
CASH AND CASH EQUIVALENTS -
 END OF PERIOD                                                                $   990,004          $ 1,532,636          $ 3,628,021
                                                                              ===========          ===========          ===========

SUPPLEMENTAL DISCLOSURE OF
 CASH FLOW INFORMATION -
      Cash paid during the period for income taxes                            $   160,000                               $    52,000
                                                                              ===========                               ===========
</TABLE>

                        See notes to financial statements

                                       F-8

<PAGE>

                            PRESSTEK, INC.

                     NOTES TO FINANCIAL STATEMENTS


1.    NATURE OF BUSINESS

     Business - Presstek, Inc. ("the Company" or "Presstek") was organized as a
Delaware corporation on September 3, 1987 and was a development stage company
through 1991. In September, 1991, Heidelberger Druckmaschinen A.G.
("Heidelberg") the world's largest printing press manufacturer introduced the
Company's initial spark discharge based imaging technology, in a jointly
developed product, the Heidelberg GTO-DI. In 1993, after investing substantial
effort and resources, the Company completed the development of PEARL(R), a
patented proprietary, nonphotographic, toxic-free, digital imaging and printing
plate technology for the printing and graphic arts industries. PEARL's laser
diode technology is capable of imaging various types of Presstek printing plates
either off-press or on-press which may then be used to produce high quality,
full-color lithographic printed materials. PEARL has completely replaced the
Company's spark discharge technology. The GTO-DI was re-introduced in September
1993, utilizing PEARL as its direct imaging technology. The Company is now
building an installed base of customers which utilizes its proprietary
consumable printing plates on PEARL equipped Heidelberg presses. During the
second quarter of 1995, the Company commenced shipments of kits to be utilized
on Heidelberg's recently introduced Quickmaster DI 46-4. Presstek is also
engaged in the development of additional products and applications that
incorporate its proprietary PEARL technologies and consumables, including both
computer-to-plate and other direct-to-press applications. At this time, the
Company relies on Heidelberg to generate substantially all of its revenues.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Fiscal Year - On January 19, 1995, the Company's Board of Directors
determined to change its fiscal year from a calendar year ending December 31 to
a fiscal year ending on the Saturday closest to December 31; accordingly, the
1995 fiscal year ended December 30. Fiscal 1993, 1994, and 1995 each reflect 52
week periods.


     Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Many of the Company's estimates and assumptions used in the financial statements
relate to the Company's products, which are subject to rapid technological
change. It is reasonably possible that changes may occur in the near term that
would affect management's estimates with respect to the carrying values of
inventories, equipment and software development costs.


     Revenue Recognition - The Company records revenues on product sales and
related royalties at the time of shipment. Certain fees and other reimbursements
are recognized as revenue when the related services have been performed or the
revenue otherwise earned.

   Product Warranties - The Company warrants its products against defects in
material and workmanship for a period of one year.  Anticipated future

                                       F-9

<PAGE>

warranty costs are accrued by a charge to expense as products are shipped and
the related revenue recognized. At December 31, 1994 and December 30, 1995,
accrued expenses included accrued warranty costs of $199,000 and $601,000 and
product replacement reserves of $28,000 and $291,000, respectively.

     Property and Equipment - Property and equipment are stated at cost and are
depreciated using a straight-line method for both financial reporting and for
tax purposes over their estimated useful lives (ranging from 3 to 7 years).
Leasehold improvements are amortized over the life of the lease for financial
reporting purposes and a required longer period for tax purposes.


     Software Development Costs - Software development costs for products and
certain product enhancements are capitalized subsequent to the establishment of
their technological feasibility (as defined in Statement of Financial Accounting
Standards No. 86) based upon the existence of working models of the products
which are ready for initial customer testing. Costs incurred prior to such
technological feasibility or subsequent to a product's general release to
customers are expensed as incurred. Prior to 1994, the Company did not incur
material costs subject to capitalization. During 1994 and 1995, the Company
incurred and capitalized $530,350 and $154,129, respectively, of costs subject
to capitalization. Amortization of these costs commenced in 1995 when the
related product was released to customers. Amortization for 1995 was $98,500,
based upon the ratio that current gross revenues bear to total estimated gross
revenues, which was an amount greater than amortization on a straight-line
method over the estimated economic life of the product of five years. Based upon
current sales estimates, software costs are expected to be fully amortized in
less than three years.


     Inventory - Inventory is valued at the lower of cost or market, with cost
determined on the first-in, first-out method. At December 31, 1994, and December
30, 1995, inventory consisted of the following:

                            1994                   1995
                            ----                   ----

Raw materials              $ 1,269,607             $ 3,476,713
Work in process                952,704               1,959,382
Finished goods                 573,854                 425,648
                           -----------             -----------

   Total                   $ 2,796,165             $ 5,861,743
                           ===========             ===========


     Patent Application Costs - Patent application costs represent the expense
of preparing and filing applications to patent the Company's proprietary
technologies. Such costs are amortized against income over a period of five
years, beginning on the date the patents are issued. As of December 30, 1995,
the Company had been issued 49 patents. Amortization expense for the years ended
December 31, 1993 and 1994, and December 30, 1995 was $53,904, $55,639, and
$72,530, respectively. (Also see Note 10.)


     Research and Development Costs - Research and development costs are
expensed as incurred for financial reporting purposes. Such costs aggregated
$5,647,562, $5,123,439 and $6,155,421 for the years ended December 31, 1993 and
1994 and December 30, 1995, respectively.


     Cash Flow Information - For purposes of reporting cash flows, the Company
considers all savings deposits, certificates of deposit, and money market funds
and deposits purchased with a maturity of three months or less to be cash
equivalents. At December 31, 1994 and December 30, 1995, cash and cash
equivalents consisted of cash balances on deposit and money market funds.

     Reclassification - Various accounts in the prior years' balance sheet and
statement of operations have been reclassified for comparative purposes to
conform with the presentation in the current-year financial statements.

                                      F-10

<PAGE>

     Effect of New Accounting Pronouncements

     Long-Lived Assets - Long-lived assets, such as property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value. This
policy is in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of,"
which is effective for fiscal years beginning after December 15, 1995. No write
downs have been necessary through December 30, 1995.


     Stock-Based Compensation - The Company does not presently intend to adopt
the fair value based method for accounting for stock options granted to
employees, as permitted by Statement of Financial Accounting Standards No. 123,
("SFAS 123") "Accounting for Stock-Based Compensation," which is effective for
transactions entered into in fiscal years that begin after December 15, 1995.
Accordingly, the adoption of SFAS 123 will have no effect on the Company's
Balance Sheet, Statement of Operations and Statement of Cash Flows. The required
pro forma disclosures will be provided when required by the statement.


3.    MARKETABLE SECURITIES

     Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Marketable Securities are classified
as available for sale and consist of United States Treasury Bills and Notes
having maturity dates of more than three months, and are stated at fair value.


     Marketable securities are classified based on expected realization which,
as of December 31, 1994, was consistent with security maturity date.
Accordingly, at that date such securities were classified as current where
maturity dates were one year or less, or noncurrent where maturity dates exceed
one year from the balance sheet date. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Contractual
maturities of securities as of December 30, 1995 were as follows: May 1996 -
$1,000,000; July 1997 - $1,000,000; April 1998 - $1,000,000. Aggregate net
unrealized holding losses of $199,334 and $3,176 at December 31, 1994 and
December 30, 1995, respectively, have been included as a separate component of
stockholders' equity in the accompanying balance sheet. Certain information with
respect to the Company's marketable securities as of December 31, 1994 and
December 30, 1995 is presented below:


                                           1994                    1995
                      -----------------------------------------------------

                      Current    Noncurrent         Total          Total
                      -------    ----------         -----          -----

Amortized Cost        $254,154   $ 5,007,382    $ 5,261,536     $ 3,054,001
Gross Unrealized
 Holding Gains             227            -             227           7,810
Gross Unrealized
 Holding Losses                   (  199,561)    (  199,561)     (   10,986)
                       -------     ---------      ---------       ---------

Fair Value            $254,381   $ 4,807,821    $ 5,062,202     $ 3,050,825
                       =======     =========      =========       =========


     For the years ended December 31, 1994 and December 30, 1995, the Company
received proceeds from the sale or maturity of available for sale securities of
$5,157,394 and $2,179,510 and recorded net realized losses of $28,174 and
$28,024. In computing such realized losses, cost was determined using the
specific cost method. The change in net unrealized holding gain or loss on

                                      F-11

<PAGE>

available for sale securities that has been included in the separate component
of stockholders' equity for the years ended December 31, 1994 and December 30,
1995 was $199,334 and $3,176, respectively.

4.   NET INCOME PER COMMON SHARE

     Net income per common share is computed by dividing net income by the
weighted average number of Common Stock and Common Stock equivalent shares
outstanding. Common Stock equivalents represent the dilutive effect of the
assumed exercise of outstanding stock options and warrants. On August 2, 1994,
the Company's Board of Directors authorized a five-for-four stock split,
effected in the form of a 25% stock dividend, during the third quarter of 1994.
The split resulted in the issuance of 1,410,235 shares of common stock. On April
19, 1995, the Company's Board of Directors declared a two-for-one stock split,
effected in the form of a 100% stock dividend, during the second quarter of
1995. The split resulted in the issuance of 7,275,972 shares of common stock.
All references to average number of shares outstanding and prices per share have
been restated retroactively to reflect the splits. A summary of the calculations
for the years ended December 31, 1993 and 1994, and December 30, 1995 follows:

                                      F-12

<PAGE>

<TABLE>
                          (In Thousands, Except Per Share)
<CAPTION>

                                         1993                      1994                      1995
                                  -----------------          ----------------         -----------------
                                              Fully                     Fully                     Fully
                                 Primary     Diluted        Primary    Diluted        Primary    Diluted
                                 -------     -------        -------    -------        -------    -------
<S>                              <C>        <C>            <C>        <C>            <C>        <C>     
Net income                       $    960   $    960       $  1,842   $  1,842       $  2,860   $  2,860
                                   ======     ======         ======     ======         ======     ======

Weighted average common
 shares outstanding                13,255     13,472         14,026     14,388         14,562     14,562

Common  equivalent  shares 
 from assumed  conversion of  
 outstanding  options and
 warrants whose effect are 
 not antidilutive on
 earnings per share                 1,663       1,663          1,938     2,131          1,742      1,770

Less shares assumed
 repurchased using the
 treasury method for
 calculation of net
 shares outstanding               (   695)    (   684)       ( 1,099)  (   917)       (   449)   (   239)
                                   ------      ------         ------    ------         ------     ------

Weighted average common
 and common equivalent
 shares outstanding                14,223      14,451         14,865    15,602         15,855     16,093
                                   ======      ======         ======    ======         ======     ======

Net income per common
 and common equivalent
 shares                             $ .07       $ .07          $ .12     $ .12          $ .18      $ .18
                                      ===         ===            ===       ===            ===        ===
</TABLE>


5.       INCOME TAXES

     The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes," as of January 1, 1993. SFAS 109
requires that the Company utilize an asset and liability approach for financial
accounting and reporting for income taxes. The primary objectives of accounting
for taxes under SFAS 109 are to (a) recognize the amount of tax payable for the
current year and (b) recognize the amount of deferred tax liability or asset for
the future tax consequences of events that have been reflected in the Company's
financial statements or tax returns.

                                      F-13

<PAGE>

     The components of the provision for income taxes for the years ended
December 31, 1993 and 1994 and December 30, 1995 were as follows:


                                         1993         1994         1995
                                         ----         ----         ----

Current tax expense                    $ 70,000      $ 46,600     $ 44,000

State tax benefit of disposition         80,000       140,000      176,000
of stock options

Change in deferred tax asset - net      (50,000)            -            -
                                       --------      --------     --------

Total provision                        $100,000      $186,600     $220,000
                                       ========      ========     ========


     Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. These temporary differences are
determined in accordance with SFAS 109. Deferred tax assets and liabilities
consisted of the following at December 31, 1994 and December 30, 1995:

                                                 1994           1995
                                                 ----           ----
Deferred tax assets:
  NOL carryforwards                          $ 2,856,000     $5,600,000
  Tax credits                                    300,000        350,000
  Warranty provision and other accruals          258,000        640,000
                                               ---------      ---------
    Gross deferred tax assets                  3,414,000      6,590,000
                                               ---------      ---------

Deferred tax liabilities:
  Patent application costs                       274,000        368,000
  Accumulated depreciation                       162,000        187,000
                                               ---------      ---------
    Gross deferred tax liabilities               436,000        555,000
                                               ---------      ---------

                                               2,978,000      6,035,000

Less valuation allowance                      (2,928,000)    (5,985,000)
                                               ---------      ---------

Deferred tax asset - net                     $    50,000     $   50,000
                                               =========      =========


     The $50,000 deferred tax asset was included in other current assets at
December 31, 1994 and December 30, 1995. The valuation allowance increased
$403,000, $195,000, and $3,057,000 in 1993, 1994, and 1995, respectively.

     The difference between income taxes at the United States federal income tax
rate and the effective income tax rate was as follows for the years ended
December 31, 1993 and 1994, and December 30, 1995:

                                      F-14

<PAGE>

                                                    1993       1994      1995
                                                    ----       ----      ----

Computed at federal statutory rate                   34%       34%       34%
Increase (decrease) resulting from:
  Expenses producing no current tax benefit          17%        2%       11%
  State tax, net of federal benefit                   7%        7%        7%
  Alternative minimum tax                             2%        2%        -
  Net operating loss carryforwards                   19%       10%       98%
  Compensation relative to stock option plans       -58%      -38%     -140%
  Deductions for tax purposes previously
   expenses for financial statement purposes        - 7%      - 7%        -
  Patent perfection costs and other                 - 5%      - 1%     -  3%
                                                     --        --       ---
        Effective rate, net                           9%        9%        7%
                                                     ==        ==       ===

     As of December 30, 1995, the Company had net operating loss carryforwards
totaling approximately $16,500,000 resulting from compensation deductions
relative to stock option plans. To the extent net operating losses resulting
from stock option plan compensation deductions become realizable, the benefit
will be credited directly to additional paid in capital. The amount of the net
operating loss carryforwards which may be utilized in any future period may be
subject to certain limitations, based upon changes in the ownership of the
Company's common stock. The following is a breakdown of the net operating losses
and their expiration dates:

     Expiration date                Amount of remaining NOL

        2005                               $2,230,000
        2006                               $5,020,000
        2007                               $  550,000
        2008                               $  600,000
        2009                               $8,100,000

     In addition, the Company has available tax credit carryforwards (adjusted
to reflect provisions of the Tax Reform Act of 1986) of approximately $350,000,
which are available to offset future taxable income and income tax liabilities,
when earned or incurred.

6.   RELATED PARTIES

     During the years ended December 31, 1993 and 1994 and December 30, 1995,
the Company made various sales to Howtek totaling approximately $38,800,
$114,500, and $23,250, respectively. Mr. Robert Howard, Chairman and a principal
stockholder of the Company, is the Chairman of the Board of Directors and a
principal stockholder of Howtek and the father of Dr. Lawrence Howard, who was
the President and Chief Executive Officer of the Company through November 30,
1992, when he resigned as President and was appointed, by the Board of

                                      F-15

<PAGE>

Directors, Vice Chairman of the Board. Dr. Lawrence Howard was a director of
Howtek until May 30, 1989.

     The Company subleases certain of its office facilities from Mr. Robert
Howard, Chairman, as a tenant-at-will. Payments totaled $33,352, $35,379, and
$35,400, respectively, for the years ended December 31, 1993 and 1994 and
December 30, 1995. Mr. Howard was paid $100,000 during each of 1993 and 1994 as
a bonus for consulting services rendered. The Company paid Mr. Howard $110,000
for consulting services provided to the Company during 1995.


7.   STOCKHOLDERS' EQUITY

     References herein to shares, options, warrants and the prices per share
have been restated to the 1994 and 1995 stock splits, effected in the form of
stock dividends, referred to in Note 4.

     Preferred Stock - The Company's certificate of incorporation empowers the
Board of Directors, without stockholder approval, to issue up to 1,000,000
shares of $.01 par value preferred stock, with dividend, liquidation,
conversion, and voting or other rights to be determined upon issuance by the
Board of Directors.

     Restricted Stock Purchase Plan - On August 22, 1988, the Company adopted a
Restricted Stock Purchase Plan ("the Purchase Plan") authorizing the sale of up
to 125,000 shares of common stock to its employees at a price to be determined
by the Board of Directors, but in no event to be less than $.01 per share or
greater than 10% of the then fair market value. At December 30, 1995, after
adjustment for the 1994 and 1995 splits 40,000 shares remained available for
sale.

     Stock Option Plans - On August 22, 1988, the Company adopted the 1988 Stock
Option Plan (the "1988 Plan"), and effective August 19, 1991, the Company
adopted the 1991 Stock Option Plan (the "1991 Plan"), and effective April 8,
1994, the Company adopted the 1994 Stock Option Plan (the "1994 Plan"). Each
plan originally provided for the aware, to key employees and other persons,
options to purchase up to 500,000 shares of the Company's common stock. As a
result of the 1994 and 1995 stock splits, the number of shares of common stock
issuable upon exercise of outstanding options granted under the above plans and
upon exercise of options available for future grants increased by 25% and 100%,
respectively. Options granted under the plans may be either Incentive Stock
Options ("ISOs") or Nonqualified Options. Generally, ISOs may only be granted to
employees of the

                                      F-16

<PAGE>

Company, at an exercise price of not less than fair market value of the stock at
the date of grant. Nonqualified Options may be granted to any person, at any
exercise price. Nonqualified Options may be granted to any person, at any
exercise price not less than par value, within the discretion of the Board of
Directors or a committee appointed by the Board of Directors ("Committee"). Any
options granted will generally become exercisable in increments over a period
not to exceed ten years from the date of grant, to be determined by the Board of
Directors or Committee, and generally will expire not more than ten years from
the date of grant.

         Information  concerning incentive stock option activity under the 1988,
1991,  and 1994  plans for the  years  ended  December  31,  1993 and 1994,  and
December 30, 1995 is summarized as follows:

                                     Option      Option price     Options
                                     Shares       per share     Exercisable
                                     ------       ---------     -----------

Outstanding at December 31, 1992     193,800    $ 1.20 - $ 1.50    118,799
                                                                   =======

Granted                              186,808    $10.00 - $25.00
Exercised                            (91,000)        $ 1.50
Cancelled/Expired                          -
                                     -------

Outstanding at December 31, 1993     289,608    $ 1.20 - $25.00    289,608
                                                                   =======

Granted                              509,000    $15.55 - $19.50
Exercised                           (116,861)   $ 1.20 - $20.00
Cancelled/Expired                    (14,844)   $20.00 - $25.00
                                     -------

Outstanding at December 31, 1994     666,903    $10.00 - $19.50     12,591
                                                                   =======

Granted                               34,500    $41.275 - $52.75
Exercised                           (112,877)   $15.55 - $20.00
Cancelled/Expired                          -
                                     -------

Outstanding at December 30, 1995     588,526    $10.00 - $52.75     76,279
                                     =======                        ======


     The proceeds to the Company from incentive stock options exercised during
the years ended December 31, 1993 and 1994 and December 30, 1995 totaled
$136,500, $416,670, and $1,629,371, respectively.

     Information concerning nonqualified stock option activity under the 1988,
1991, and 1994 Plans for the years ended December 31, 1993 and 1994 and December
30, 1995 is summarized as follows:

                                      F-17

<PAGE>

                                     Option      Option price     Options
                                     Shares       per share     Exercisable
                                     ------       ---------     -----------

Outstanding at December 31, 1992     819,719    $ 2.00 - $16.75    487,219
                                                                   =======

Granted                              268,624    $ 7.10 - $21.00
Exercised                            (34,300)   $ 5.00 - $14.75
Cancelled/Expired                    (64,250)   $10.38 - $21.00
                                     -------

Outstanding at December 31, 1993     989,793    $ 2.00 - $19.40    865,543
                                                                   =======

Granted                              421,687    $ 9.70 - $29.20
Exercised                            (74,856)   $ 5.00 - $16.75
Cancelled/Expired                     (2,878)   $11.80 - $29.20
                                     -------

Outstanding at December 31, 1994   1,333,746    $ 2.00 - $25.00    878,802
                                                                   =======

Granted                               52,750    $22.313 - $62.00
Exercised                           (191,381)*  $ 4.00 - $15.55
Cancelled/Expired                       (245)   $12.20 - $18.40
                                   ---------

Outstanding at December 30, 1995   1,194,870    $ 4.00 - $62.00    802,800
                                   =========                       =======

* Includes 31,450 additional options arising from the 1995 stock split.

     The incentive and nonqualified stock options summarized in the tables above
were granted under various vesting schedules ranging from immediate to five
years, with termination dates ranging from five to six years from dates of grant
and may be subject to earlier termination as provided in the Plans.

     The proceeds to the Company from nonqualified stock options exercised
during the years ended December 31, 1993 and 1994 and December 30, 1995 totaled
$320,670, $613,711, and $1,284,359, respectively.

     Director Stock Option Plan - Effective December 1993, the Company adopted
its Nonemployee Director Stock Option Plan (the "Director Plan"). Only
nonemployee directors of the Company (other than Robert Howard or Dr. Lawrence
Howard) are eligible to receive grants under the Director Plan. The Director
Plan provides that eligible directors automatically receive a grant of options
to purchase 5,000 shares of Common Stock at fair market value upon first
becoming a director and, thereafter, an annual grant, in January of each year,
options to purchase 2,500 shares at fair market value. Pursuant to the terms of
the Director Plan, options to purchase 3,125 shares, after adjustment for the
five-for-four stock split, were automatically granted to each of two of the
directors in January, 1994, and options to purchase

                                      F-18

<PAGE>

5,000 shares, after adjustment for the two-for-one stock split, were
automatically granted to each of two of the directors in January, 1995.


                                       Option      Option price       Options
                                       Shares       per share       Exercisable
                                       ------       ---------       -----------
Outstanding at December 31, 1993         --                                --
                                                                       ======
Granted                                12,500      $   11.00
Exercised                                --
Cancelled/Expired                        --
                                       ------
Outstanding at December 31, 1994       12,500      $   11.00               --
                                                                       ======

Granted                                10,000      $   24.38
Exercised                                --
Cancelled/Expired                        --
                                       ------
Outstanding at December 30, 1995       22,500      $11.00-$24.38       12,500
                                       ======                          ======


     Underwriter's Warrants - In connection with an initial public offering
during 1989, the Company issued the underwriter warrants to purchase 260,000
shares of common stock.

     Through December 30, 1995, 138,034 shares of common stock at $5.75 per
share and 138,034 shares of common stock at $6.25 ($4.60 and $5.00 for exercises
after the four-for-five stock split) were issued to certain designees of the
underwriter pursuant to their exercise of warrants and unit warrants. The
proceeds to the Company from these transactions totaled $1,559,993.

     At December 30, 1995, there were no remaining warrants outstanding.

     Other - On January 20, 1992, in consideration of the payment by Union Bank
of Switzerland (the "Bank") to the Company of $25,000, the Company issued to the
Bank a warrant which, entitled the Bank or its assigns to purchase from the
Company 25,000 shares of common stock at $26.00 per share, which was
subsequently amended to $14.25 per share. The Warrant was exercised during
March, 1994, generating proceeds to the Company of $356,250.

     On February 11, 1994, the Company issued 25,000 shares of common stock, at
$12.50 per share, to a consultant, in consideration of payment of $312,000
pursuant to the exercise of a warrant granted on August 12, 1992.

8.   LEASES

     Effective March 16, 1993, the Company entered into an agreement to amend
and extend the basic lease for its operating facilities for an additional period
of three years ending March 15, 1996 with three one-year renewal options. The
amended lease specifies a fixed base monthly rent of $8,693, plus a pro rata
share of real estate taxes and certain other expenses. The Company paid
approximately $132,000 in 1993, $130,000 in 1994, and $131,000 in 1995 under the
lease agreement and amendments. During May, 1994, the Company entered into an
additional three year lease agreement (which was amended in December 1994) for
approximately 36,000 square feet to accommodate its manufacturing facilities.
The lease, as amended, specifies a fixed base monthly rent of $11,250, plus real
estate taxes, utilities, and certain other expenses. The lease contains an
option to renew for an additional three years and a right of first refusal to

                                      F-19

<PAGE>

purchase the property. The Company paid approximately $71,500 in 1994 and
$165,000 in 1995 under this lease agreement. As of December 30, 1995, future
minimum lease payments under these agreements were as follows:

       1996                               $ 152,386
       1997                                  45,000
                                          ---------
       Total                              $ 197,386
                                          =========

9.   HEIDELBERG AGREEMENTS

     In January 1991, the Company entered into a master agreement (the "Master
Agreement"), a technology license agreement (the "Technology License"), and a
supply agreement (the "Supply Agreement"), (the foregoing agreements being
sometimes collectively referred to herein as the "Heidelberg Agreements") with
Heidelberg. Pursuant to this series of related agreements, as amended, the
Company and Heidelberg agreed to certain terms relating to the integration of
the Company's proprietary Direct Imaging Technology into various presses
manufactured by Heidelberg and certain of its related parties (the "Heidelberg
Presses") and the manufacture of components for and the commercialization of
such presses.

     Pursuant to the Heidelberg Agreements, the Company granted Heidelberg
certain exclusive rights, subject to the satisfaction of certain conditions, for
the use of the Direct Imaging Technology in Heidelberg Presses. In consideration
of such rights, Heidelberg agreed to pay to the Company royalties on the net
sales prices of various specified types of Heidelberg Presses.

     The Heidelberg Agreements also provide for the Company to furnish, among
other things, engineering and development work based upon work projects and
budgets agreed to by the Company and Heidelberg. The terms of the Heidelberg
Agreements are for periods ending in December 2011 in the case of each of the
Master Agreement and Technology License and December 1995 in the case of the
Supply Agreement. The Heidelberg Agreements also contain, among other things,
certain early termination provisions and extension provisions.

10.  NONRECURRING CHARGE

     During the second quarter of 1993 the Company recorded a $1,949,000
nonrecurring charge associated with the Company's change from spark discharge
technology to its PEARL technology. The termination of shipments of units
incorporating the spark discharge technology dictated that certain assets
associated with the earlier imaging process, including certain property and

                                      F-20

<PAGE>

equipment, unamortized patent costs and inventory, be written off, and that
reserves be established for the transition to PEARL technology. The individual
elements making up the charge consisted of write-offs of property and equipment,
inventory, and patent application costs of $613,000, $546,000, and $294,000,
respectively, and a reserve of $496,000 for certain estimated costs required to
retrofit existing customer equipment. The reserve was fully utilized during
1993, 1994, and 1995.

11.  OTHER INFORMATION

     In April 1995 the Company commenced an action against Agfa-Gevaert, N.V.
("Agfa") in the U.S. District Court for the District of New Hampshire alleging
that Agfa violated provisions of a confidentiality agreement and a manufacturing
agreement (the "Manufacturing Agreement") between the parties and
misappropriated certain trade secrets of the Company. In June 1995, Agfa
commenced an arbitration proceeding against the Company in the International
Chamber of Commerce in which it seeks arbitration of the disputes between the
parties arising from the Manufacturing Agreement and also seeks to have the
trade secret issues determined in arbitration. In its request for arbitration
Agfa has, among other things, charged Presstek with breaches of the
Manufacturing Agreement, good faith and fair dealing, and is seeking damages in
an amount alleged to be $2,000,000. The action commenced by the Company in
District Court has been stayed to allow the arbitrators to determine the issues
in dispute between the parties.


     The Company has vigorously pursued its claims against Agfa and intends to
vigorously contest Agfa's assertions of breach of the Manufacturing Agreement
and other claims. Although the Company and its counsel believes that an
unfavorable outcome of the litigation and arbitration is unlikely, there can be
no assurance as to the outcome of the proceedings. Moreover, although the
outcome of the proceedings against Agfa is uncertain, the Company does not
believe that the proceedings will have a material adverse effect on its
financial condition, results of operations or cash flows.


     The Company has been advised that the Securities and Exchange Commission
(the "Commission") has entered a formal order of private investigation with
respect to certain activities by certain unnamed persons and entities in
connection with the securities of the Company. In that connection, the Company
has received subpoenas duces tecum requesting it to produce certain documents
and has complied with the requests. The Company has not been advised by the
Staff of the Commission that the Staff intends to recommend to the Commission
that it initiate a proceeding against the Company in connection with the
foregoing investigation.

                                      F-21

<PAGE>

12.  SUBSEQUENT EVENTS


     (a) During February, 1996, the Company completed private placements of an
aggregate of 282,846 shares of its common stock for net proceeds of $20,208,758
to a limited number of domestic individual and institutional investors.


     A portion of the funds raised from the private placements were utilized to
complete the acquisition referred to below, with the balance to be utilized for
general working capital purposes.

     On February 15, 1996, the Company acquired 90% of the outstanding common
stock (the "Purchased Shares") of Catalina Coatings, Inc., an Arizona
corporation ("Catalina"). Catalina is engaged in the development, manufacture
and sale of vacuum deposition coating equipment and the licensing and
sublicensing of patent rights with respect to vapor deposition process to coat
moving webs of material at high rates. The Company intends to continue the
business of Catalina which will operate as a subsidiary of the Company. The
Purchased Shares were acquired from the selling shareholders pursuant to a Stock
Purchase Agreement (the "Stock Purchase Agreement") dated and effective as of
January 1, 1996. The aggregate consideration paid by the Company pursuant to the
Stock Purchase Agreement was $8,400,000, of which $8,200,000 represented the
purchase price of the Purchased Shares and $200,000 represented consideration
for the non-competition and confidentiality covenants of the selling
shareholders.

     Simultaneous with the closing of the acquisition, the Company entered into
a Put and Call Option Agreement (the "Option Agreement") which provides the
Company with the right, at any time after February 15, 2000, to acquire the
remaining 10% of the outstanding common stock of Catalina for aggregate
consideration of $2,000,000. The Option Agreement also provides the selling
shareholders and another employee of Catalina with the right, at any time after
August 15, 2000, to cause the Company to purchase the remaining shares for
aggregate consideration of $1,000,000. The Option Agreement will terminate if
Catalina consummates an initial public offering of its securities prior to
February 15, 2000.

     The Company granted the Selling Shareholders and the other employee of
Catalina five-year non-qualified options to purchase an aggregate 100,000 of the
Company's common stock at an exercise price of $89.50 per share and Catalina
granted to the same individuals an option to purchase an aggregate 5% of the
issued and outstanding common stock of Catalina in the event that a registration
statement relating to an initial public offering of Catalina common stock is
declared effective by February 15, 2000.


     (b) Between June 28, 1996 and July 31, 1996, seven lawsuits were filed
against the Company and certain other defendants, including, but not limited to
the Company's officers and directors. Six of such actions were purportedly
brought on behalf of similarly situated classes of defendants and were commenced
in a United States District Court in either the State of New Hampshire or the
Southern District of New York. the remaining action was filed derivatively, on
behalf of the Company in the Chancery Court of the State of Delaware.

     The  lawsuits  each  contain  a  variety  of  allegations   (some  of  them
overlapping) including, among other things, that the defendants violated Section
10(b) of the  Securities  Exchange  Act of 1934 (the  "Exchange  Act") and Rule
10b-5 promulgated  thereunder,  violations of Section 20(a) of the Exchange Act,
common law fraud and deceit, negligent  misrepresentation and waste of corporate
assets. The plaintiffs  generally are seeking to recover unspecified damages and
reimbursement  of their  costs and  expenses  incurred  in  connection  with the
action.  Moreover,  the  plaintiff  in the  derivative  action is also seeking a
return to the Company of all salaries and the value of other  remuneration  paid
to the  defendants  by the Company  during the time they were in breach of their
fiduciary duties and an accounting of and/or  constructive trust on the proceeds
of defendants trading activities in the Common Stock.

     The Company  believes that the allegations  against it and its officers and
directors  alleged in the foregoing  actions are without merit,  and the Company
intends  to  vigorously  defend  all  actions.  However,  the  outcome  of  any
litigation is subject to uncertainty and a successful claim against the Company,
in any of the foregoing  actions,  could have a material  adverse  effect on the
financial  position and results of  operations  of the  Company.  At the present
time, the Company cannot  reasonably  estimate the ultimate  liability,  if any,
resulting from these lawsuits.  Accordingly, no provision for any liability that
may result has been recorded in the accompanying financial statements.



 
                                      F-22

<PAGE>

                                                         PRESSTEK, INC.

 <TABLE>
                                                         SCHEDULE II
                                                VALUATION AND QUALIFYING ACCOUNTS

<CAPTION>

                                                                        Charged to
                                       Balance at      Charged to         Other         Changes           Balance
                                       Beginning       Costs and         Account -    Add (Deduct) -      at End
Year     Description                    of Year         Expenses         Describe       Describe          of Year
----     -----------                   ----------      ----------       ----------    -------------      --------
<C>                                    <C>             <C>              <C>            <C>               <C>     
1993     Warranty reserve              $ 70,000        $ 20,000         $       -       $(12,556) (1)    $ 77,444
                                        =======         =======           =======        =======          =======
         Equipment replacement
          reserve                             -         495,880                 -        (94,900) (2)     400,980
                                        =======         =======           =======        =======          =======


1994     Warranty reserve                77,444         215,000                 -        (93,360) (1)     199,084
                                        =======         =======           =======        =======          =======
         Equipment replacement
          reserve                       400,980               -                 -       (373,230) (2)      27,750
                                        =======         =======           =======        =======          =======


1995     Warranty reserve               199,084         467,500                 -        (65,370) (1)     601,214
                                        =======         =======           =======        =======          =======
         Equipment replacement
          reserve                        27,750         291,240                 -        (27,750) (2)     291,240
                                        =======         =======           =======        =======          =======

</TABLE>


----------
(1)   Warranty expenditures

(2)   Equipment replacement expenditures

                                      FS-1

<PAGE>


                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to this
report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                          PRESSTEK, INC.



   
Dated:  December 17, 1996                 By:  /s/ Robert E. Verrando
                                               -----------------------
                                                Robert E. Verrando
                                                President and Chief 
                                                Operating Officer