##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|   |  | For the fiscal year ended December 31, 2005                                                 
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|   |  | For the transition period
    from           to                                             






PRESSTEK, INC.


(Exact name of registrant as specified in its charter)


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

55 Executive Drive, Hudson, New Hampshire 03051-4903


(Address of principal executive offices including zip
code)


Registrants telephone number, including area code:


(603) 595-7000


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


None


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


Common Stock, $0.01 par value


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ






Documents Incorporated by Reference


10-K.










---



##### 










PRESSTEK, INC.


ANNUAL REPORT ON
FORM 10-K


For the Fiscal Year Ended December 31, 2005


|                                       |     |  |  |                                                                                                                      |      |  |    | 
|-------------------------------------- | --- |  |  | -------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|Item                                   |     |  |  |                                                                                                                      | Page | 
|                                       |     |  |  |                                                                                                                      |      | 
|PART 1                                
|                                       | 1.  |  |  | Business                                                                                                             |      |  | 1  | 
|                                       | 1A. |  |  | Risk Factors                                                                                                         |      |  | 18 | 
|                                       | 1B. |  |  | Unresolved Staff Comments                                                                                            |      |  | 28 | 
|                                       | 2.  |  |  | Properties                                                                                                           |      |  | 29 | 
|                                       | 3.  |  |  | Legal Proceedings                                                                                                    |      |  | 30 | 
|PART II                               
|                                       | 5.  |  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |      |  | 30 | 
|                                       | 6.  |  |  | Selected Financial Data                                                                                              |      |  | 31 | 
|                                       | 7.  |  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |      |  | 33 | 
|                                       | 7A. |  |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |      |  | 51 | 
|                                       | 8.  |  |  | Financial Statements and Supplementary
    Data                                                                      |      |  | 53 | 
|                                       | 9A. |  |  | Controls and Procedures                                                                                              |      |  | 88 | 
|                                       | 9B. |  |  | Other Information                                                                                                    |      |  | 90 | 
|PART III                              
|                                       | 10. |  |  | Directors and Executive Officers of the
    Registrant                                                               |      |  | 90 | 
|                                       | 11. |  |  | Executive Compensation                                                                                               |      |  | 90 | 
|                                       | 12. |  |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |      |  | 90 | 
|                                       | 13. |  |  | Certain Relationships and Related
    Transactions                                                                   |      |  | 90 | 
|                                       | 14. |  |  | Principal Accounting Fees and Services                                                                               |      |  | 90 | 
|PART IV                               
|                                       | 15. |  |  | Exhibits, Financial Statement Schedules                                                                              |      |  | 91 | 
|EX-21.1 Subsidiaries of the Registrant
|EX-23.1 Consent of BDO Seidman, LLP   
|EX-31.1 Certification of CEO          
|Ex-31.2 Certification of CFO          
|EX-32.1 Certification of CEO          
|EX-32.2 Certification of CFO          





---






PART I







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

General










| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide advanced print solutions through the development and
    manufacture of digital laser imaging equipment and advanced
    technology chemistry-free printing plates, which we call
    consumables, for commercial and in-plant print providers
    targeting the growing market for high quality, fast turnaround
    short-run color printing;
|
| |  | are a leading sales and services company delivering Presstek
    digital solutions and solutions from other manufacturing
    partners through our direct sales and service force and through
    distribution partners worldwide;                                                                                                                     
|
| |  | manufacture semiconductor solid state laser diodes for Presstek
    imaging applications and for use by external
    applications; and                                                                                                                                                                                                                 
|
| |  | manufacture and distribute printing plates for conventional
    print applications.                                                                                                                                                                                                                                                                    

Background


computer-to






1



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| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | invented on-press Direct Imaging technology;                                                                                                                 
|
| |  | invented the chemistry-free imaging of printing plates;                                                                                                      
|
| |  | have dramatically streamlined the workflow in commercial print
    operations through our many innovations;                                                  
|
| |  | have developed workflows that require less craft in the printing
    process through the application of our technology; and                                  
|
| |  | continue to innovate with our recent announcement of the latest
    generation of a larger format, more automated Direct Imaging
    press known as the 52DI.



® ® ® ®












| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we use our direct sales and service operation to deliver our
    solutions and those of other partner manufacturers primarily in
    the U.S., Canada and the United Kingdom;
|
| |  | we have a well developed graphic arts dealer network to deliver
    our products in continental Europe and worldwide; and                                                    
|
| |  | we use OEMs to deliver our products to markets worldwide.                                                                                                                    

2



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ABDick












Precision




www.presstek.com


3



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Business Overview






end-to














4



---



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(SS-MBE)




10-K.


Our Business Segments


direct-to


The Presstek Segment














5



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The Lasertel Segment


state-of state-of


The Precision Segment




Strategy








| |                                                                      
| | ---------------------------------------------------------------------
| | 1. Our primary focus is on the growth of our consumables
    product.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The graphic arts industry is in the midst of a fundamental
    structural change from analog to digital operations. We provide
    digital print solutions that use our chemistry-free and
    process-free printing plates for both DI, or on press, and CTP,
    or off press, applications. Presstek-manufactured digital
    equipment such as CTP systems and DI presses allow us to build a
    substantial installed base of digital consumable customers. We
    refer to the installed base of DI presses and CTP units as
    consumable burning engines, or CBEs. One method of growing the
    market for consumables involves further expanding the base of
    our installed CBEs.

6



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | With our direct sales and service force and our distribution
    network, we are positioned to expand our customer base and
    assist customers in evolving from analog to digital processes,
    creating additional market opportunities for the CBEs and
    consumables that we manufacture. Another method of growing the
    market for consumables is to develop consumables that can be
    imaged by non-Presstek devices, reaching beyond our own
    manufactured systems and penetrating the installed base of CTP
    devices in all market segments with our chemistry-free and
    process-free offerings. The first step in executing this
    strategy was the launch of Aurora, our open-platform
    chemistry-free printing plate that uses our patented technology.
    The Aurora plate is designed to be used with CBEs manufactured
    by CTP market leaders such as Screen and Kodak.



| |                                       
| | --------------------------------------
| | 2. We focus on select market segments.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Large print providers have been the vanguard in adopting digital
    technology and have driven the industrys digital
    transformation of the commercial printing segment of the graphic
    arts industry. The small and medium-sized commercial and quick
    print providers and in-plant print operations are currently
    converting to digital systems and processes. With our innovative
    digital printing solutions and the strength of our direct sales
    and service force, we believe that we can leverage the depth and
    breadth of our products, services, supplies, internal skills,
    and strategic partnerships to address these new and emerging
    market demands among small and medium sized print providers.



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Three unique types of businesses have demonstrated success with
    Presstek digital solutions.



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | Small to mid-sized commercial printers that need to adjust their
    production capacity, level of productivity and output quality
    while improving profitability have demonstrated success with our
    digital products. These printers are often acquiring their first
    four-color press. 2004 research from InfoTrends/ CAP Ventures
    indicates that there are approximately 25,000 print
    establishments in the United States that fall within this
    category.



| |    |                                                                                                                                                                                                                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | Digital printers, shops that operate toner-based digital
    equipment, are acquiring DI presses as complementary devices.
    They are using DI presses for applications that require run
    lengths greater than 500, a higher level of quality and are
    printed on a wider range of materials.



| |    |                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. | In-plant print shops that operate within corporations, colleges
    and universities and government agencies are attracted to the
    ease-of-use and
    environmentally responsible nature of our solutions. 2004
    research from InfoTrends/ CAP Ventures indicates that there are
    approximately 9,600 in-plant establishments in the United
    States.



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | 3. Because we compete on the basis of technology and
    innovation, we deliver differentiated products.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have been technology innovators since our inception,
    providing digital laser technology that is directly responsible
    for what is estimated to be over 90% of worldwide DI
    installations. As we expand and refine our product offerings, we
    will strive to lead the market with high performance products.
    We will also introduce a range of Presstek-branded products in
    2006 and beyond, beginning with the Presstek 52DI press in the
    spring of 2006. This will extend Presstek brand awareness and
    increase the strength of the brand as well as offer us more
    control over the sales and service process.
|
| | The Presstek 52DI is a landscape format 52cm direct imaging
    press with a maximum speed of 10,000 sheets per hour. This press
    is highly automated and designed to deliver superior economics,
    faster turnaround times for printed jobs, require lower skilled
    operators and reduced paper waste. The Presstek 52DI images all
    four printing plates simultaneously on press. The press
    unique design with Zero Transfer Print technology, results in
    perfect registration on each sheet, an exceptionally fast
    make-ready time and reliable handling across a wide range of
    printed substrates.                  



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | 4. We provide environmentally responsible solutions
    through our application of technology.



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

7



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Technology and
Products


Direct Imaging Technology










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






CTP Products


computer-to


8



---



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Dimension


(2-page), (4-page) (8-page)


Vector TX52


ease-of


The Digital PlateMaster


tm




Printing Plates


General






9



---



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DI


PearlDry Plus




PearlDry




ProFire Digital Media


300-line


CTP


Anthem




Applause




Freedom




10



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Aurora






Analog


Publica




Qualis




Express




Fuchsia




computer-to


Lasertel Diode Products




Manufacturing




11



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165,000-square state-of point-of




state-of


75,000-square








Marketing, Distribution and Customer
Support




12



---



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analog-to e-commerce








Strategic
Relationships










13



---



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Competition
















14



---



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Patents, Trademarks and Proprietary
Rights










15



---



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Research and
Development




Backlog




Employees




Investor Information


www.presstek.com 10-K, 10-Q, 8-K


Glossary






|               |  |                                                                                                                                                           
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|A1 (8-page)    |  | a printing term referring to a standard paper size capable of
    printing eight 8.5 x 11 pages on a sheet of paper                                     
|              
|A2 (4-page)    |  | a printing term referring to a standard paper size capable of
    printing four 8.5 x 11 pages on a sheet of paper                                      
|              
|A3/B3 (2-page) |  | a printing term referring to a standard paper size capable of
    printing two 8.5 x 11 pages on a sheet of paper                                       
|              
|Ablation       |  | a controlled detachment/vaporization caused by a thermal event,
    this process is used during the imaging of Pressteks PEARL
    and Anthem consumables

16



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|                                          |  |                                                                                                                                                                                                                                                         
|----------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Anthem                                    |  | Pressteks line of wet offset digital plates with a unique
    polymer-ceramic construction                                                                                                                                                             
|                                         
|Applause                                  |  | Pressteks process-free wet offset digital plate                                                                                                                                                                                                        
|                                         
|Computer-to-plate (CTP)                   |  | a general term referring to the exposure of lithographic plate
    material from a digital database, off-press                                                                                                                                          
|                                         
|Direct Imaging (DI)                       |  | Pressteks registered trademark for digital imaging systems
    that allow image carriers (film and plates) to be imaged from a
    digital database, on and off-press                                                                                  
|                                         
|Dots per inch (dpi)                       |  | a measurement of the resolving power or the addressability of an
    imaging device                                                                                                                                                                     
|                                         
|Heidelberg                                |  | Heidelberger Druckmaschinen AG, one of the worlds largest
    printing press manufacturers, headquartered in Heidelberg,
    Germany                                                                                                                   
|                                         
|Infrared                                  |  | light lying outside of the visible spectrum beyond its red-end,
    characterized by longer wavelengths; used in our thermal imaging
    process                                                                                                        
|                                         
|KBA                                       |  | Koenig & Bauer, AG, one of the worlds largest
    printing press manufacturers, headquartered in Wurzburg, Germany                                                                                                                                     
|                                         
|Kodak                                     |  | Eastman Kodak Company, a leading supplier of digital,
    conventional and business solutions for the graphic arts
    industry, headquartered in Rochester, New York                                                                                   
|                                         
|Lithography                               |  | printing from a single plane surface under the principle that
    the image area carries ink and the non-image area does not, and
    that ink and water do not mix                                                                                     
|                                         
|Off-press                                 |  | making a printing plate from either an analog or digital source
    independent of the press on which it will be used                                                                                                                                   
|                                         
|On-press                                  |  | the use of Pressteks direct imaging technologies to make a
    plate directly from a digital file on the press                                                                                                                                         
|                                         
|PEARL                                     |  | the name associated with Pressteks first generation laser
    imaging technologies and related products and consumables                                                                                                                                
|                                         
|ProFire and ProFire Excel imaging systems |  | the Presstek components required to convert a conventional
    printing press into a direct imaging press, including laser
    diode arrays, computers, electronics                                                                                     
|                                         
|Dimension                                 |  | Pressteks product line of CTP off-press platemaking
    equipment                                                                                                                                                                                      
|                                         
|Platemaking                               |  | the process of applying a printable image to a printing plate                                                                                                                                                                                           
|                                         
|Prepress                                  |  | graphic arts operations and methodologies that occur prior to
    the printing process; typically these include photography,
    scanning, image assembly, color correction, exposure of image
    carriers (film and/or plate), proofing and processing
|                                         
|Quickmaster DI                            |  | the second generation of direct imaging, waterless presses,
    highly automated with roll-fed PearlDry Plus plate material, a
    joint development effort between Heidelberg and Presstek                                                             
|                                         
|Ryobi                                     |  | Ryobi Limited of Japan, a printing press manufacturer
    headquartered in Japan                                                                                                                                                                        

17



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|                           |  |                                                                                                                                                                                                       
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Ryobi 3404DI               |  | an A3 format size four-color sheet-fed press, incorporating
    Pressteks dual plate cylinder concept and PearlDry Plus
    spooled plates, a joint development effort between Ryobi and
    Presstek
|                          
|Semiconductor laser diode  |  | a high-powered, infrared imaging technology employed in the DI
    imaging systems                                                                                                                    
|                          
|Short-run markets/printing |  | a graphic arts classification used to denote an emerging trend
    for lower print quantities                                                                                                         
|                          
|Thermal                    |  | a method of digitally exposing a material via the heat generated
    from a laser beam                                                                                                                
|                          
|Vacuum deposition process  |  | a technology to accurately, uniformly coat substrates in a
    controlled environment                                                                                                                 
|                          
|Waterless                  |  | a lithographic printing method that uses dry offset printing
    plates and inks and does not require a dampening system                                                                              




Item 1A.     Risk
Factors


10-K




| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations for our financial and operating performance in
    2006 and beyond;                                                                                              
|
| |  | the adequacy of internal cash and working capital for our
    operations;                                                                                                         
|
| |  | our ability to supply sufficient product for anticipated demand
    and production delays associated with such demand;                                                            
|
| |  | availability of component materials;                                                                                                                                              
|
| |  | managements plans and goals with regard to our shipping
    and production capabilities, including the adequacy of our
    facilities for present and expected future operations;
|
| |  | the availability of alternative suppliers and manufacturers;                                                                                                                      
|
| |  | manufacturing constraints or difficulties;                                                                                                                                        
|
| |  | the introduction of competitive products into the marketplace;                                                                                                                    
|
| |  | managements plans and goals for our subsidiaries;                                                                                                                                
|
| |  | the ability of our subsidiaries to generate positive cash flows
    in the near-term;                                                                                             
|
| |  | our subsidiaries ability to produce commercially
    competitive products;                                                                                                       
|
| |  | the strength of our various strategic partnerships both on
    manufacturing and distribution;                                                                                    
|
| |  | our ability to secure other strategic alliances and
    relationships;                                                                                                            
|
| |  | our expectations regarding our strategy for growth, including
    statements regarding our expectations for continued product mix
    improvement;                                
|
| |  | our expectations regarding the balance, independence and control
    of our business;                                                                                             
|
| |  | the resulting and expected effects and benefits from our
    transformation efforts;                                                                                              
|
| |  | our expectations regarding the strength and improvement of our
    fundamentals, including management of our financial controls;                                                  
|
| |  | our expectations relating to the Heidelberg overstock position;                                                                                                                   

18



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

10-K.


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




19



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




If we are unable to manage acquisitions successfully it
could harm our financial results, business and prospects.








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

20



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




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






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


21



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




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




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




22



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

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




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




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




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




23



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




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


10-K,




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






24



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




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












25



---



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We face substantial competition in the sale of our
products.


direct-to


computer-to computer-to








26



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






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



Ongoing litigation could have an adverse impact on our
business.








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






27



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






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






Item 1B.     Unresolved
Staff Comments




28



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|        |           
|------- | ----------
|Item 2. | Properties



|                                            |  |                                                                                                                                                   |  |                |         |  |                   |                                                                              
|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- |  | ----------------- | -----------------------------------------------------------------------------
|                                            |  |                                                                                                                                                   |  | Square footage |         |  | Ownership status/
|Location                                    |  | Functions                                                                                                                                         |  | (approximate)  |         |  | lease expiration 
|                                            |  |                                                                                                                                                   |  |                |         |  |                  
|Hudson, New Hampshire                       |  | Corporate headquarters, manufacturing, research and development,
    marketing, demonstration activities, administrative and customer
    support |  |                | 165,000 |  |                   | Owned                                                                        
|                                           
|South Hadley, Massachusetts (two buildings) |  | Manufacturing, research and development, administrative support                                                                                   |  |                | 100,000 |  |                   | Owned                                                                        
|                                           
|Tucson, Arizona                             |  | Manufacturing, research and development, administrative supports                                                                                  |  |                | 75,000  |  |                   | Owned                                                                        
|                                           
|Des Plaines, Illinois                       |  | Distribution center                                                                                                                               |  |                | 127,000 |  |                   | Lease expires in February 2008                                               
|                                           
|Des Plaines, Illinois                       |  | Sales, service                                                                                                                                    |  |                | 10,000  |  |                   | Lease expires in October 2007                                                
|                                           
|Fresno, California                          |  | Distribution center                                                                                                                               |  |                | 13,000  |  |                   | Lease expires in July 2007                                                   
|                                           
|Harrisburg, Pennsylvania                    |  | Distribution center                                                                                                                               |  |                | 15,000  |  |                   | Lease expires in December 2006                                               
|                                           
|Mississauga, Ontario                        |  | Sales, service                                                                                                                                    |  |                | 28,000  |  |                   | Lease expires in March 2010                                                  
|                                           
|Vancouver, British Columbia                 |  | Sales, service                                                                                                                                    |  |                | 10,500  |  |                   | Lease expires in December 2007                                               
|                                           
|Heathrow, United Kingdom                    |  | European headquarters, sales, service                                                                                                             |  |                | 14,500  |  |                   | Lease expires in November 2020, with an option to cancel in
    November 2010















29



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings












PART II







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



|                                    |                |      |   |       |  |  |   |       | 
|----------------------------------- | -------------- | ---- | - | ----- |  |  | - | ----- | 
|Fiscal Year Ended December 31, 2005 |                | High |   | Low  
|                                    |                |      |   |      
|                                    | First quarter  |      | $ | 10.75 |  |  | $ | 7.27  | 
|                                    | Second quarter |      | $ | 11.75 |  |  | $ | 7.05  | 
|                                    | Third quarter  |      | $ | 13.74 |  |  | $ | 11.14 | 
|                                    | Fourth quarter |      | $ | 13.20 |  |  | $ | 8.73  | 
|                                   
|Fiscal Year Ended January 1, 2005   |                |      |   |       |  |  |   |      
|                                    |                |      |   |       |  |  |   |      
|                                    | First quarter  |      | $ | 12.20 |  |  | $ | 7.25  | 
|                                    | Second quarter |      | $ | 12.05 |  |  | $ | 9.00  | 
|                                    | Third quarter  |      | $ | 10.24 |  |  | $ | 8.15  | 
|                                    | Fourth quarter |      | $ | 10.99 |  |  | $ | 8.56  | 

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|                       |  |                     |        |   |                   |                      |        |                    |                        |  |                     |  |  |  |   | 
|---------------------- |  | ------------------- | ------ | - | ----------------- | -------------------- | ------ | ------------------ | ---------------------- |  | ------------------- |  |  |  | - | 
|                       |  |                     |        |   |                   |                      |        | (d) Maximum Number |                       
|                       |  |                     |        |   |                   |                      |        | (or Approximate    |                       
|                       |  |                     |        |   |                   | (c) Total Number of  |        |                    | Dollar value) of       | 
|                       |  |                     |        |   |                   | Shares (or Units) of |        |                    | Shares (or Units) that | 
|                       |  | (a) Total Number of |        |   | (b) Average Price |                      |        | Publicly           |                        |  | May Yet Be          | 
|                       |  | Shares (or Units)   |        |   | Paid Per Share    |                      |        | Announced          |                        |  | Purchased Under the | 
|Period                 |  | Purchased           |        |   | (or Unit)         |                      |        | Plans of Programs  |                        |  | Plans or Programs   | 
|                       |  |                     |        |   |                   |                      |        |                    |                        |  |                     | 
|Oct. 2  Nov. 1, 2005  |  |                     |       |   |                   |                      |       |                    |                        |  |                    |  |  |  |  | 
|Nov. 2  Dec. 3, 2005  |  |                     | 15,000 | * |                   | $                    | 0.01   |                    |                        |  |                    |  |  |  |  | 
|Dec. 4  Dec. 31, 2005 |  |                     |       |   |                   |                      |       |                    |                        |  |                    |  |  |  |  | 
|Total                  |  |                     | 15,000 |   |                   | $                    | 150.00 |                    |                        |  |                    |  |  |  |  | 






|  |                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Consists of 15,000 shares repurchased by us pursuant to a
    repurchase right contained in an employment agreement between us
    and one of our former executives.

Dividend Policy









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

10-K 10-K.


53-week, 52-week 52-week 53-week 52-week 52-week


31



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|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |        |  
|------------------------------------------------------------ | ------------------------------------------- | ------------------------------------- | ------- | ---------- | - | ---------- | ------- | ------------ | - | ------------ | ------ | ------ | - | - | ------ | ------ | - | - | ------- | ------ | -
|                                                             |                                             | Fiscal Year Ended                    
|                                                             |                                             |                                      
|                                                             |                                             | December 31,                          |         | January 1, |   | January 3, |         | December 28, |   | December 29,
|                                                             |                                             | 2005                                  |         | 2005(1)    |   | 2004(2)    |         | 2002(3)      |   | 2001(4)     
|                                                             |                                             |                                       |         |            |   |            |         |              |   |             
|                                                             |                                             | (In thousands, except per-share data)
|Revenue                                                      |                                             | $                                     | 274,140 |            |   | $          | 129,851 |              |   | $            | 87,232 |        |   | $ | 83,453 |        |   | $ | 102,303 |       
|                                                             | Cost of revenue                             |                                       |         | 192,144    |   |            |         | 87,387       |   |              |        | 51,151 |   |   |        | 54,639 |   |   |         | 64,395 |  
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Gross profit                                                 |                                             |                                       | 81,996  |            |   |            | 42,464  |              |   |              | 36,081 |        |   |   | 28,814 |        |   |   | 37,908  |       
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Operating expenses                                           |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             | Research and development                    |                                       |         | 7,335      |   |            |         | 6,460        |   |              |        | 7,061  |   |   |        | 9,303  |   |   |         | 11,719 |  
|                                                             | Sales, marketing and customer support       |                                       |         | 40,396     |   |            |         | 17,675       |   |              |        | 12,272 |   |   |        | 10,767 |   |   |         | 13,311 |  
|                                                             | General and administrative                  |                                       |         | 21,187     |   |            |         | 12,471       |   |              |        | 8,399  |   |   |        | 9,345  |   |   |         | 14,701 |  
|                                                             | Amortization of intangible assets           |                                       |         | 2,724      |   |            |         | 1,315        |   |              |        | 964    |   |   |        | 867    |   |   |         | 794    |  
|                                                             | Restructuring and special charges (credits) |                                       |         | 874        |   |            |         | (392         | ) |              |        | 550    |   |   |        | 5,961  |   |   |         |       |  
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Total operating expenses                                     |                                             |                                       | 72,516  |            |   |            | 37,529  |              |   |              | 29,246 |        |   |   | 36,243 |        |   |   | 40,525  |       
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Income (loss) from continuing operations                     |                                             |                                       | 9,480   |            |   |            | 4,935   |              |   |              | 6,835  |        |   |   | (7,429 | )      |   |   | (2,617  | )     
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Other income (expense), net                                  |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             | Interest, net                               |                                       |         | (2,329     | ) |            |         | (605         | ) |              |        | (376   | ) |   |        | (872   | ) |   |         | (1,136 | )
|                                                             | Other, net                                  |                                       |         | 109        |   |            |         | (265         | ) |              |        | 209    |   |   |        | 21     |   |   |         | (63    | )
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Total other income (expense), net                            |                                             |                                       | (2,220  | )          |   |            | (870    | )            |   |              | (167   | )      |   |   | (851   | )      |   |   | (1,199  | )     
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Income (loss) from continuing operations before income taxes |                                             |                                       | 7,260   |            |   |            | 4,065   |              |   |              | 6,668  |        |   |   | (8,280 | )      |   |   | (3,816  | )     
|Provision for income taxes                                   |                                             |                                       | 1,174   |            |   |            | 200     |              |   |              |       |        |   |   |       |        |   |   |        |       
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Income (loss) from continuing operations                     |                                             |                                       | 6,086   |            |   |            | 3,865   |              |   |              | 6,668  |        |   |   | (8,280 | )      |   |   | (3,816  | )     
|Income from discontinued operations                          |                                             |                                       |        |            |   |            |        |              |   |              | 1,429  |        |   |   |       |        |   |   |        |       
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Net income (loss)                                            |                                             | $                                     | 6,086   |            |   | $          | 3,865   |              |   | $            | 8,097  |        |   | $ | (8,280 | )      |   | $ | (3,816  | )     
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Earnings (loss) per share  basic                            |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             | Income (loss) from continuing operations    |                                       | $       | 0.17       |   |            | $       | 0.11         |   |              | $      | 0.20   |   |   | $      | (0.24  | ) |   | $       | (0.11  | )
|                                                             | Income from discontinued operations         |                                       |         |           |   |            |         |             |   |              |        | 0.04   |   |   |        |       |   |   |         |       |  
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             |                                             | $                                     | 0.17    |            |   | $          | 0.11    |              |   | $            | 0.24   |        |   | $ | (0.24  | )      |   | $ | (0.11   | )     
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Earnings (loss) per share  diluted                          |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             | Income (loss) from continuing operations    |                                       | $       | 0.17       |   |            | $       | 0.11         |   |              | $      | 0.20   |   |   | $      | (0.24  | ) |   | $       | (0.11  | )
|                                                             | Income from discontinued operations         |                                       |         |           |   |            |         |             |   |              |        | 0.04   |   |   |        |       |   |   |         |       |  
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             |                                             | $                                     | 0.17    |            |   | $          | 0.11    |              |   | $            | 0.24   |        |   | $ | (0.24  | )      |   | $ | (0.11   | )     
|                                                             |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|Weighted average shares outstanding                          |                                             |                                       |         |            |   |            |         |              |   |              |        |        |   |   |        |        |   |   |         |       
|                                                             | Basic                                       |                                       |         | 35,153     |   |            |         | 34,558       |   |              |        | 34,167 |   |   |        | 34,124 |   |   |         | 34,096 |  
|                                                             | Diluted                                     |                                       |         | 35,572     |   |            |         | 35,357       |   |              |        | 34,400 |   |   |        | 34,124 |   |   |         | 34,096 |  

|                                         |  |              |         |            |  |            |         |              |  |              |         |  |  |   |         |  |  |   |         | 
|---------------------------------------- |  | ------------ | ------- | ---------- |  | ---------- | ------- | ------------ |  | ------------ | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                         |  | As of       
|                                         |  |             
|                                         |  | December 31, |         | January 1, |  | January 3, |         | December 28, |  | December 29,
|                                         |  | 2005         |         | 2005       |  | 2004       |         | 2002         |  | 2001        
|                                         |  |              |         |            |  |            |         |              |  |             
|Working capital                          |  | $            | 41,392  |            |  | $          | 41,117  |              |  | $            | 42,512  |  |  | $ | 28,572  |  |  | $ | 26,741  | 
|Total assets                             |  | $            | 181,487 |            |  | $          | 171,318 |              |  | $            | 106,528 |  |  | $ | 101,796 |  |  | $ | 106,844 | 
|Total debt and capital lease obligations |  | $            | 35,643  |            |  | $          | 41,822  |              |  | $            | 14,464  |  |  | $ | 16,707  |  |  | $ | 16,398  | 
|Stockholders equity                     |  | $            | 98,633  |            |  | $          | 89,402  |              |  | $            | 80,183  |  |  | $ | 71,766  |  |  | $ | 79,985  | 






|    |                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts include results of operations of ABD International, Inc.
    (which acquired certain assets and assumed certain liabilities
    of The A.B. Dick Company on November 5, 2004) and Precision
    Lithograining Corp. (acquired July 30, 2004) for the
    periods subsequent to their respective acquisitions.
|   
|(2) | The income from discontinued operations amount relates to the
    operations of Delta V Technologies, Inc., which were shut down
    in fiscal 1999.                                                                                                                                                                 
|   
|(3) | The cost of revenue amount reported for the fiscal year ended
    December 28, 2002 includes $3.7 million of inventory
    writedowns and other charges related to discontinued programs.                                                                                                                            
|   
|(4) | The general and administrative amount reported for the fiscal
    year ended December 29, 2001 includes $2.1 million
    related to the writeoff of pre-payments made to a press supplier
    as a result of the suppliers bankruptcy petition in 2002.                                                             

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

10-K.


Overview










| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide advanced print solutions through the development and
    manufacture of digital laser imaging equipment and advanced
    technology chemistry-free printing plates, which we call
    consumables, for commercial and in-plant print providers
    targeting the growing market for high quality, fast turnaround
    short-run color printing;
|
| |  | are a leading sales and services company delivering Presstek
    digital solutions and solutions from other manufacturing
    partners through our direct sales and service force and through
    distribution partners worldwide;                                                                                                                     
|
| |  | manufacture semiconductor solid state laser diodes for Presstek
    imaging applications and for use by external
    applications; and                                                                                                                                                                                                                 
|
| |  | manufacture and distribute printing plates for conventional
    print applications.                                                                                                                                                                                                                                                                    

computer-to computer-to








33



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| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Presstekis primarily engaged in the development,
    manufacture, sale and servicing of our patented digital imaging
    systems and patented printing plate technologies as well as
    traditional, analog systems and related equipment and supplies
    for the graphic arts and printing industries, primarily the
    short-run, full-color market segment.
|
| |  | Precisionmanufactures chemistry-free digital and
    conventional printing plates for both web and sheet-fed printing
    applications for sale to Presstek and to external customers.                                                                                                                                                                           
|
| |  | Lasertelmanufactures and develops high-powered laser
    diodes for Presstek and for sale to external customers.                                                                                                                                                                                                                                                 







34



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53-week, 52-week 52-week 53-week






35



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RESULTS OF OPERATIONS




|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |      |        |        |        |        |      |      |       |      | 
|----------------------------------------------------- | ------------------------------------------- | ----------------- | ------------------------ | ------- | --------------- | ------ | ---- | --------------- | ------- | ---- | ------ | ------- | ------- | ------- | ---- | ---- | ----- | ---- | ------ | ------ | ------ | ------ | ---- | ---- | ----- | ---- | 
|                                                      |                                             | Fiscal Year Ended |                         
|                                                      |                                             |                   |                         
|                                                      |                                             | December 31, 2005 |                          |         | January 1, 2005 |        |      | January 3, 2004 |        
|                                                      |                                             |                   |                          |         |                 |        |      |                 |        
|                                                      |                                             |                   |                          | % of    |                 |        |      |                 | % of    |      |        |         |         | % of    |     
|                                                      |                                             |                   |                          | revenue |                 |        |      |                 | revenue |      |        |         |         | revenue |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |     
|Revenue                                               |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |      |        |        |        |        |      |     
|                                                      | Product                                     |                   | $                        | 225,619 |                 |        |      | 82.3            |         |      | $      | 116,788 |         |         |      | 89.9 |       |      | $      | 82,853 |        |        |      | 95.0 |      
|                                                      | Service and parts                           |                   |                          | 48,521  |                 |        |      | 17.7            |         |      |        | 13,063  |         |         |      | 10.1 |       |      |        | 4,379  |        |        |      | 5.0  |      
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|                                                      |                                             | Total revenue     |                          |         | 274,140         |        |      |                 | 100.0   |      |        |         | 129,851 |         |      |      | 100.0 |      |        |        | 87,232 |        |      |      | 100.0 |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Cost of revenue                                       |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |      |        |        |        |        |      |     
|                                                      | Cost of product                             |                   |                          | 159,282 |                 |        |      | 58.1            |         |      |        | 78,252  |         |         |      | 60.3 |       |      |        | 48,235 |        |        |      | 55.3 |      
|                                                      | Cost of service and parts                   |                   |                          | 32,862  |                 |        |      | 12.0            |         |      |        | 9,135   |         |         |      | 7.0  |       |      |        | 2,916  |        |        |      | 3.3  |      
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Total cost of revenue                                 |                                             |                   | 192,144                  |         |                 |        | 70.1 |                 |         |      | 87,387 |         |         |         | 67.3 |      |       |      | 51,151 |        |        |        | 58.6 |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Gross profit                                          |                                             |                   | 81,996                   |         |                 |        | 29.9 |                 |         |      | 42,464 |         |         |         | 32.7 |      |       |      | 36,081 |        |        |        | 41.4 |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Operating expenses                                    |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |      |        |        |        |        |      |     
|                                                      | Research and development                    |                   |                          | 7,335   |                 |        |      | 2.7             |         |      |        | 6,460   |         |         |      | 5.0  |       |      |        | 7,061  |        |        |      | 8.1  |      
|                                                      | Sales, marketing and customer support       |                   |                          | 40,396  |                 |        |      | 14.7            |         |      |        | 17,675  |         |         |      | 13.6 |       |      |        | 12,272 |        |        |      | 14.1 |      
|                                                      | General and administrative                  |                   |                          | 21,187  |                 |        |      | 7.7             |         |      |        | 12,471  |         |         |      | 9.6  |       |      |        | 8,399  |        |        |      | 9.7  |      
|                                                      | Amortization of intangible assets           |                   |                          | 2,724   |                 |        |      | 1.0             |         |      |        | 1,315   |         |         |      | 1.0  |       |      |        | 964    |        |        |      | 1.1  |      
|                                                      | Restructuring and special charges (credits) |                   |                          | 874     |                 |        |      | 0.3             |         |      |        | (392    | )       |         |      | (0.3 | )     |      |        | 550    |        |        |      | 0.6  |      
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|                                                      |                                             |                   | Total operating expenses |         |                 | 72,516 |      |                 |         | 26.4 |        |         |         | 37,529  |      |      |       | 28.9 |        |        |        | 29,246 |      |      |       | 33.6 | 
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Income from continuing operations                     |                                             |                   | 9,480                    |         |                 |        | 3.5  |                 |         |      | 4,935  |         |         |         | 3.8  |      |       |      | 6,835  |        |        |        | 7.8  |     
|Interest and other expense, net                       |                                             |                   | (2,220                   | )       |                 |        | (0.9 | )               |         |      | (870   | )       |         |         | (0.7 | )    |       |      | (167   | )      |        |        | (0.1 | )   
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Income from continuing operations before income taxes |                                             |                   | 7,260                    |         |                 |        | 2.6  |                 |         |      | 4,065  |         |         |         | 3.1  |      |       |      | 6,668  |        |        |        | 7.7  |     
|Provision for income taxes                            |                                             |                   | 1,174                    |         |                 |        | 0.4  |                 |         |      | 200    |         |         |         | 0.1  |      |       |      |       |        |        |        |     |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Income from continuing operations                     |                                             |                   | 6,086                    |         |                 |        | 2.2  |                 |         |      | 3,865  |         |         |         | 3.0  |      |       |      | 6,668  |        |        |        | 7.7  |     
|Income from discontinued operations                   |                                             |                   |                         |         |                 |        |     |                 |         |      |       |         |         |         |     |      |       |      | 1,429  |        |        |        | 1.6  |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     
|Net income                                            |                                             | $                 | 6,086                    |         |                 |        | 2.2  |                 |         | $    | 3,865  |         |         |         | 3.0  |      |       | $    | 8,097  |        |        |        | 9.3  |     
|                                                      |                                             |                   |                          |         |                 |        |      |                 |         |      |        |         |         |         |      |      |       |     

Fiscal 2005 Compared to Fiscal
2004


Revenue


Consolidated Revenue






36



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Segment Revenue






Presstek Segment










Precision Segment




37



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Lasertel Segment




Cost of Revenue


Consolidated Cost of
Revenue






Segment Cost of
Revenue








Consolidated Gross Margin






Research and Development






38



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Sales, Marketing and Customer
Support














General and Administrative






39



---



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Amortization of Intangible
Assets




Restructuring and Special Charges/
Credits






Interest and Other Income/ Expense,
Net








Provision for Income Taxes




40



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Fiscal 2004 Compared to Fiscal
2003


Revenue


Consolidated Revenue






Segment Revenue










Cost of Revenue


Consolidated Cost of
Revenue






41



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Segment Cost of
Revenue








Consolidated Gross Margin




Research and Development












Sales, Marketing and Customer
Support












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General and Administrative










Amortization of Intangible
Assets




Restructuring and Special
Charges/Credits




Interest and Other Income/Expense,
Net








Provision for Income Taxes




43



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Liquidity and Capital
Resources




ramp-up








non-U.S.


44



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Accounting for Leases








45



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Contractual Obligations




|                                                                |                               |       |        |                        |          |   |              |        |  |          |            |        |  |   |       |        | 
|--------------------------------------------------------------- | ----------------------------- | ----- | ------ | ---------------------- | -------- | - | ------------ | ------ |  | -------- | ---------- | ------ |  | - | ----- | ------ | 
|                                                                |                               |       |        | Payments Due by Period |         
|                                                                |                               |       |        |                        |         
|                                                                |                               |       |        | Less than              |          |   | One to Three |        |  | Three to |           
|                                                                |                               | Total |        |                        | One Year |   |              | Years  |  |          | Five Years |       
|                                                                |                               |       |        |                        |          |   |              |        |  |          |            |       
|Senior Secured Credit Facilities                                |                               | $     | 35,536 |                        |          | $ | 13,036       |        |  | $        | 14,000     |        |  | $ | 8,500 |       
|Estimated interest payments on Senior Secured Credit Facilities |                               |       | 4,995  |                        |          |   | 2,049        |        |  |          | 2,499      |        |  |   | 447   |       
|Capital lease, including contractual interest                   |                               |       | 118    |                        |          |   | 37           |        |  |          | 81         |        |  |   |      |       
|Minimum royalty obligation                                      |                               |       | 600    |                        |          |   | 600          |        |  |          |           |        |  |   |      |       
|Executive contractual obligations                               |                               |       | 2,164  |                        |          |   | 1,229        |        |  |          | 935        |        |  |   |      |       
|Operating leases                                                |                               |       | 5,467  |                        |          |   | 1,685        |        |  |          | 2,016      |        |  |   | 1,766 |       
|                                                                |                               |       |        |                        |          |   |              |        |  |          |            |       
|                                                                | Total contractual obligations |       | $      | 48,880                 |          |   | $            | 18,636 |  |          | $          | 19,531 |  |   | $     | 10,713 | 
|                                                                |                               |       |        |                        |          |   |              |        |  |          |            |       









Effect of Inflation




Net Operating Loss
Carryforwards




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Critical Accounting Policies and
Estimates


General






Revenue Recognition










| |         
| | --------
| | Products

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | End-User Customers  Under the Companys
    standard terms and conditions of sale of equipment, title and
    risk of loss is transferred to third-party end-user customers
    upon completion of installation and revenue is recognized
    accordingly, unless customer acceptance is uncertain or
    significant deliverables remain. Sales of other products,
    including printing plates, are recognized at the time of
    shipment.
|
| | OEM Relationships  Product revenue and any
    related royalties for products sold to companies with whom we
    have an OEM relationship are recognized at the time of shipment.
    Contracts with companies with whom we have OEM relationships do
    not include price protection or product return rights; however,
    the Company may elect, in certain circumstances, to accept
    returns of product.                              

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Distributor Relationships  Revenue for product
    sold to distributors, whereby the distributor is responsible for
    installation, is recognized at shipment. Revenue for equipment
    sold to distributors whereby the Company is responsible for
    installation, for which the installation is not deemed
    inconsequential, is recognized upon completion of installation
    and customer acceptance. Except in the case of termination of
    the contract, which includes product return rights, contracts
    with distributors do not include price protection or product
    return rights; however, the Company may elect, in certain
    circumstances, to accept returns of product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | Services and Parts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Revenue for installation services, including time and material
    contracts, is recognized as services are rendered. Revenue
    associated with maintenance or extended service agreements is
    recognized ratably over the contract period. Revenue associated
    with training and support services is recognized as services are
    rendered. Certain fees and other reimbursements are recognized
    as revenue when the related services have been performed or the
    revenue is otherwise earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | Sales Transactions Financed with
    Recourse Clauses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | From time to time the Company has engaged in sales of equipment
    that is leased by or intended to be leased by a third party
    purchaser to another party. In certain situations, the Company
    may retain recourse obligations to a financing institution
    involved in providing financing to the ultimate lessee in the
    event the lessee of the equipment defaults on its lease
    obligations. In certain such instances, the Company may
    refurbish and remarket the equipment on behalf of the financing
    company, should the ultimate lessee default on payment of the
    lease. In certain circumstances, should the resale price of such
    equipment fall below certain predetermined levels, the Company
    would, under these agreements, reimburse the financing company
    for any such shortfall in sale price. When such recourse
    obligations are of such a magnitude to indicate that substantial
    risk of ownership of the equipment has not transferred to the
    third party purchaser, the Company would record the transaction
    as a financing transaction to the extent they are material
    individually or in the aggregate to the operating results of the
    period in which the transactions occur.

Allowance for Doubtful
Accounts




Product Warranties




Inventory Valuation


first-in,




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Property, Plant and Equipment,
Net




|                               |  |              
|------------------------------ |  | -------------
|Buildings and improvements     |  | 25 - 30 years
|Production equipment and other |  | 5 - 10 years 
|Office furniture and equipment |  | 3 - 7 years  



Acquisitions




95-3, Recognition of Liabilities in Connection with a Purchase
Business Combination


Goodwill and Intangible
Assets


Accounting for the Impairment or
Disposal of Long-Lived Assets


49



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|                       |  |             
|---------------------- |  | ------------
|Trade names            |  | 2 - 3 years 
|Customer relationships |  | 7 - 10 years
|Software licenses      |  | 3 years     
|Non-compete covenants  |  | 5 years     

Accounting for Income Taxes








Recently Issued Accounting
Standards


Accounting
Changes and Error Corrections Accounting
Changes Reporting Accounting
Changes in Interim Financial Statements  An Amendment
of APB Opinion No. 28


50



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Share-Based Payment




Inventory Costs Inventory Pricing


Off-Balance Sheet
Arrangements







Item 7A.Quantitative
and Qualitative Disclosures About Market Risk








51



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PART II







|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and
    Supplementary Data

|                                                                                                                                                                                  |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                                  |  | Page
|                                                                                                                                                                                  |  |     
|Report of Independent Registered Public
    Accounting Firm                                                                                                                       |  |      | 54 | 
|Consolidated Balance Sheets as of
    December 31, 2005 and January 1, 2005                                                                                                       |  |      | 55 | 
|Consolidated Statements of Income for the
    fiscal years ended December 31, 2005, January 1, 2005
    and January 3, 2004                                                       |  |      | 56 | 
|Consolidated Statements of Changes in
    Stockholders Equity and Comprehensive Income for the
    fiscal years ended December 31, 2005, January 1, 2005
    and January 3, 2004 |  |      | 57 | 
|Consolidated Statements of Cash Flows for
    the fiscal years ended December 31, 2005, January 1,
    2005 and January 3, 2004                                                   |  |      | 58 | 
|Notes to Consolidated Financial
    Statements                                                                                                                                    |  |      | 60 | 

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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM














Internal Control 
Integrated Framework




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





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PRESSTEK, INC.





CONSOLIDATED BALANCE SHEETS




|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |         |         | 
|----------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ---------- | ------- |  | ------ | ------- | ------- | 
|                                                                  |                                                                                                                                                                                         | December 31,                               |        | January 1,
|                                                                  |                                                                                                                                                                                         | 2005                                       |        | 2005      
|                                                                  |                                                                                                                                                                                         |                                            |        |           
|ASSETS                                                            |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|Current assets                                                    |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  | Cash and cash equivalents                                                                                                                                                               |                                            | $      | 5,615      |         |  | $      | 8,739   |        
|                                                                  | Accounts receivable, net                                                                                                                                                                |                                            |        | 44,088     |         |  |        | 38,946  |        
|                                                                  | Inventories, net                                                                                                                                                                        |                                            |        | 50,083     |         |  |        | 44,229  |        
|                                                                  | Other current assets                                                                                                                                                                    |                                            |        | 1,175      |         |  |        | 1,499   |        
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  |                                                                                                                                                                                         | Total current assets                       |        |            | 100,961 |  |        |         | 93,413  | 
|Property, plant and equipment, net                                |                                                                                                                                                                                         |                                            | 45,250 |            |         |  | 47,372 |        
|Intangible assets, net                                            |                                                                                                                                                                                         |                                            | 11,974 |            |         |  | 10,460 |        
|Goodwill                                                          |                                                                                                                                                                                         |                                            | 23,089 |            |         |  | 18,888 |        
|Other noncurrent assets                                           |                                                                                                                                                                                         |                                            | 213    |            |         |  | 1,185  |        
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  |                                                                                                                                                                                         | Total assets                               |        | $          | 181,487 |  |        | $       | 171,318 | 
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                 
|LIABILITIES AND STOCKHOLDERS EQUITY                              |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|Current liabilities                                               |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  | Current portion of long-term debt and capital lease obligation                                                                                                                          |                                            | $      | 7,037      |         |  | $      | 5,500   |        
|                                                                  | Line of credit                                                                                                                                                                          |                                            |        | 6,036      |         |  |        | 6,822   |        
|                                                                  | Accounts payable                                                                                                                                                                        |                                            |        | 21,199     |         |  |        | 13,394  |        
|                                                                  | Accrued expenses                                                                                                                                                                        |                                            |        | 16,718     |         |  |        | 16,060  |        
|                                                                  | Deferred revenue                                                                                                                                                                        |                                            |        | 8,579      |         |  |        | 10,520  |        
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  |                                                                                                                                                                                         | Total current liabilities                  |        |            | 59,569  |  |        |         | 52,296  | 
|Long-term debt and capital lease obligation, less current portion |                                                                                                                                                                                         |                                            | 22,570 |            |         |  | 29,500 |        
|Deferred income taxes                                             |                                                                                                                                                                                         |                                            | 715    |            |         |  | 120    |        
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  |                                                                                                                                                                                         | Total liabilities                          |        |            | 82,854  |  |        |         | 81,916  | 
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|Commitments and contingencies (See Note 20)                       |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|Stockholders equity                                              |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  | Preferred stock, $0.01 par value, 1,000,000 shares
    authorized, no shares issued                                                                                                     |                                            |        |           |         |  |        |        |        
|                                                                  | Common stock, $0.01 par value, 75,000,000 shares
    authorized, 35,366,024 and 34,896,985 shares issued and
    outstanding at December 31, 2005 and January 1, 2005,
    respectively |                                            |        | 354        |         |  |        | 349     |        
|                                                                  | Additional paid-in capital                                                                                                                                                              |                                            |        | 106,268    |         |  |        | 102,962 |        
|                                                                  | Accumulated other comprehensive income (loss)                                                                                                                                           |                                            |        | (59        | )       |  |        | 107     |        
|                                                                  | Accumulated deficit                                                                                                                                                                     |                                            |        | (7,930     | )       |  |        | (14,016 | )      
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  |                                                                                                                                                                                         | Total stockholders equity                 |        |            | 98,633  |  |        |         | 89,402  | 
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        
|                                                                  |                                                                                                                                                                                         | Total liabilities and stockholders equity |        | $          | 181,487 |  |        | $       | 171,318 | 
|                                                                  |                                                                                                                                                                                         |                                            |        |            |         |  |        |        



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PRESSTEK, INC.


CONSOLIDATED STATEMENTS OF
INCOME




|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |        |        | 
|----------------------------------------------------- | -------------------------------------------- | ------------------------ | ------ | ---------- | ------- | ---------- | ------ | ------- | ------- | - | ------ | ------ | ------ | 
|                                                      |                                              | Fiscal year ended       
|                                                      |                                              |                         
|                                                      |                                              | December 31,             |        | January 1, |         | January 3,
|                                                      |                                              | 2005                     |        | 2005       |         | 2004      
|                                                      |                                              |                          |        |            |         |           
|Revenue                                               |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Product                                      |                          | $      | 225,619    |         |            | $      | 116,788 |         |   | $      | 82,853 |       
|                                                      | Service and parts                            |                          |        | 48,521     |         |            |        | 13,063  |         |   |        | 4,379  |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      |                                              | Total revenue            |        |            | 274,140 |            |        |         | 129,851 |   |        |        | 87,232 | 
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Cost of revenue                                       |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Product                                      |                          |        | 159,282    |         |            |        | 78,252  |         |   |        | 48,235 |       
|                                                      | Service and parts                            |                          |        | 32,862     |         |            |        | 9,135   |         |   |        | 2,916  |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      |                                              | Total cost of revenue    |        |            | 192,144 |            |        |         | 87,387  |   |        |        | 51,151 | 
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Gross profit                                          |                                              |                          | 81,996 |            |         |            | 42,464 |         |         |   | 36,081 |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Operating expenses                                    |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Research and development                     |                          |        | 7,335      |         |            |        | 6,460   |         |   |        | 7,061  |       
|                                                      | Sales, marketing and customer support        |                          |        | 40,396     |         |            |        | 17,675  |         |   |        | 12,272 |       
|                                                      | General and administrative                   |                          |        | 21,187     |         |            |        | 12,471  |         |   |        | 8,399  |       
|                                                      | Amortization of intangible assets            |                          |        | 2,724      |         |            |        | 1,315   |         |   |        | 964    |       
|                                                      | Restructuring and special charges (credits)  |                          |        | 874        |         |            |        | (392    | )       |   |        | 550    |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      |                                              | Total operating expenses |        |            | 72,516  |            |        |         | 37,529  |   |        |        | 29,246 | 
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Income from continuing operations                     |                                              |                          | 9,480  |            |         |            | 4,935  |         |         |   | 6,835  |       
|Interest and other income (expense), net              |                                              |                          | (2,220 | )          |         |            | (870   | )       |         |   | (167   | )     
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Income from continuing operations before income taxes |                                              |                          | 7,260  |            |         |            | 4,065  |         |         |   | 6,668  |       
|Provision for income taxes                            |                                              |                          | 1,174  |            |         |            | 200    |         |         |   |       |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Income from continuing operations                     |                                              |                          | 6,086  |            |         |            | 3,865  |         |         |   | 6,668  |       
|Income from discontinued operations                   |                                              |                          |       |            |         |            |       |         |         |   | 1,429  |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Net income                                            |                                              | $                        | 6,086  |            |         | $          | 3,865  |         |         | $ | 8,097  |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Earnings per common share  basic                     |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Income from continuing operations            |                          | $      | 0.17       |         |            | $      | 0.11    |         |   | $      | 0.20   |       
|                                                      | Income from discontinued operations          |                          |        |           |         |            |        |        |         |   |        | 0.04   |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      |                                              | $                        | 0.17   |            |         | $          | 0.11   |         |         | $ | 0.24   |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Earnings per common share  diluted                   |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Income from continuing operations            |                          | $      | 0.17       |         |            | $      | 0.11    |         |   | $      | 0.20   |       
|                                                      | Income from discontinued operations          |                          |        |           |         |            |        |        |         |   |        | 0.04   |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      |                                              | $                        | 0.17   |            |         | $          | 0.11   |         |         | $ | 0.24   |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|Weighted average shares outstanding                   |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Weighted average shares outstanding  basic  |                          |        | 35,153     |         |            |        | 34,558  |         |   |        | 34,167 |       
|                                                      | Dilutive effect of options                   |                          |        | 419        |         |            |        | 799     |         |   |        | 233    |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       
|                                                      | Weighed average shares outstanding  diluted |                          |        | 35,572     |         |            |        | 35,357  |         |   |        | 34,400 |       
|                                                      |                                              |                          |        |            |         |            |        |         |         |   |        |       



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PRESSTEK, INC.


CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY


AND COMPREHENSIVE INCOME




|                                                      |  |              |        |            |  |               |     |               |  |          |         |       |  |   |      |   |  |   |         |   |  |   |        |  
|----------------------------------------------------- |  | ------------ | ------ | ---------- |  | ------------- | --- | ------------- |  | -------- | ------- | ----- |  | - | ---- | - |  | - | ------- | - |  | - | ------ | -
|                                                      |  |              |        |            |  | Accumulated   |     | Retained      |  |         
|                                                      |  | Common stock |        | Additional |  | other         |     | earnings      |  |         
|                                                      |  |              |        | paid-in    |  | comprehensive |     | (accumulated  |  |         
|                                                      |  | Shares       |        | Par value  |  | capital       |     | income (loss) |  | deficit) |         | Total
|                                                      |  |              |        |            |  |               |     |               |  |          |         |      
|Balance at December 28, 2002                          |  |              | 34,125 |            |  | $             | 341 |               |  | $        | 97,403  |       |  | $ |     |   |  | $ | (25,978 | ) |  | $ | 71,766 |  
|Issuance of common stock                              |  |              | 77     |            |  |               | 1   |               |  |          | 366     |       |  |   |     |   |  |   |        |   |  |   | 367    |  
|Unrealized loss related to interest rate swaps(1)     |  |              |       |            |  |               |    |               |  |          |        |       |  |   | (47  | ) |  |   |        |   |  |   | (47    | )
|Net income                                            |  |              |       |            |  |               |    |               |  |          |        |       |  |   |     |   |  |   | 8,097   |   |  |   | 8,097  |  
|                                                      |  |              |        |            |  |               |     |               |  |          |         |       |  |   |      |   |  |   |         |   |  |   |        |  
|Balance at January 3, 2004                            |  |              | 34,202 |            |  |               | 342 |               |  |          | 97,769  |       |  |   | (47  | ) |  |   | (17,881 | ) |  |   | 80,183 |  
|Issuance of common stock                              |  |              | 695    |            |  |               | 7   |               |  |          | 5,193   |       |  |   |     |   |  |   |        |   |  |   | 5,200  |  
|Realization of loss related to interest rate swaps(1) |  |              |       |            |  |               |    |               |  |          |        |       |  |   | 47   |   |  |   |        |   |  |   | 47     |  
|Currency translation adjustments(1)                   |  |              |       |            |  |               |    |               |  |          |        |       |  |   | 107  |   |  |   |        |   |  |   | 107    |  
|Net income                                            |  |              |       |            |  |               |    |               |  |          |        |       |  |   |     |   |  |   | 3,865   |   |  |   | 3,865  |  
|                                                      |  |              |        |            |  |               |     |               |  |          |         |       |  |   |      |   |  |   |         |   |  |   |        |  
|Balance at January 1, 2005                            |  |              | 34,897 |            |  |               | 349 |               |  |          | 102,962 |       |  |   | 107  |   |  |   | (14,016 | ) |  |   | 89,402 |  
|Issuance of common stock                              |  |              | 469    |            |  |               | 5   |               |  |          | 3,306   |       |  |   |     |   |  |   |        |   |  |   | 3,311  |  
|Currency translation adjustments(1)                   |  |              |       |            |  |               |    |               |  |          |        |       |  |   | (166 | ) |  |   |        |   |  |   | (166   | )
|Net income                                            |  |              |       |            |  |               |    |               |  |          |        |       |  |   |     |   |  |   | 6,086   |   |  |   | 6,086  |  
|                                                      |  |              |        |            |  |               |     |               |  |          |         |       |  |   |      |   |  |   |         |   |  |   |        |  
|Balance at December 31, 2005                          |  |              | 35,366 |            |  | $             | 354 |               |  | $        | 106,268 |       |  | $ | (59  | ) |  | $ | (7,930  | ) |  | $ | 98,633 |  
|                                                      |  |              |        |            |  |               |     |               |  |          |         |       |  |   |      |   |  |   |         |   |  |   |        |  



|                                                                |                      |              |       |       |            |   |       |            |  |   |       |       | 
|--------------------------------------------------------------- | -------------------- | ------------ | ----- | ----- | ---------- | - | ----- | ---------- |  | - | ----- | ----- | 
|                                                                |                      | Year Ended   |      
|                                                                |                      |              |      
|                                                                |                      | December 31, |       |       | January 1, |   |       | January 3, | 
|                                                                |                      | 2005         |       |       | 2005       |   |       | 2004       | 
|                                                                |                      |              |       |       |            |   |       |            | 
|Net income                                                      |                      | $            | 6,086 |       |            | $ | 3,865 |            |  | $ | 8,097 |      
|Adjustments to accumulated other comprehensive income (loss)(1) |                      |              | (166  | )     |            |   | 154   |            |  |   | (47   | )    
|                                                                |                      |              |       |       |            |   |       |            | 
|                                                                | Comprehensive income |              | $     | 5,920 |            |   | $     | 4,019      |  |   | $     | 8,050 | 
|                                                                |                      |              |       |       |            |   |       |            | 



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PRESSTEK, INC. AND
SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH
FLOWS




|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |        |       |        |        |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------- | --------------------------------------------------- | ----- | ---------- | ------- | ------- | ----- | ------ | ------- | ------ | ----- | ------ | ------ | -
|                                                             |                                                                                       | Fiscal year ended                           
|                                                             |                                                                                       |                                             
|                                                             |                                                                                       | December 31,                                 |                         | January 1,                                          |       | January 3,
|                                                             |                                                                                       | 2005                                         |                         | 2005                                                |       | 2004      
|                                                             |                                                                                       |                                              |                         |                                                     |       |           
|Operating activities                                         |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             | Net income                                                                            |                                              | $                       | 6,086                                               |       |            | $       | 3,865   |       |        | $       | 8,097  |      
|                                                             | Less income from discontinued operations                                              |                                              |                         |                                                    |       |            |         |        |       |        |         | (1,429 | )    
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             | Income from continuing operations                                                     |                                              |                         | 6,086                                               |       |            |         | 3,865   |       |        |         | 6,668  |      
|                                                             | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                              |                         |                                                     |       |            |         |         |       |        |         |        |      
|                                                             |                                                                                       | Depreciation                                 |                         |                                                     | 8,225 |            |         |         | 7,791 |        |         |        | 7,903 |       
|                                                             |                                                                                       | Amortization of intangible assets            |                         |                                                     | 2,724 |            |         |         | 1,315 |        |         |        | 964   |       
|                                                             |                                                                                       | Restructuring and special charges (credits)  |                         |                                                     | 874   |            |         |         | (392  | )      |         |        | 550   |       
|                                                             |                                                                                       | Provision for warranty costs                 |                         |                                                     | 1,558 |            |         |         | 1,109 |        |         |        | 1,228 |       
|                                                             |                                                                                       | Provision for accounts receivable allowances |                         |                                                     | 1,397 |            |         |         | 1,949 |        |         |        | 1,358 |       
|                                                             |                                                                                       | Stock compensation expense                   |                         |                                                     | 148   |            |         |         |      |        |         |        |      |       
|                                                             |                                                                                       | Loss on disposal of assets                   |                         |                                                     | 153   |            |         |         | 24    |        |         |        |      |       
|                                                             |                                                                                       | Changes in operating assets and liabilities: |                         |                                                     |       |            |         |         |       |        |         |        |       |       
|                                                             |                                                                                       |                                              | Accounts receivable     |                                                     |       | (7,344     | )       |         |       | (6,427 | )       |        |       | (1,172 | )     
|                                                             |                                                                                       |                                              | Inventories             |                                                     |       | (7,054     | )       |         |       | (6,351 | )       |        |       | (639   | )     
|                                                             |                                                                                       |                                              | Other current assets    |                                                     |       | 214        |         |         |       | 324    |         |        |       | (510   | )     
|                                                             |                                                                                       |                                              | Other noncurrent assets |                                                     |       | (43        | )       |         |       | (304   | )       |        |       | (309   | )     
|                                                             |                                                                                       |                                              | Accounts payable        |                                                     |       | 9,218      |         |         |       | (4,517 | )       |        |       | 1,419  |       
|                                                             |                                                                                       |                                              | Accrued expenses        |                                                     |       | (2,486     | )       |         |       | 6,936  |         |        |       | (3,508 | )     
|                                                             |                                                                                       |                                              | Deferred revenue        |                                                     |       | (1,940     | )       |         |       | 1,039  |         |        |       | 300    |       
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             |                                                                                       |                                              |                         | Net cash provided by operating activities           |       |            | 11,730  |         |       |        | 6,361   |        |       |        | 14,252 |  
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|Investing activities                                         |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             | Purchase of property, plant and equipment                                             |                                              |                         | (6,129                                              | )     |            |         | (2,194  | )     |        |         | (1,344 | )    
|                                                             | Business acquisitions, net of cash acquired                                           |                                              |                         | (3,467                                              | )     |            |         | (55,468 | )     |        |         |       |      
|                                                             | Investment in patents and other intangible assets                                     |                                              |                         | (2,176                                              | )     |            |         | (387    | )     |        |         | (399   | )    
|                                                             | Proceeds from the sale of long-lived assets                                           |                                              |                         | 124                                                 |       |            |         | 5       |       |        |         |       |      
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             |                                                                                       |                                              |                         | Net cash used in investing activities               |       |            | (11,648 | )       |       |        | (58,044 | )      |       |        | (1,743 | )
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|Financing activities                                         |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             | Net proceeds from issuance of common stock                                            |                                              |                         | 3,113                                               |       |            |         | 5,200   |       |        |         | 367    |      
|                                                             | Proceeds from term loan                                                               |                                              |                         |                                                    |       |            |         | 35,000  |       |        |         | 15,000 |      
|                                                             | Repayments of term loan and capital lease                                             |                                              |                         | (5,503                                              | )     |            |         | (14,464 | )     |        |         | (7,953 | )    
|                                                             | Net borrowings (repayments) under line of credit agreement                            |                                              |                         | (786                                                | )     |            |         | 6,822   |       |        |         |       |      
|                                                             | Repayments of lease line of credit                                                    |                                              |                         |                                                    |       |            |         |        |       |        |         | (9,290 | )    
|                                                             | Debt financing costs                                                                  |                                              |                         |                                                    |       |            |         | (332    | )     |        |         |       |      
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|                                                             |                                                                                       |                                              |                         | Net cash provided by (used in) financing activities |       |            | (3,176  | )       |       |        | 32,226  |        |       |        | (1,876 | )
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                       |                                              | (30                     | )                                                   |       |            |        |         |       |        |        |       
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|Net increase (decrease) in cash and cash equivalents         |                                                                                       |                                              | (3,124                  | )                                                   |       |            | (19,457 | )       |       |        | 10,633  |       
|Cash and cash equivalents, beginning of period               |                                                                                       |                                              | 8,739                   |                                                     |       |            | 28,196  |         |       |        | 17,563  |       
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       
|Cash and cash equivalents, end of period                     |                                                                                       | $                                            | 5,615                   |                                                     |       | $          | 8,739   |         |       | $      | 28,196  |       
|                                                             |                                                                                       |                                              |                         |                                                     |       |            |         |         |       |        |         |       

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|                                                                           |                                             |                                                                                                       |   |            |        |            |   |     |         |   |   |     |  | 
|-------------------------------------------------------------------------- | ------------------------------------------- | ----------------------------------------------------------------------------------------------------- | - | ---------- | ------ | ---------- | - | --- | ------- | - | - | --- |  | 
|                                                                           |                                             | Fiscal year ended                                                                                    
|                                                                           |                                             |                                                                                                      
|                                                                           |                                             | December 31,                                                                                          |   | January 1, |        | January 3,
|                                                                           |                                             | 2005                                                                                                  |   | 2005       |        | 2004      
|                                                                           |                                             |                                                                                                       |   |            |        |           
|Supplemental disclosure of cash flow information                           |                                             |                                                                                                       |   |            |        |            |   |     |         |   |   |    
|                                                                           | Cash paid for interest                      |                                                                                                       | $ | 2,459      |        |            | $ | 923 |         |   | $ | 707 | 
|                                                                           | Cash paid for income taxes                  |                                                                                                       | $ | 327        |        |            | $ |    |         |   | $ |    | 
|Supplemental disclosure of cash flows related to business
    acquisitions |                                             |                                                                                                       |   |            |        |            |   |     |         |   |   |    
|                                                                           | The acquisitions are summarized as follows: |                                                                                                       |   |            |        |            |   |     |         |   |   |     | 
|                                                                           |                                             | Fair value of assets acquired and adjustments to final purchase
    price allocations, excluding cash |   | $          | 2,830  |            |   | $   | 79,497  |   |   |     |  | 
|                                                                           |                                             | Payments in connection with the acquisitions, net of cash
    acquired                                |   |            | (3,467 | )          |   |     | (55,468 | ) |   |     |  | 
|                                                                           |                                             |                                                                                                       |   |            |        |            |   |     |         |   |   |    
|                                                                           |                                             | Liabilities assumed and adjustments to final purchase price
    allocations                           |   | $          | (637   | )          |   | $   | 24,029  |   |   |     |  | 
|                                                                           |                                             |                                                                                                       |   |            |        |            |   |     |         |   |   |    

Supplemental disclosure of non-cash investing and
financing activities




|                               |                                  |                                |   |       |       |  |  |  |  |  |  |  |  | 
|------------------------------ | -------------------------------- | ------------------------------ | - | ----- | ----- |  |  |  |  |  |  |  |  | 
|                               |                                  | Fiscal year                    |   |       |       | 
|                               |                                  | ended                          |   |       |       | 
|                               |                                  | December 31,                   |   |       |       | 
|                               |                                  | 2005                           |   |       |       | 
|                               |                                  |                                |   |       |       | 
|Consideration by the Company   |                                  |                                |   |       |       |  |  |  |  |  |  | 
|                               | Accounts receivable              |                                | $ | 888   |       |  |  |  |  |  |  |  | 
|                               | Other noncurrent assets          |                                |   | 920   |       |  |  |  |  |  |  |  | 
|                               |                                  |                                |   |       |       |  |  |  |  |  |  | 
|                               |                                  | Total non-cash consideration   |   | $     | 1,808 |  |  |  |  |  |  |  |  | 
|                               |                                  |                                |   |       |       |  |  |  |  |  |  | 
|Assets received by the Company |                                  |                                |   |       |       |  |  |  |  |  |  | 
|                               | Patents                          |                                | $ | 1,677 |       |  |  |  |  |  |  |  | 
|                               | Customer contracts/customer list |                                |   | 131   |       |  |  |  |  |  |  |  | 
|                               |                                  |                                |   |       |       |  |  |  |  |  |  | 
|                               |                                  | Total non-cash assets received |   | $     | 1,808 |  |  |  |  |  |  |  |  | 
|                               |                                  |                                |   |       |       |  |  |  |  |  |  | 



|                                                    |                                                     |                                                                 |     |     |    |  |  |  |  |  |  |  |  | 
|--------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------------------- | --- | --- | -- |  |  |  |  |  |  |  |  | 
|                                                    | Capital lease financing entered into by the Company |                                                                 |     |     |    |  |  |  |  |  |  |  | 
|                                                    |                                                     | Current portion of long-term debt and capital lease obligations |     | $   | 40 |  |  |  |  |  |  |  |  | 
|                                                    |                                                     | Long-term debt and capital lease obligations                    |     |     | 70 |  |  |  |  |  |  |  |  | 
|                                                    |                                                     |                                                                 |     |     |    |  |  |  |  |  |  | 
|                                                    |                                                     | $                                                               | 110 |     |    |  |  |  |  |  |  | 
|                                                    |                                                     |                                                                 |     |     |    |  |  |  |  |  |  | 
|Asset financed through capital lease by the Company |                                                     |                                                                 |     |     |    |  |  |  |  |  |  | 
|                                                    | Property, plant and equipment                       |                                                                 | $   | 110 |    |  |  |  |  |  |  |  | 
|                                                    |                                                     |                                                                 |     |     |    |  |  |  |  |  |  | 



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PRESSTEK, INC.





NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS




|   |                       
|-- | ----------------------
|1. | NATURE OF THE BUSINESS





|   |                                               
|-- | ----------------------------------------------
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES

Principles of Consolidation and
Basis of Presentation






direct-to


53-week, 52-week 52-week 53-week


Use of Estimates




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Revenue Recognition










| |         
| | --------
| | Products

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | End-User Customers  Under the Companys
    standard terms and conditions of sale of equipment, title and
    risk of loss is transferred to third-party end-user customers
    upon completion of installation and revenue is recognized
    accordingly, unless customer acceptance is uncertain or
    significant deliverables remain. Sales of other products,
    including printing plates, are recognized at the time of
    shipment.                                                                                                                                                                                                                                  
|
| |  | OEM Relationships  Product revenue and any
    related royalties for products sold to companies with whom we
    have an OEM relationship are recognized at the time of shipment.
    Contracts with companies with whom we have OEM relationships do
    not include price protection or product return rights; however,
    the Company may elect, in certain circumstances, to accept
    returns of product.                                                                                                                                                                                                                                                                
|
| |  | Distributor Relationships  Revenue for product
    sold to distributors, whereby the distributor is responsible for
    installation, is recognized at shipment. Revenue for equipment
    sold to distributors whereby the Company is responsible for
    installation, for which the installation is not deemed
    inconsequential, is recognized upon completion of installation.
    Except in the case of termination of the contract, which
    includes product return rights, contracts with distributors do
    not include price protection or product return rights; however,
    the Company may elect, in certain circumstances, to accept
    returns of product.



| |                       
| | ----------------------
| | Services and
    Parts

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenue for installation services, including time and material
    contracts, is recognized as services are rendered. Revenue
    associated with maintenance or extended service agreements is
    recognized ratably over the contract period. Revenue associated
    with training and support services is recognized as services are
    rendered. Certain fees and other reimbursements are recognized
    as revenue when the related services have been performed or the
    revenue is otherwise earned.



| |                                                      
| | -----------------------------------------------------
| | Sales Transactions Financed with
    Recourse Clauses

| |  |                                                                                                                                                                                                                                            
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | From time to time the Company has engaged in sales of equipment
    that is leased by or intended to be leased by a third party
    purchaser to another party. In certain situations, the Company
    may retain recourse obligations to a

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financing institution involved in providing financing to the
    ultimate lessee in the event the lessee of the equipment
    defaults on its lease obligations. In certain such instances,
    the Company may refurbish and remarket the equipment on behalf
    of the financing company, should the ultimate lessee default on
    payment of the lease. In certain circumstances, should the
    resale price of such equipment fall below certain predetermined
    levels, the Company would, under these agreements, reimburse the
    financing company for any such shortfall in sale price. When
    such recourse obligations are of such a magnitude to indicate
    that substantial risk of ownership of the equipment has not
    transferred to the third party purchaser, the Company would
    record the transaction as a financing transaction to the extent
    they are material individually or in the aggregate to the
    operating results of the period in which the transactions occur.

Fair Value of Financial
Instruments




Cash and Cash
Equivalents




Concentration of Credit
Risk




Accounts Receivable, Net of
Allowance for Doubtful Accounts




Inventories, Net


first-in,


Property, Plant and Equipment,
Net




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|                               |  |              
|------------------------------ |  | -------------
|Buildings and improvements     |  | 25 - 30 years
|Production equipment and other |  | 5 - 10 years 
|Office furniture and equipment |  | 3 - 7 years  



Acquisitions




95-3, Recognition of Liabilities in Connection with a Purchase
Business Combination


Intangible Assets and
Goodwill












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##### Table of Contents





|                       |  |             
|---------------------- |  | ------------
|Trade names            |  | 2 - 3 years 
|Customer relationships |  | 7 - 10 years
|Software licenses      |  | 3 years     
|Non-compete covenants  |  | 5 years     

Goodwill and Other Intangible Assets


Impairment of Goodwill and
Long-Lived Assets




Accounting for the Impairment or
Disposal of Long-Lived Assets


Product Warranties




Research and Development
Costs




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##### Table of Contents



Advertising Costs




Income Taxes








Stock-Based
Compensation


, Accounting for Stock
Issued to Employees Accounting for Stock-Based
Compensation




|                                                                                                                                                |         |        |        |      |        |   |        |        |  |   |        |      | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------ | ------ | ---- | ------ | - | ------ | ------ |  | - | ------ | ---- | 
|                                                                                                                                                |         | Fiscal |        |      | Fiscal |   |        | Fiscal | 
|                                                                                                                                                |         | 2005   |        |      | 2004   |   |        | 2003   | 
|                                                                                                                                                |         |        |        |      |        |   |        |        | 
|Net income, as reported                                                                                                                         |         | $      | 6,086  |      |        | $ | 3,865  |        |  | $ | 8,097  |     
|Add: stock-based compensation expense recognized                                                                                                |         |        | 148    |      |        |   |       |        |  |   |       |     
|Deduct: total stock-based employee compensation determined under
    the fair-value-based method for all awards, net of related tax
    effects |         |        | (4,011 | )    |        |   | (2,074 | )      |  |   | (2,942 | )   
|                                                                                                                                                |         |        |        |      |        |   |        |        | 
|Pro forma net income                                                                                                                            |         | $      | 2,223  |      |        | $ | 1,791  |        |  | $ | 5,155  |     
|                                                                                                                                                |         |        |        |      |        |   |        |        | 
|Earnings per common share, as reported:                                                                                                         |         |        |        |      |        |   |        |        |  |   |        |     
|                                                                                                                                                | Basic   |        | $      | 0.17 |        |   | $      | 0.11   |  |   | $      | 0.24 | 
|                                                                                                                                                | Diluted |        | $      | 0.17 |        |   | $      | 0.11   |  |   | $      | 0.24 | 
|Pro forma earnings per common share:                                                                                                            |         |        |        |      |        |   |        |        |  |   |        |     
|                                                                                                                                                | Basic   |        | $      | 0.06 |        |   | $      | 0.05   |  |   | $      | 0.15 | 
|                                                                                                                                                | Diluted |        | $      | 0.06 |        |   | $      | 0.05   |  |   | $      | 0.15 | 

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|                                |  |        |       |   |        |  |       |        |  |  |       |  
|------------------------------- |  | ------ | ----- | - | ------ |  | ----- | ------ |  |  | ----- | -
|                                |  | Fiscal |       |   | Fiscal |  |       | Fiscal | 
|                                |  | 2005   |       |   | 2004   |  |       | 2003   | 
|                                |  |        |       |   |        |  |       |        | 
|Dividend yield                  |  |        | None  |   |        |  | None  |        |  |  | None  |  
|Expected volatility             |  |        | 55.05 | % |        |  | 63.38 | %      |  |  | 69.00 | %
|Risk-free interest rate         |  |        | 4.55  | % |        |  | 3.71  | %      |  |  | 3.51  | %
|Expected option life (in years) |  |        | 4.27  |   |        |  | 5.10  |        |  |  | 5.49  |  

Comprehensive Income




Foreign Currency
Translation




Derivatives


Accounting for Derivative
Instruments and Hedging Activities


Earnings per Share




66



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Reclassifications




Recent Accounting
Pronouncements


Accounting
Changes and Error Corrections Accounting Changes Reporting Accounting Changes in
Interim Financial Statements  An Amendment of APB
Opinion No. 28


Share-Based Payment




Inventory Costs Inventory Pricing




|   |                      
|-- | ---------------------
|3. | BUSINESS ACQUISITIONS

ABDick


computer-to


67



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68



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|                                                                                 |                                                     |                                            |        |        |        | 
|-------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------ | ------ | ------ | ------ | 
|Consideration                                                                    |                                                     |                                            |        |       
|                                                                                 | Net cash paid                                       |                                            | $      | 40,000 |       
|                                                                                 | Transaction costs                                   |                                            |        | 5,121  |       
|                                                                                 | Integration costs                                   |                                            |        | 3,029  |       
|                                                                                 |                                                     |                                            |       
|                                                                                 |                                                     | Total consideration                        |        |        | 48,150 | 
|                                                                                 |                                                     |                                            |       
|Allocation of consideration to assets acquired (liabilities
    assumed)         |                                                     |                                            |        |       
|                                                                                 | Accounts receivable                                 |                                            |        | 16,930 |       
|                                                                                 | Inventories                                         |                                            |        | 21,172 |       
|                                                                                 | Other current assets                                |                                            |        | 646    |       
|                                                                                 | Property, plant and equipment                       |                                            |        | 1,375  |       
|                                                                                 | Other noncurrent assets                             |                                            |        | 109    |       
|                                                                                 | Accounts payable and accrued expenses               |                                            |        | (7,472 | )     
|                                                                                 | Deferred revenue                                    |                                            |        | (8,899 | )     
|                                                                                 |                                                     |                                            |       
|                                                                                 |                                                     | Fair value of net tangible assets acquired |        |        | 23,861 | 
|                                                                                 |                                                     |                                            |       
|Excess of consideration over fair value of net tangible assets
    acquired      |                                                     |                                            | 24,289 |       
|                                                                                 |                                                     |                                            |       
|Allocation of excess consideration to identifiable intangible
    assets         |                                                     |                                            |        |       
|                                                                                 | Trade names (estimated life of 3 years)             |                                            |        | 2,100  |       
|                                                                                 | Customer relationships (estimated life of 10 years) |                                            |        | 3,800  |       
|                                                                                 | Software license (estimated life of 3 years)        |                                            |        | 450    |       
|                                                                                 |                                                     |                                            |       
|                                                                                 |                                                     |                                            | 6,350  |       
|                                                                                 |                                                     |                                            |       
|Allocation of excess consideration to goodwill (deductible for
    tax purposes) |                                                     | $                                          | 17,939 |       
|                                                                                 |                                                     |                                            |       





|                                  |  |                      |       |                       |           |   |             |          |  |   |             |              |  |      |        |   |  |   |       | 
|--------------------------------- |  | -------------------- | ----- | --------------------- | --------- | - | ----------- | -------- |  | - | ----------- | ------------ |  | ---- | ------ | - |  | - | ----- | 
|                                  |  | Fiscal 2005 activity |      
|                                  |  |                      |      
|                                  |  |                      |       | Purchase accounting   |           |   |            
|                                  |  |                      |       | adjustments offset to |           |   |            
|                                  |  |                      |       | goodwill              |           |   |            
|                                  |  |                      |       |                       |           |   |            
|                                  |  | Balance              |       |                       |           |   | Reversals  |          |  |   |             | Balance      | 
|                                  |  | January 1,           |       |                       |           |   | changes in  |          |  |   |             | December 31, | 
|                                  |  | 2005                 |       |                       | Additions |   |             | estimate |  |   | Utilization |              |  | 2005 |       
|                                  |  |                      |       |                       |           |   |             |          |  |   |             |              |  |      |       
|Severance and fringe benefits     |  | $                    | 795   |                       |           | $ | 2,340       |          |  | $ | (380        | )            |  | $    | (1,513 | ) |  | $ | 1,242 | 
|Lease termination and other costs |  |                      | 703   |                       |           |   | 75          |          |  |   | (504        | )            |  |      | (179   | ) |  |   | 95    | 
|                                  |  |                      |       |                       |           |   |             |          |  |   |             |              |  |      |       
|                                  |  | $                    | 1,498 |                       |           | $ | 2,415       |          |  | $ | (884        | )            |  | $    | (1,692 | ) |  | $ | 1,337 | 
|                                  |  |                      |       |                       |           |   |             |          |  |   |             |              |  |      |       

|                                  |  |                      |   |             |  |   |             |  |            |   |   |  |  |   |       | 
|--------------------------------- |  | -------------------- | - | ----------- |  | - | ----------- |  | ---------- | - | - |  |  | - | ----- | 
|                                  |  | Fiscal 2004 activity |  
|                                  |  |                      |  
|                                  |  |                      |   | Purchase    |  |   |            
|                                  |  |                      |   | accounting  |  |   |            
|                                  |  | Balance              |   | adjustments |  |   |             |  | Balance    |  
|                                  |  | January 3,           |   | offset to   |  |   |             |  | January 1, |  
|                                  |  | 2004                 |   | goodwill    |  |   | Utilization |  | 2005       |  
|                                  |  |                      |   |             |  |   |             |  |            |  
|Severance and fringe benefits     |  | $                    |  |             |  | $ | 795         |  |            | $ |  |  |  | $ | 795   | 
|Lease termination and other costs |  |                      |  |             |  |   | 703         |  |            |   |  |  |  |   | 703   | 
|                                  |  |                      |   |             |  |   |             |  |            |   |   | 
|                                  |  | $                    |  |             |  | $ | 1,498       |  |            | $ |  |  |  | $ | 1,498 | 
|                                  |  |                      |   |             |  |   |             |  |            |   |   | 

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Precision




|                                                                                 |                                                    |                                            |       |        |        | 
|-------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------ | ----- | ------ | ------ | 
|Consideration                                                                    |                                                    |                                            |       |       
|                                                                                 | Net cash paid                                      |                                            | $     | 12,127 |       
|                                                                                 | Integration costs                                  |                                            |       | 400    |       
|                                                                                 |                                                    |                                            |      
|                                                                                 |                                                    | Total consideration                        |       |        | 12,527 | 
|                                                                                 |                                                    |                                            |      
|Allocation of consideration to assets acquired (liabilities
    assumed)         |                                                    |                                            |       |       
|                                                                                 | Accounts receivable                                |                                            |       | 2,636  |       
|                                                                                 | Inventories                                        |                                            |       | 2,695  |       
|                                                                                 | Property, plant and equipment                      |                                            |       | 6,065  |       
|                                                                                 | Accounts payable and accrued expenses              |                                            |       | (5,279 | )     
|                                                                                 |                                                    |                                            |      
|                                                                                 |                                                    | Fair value of net tangible assets acquired |       |        | 6,117  | 
|                                                                                 |                                                    |                                            |      
|Excess of consideration over fair value of net tangible assets
    acquired      |                                                    |                                            | 6,410 |       
|                                                                                 |                                                    |                                            |      
|Allocation of excess consideration to identifiable intangible
    assets         |                                                    |                                            |       |       
|                                                                                 | Customer relationships (estimated life of 7 years) |                                            |       | 900    |       
|                                                                                 | Trade names (estimated life of 2 years)            |                                            |       | 260    |       
|                                                                                 | Non-compete covenants (estimated life of 5 years)  |                                            |       | 100    |       
|                                                                                 |                                                    |                                            |      
|                                                                                 |                                                    |                                            | 1,260 |       
|                                                                                 |                                                    |                                            |      
|Allocation of excess consideration to goodwill (deductible for
    tax purposes) |                                                    | $                                          | 5,150 |       
|                                                                                 |                                                    |                                            |      



Pro forma results of
operations




|                             |  |        |         |  |        |   |         | 
|---------------------------- |  | ------ | ------- |  | ------ | - | ------- | 
|                             |  | Fiscal |         |  | Fiscal |  
|                             |  | 2004   |         |  | 2003   |  
|                             |  |        |         |  |        |  
|Revenue                      |  | $      | 290,171 |  |        | $ | 304,655 | 
|Net income                   |  | $      | 1,355   |  |        | $ | 11,930  | 
|Earnings per share (basic)   |  | $      | 0.04    |  |        | $ | 0.35    | 
|Earnings per share (diluted) |  | $      | 0.04    |  |        | $ | 0.35    | 

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|   |                        
|-- | -----------------------
|4. | DISCONTINUED OPERATIONS





|   |                                                    
|-- | ---------------------------------------------------
|5. | ACCOUNTS RECEIVABLE AND RELATED
    ALLOWANCES, NET



|                    |  |              |        |   |            |   |        |  
|------------------- |  | ------------ | ------ | - | ---------- | - | ------ | -
|                    |  | December 31, |        |   | January 1, |  
|                    |  | 2005         |        |   | 2005       |  
|                    |  |              |        |   |            |  
|Accounts receivable |  | $            | 47,495 |   |            | $ | 43,570 |  
|Less allowances     |  |              | (3,407 | ) |            |   | (4,624 | )
|                    |  |              |        |   |            |  
|                    |  | $            | 44,088 |   |            | $ | 38,946 |  
|                    |  |              |        |   |            |  



|                               |                                           |        |        |     |        |   |        |        |  |   |        |   | 
|------------------------------ | ----------------------------------------- | ------ | ------ | --- | ------ | - | ------ | ------ |  | - | ------ | - | 
|                               |                                           | Fiscal |        |     | Fiscal |   |        | Fiscal | 
|                               |                                           | 2005   |        |     | 2004   |   |        | 2003   | 
|                               |                                           |        |        |     |        |   |        |        | 
|Balance at beginning of period |                                           | $      | 4,624  |     |        | $ | 1,892  |        |  | $ | 2,167  |  
|Charged to costs and expenses  |                                           |        | 1,397  |     |        |   | 1,935  |        |  |   | 1,358  |  
|Charged to other accounts:     |                                           |        |        |     |        |   |        |        |  |   |        |  
|                               | Purchase accounting adjustments           |        |        | (30 | )      |   |        |       |  |   |        |  | 
|                               | Acquired balance in business combinations |        |        |    |        |   |        | 2,114  |  |   |        |  | 
|Deductions and write-offs      |                                           |        | (2,584 | )   |        |   | (1,317 | )      |  |   | (1,633 | )
|                               |                                           |        |        |     |        |   |        |        | 
|Balance at end of period       |                                           | $      | 3,407  |     |        | $ | 4,624  |        |  | $ | 1,892  |  
|                               |                                           |        |        |     |        |   |        |        | 



|   |                 
|-- | ----------------
|6. | INVENTORIES, NET



|                |  |              |        |  |            |   |        | 
|--------------- |  | ------------ | ------ |  | ---------- | - | ------ | 
|                |  | December 31, |        |  | January 1, |  
|                |  | 2005         |        |  | 2005       |  
|                |  |              |        |  |            |  
|Raw materials   |  | $            | 7,945  |  |            | $ | 9,424  | 
|Work in process |  |              | 8,953  |  |            |   | 5,458  | 
|Finished goods  |  |              | 33,185 |  |            |   | 29,347 | 
|                |  |              |        |  |            |  
|                |  | $            | 50,083 |  |            | $ | 44,229 | 
|                |  |              |        |  |            |  



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|   |                                       
|-- | --------------------------------------
|7. | PROPERTY, PLANT AND EQUIPMENT,
    NET



|                                          |                                              |                                   |         |        |            |   |         |        |        | 
|----------------------------------------- | -------------------------------------------- | --------------------------------- | ------- | ------ | ---------- | - | ------- | ------ | ------ | 
|                                          |                                              | December 31,                      |         |        | January 1, |  
|                                          |                                              | 2005                              |         |        | 2005       |  
|                                          |                                              |                                   |         |        |            |  
|Land and improvements                     |                                              | $                                 | 2,241   |        |            | $ | 2,352   |       
|Buildings and leasehold improvements      |                                              |                                   | 28,902  |        |            |   | 27,695  |       
|Production and other equipment            |                                              |                                   | 52,018  |        |            |   | 51,106  |       
|Office furniture and equipment            |                                              |                                   | 6,668   |        |            |   | 5,527   |       
|Construction in process                   |                                              |                                   | 3,882   |        |            |   | 918     |       
|                                          |                                              |                                   |         |        |            |  
|                                          | Total property, plant and equipment, at cost |                                   |         | 93,711 |            |   |         | 87,598 |       
|Accumulated depreciation and amortization |                                              |                                   | (48,461 | )      |            |   | (40,226 | )     
|                                          |                                              |                                   |         |        |            |  
|                                          |                                              | Net property, plant and equipment |         | $      | 45,250     |   |         | $      | 47,372 | 
|                                          |                                              |                                   |         |        |            |  









|   |                                         
|-- | ----------------------------------------
|8. | GOODWILL AND OTHER INTANGIBLE
    ASSETS



|                                                              |  |          |        |  |           |   |       |       |  |   |        | 
|------------------------------------------------------------- |  | -------- | ------ |  | --------- | - | ----- | ----- |  | - | ------ | 
|                                                              |  | Presstek |        |  | Precision |   |       | Total | 
|                                                              |  |          |        |  |           |   |       |       | 
|Balance at January 1, 2005                                    |  | $        | 13,466 |  |           | $ | 5,422 |       |  | $ | 18,888 | 
|Purchase accounting adjustments for prior period acquisitions |  |          | 4,473  |  |           |   | (272  | )     |  |   | 4,201  | 
|                                                              |  |          |        |  |           |   |       |       | 
|Balance at December 31, 2005                                  |  | $        | 17,939 |  |           | $ | 5,150 |       |  | $ | 23,089 | 
|                                                              |  |          |        |  |           |   |       |       | 



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|                                  |  |                   |        |             |                 |   |       |      |             |   |              |  |  |   |       | 
|--------------------------------- |  | ----------------- | ------ | ----------- | --------------- | - | ----- | ---- | ----------- | - | ------------ |  |  | - | ----- | 
|                                  |  | December 31, 2005 |        |             | January 1, 2005 |  
|                                  |  |                   |        |             |                 |  
|                                  |  |                   |        | Accumulated |                 |   |       |      | Accumulated |  
|                                  |  | Cost              |        |             | amortization    |   |       | Cost |             |   | amortization | 
|                                  |  |                   |        |             |                 |   |       |      |             |   |              | 
|Patents and intellectual property |  | $                 | 10,840 |             |                 | $ | 6,173 |      |             | $ | 8,135        |  |  | $ | 5,296 | 
|Trade names                       |  |                   | 2,360  |             |                 |   | 1,001 |      |             |   | 2,360        |  |  |   | 171   | 
|Customer relationships            |  |                   | 5,483  |             |                 |   | 876   |      |             |   | 4,700        |  |  |   | 117   | 
|Software licenses                 |  |                   | 450    |             |                 |   | 175   |      |             |   | 1,203        |  |  |   | 778   | 
|License agreements                |  |                   | 750    |             |                 |   | 11    |      |             |   |             |  |  |   |      | 
|Non-compete covenants             |  |                   | 100    |             |                 |   | 28    |      |             |   | 245          |  |  |   | 153   | 
|Loan origination fees             |  |                   | 332    |             |                 |   | 77    |      |             |   | 339          |  |  |   | 7     | 
|                                  |  |                   |        |             |                 |   |       |      |             |   |              | 
|                                  |  | $                 | 20,315 |             |                 | $ | 8,341 |      |             | $ | 16,982       |  |  | $ | 6,522 | 
|                                  |  |                   |        |             |                 |   |       |      |             |   |              | 



|            |  |   |       | 
|----------- |  | - | ----- | 
|Fiscal 2006 |  | $ | 3,017 | 
|Fiscal 2007 |  | $ | 2,228 | 
|Fiscal 2008 |  | $ | 1,251 | 
|Fiscal 2009 |  | $ | 1,104 | 
|Fiscal 2010 |  | $ | 941   | 
|Thereafter  |  | $ | 1,891 | 



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|   |                       
|-- | ----------------------
|9. | FINANCING ARRANGEMENTS



|               |                      |              |        |         |            |   |        |         |  
|-------------- | -------------------- | ------------ | ------ | ------- | ---------- | - | ------ | ------- | -
|               |                      | December 31, |        |         | January 1, |  
|               |                      | 2005         |        |         | 2005       |  
|               |                      |              |        |         |            |  
|Term loan      |                      | $            | 29,500 |         |            | $ | 35,000 |        
|Line of credit |                      |              | 6,036  |         |            |   | 6,822  |        
|Capital lease  |                      |              | 107    |         |            |   |       |        
|               |                      |              |        |         |            |  
|               |                      |              | 35,643 |         |            |   | 41,822 |        
|               | Less current portion |              |        | (13,073 | )          |   |        | (12,322 | )
|               |                      |              |        |         |            |  
|Long-term debt |                      | $            | 22,570 |         |            | $ | 29,500 |        
|               |                      |              |        |         |            |  











Accounting for Leases


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|     |  |   |        | 
|---- |  | - | ------ | 
|2006 |  | $ | 13,073 | 
|2007 |  | $ | 7,041  | 
|2008 |  | $ | 7,040  | 
|2009 |  | $ | 8,500  | 







|    |                 
|--- | ----------------
|10. | ACCRUED EXPENSES



|                                          |  |              |        |  |            |   |        | 
|----------------------------------------- |  | ------------ | ------ |  | ---------- | - | ------ | 
|                                          |  | December 31, |        |  | January 1, |  
|                                          |  | 2005         |        |  | 2005       |  
|                                          |  |              |        |  |            |  
|Accrued payroll and employee benefits     |  | $            | 8,266  |  |            | $ | 6,141  | 
|Accrued warranty                          |  |              | 1,483  |  |            |   | 1,472  | 
|Accrued integration costs                 |  |              | 1,337  |  |            |   | 1,498  | 
|Accrued restructuring and special charges |  |              | 482    |  |            |   | 154    | 
|Accrued royalties                         |  |              | 344    |  |            |   | 1,247  | 
|Other                                     |  |              | 4,806  |  |            |   | 5,548  | 
|                                          |  |              |        |  |            |  
|                                          |  | $            | 16,718 |  |            | $ | 16,060 | 
|                                          |  |              |        |  |            |  



|    |                                           
|--- | ------------------------------------------
|11. | ACCRUED WARRANTY AND DEFERRED
    REVENUES

Accrued Warranty






|                                                     |  |        |        |   |        |   |        |        |  |   |        |  
|---------------------------------------------------- |  | ------ | ------ | - | ------ | - | ------ | ------ |  | - | ------ | -
|                                                     |  | Fiscal |        |   | Fiscal |   |        | Fiscal | 
|                                                     |  | 2005   |        |   | 2004   |   |        | 2003   | 
|                                                     |  |        |        |   |        |   |        |        | 
|Balance at beginning of period                       |  | $      | 1,472  |   |        | $ | 935    |        |  | $ | 1,089  |  
|Accruals for warranties                              |  |        | 1,558  |   |        |   | 1,109  |        |  |   | 1,228  |  
|Assumed warranty liabilities  business acquisitions |  |        |       |   |        |   | 795    |        |  |   |       |  
|Charges to accrual for warranty costs                |  |        | (1,547 | ) |        |   | (1,367 | )      |  |   | (1,382 | )
|                                                     |  |        |        |   |        |   |        |        | 
|Balance at end of period                             |  | $      | 1,483  |   |        | $ | 1,472  |        |  | $ | 935    |  
|                                                     |  |        |        |   |        |   |        |        | 

75



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Deferred Revenues






|                         |  |              |       |  |            |   |        | 
|------------------------ |  | ------------ | ----- |  | ---------- | - | ------ | 
|                         |  | December 31, |       |  | January 1, |  
|                         |  | 2005         |       |  | 2005       |  
|                         |  |              |       |  |            |  
|Deferred service revenue |  | $            | 7,951 |  |            | $ | 8,488  | 
|Deferred product revenue |  |              | 628   |  |            |   | 2,032  | 
|                         |  |              |       |  |            |  
|                         |  | $            | 8,579 |  |            | $ | 10,520 | 
|                         |  |              |       |  |            |  



|    |                                      
|--- | -------------------------------------
|12. | RESTRUCTURING AND SPECIAL
    CHARGES









|                                  |  |                      |     |            |  |           |     |              |  |      |      |   |  |   |      |   |  |   |     | 
|--------------------------------- |  | -------------------- | --- | ---------- |  | --------- | --- | ------------ |  | ---- | ---- | - |  | - | ---- | - |  | - | --- | 
|                                  |  | Fiscal 2005 Activity
|                                  |  |                     
|                                  |  | Balance              |     |            |  | Balance  
|                                  |  | January 1,           |     | Charged to |  |           |     | December 31,
|                                  |  | 2005                 |     | Expense    |  | Reversals |     | Utilization  |  | 2005
|                                  |  |                      |     |            |  |           |     |              |  |     
|Executive contractual obligations |  | $                    | 154 |            |  | $         | 282 |              |  | $    |     |   |  | $ | (436 | ) |  | $ |    | 
|Severance and fringe benefits     |  |                      |    |            |  |           | 700 |              |  |      | (108 | ) |  |   | (110 | ) |  |   | 482 | 
|                                  |  |                      |     |            |  |           |     |              |  |      |      |   |  |   |      |   |  |   |     | 
|                                  |  | $                    | 154 |            |  | $         | 982 |              |  | $    | (108 | ) |  | $ | (546 | ) |  | $ | 482 | 
|                                  |  |                      |     |            |  |           |     |              |  |      |      |   |  |   |      |   |  |   |     | 

|                                  |  |                      |       |            |  |           |   |             |  |      |      |   |  |   |      |   |  |   |     | 
|--------------------------------- |  | -------------------- | ----- | ---------- |  | --------- | - | ----------- |  | ---- | ---- | - |  | - | ---- | - |  | - | --- | 
|                                  |  | Fiscal 2004 Activity
|                                  |  |                     
|                                  |  | Balance              |       |            |  | Balance  
|                                  |  | January 3,           |       | Charged to |  |           |   | January 1, 
|                                  |  | 2004                 |       | Expense    |  | Reversals |   | Utilization |  | 2005
|                                  |  |                      |       |            |  |           |   |             |  |     
|Executive contractual obligations |  | $                    | 699   |            |  | $         |  |             |  | $    | (76  | ) |  | $ | (469 | ) |  | $ | 154 | 
|Severance and fringe benefits     |  |                      | 356   |            |  |           |  |             |  |      | (316 | ) |  |   | (40  | ) |  |   |    | 
|                                  |  |                      |       |            |  |           |   |             |  |      |      |   |  |   |      |   |  |   |     | 
|                                  |  | $                    | 1,055 |            |  | $         |  |             |  | $    | (392 | ) |  | $ | (509 | ) |  | $ | 154 | 
|                                  |  |                      |       |            |  |           |   |             |  |      |      |   |  |   |      |   |  |   |     | 

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|                                                |  |                      |       |  |            |   |         |           |  |            |             |   |  |      |        |   |  |   |       | 
|----------------------------------------------- |  | -------------------- | ----- |  | ---------- | - | ------- | --------- |  | ---------- | ----------- | - |  | ---- | ------ | - |  | - | ----- | 
|                                                |  | Fiscal 2003 Activity |      
|                                                |  |                      |      
|                                                |  | Balance              |       |  |            |   | Balance |          
|                                                |  | December 28,         |       |  | Charged to |   |         |           |  | January 3, |            
|                                                |  | 2002                 |       |  | Expense    |   |         | Reversals |  |            | Utilization |   |  | 2004 |       
|                                                |  |                      |       |  |            |   |         |           |  |            |             |   |  |      |       
|Executive contractual obligations               |  | $                    | 1,257 |  |            | $ |        |           |  | $          |            |   |  | $    | (558   | ) |  | $ | 699   | 
|Severance and fringe benefits                   |  |                      | 262   |  |            |   | 550     |           |  |            |            |   |  |      | (456   | ) |  |   | 356   | 
|Equipment and other asset writedowns            |  |                      | 39    |  |            |   |        |           |  |            | (39         | ) |  |      |       |   |  |   |      | 
|Lease termination and other miscellaneous costs |  |                      | 167   |  |            |   |        |           |  |            |            |   |  |      | (167   | ) |  |   |      | 
|                                                |  |                      |       |  |            |   |         |           |  |            |             |   |  |      |       
|                                                |  | $                    | 1,725 |  |            | $ | 550     |           |  | $          | (39         | ) |  | $    | (1,181 | ) |  | $ | 1,055 | 
|                                                |  |                      |       |  |            |   |         |           |  |            |             |   |  |      |       





|    |                                          
|--- | -----------------------------------------
|13. | INTEREST AND OTHER INCOME AND
    EXPENSE



|                            |  |        |        |   |        |   |      |        |  |   |      |  
|--------------------------- |  | ------ | ------ | - | ------ | - | ---- | ------ |  | - | ---- | -
|                            |  | Fiscal |        |   | Fiscal |   |      | Fiscal | 
|                            |  | 2005   |        |   | 2004   |   |      | 2003   | 
|                            |  |        |        |   |        |   |      |        | 
|Interest expense            |  | $      | (2,459 | ) |        | $ | (923 | )      |  | $ | (707 | )
|Interest income             |  |        | 130    |   |        |   | 318  |        |  |   | 331  |  
|Other income (expense), net |  |        | 109    |   |        |   | (265 | )      |  |   | 209  |  
|                            |  |        |        |   |        |   |      |        | 
|                            |  | $      | (2,220 | ) |        | $ | (870 | )      |  | $ | (167 | )
|                            |  |        |        |   |        |   |      |        | 





|    |             
|--- | ------------
|14. | Income Taxes



|                           |         |        |       |     |        |   |     |        |  |   |   |   | 
|-------------------------- | ------- | ------ | ----- | --- | ------ | - | --- | ------ |  | - | - | - | 
|                           |         | Fiscal |       |     | Fiscal |   |     | Fiscal
|                           |         | 2005   |       |     | 2004   |   |     | 2003  
|                           |         |        |       |     |        |   |     |       
|Current:                   |         |        |       |     |        |   |     |        |  |   |   |  
|                           | Federal |        | $     | 175 |        |   | $   | 40     |  |   | $ |  | 
|                           | State   |        |       | 186 |        |   |     | 40     |  |   |   |  | 
|                           | Foreign |        |       | 218 |        |   |     |       |  |   |   |  | 
|                           |         |        |       |     |        |   |     |        | 
|                           |         |        | 579   |     |        |   | 80  |        |  |   |  |  
|                           |         |        |       |     |        |   |     |        | 
|Deferred:                  |         |        |       |     |        |   |     |        |  |   |   |  
|                           | Federal |        |       | 475 |        |   |     | 96     |  |   |   |  | 
|                           | State   |        |       | 120 |        |   |     | 24     |  |   |   |  | 
|                           | Foreign |        |       |    |        |   |     |       |  |   |   |  | 
|                           |         |        |       |     |        |   |     |        | 
|                           |         |        | 595   |     |        |   | 120 |        |  |   |  |  
|                           |         |        |       |     |        |   |     |        | 
|Provision for income taxes |         | $      | 1,174 |     |        | $ | 200 |        |  | $ |  |  
|                           |         |        |       |     |        |   |     |        | 



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|        |  |        |       |  |        |   |       |        |  |   |       | 
|------- |  | ------ | ----- |  | ------ | - | ----- | ------ |  | - | ----- | 
|        |  | Fiscal |       |  | Fiscal |   |       | Fiscal | 
|        |  | 2005   |       |  | 2004   |   |       | 2003   | 
|        |  |        |       |  |        |   |       |        | 
|U.S.    |  | $      | 6,778 |  |        | $ | 3,954 |        |  | $ | 8,097 | 
|Foreign |  |        | 482   |  |        |   | 111   |        |  |   |      | 
|        |  |        |       |  |        |   |       |        | 
|        |  | $      | 7,260 |  |        | $ | 4,065 |        |  | $ | 8,097 | 
|        |  |        |       |  |        |   |       |        | 





|                             |                                                    |                           |         |        |            |   |         |            |        |   |         |        |        | 
|---------------------------- | -------------------------------------------------- | ------------------------- | ------- | ------ | ---------- | - | ------- | ---------- | ------ | - | ------- | ------ | ------ | 
|                             |                                                    | December 31,              |         |        | January 1, |   |         | January 3, |       
|                             |                                                    | 2005                      |         |        | 2005       |   |         | 2004       |       
|                             |                                                    |                           |         |        |            |   |         |            |       
|Deferred tax assets          |                                                    |                           |         |        |            |   |         |            |        |   |         |       
|                             | Net operating loss carryforwards                   |                           | $       | 26,500 |            |   | $       | 29,000     |        |   | $       | 30,400 |       
|                             | Tax credits                                        |                           |         | 5,300  |            |   |         | 4,900      |        |   |         | 5,100  |       
|                             | Warranty provisions, litigation and other accruals |                           |         | 5,900  |            |   |         | 4,400      |        |   |         | 3,800  |       
|                             |                                                    |                           |         |        |            |   |         |            |       
|                             |                                                    | Gross deferred tax assets |         |        | 37,700     |   |         |            | 38,300 |   |         |        | 39,300 | 
|Deferred tax liabilities     |                                                    |                           |         |        |            |   |         |            |        |   |         |       
|                             | Amortizable and depreciable assets                 |                           |         | 715    |            |   |         | 320        |        |   |         | 100    |       
|                             | Accumulated depreciation and amortization          |                           |         | 2,000  |            |   |         | 3,900      |        |   |         | 3,300  |       
|                             |                                                    |                           |         |        |            |   |         |            |       
|                             |                                                    |                           | 34,985  |        |            |   | 34,080  |            |        |   | 35,900  |       
|Less valuation allowance     |                                                    |                           | (35,700 | )      |            |   | (34,200 | )          |        |   | (35,900 | )     
|                             |                                                    |                           |         |        |            |   |         |            |       
|Net deferred tax liabilities |                                                    | $                         | (715    | )      |            | $ | (120    | )          |        | $ |        |       
|                             |                                                    |                           |         |        |            |   |         |            |       





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|                                  |  |        |       |   |        |  |       |        |  |  |       |  
|--------------------------------- |  | ------ | ----- | - | ------ |  | ----- | ------ |  |  | ----- | -
|                                  |  | Fiscal |       |   | Fiscal |  |       | Fiscal | 
|                                  |  | 2005   |       |   | 2004   |  |       | 2003   | 
|                                  |  |        |       |   |        |  |       |        | 
|Federal statutory tax rate        |  |        | 34.0  | % |        |  | 34.0  | %      |  |  | 34.0  | %
|State tax, net of federal benefit |  |        | 2.6   |   |        |  |      |        |  |  |      |  
|Alternative minimum tax           |  |        | 2.4   |   |        |  | 1.1   |        |  |  |      |  
|Other                             |  |        | 2.0   |   |        |  |      |        |  |  |      |  
|Change in valuation allowance     |  |        | (24.8 | ) |        |  | (30.2 | )      |  |  | (34.0 | )
|                                  |  |        |       |   |        |  |       |        | 
|                                  |  |        | 16.2  | % |        |  | 4.9   | %      |  |  |      | %
|                                  |  |        |       |   |        |  |       |        | 





|    |                
|--- | ---------------
|15. | PREFERRED STOCK





|    |                                   
|--- | ----------------------------------
|16. | STOCK-BASED COMPENSATION
    PLANS







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Employee Stock Purchase
Plan




Director Stock Option
Plan






|                                 |                  |        |           |                  |   |   |      |       | 
|-------------------------------- | ---------------- | ------ | --------- | ---------------- | - | - | ---- | ----- | 
|                                 |                  |        |           | Weighted Average
|                                 |                  | Shares |           | Exercise Price  
|                                 |                  |        |           |                 
|Outstanding at December 28, 2002 |                  |        | 3,639,801 |                  |   | $ | 8.84 |      
|                                 | Granted          |        |           | 385,000          |   |   | $    | 5.84  | 
|                                 | Exercised        |        |           | (20,200          | ) |   | $    | 6.71  | 
|                                 | Canceled/expired |        |           | (552,125         | ) |   | $    | 9.83  | 
|                                 |                  |        |           |                  |   |   |      |      
|Outstanding at January 3, 2004   |                  |        | 3,452,476 |                  |   | $ | 8.36 |      
|                                 | Granted          |        |           | 76,750           |   |   | $    | 10.08 | 
|                                 | Exercised        |        |           | (663,450         | ) |   | $    | 7.53  | 
|                                 | Canceled/expired |        |           | (112,550         | ) |   | $    | 9.25  | 
|                                 |                  |        |           |                  |   |   |      |      
|Outstanding at January 1, 2005   |                  |        | 2,753,226 |                  |   | $ | 8.57 |      
|                                 | Granted          |        |           | 1,104,667        |   |   | $    | 8.83  | 
|                                 | Exercised        |        |           | (477,654         | ) |   | $    | 6.51  | 
|                                 | Canceled/expired |        |           | (278,764         | ) |   | $    | 9.92  | 
|                                 |                  |        |           |                  |   |   |      |      
|Outstanding at December 31, 2005 |                  |        | 3,101,475 |                  |   | $ | 8.86 |      
|                                 |                  |        |           |                  |   |   |      |      

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| |                                    
| | -----------------------------------
| | Options Outstanding and Exercisable

|                         |  |        |  |                  |           |                  |  |          |      |  |  |   |       | 
|------------------------ |  | ------ |  | ---------------- | --------- | ---------------- |  | -------- | ---- |  |  | - | ----- | 
|                         |  |        |  |                  |           | Weighted Average |  |         
|                         |  |        |  |                  |           | Remaining        |  | Weighted
|                         |  |        |  | Contractual Life |           | Average         
|Range of exercise prices |  | Shares |  | (Years)          |           | Exercise Price  
|                         |  |        |  |                  |           |                 
|$ 0.01 - $ 5.22          |  |        |  |                  | 186,300   |                  |  |          | 6.76 |  |  | $ | 3.99  | 
|$ 5.23 - $ 6.00          |  |        |  |                  | 575,400   |                  |  |          | 6.14 |  |  | $ | 5.27  | 
|$ 6.01 - $ 6.75          |  |        |  |                  | 303,675   |                  |  |          | 6.18 |  |  | $ | 6.34  | 
|$ 6.76 - $ 8.00          |  |        |  |                  | 322,975   |                  |  |          | 6.11 |  |  | $ | 7.34  | 
|$ 8.01 - $10.00          |  |        |  |                  | 812,425   |                  |  |          | 8.86 |  |  | $ | 8.85  | 
|$10.01 - $15.00          |  |        |  |                  | 683,200   |                  |  |          | 4.46 |  |  | $ | 12.72 | 
|$15.01 - $23.00          |  |        |  |                  | 217,500   |                  |  |          | 4.38 |  |  | $ | 16.16 | 
|                         |  |        |  |                  |           |                  |  |          |      |  |  |   |       | 
|$ 0.01 - $23.00          |  |        |  |                  | 3,101,475 |                  |  |          | 6.40 |  |  | $ | 8.86  | 
|                         |  |        |  |                  |           |                  |  |          |      |  |  |   |       | 







|                                 |                  |        |         |                  |   |   |      |      | 
|-------------------------------- | ---------------- | ------ | ------- | ---------------- | - | - | ---- | ---- | 
|                                 |                  |        |         | Weighted Average
|                                 |                  | Shares |         | Exercise Price  
|                                 |                  |        |         |                 
|Outstanding at December 28, 2002 |                  |        | 564,175 |                  |   | $ | 0.19 |     
|                                 | Granted          |        |         | 46,550           |   |   | $    | 0.15 | 
|                                 | Exercised        |        |         | (12,500          | ) |   | $    | 0.15 | 
|                                 | Canceled/expired |        |         | (54,788          | ) |   | $    | 0.32 | 
|                                 |                  |        |         |                  |   |   |      |     
|Outstanding at January 3, 2004   |                  |        | 543,437 |                  |   | $ | 0.17 |     
|                                 | Granted          |        |         | 12,750           |   |   | $    | 0.15 | 
|                                 | Exercised        |        |         |                 |   |   | $    |     | 
|                                 | Canceled/expired |        |         | (312,487         | ) |   | $    | 0.13 | 
|                                 |                  |        |         |                  |   |   |      |     
|Outstanding at January 1, 2005   |                  |        | 243,700 |                  |   | $ | 0.21 |     
|                                 | Granted          |        |         | 15,000           |   |   | $    | 0.15 | 
|                                 | Exercised        |        |         | (250             | ) |   | $    | 0.15 | 
|                                 | Canceled/expired |        |         | (8,376           | ) |   | $    | 0.60 | 
|                                 |                  |        |         |                  |   |   |      |     
|Outstanding at December 31, 2005 |                  |        | 250,074 |                  |   | $ | 0.20 |     
|                                 |                  |        |         |                  |   |   |      |     

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|    |                                                
|--- | -----------------------------------------------
|17. | BUSINESS SEGMENT AND GEOGRAPHIC
    INFORMATION





|  |                                                                                                                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Presstekis primarily engaged in the development,
    manufacture, sale and servicing of our patented digital imaging
    systems and patented printing plate technologies and related
    equipment and supplies for the graphic arts and printing
    industries, primarily serving the short-run, full-color market
    segment.
| 
| | Precisionmanufactures chemistry-free digital and
    conventional printing plates for both web and sheet-fed printing
    applications for sale to Presstek and external customers.                                                                                                                                               
| 
| | Lasertelmanufactures and develops high-powered laser
    diodes for sale to Presstek and external customers.                                                                                                                                                                                                                      

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|                                                                              |                       |                                        |                |         |         |       |         |         |         |     |        |        |        |       | 
|----------------------------------------------------------------------------- | --------------------- | -------------------------------------- | -------------- | ------- | ------- | ----- | ------- | ------- | ------- | --- | ------ | ------ | ------ | ----- | 
|                                                                              |                       | Fiscal                                 |                |         | Fiscal  |       |         | Fiscal  |        
|                                                                              |                       | 2005                                   |                |         | 2004    |       |         | 2003    |        
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|Revenue                                                                       |                       |                                        |                |         |         |       |         |         |         |     |        |       
|                                                                              | Presstek              |                                        | $              | 255,344 |         |       | $       | 118,576 |         |     | $      | 85,497 |       
|                                                                              | Precision             |                                        |                | 25,254  |         |       |         | 11,248  |         |     |        |       |       
|                                                                              | Lasertel              |                                        |                | 7,760   |         |       |         | 7,765   |         |     |        | 6,804  |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       | Total revenue, including inter-segment |                |         | 288,358 |       |         |         | 137,589 |     |        |        | 92,301 |      
|                                                                              | Inter-segment revenue |                                        |                | (14,218 | )       |       |         | (7,738  | )       |     |        | (5,069 | )     
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       | $                                      | 274,140        |         |         | $     | 129,851 |         |         | $   | 87,232 |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|Revenues from external customers                                              |                       |                                        |                |         |         |       |         |         |         |     |        |       
|                                                                              | Presstek              |                                        | $              | 255,344 |         |       | $       | 118,576 |         |     | $      | 85,497 |       
|                                                                              | Precision             |                                        |                | 15,006  |         |       |         | 8,398   |         |     |        |       |       
|                                                                              | Lasertel              |                                        |                | 3,790   |         |       |         | 2,877   |         |     |        | 1,735  |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       | $                                      | 274,140        |         |         | $     | 129,851 |         |         | $   | 87,232 |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|Income (loss) from continuing operations                                      |                       |                                        |                |         |         |       |         |         |         |     |        |       
|                                                                              | Presstek              |                                        | $              | 12,296  |         |       | $       | 9,203   |         |     | $      | 10,285 |       
|                                                                              | Precision             |                                        |                | 844     |         |       |         | (630    | )       |     |        |       |       
|                                                                              | Lasertel              |                                        |                | (3,660  | )       |       |         | (3,638  | )       |     |        | (3,450 | )     
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       | $                                      | 9,480          |         |         | $     | 4,935   |         |         | $   | 6,835  |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|Depreciation and amortization                                                 |                       |                                        |                |         |         |       |         |         |         |     |        |       
|                                                                              | Presstek              |                                        | $              | 7,842   |         |       | $       | 6,314   |         |     | $      | 6,137  |       
|                                                                              | Precision             |                                        |                | 754     |         |       |         | 299     |         |     |        |       |       
|                                                                              | Lasertel              |                                        |                | 2,353   |         |       |         | 2,493   |         |     |        | 2,730  |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       | $                                      | 10,949         |         |         | $     | 9,106   |         |         | $   | 8,867  |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|Capital expenditures and other additions to property, plant and
    equipment |                       |                                        |                |         |         |       |         |         |         |     |        |       
|                                                                              | Presstek              |                                        |                |         |         |       |         |         |         |     |        |        |       
|                                                                              |                       | Capital expenditures                   |                | $       | 3,008   |       |         | $       | 749     |     |        | $      | 1,044  |      
|                                                                              |                       | Equipment obtained under capital lease |                |         | 110     |       |         |         |        |     |        |        |       |      
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       |                                        | Total Presstek |         |         | 3,118 |         |         |         | 749 |        |        |        | 1,044 | 
|                                                                              | Precision             |                                        |                | 437     |         |       |         | 464     |         |     |        |       |       
|                                                                              | Lasertel              |                                        |                | 2,684   |         |       |         | 981     |         |     |        | 300    |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        
|                                                                              |                       | $                                      | 6,239          |         |         | $     | 2,194   |         |         | $   | 1,344  |       
|                                                                              |                       |                                        |                |         |         |       |         |         |        



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|          |  |                   |         |  |                 |   |         | 
|--------- |  | ----------------- | ------- |  | --------------- | - | ------- | 
|          |  | December 31, 2005 |         |  | January 1, 2005 |  
|          |  |                   |         |  |                 |  
|Presstek  |  | $                 | 150,491 |  |                 | $ | 138,503 | 
|Precision |  |                   | 19,186  |  |                 |   | 18,555  | 
|Lasertel  |  |                   | 11,810  |  |                 |   | 14,260  | 
|          |  |                   |         |  |                 |  
|          |  | $                 | 181,487 |  |                 | $ | 171,318 | 
|          |  |                   |         |  |                 |  



|               |  |        |         |  |        |   |         |        |  |   |        | 
|-------------- |  | ------ | ------- |  | ------ | - | ------- | ------ |  | - | ------ | 
|               |  | Fiscal |         |  | Fiscal |   |         | Fiscal | 
|               |  | 2005   |         |  | 2004   |   |         | 2003   | 
|               |  |        |         |  |        |   |         |        | 
|United States  |  | $      | 170,499 |  |        | $ | 91,230  |        |  | $ | 41,910 | 
|United Kingdom |  |        | 34,804  |  |        |   | 7,747   |        |  |   | 3,583  | 
|Canada         |  |        | 15,000  |  |        |   | 4,249   |        |  |   | 1,773  | 
|Germany        |  |        | 13,178  |  |        |   | 13,541  |        |  |   | 19,276 | 
|Japan          |  |        | 8,513   |  |        |   | 6,209   |        |  |   | 7,594  | 
|All other      |  |        | 32,146  |  |        |   | 6,875   |        |  |   | 13,096 | 
|               |  |        |         |  |        |   |         |        | 
|               |  | $      | 274,140 |  |        | $ | 129,851 |        |  | $ | 87,232 | 
|               |  |        |         |  |        |   |         |        | 



|               |  |                   |        |  |                 |   |        | 
|-------------- |  | ----------------- | ------ |  | --------------- | - | ------ | 
|               |  | December 31, 2005 |        |  | January 1, 2005 |  
|               |  |                   |        |  |                 |  
|United States  |  | $                 | 79,462 |  |                 | $ | 77,571 | 
|United Kingdom |  |                   | 682    |  |                 |   | 278    | 
|Canada         |  |                   | 382    |  |                 |   | 56     | 
|               |  |                   |        |  |                 |  
|               |  | $                 | 80,526 |  |                 | $ | 77,905 | 
|               |  |                   |        |  |                 |  



|    |                
|--- | ---------------
|18. | MAJOR CUSTOMERS









|    |                
|--- | ---------------
|19. | RELATED PARTIES





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|    |                              
|--- | -----------------------------
|20. | COMMITMENTS AND CONTINGENCIES

Commitments






|            |  |   |       | 
|----------- |  | - | ----- | 
|Fiscal 2006 |  | $ | 1,685 | 
|Fiscal 2007 |  | $ | 1,073 | 
|Fiscal 2008 |  | $ | 943   | 
|Fiscal 2009 |  | $ | 841   | 
|Fiscal 2010 |  | $ | 925   | 



Contingencies






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Litigation












|    |                              
|--- | -----------------------------
|21. | QUARTERLY RESULTS (Unaudited)

|            |                                        |                                       |   |        |         |       |   |         |        |  |              |        |  |  |   |        |  
|----------- | -------------------------------------- | ------------------------------------- | - | ------ | ------- | ----- | - | ------- | ------ |  | ------------ | ------ |  |  | - | ------ | -
|            |                                        |                                       |   |        |         | Third |   |         | Fourth | 
|            |                                        | First                                 |   |        | Second  |       |   | Quarter |        |  | Quarter      |       
|            |                                        | Quarter                               |   |        | Quarter |       |   | (2)     |        |  | (3)(4)(5)(6) |       
|            |                                        |                                       |   |        |         |       |   |         |        |  |              |       
|            |                                        | (In thousands, except per-share data) |  
|Fiscal 2005 |                                        |                                       |   |        |         |       |   |         |        |  |              |        |  |  |   |       
|            | Revenue                                |                                       | $ | 70,395 |         |       | $ | 69,720  |        |  | $            | 64,689 |  |  | $ | 69,336 |  
|            | Gross profit                           |                                       | $ | 20,142 |         |       | $ | 21,284  |        |  | $            | 19,630 |  |  | $ | 20,940 |  
|            | Net income                             |                                       | $ | 481    |         |       | $ | 2,339   |        |  | $            | 823    |  |  | $ | 2,443  |  
|            | Earnings per share  basic(1)          |                                       | $ | 0.01   |         |       | $ | 0.07    |        |  | $            | 0.02   |  |  | $ | 0.07   |  
|            | Earnings per share  diluted(1)        |                                       | $ | 0.01   |         |       | $ | 0.07    |        |  | $            | 0.02   |  |  | $ | 0.07   |  
|Fiscal 2004 |                                        |                                       |   |        |         |       |   |         |        |  |              |        |  |  |   |       
|            | Revenue                                |                                       | $ | 23,314 |         |       | $ | 22,697  |        |  | $            | 29,750 |  |  | $ | 54,090 |  
|            | Gross profit                           |                                       | $ | 8,782  |         |       | $ | 9,144   |        |  | $            | 10,003 |  |  | $ | 14,535 |  
|            | Net income (loss)                      |                                       | $ | 1,899  |         |       | $ | 1,447   |        |  | $            | 2,707  |  |  | $ | (2,188 | )
|            | Earnings (loss) per share  basic(1)   |                                       | $ | 0.06   |         |       | $ | 0.04    |        |  | $            | 0.08   |  |  | $ | (0.06  | )
|            | Earnings (loss) per share  diluted(1) |                                       | $ | 0.05   |         |       | $ | 0.04    |        |  | $            | 0.08   |  |  | $ | (0.06  | )






|    |                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Income (loss) per share is computed independently for each of
    the quarters presented; accordingly, the sum of the quarterly
    income (loss) per share may not equal the total computed for the
    year.

86



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | 2004 amounts include results of operations of Precision for the
    period subsequent to its acquisition. During this period,
    revenues attributable to Precision were $3.1 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) | 2004 amounts include results of operations of ABDick for the
    period subsequent to its acquisition. During this period,
    revenues attributable to ABDick were $24.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(4) | 2004 amounts include results of operations of Precision for the
    entire fourth quarter. During this period, revenues attributable
    to Precision were $5.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(5) | 2005 amounts reflect the effect of a change in accounting
    estimate to increase the useful lives of certain property, plant
    and equipment used by Lasertel from five to seven years. This
    change reduced depreciation expense by $0.4 million,
    increased net income by $0.3 million and increased both
    basic and diluted earnings per share by $0.01.                                                                                                                                                                                                                                                                                                                           
|   
|(6) | In the fourth quarter of fiscal 2005, the Company finalized its
    purchase accounting allocation related to the ABDick
    acquisition. Adjustments to the acquired balance sheet and to
    properly reflect integration cost accruals for this acquisition
    include $0.1 million of increases to accounts receivable,
    $1.5 million of reductions to inventories,
    $0.1 million of reductions to other current assets,
    $0.4 million of increases to accounts payable and
    $1.2 million of reductions to accrued expenses, including
    $0.9 million of reversals of integration cost accruals. In
    accordance with SFAS 141, these adjustments were offset to
    goodwill.

87



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








|         |                            
|-------- | ---------------------------
|Item 9A. | Controls and
    Procedures



10-K,




13a-15(f).








|    |                                                      
|--- | -----------------------------------------------------
|(c) | Changes in Internal Controls Over Financial Reporting



88



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM








10-K,














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





89



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##### Table of Contents






Item 9B.     Other
Information







PART III







|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of
    the Registrant










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








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










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








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



90



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##### Table of Contents






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits, Financial Statement
    Schedule

|               |  |                                                                                                                                                                    |  | 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | 
|(a)(1) and (2) |  | Financial Statements and Financial Statement Schedule                                                                                                              |  | 
|               |  | The consolidated financial statements of the Company are listed
    in the index under Part II, Item 8, of this Annual
    Report on Form 10-K.                    |  | 
|(3)  Exhibits 
|               |  | The exhibits that are filed with this Annual Report on
    Form 10-K, or that are incorporated herein by reference,
    are set forth in the Exhibit Index hereto. |  | 

91



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##### Table of Contents



SIGNATURES






| |                                      
| | -------------------------------------
| | PRESSTEK, INC.                       
|
| | /s/ Edward J. Marino                 
| |                                      
| | Edward J. Marino                     
| | President and Chief Executive Officer





|                                                 |  |                                                                                                       |  |                |  | 
|------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                        |  | Title                                                                                                 |  | Date          
|                                                 |  |                                                                                                       |  |               
|                                                
|/s/ Edward J. MarinoEdward J. Marino             |  | President, Chief Executive Officer and Director                                                       |  | March 16, 2006
|                                                
|/s/ Moosa E. MoosaMoosa E. Moosa                 |  | Executive Vice President and Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | March 16, 2006
|                                                
|/s/ John W. DreyerJohn W. Dreyer                 |  | Lead Director                                                                                         |  | March 16, 2006
|                                                
|/s/ Daniel S. EbensteinDaniel S. Ebenstein, Esq. |  | Director                                                                                              |  | March 16, 2006
|                                                
|/s/ Dr. Lawrence HowardDr. Lawrence Howard       |  | Director                                                                                              |  | March 16, 2006
|                                                
|/s/ Michael D. MoffittMichael D. Moffitt         |  | Director                                                                                              |  | March 16, 2006
|                                                
|/s/ Brian MullaneyBrian Mullaney                 |  | Director                                                                                              |  | March 16, 2006
|                                                
|/s/ Steven N. RappaportSteven N. Rappaport       |  | Director                                                                                              |  | March 16, 2006
|                                                
|/s/ Donald C.
    Waite, IIIDonald C. Waite, III |  | Director                                                                                              |  | March 16, 2006

92



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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | (a)         |  | Amended and Restated Certificate of Incorporation of Presstek,
    Inc., as amended. (Previously filed as Exhibit 3 to
    Pressteks Quarterly Report on Form 10-Q for the
    Quarter ended June 29, 1996, hereby incorporated by
    reference.)                                                                                                                                                
|        | 3  | (b)         |  | By-laws of Presstek, Inc. (Previously filed as an exhibit with
    Pressteks Form 10-K for the fiscal year ended
    December 30, 1995, filed March 29, 1996, hereby
    incorporated by reference.)                                                                                                                                                                                              
|        | 2  | (a)         |  | Stock Purchase Agreement among Presstek, Inc., Precision
    Lithograining, Inc. and SDK Realty Co. dated June 2,
    2004 (Previously filed as Exhibit 2.1 to Pressteks
    Form 8-K filed on July 30, 2004, hereby incorporated
    by reference)                                                                                                                                               
|        | 2  | (b)         |  | Asset Purchase Agreement among Presstek, Inc., Silver
    Acquisitions Corp., Paragon Corporate Holdings, Inc.,
    A.B. Dick Company, A.B. Dick Company of Canada, Ltd.
    And Interactive Media Group, Inc., dated July 13, 2004
    (Previously filed as Exhibit 2.1 to Pressteks
    Form 8-K filed on July 13, 2004, hereby incorporated
    by reference)                                  
|        | 2  | (c)         |  | Second Amendment to Asset Purchase Agreement between the Company
    and A.B. Dick Company dated November 5, 2004
    (Previously filed as Exhibit 2.1 to Pressteks
    Form 8-K filed on November 12, 2004, hereby
    incorporated by reference)                                                                                                                                                
|        | 2  | (d)         |  | Amendment to Asset Purchase Agreement between the Company and
    A.B. Dick Company dated August 20, 2004 (Previously
    filed as Exhibit 2.2 to Pressteks Form 8-K filed
    on November 12, 2004, hereby incorporated by reference)                                                                                                                                                            
|        | 10 | (a)         |  | Confidentiality Agreement between Presstek, Inc. and
    Heidelberger Druckmaschinen A.G., effective December 7,
    1989 as amended. (Previously filed as Exhibit 10(i) of
    Pressteks Annual Report on Form 10-K for the fiscal
    year ended December 31, 1989, hereby incorporated by
    reference.)                                                                                      
|        | 10 | (b)         |  | Master Agreement effective January 1, 1991, by and between
    Heidelberger Druckmaschinen Aktiengesellschaft and Presstek,
    Inc. (Previously filed as an exhibit to Pressteks
    Form 8-K, dated January 1, 1991, hereby incorporated
    by reference.)                                                                                                                                     
|        | 10 | (c)         |  | Technology License effective January 1, 1991, by and
    between Heidelberger Druckmaschinen Aktiengesellschaft and
    Presstek, Inc. (Previously filed as an exhibit to
    Pressteks Form 8-K, dated January 1, 1991,
    hereby incorporated by reference.)                                                                                                                                   
|        | 10 | (d)         |  | Memorandum of Performance No. 3 dated April 27, 1993,
    to the Master Agreement, Technology License, and Supply
    Agreement between Presstek, Inc. and Heidelberger Druckmaschinen
    Aktiengesellschaft. (Previously filed as an exhibit to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended June 30, 1993, hereby incorporated by
    reference.)                     
|        | 10 | (e)         |  | Modification to Memorandum of Performance No. 3 dated
    April 27, 1993, to the Master Agreement, Technology
    License, and Supply Agreement between Presstek, Inc. and
    Heidelberger Druckmaschinen Aktiengesellschaft. (Previously
    filed as an exhibit to Pressteks Annual report on
    Form 10-K for the fiscal year ended December 31, 1994,
    hereby incorporated by reference.)
|        | 10 | (f)*        |  | Memorandum of Understanding No. 4 dated November 9,
    1995, to the Master Agreement and Technology License and Supply
    Agreement between Presstek, Inc. and Heidelberger Druckmaschinen
    Aktiengesellschaft. (Previously filed as Exhibit 10.k to
    Pressteks Form 10-K for the fiscal year ended
    December 30, 1995, filed March 29, 1996, hereby
    incorporated by reference.)   
|        | 10 | (g)**       |  | 1991 Stock Option Plan. (Previously filed as an exhibit to
    Pressteks Annual report on Form 10-K for the fiscal
    year ended December 31, 1991, hereby incorporated by
    reference.)                                                                                                                                                                                                       
|        | 10 | (h)**       |  | 1994 Stock Option Plan. (Previously filed as an exhibit to
    Pressteks Annual report on Form 10-K for the fiscal
    year ended December 31, 1994, hereby incorporated by
    reference.)                                                                                                                                                                                                       
|        | 10 | (i)**       |  | Non-Employee Director Stock Option Plan. (Previously filed as
    Exhibit 10.0 to Pressteks Form 10-K for the
    fiscal year ended January 2, 1999, filed March 2,
    1999, hereby incorporated by reference.)                                                                                                                                                                                  
|        | 10 | (j)**       |  | 1997 Interim Stock Option Plan. (Previously filed as
    Exhibit 10.1 to Pressteks Quarterly report on
    Form 10-Q for the quarter ended September 27, 1997,
    filed November 7, 1997, hereby incorporated by reference.)                                                                                                                                                                     



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | (k)**       |  | 1998 Stock Incentive Plan. (Previously filed as Exhibit A
    to Pressteks April 23, 1998 Proxy Statement, filed
    April 24, 1998, hereby incorporated by reference.)                                                                                                                                                                                                                                                               
|        | 10 | (l)*        |  | Memorandum of Understanding No. 5 dated March 7, 1997
    between Presstek, Inc. and Heidelberger Druckmaschinen
    Aktiengesellschaft. (Previously filed as Exhibit 10(T) to
    Pressteks Annual Report on Form 10-K for the fiscal
    year ended December 28, 1996 filed March 31, 1997,
    hereby incorporated by reference.)                                                                                                  
|        | 10 | (m)*        |  | Master Supply and Distribution Agreement by and between
    Presstek, Inc. and Xerox Corporation dated September 22,
    2000. (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2000, filed November 14, 2000, hereby
    incorporated by reference.)                                                                                                         
|        | 10 | (n)         |  | Amended Master Supply and Distribution Agreement by and between
    Presstek, Inc. and Xerox Corporation dated May 11, 2001.
    (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2001, filed August 14, 2001, hereby
    incorporated by reference.)                                                                                                              
|        | 10 | (o)*        |  | Agreement between Presstek, Inc. and Adamovski
    Strojírny a.s. dated as of April 24, 2001.
    (Previously filed as Exhibit 10.2 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2001, filed August 14, 2001 hereby
    incorporated by reference.)                                                                                                                                              
|        | 10 | (p)*        |  | Settlement Agreement made as of July 13, 2001 by and
    between Heidelberger Druckmaschinen Aktiengesellschaft and
    Presstek, Inc. (Previously filed as Exhibit 10.3 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 29, 2001, filed November 13,
    2001, hereby incorporated by reference.)                                                                                                 
|        | 10 | (q)*        |  | Letter Agreement dated September 19, 2001 between Xerox
    Corporation and Presstek, Inc. amending the Amended Master
    Supply and Distribution Agreement by and among, Presstek, Inc.
    and Xerox Corporation dated May 11, 2001. (Previously filed
    as Exhibit 10.1 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 29, 2001,
    filed November 13, 2001, hereby incorporated by reference.)
|        | 10 | (r)**       |  | Resignation Agreement and General Release by and between
    Presstek, Inc. and Neil M. Rossen, dated November 14, 2001
    and effective as of December 31, 2001. (Previously filed as
    Exhibit 10.1 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended March 30, 2002, filed
    May 14, 2002, hereby incorporated by reference.)                                                                              
|        | 10 | (s)**       |  | Separation Agreement by and between Presstek, Inc. and Robert W.
    Hallman dated as of April 26, 2002, and effective as of
    April 30, 2002. (Previously filed as Exhibit 10.1 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended June 29, 2002, filed August 13, 2002,
    hereby incorporated by reference.)                                                                                              
|        | 10 | (t)*        |  | Agreement for Manufacture & Sale of Sun
    Press between Presstek, Inc. and Ryobi Limited, dated as
    of April 5, 2002. (Previously filed as Exhibit 10.4 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended June 29, 2002, filed on August 13, 2002,
    hereby incorporated by reference.)                                                                                                               
|        | 10 | (u)**       |  | 2002 Employee Stock Purchase Plan of Presstek, Inc. (Previously
    filed as Exhibit 4.3 to Pressteks Registration
    Statement on Form S-8 filed with the Commission on
    August 9, 2002, hereby incorporated by reference.)                                                                                                                                                                                                      
|        | 10 | (v)**       |  | Description of Pressteks Non-Employee Director
    Compensation Arrangements approved by Pressteks Board of
    Directors on July 17, 2002 and amended by Pressteks
    Board of Directors on December 17, 2002. (Previously filed
    as Exhibit 10(hh) to Pressteks Form 10-K for the
    fiscal year ended December 28, 2002, filed March 28,
    2003, hereby incorporated by reference.)                                      
|        | 10 | (w)**       |  | Retirement Agreement by and between Presstek, Inc. and Richard
    A. Williams dated January 7, 2003. (Previously filed as
    Exhibit 10(ll) to Pressteks Form 10-K for the
    fiscal year ended December 28, 2002, filed March 28,
    2003, hereby incorporated by reference.)                                                                                                                                                    
|        | 10 | (x)         |  | Distribution Agreement by and between Presstek, Inc. and Kodak
    Polychrome Graphics LLC dated March 18, 2003. (Previously
    filed as Exhibit 10.1 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended March 29, 2003,
    filed May 13, 2003, hereby incorporated by reference.)                                                                                                                                
|        | 10 | (y)         |  | Restated Amended Master Supply and Distribution Agreement by and
    between Presstek, Inc. and Xerox Corporation dated
    March 18, 2003. (Previously filed as Exhibit 10.1 to
    Pressteks Quarterly Report on Form 10-Q for the
    quarter ended March 29, 2003, filed May 13, 2003,
    hereby incorporated by reference.)                                                                                                     
|        | 10 | (z)**       |  | 2003 Stock Option and Incentive Plan of Presstek, Inc.
    (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    June 28, 2003, filed August 12, 2003, hereby
    incorporated by reference.)                                                                                                                                                                                    



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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | (aa)*       |  | OEM Consumables Supply Agreement by and between Presstek, Inc.
    and Heidelberg Druckmaschinen, AG., dated July 1, 2003.
    (Previously filed as Exhibit 10.1 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 27, 2003, filed November 12, 2003, hereby
    incorporated by reference.)                                                                                    
|        | 10 | (bb)*       |  | OEM Consumables Supply Agreement by and between Presstek, Inc.
    and Heidelberg U.S.A., Inc. dated July 1, 2003. (Previously
    filed as Exhibit 10.2 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                
|        | 10 | (cc)        |  | Credit Agreement by and among Presstek, Inc., Lasertel Inc.,
    Citizens Bank New Hampshire and Keybank National Association
    dated October 15, 2003. (Previously filed as
    Exhibit 10.3 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                         
|        | 10 | (dd)        |  | Revolving Note dated October 15, 2003 made by Presstek,
    Inc. in favor of Citizens Bank New Hampshire. (Previously filed
    as Exhibit 10.4 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                         
|        | 10 | (ee)        |  | Revolving Note dated October 15, 2003 made by Presstek,
    Inc. in favor of Keybank National Association. (Previously filed
    as Exhibit 10.5 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                        
|        | 10 | (ff)        |  | Term Note dated October 15, 2003 made by Presstek, Inc. in
    favor of Citizens Bank New Hampshire. (Previously filed as
    Exhibit 10.6 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                              
|        | 10 | (gg)        |  | Term Note dated October 15, 2003 made by Presstek, Inc. in
    favor of Keybank National Association. (Previously filed as
    Exhibit 10.7 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                             
|        | 10 | (hh)        |  | Swing Line Note dated October 15, 2003 made by Presstek,
    Inc. in favor of Citizens Bank New Hampshire. (Previously filed
    as Exhibit 10.8 to Pressteks Quarterly Report on
    Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                        
|        | 10 | (ii)        |  | Security Agreement by and between Presstek, Inc. and Citizens
    Bank New Hampshire dated October 15, 2003. (Previously
    filed as Exhibit 10.9 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                      
|        | 10 | (jj)        |  | Security Agreement by and between Lasertel, Inc. and Citizens
    Bank New Hampshire dated October 15, 2003. (Previously
    filed as Exhibit 10.10 to Pressteks Quarterly Report
    on Form 10-Q for the quarter ended September 27, 2003,
    filed November 12, 2003, hereby incorporated by reference.)                                                                                                     
|        | 10 | (kk)        |  | Security Agreement (Intellectual Property) by and between
    Presstek, Inc. and Citizens Bank New Hampshire dated
    October 15, 2003. (Previously filed as Exhibit 10.11
    to Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 27, 2003, filed November 12,
    2003, hereby incorporated by reference.)                                                                         
|        | 10 | (ll)        |  | Security Agreement (Intellectual Property) by and between
    Lasertel, Inc. and Citizens Bank New Hampshire dated
    October 15, 2003. (Previously filed as Exhibit 10.12
    to Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 27, 2003, filed November 12,
    2003, hereby incorporated by reference.)                                                                         
|        | 10 | (mm)        |  | Mortgage and Security Agreement between Presstek, Inc. and
    Citizens Bank New Hampshire dated October 15, 2003.
    (Previously filed as Exhibit 10.13 to Pressteks
    Quarterly Report on Form 10-Q for the quarter ended
    September 27, 2003, filed November 12, 2003, hereby
    incorporated by reference.)                                                                                           
|        | 10 | (nn)        |  | Deed of Trust, Assignment of Rents, Security Agreement and
    Fixture Filing by and among Presstek, Inc., First American Title
    Insurance Company and Citizens Bank New Hampshire dated
    October 15, 2003. (Previously filed as Exhibit 10.14
    to Pressteks Quarterly Report on Form 10-Q for the
    quarter ended September 27, 2003, filed November 12,
    2003, hereby incorporated by reference.)
|        | 10 | (oo)**      |  | Employment Agreement by and between Presstek, Inc. and Moosa E.
    Moosa dated December 31, 2003 (Previously filed as
    Exhibit 10(pp) to Pressteks Form 10-K for the
    fiscal year ended January 3, 2004, filed March 18,
    2004, hereby incorporated by reference.)                                                                                                                                     
|        | 10 | (pp)        |  | Amendment to Employment Agreement by and between Presstek, Inc.
    and Moosa E. Moosa dated January 10, 2004 (Previously filed
    as Exhibit 10(qq) to Pressteks Form 10-K for the
    fiscal year ended January 3, 2004, filed March 18,
    2004, hereby incorporated by reference.)                                                                                                                         



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##### Table of Contents



|        |      |             |  |                                                                                                                                                                                                                                                                                                                             
|------- | ---- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 10   | (qq)        |  | Debtor-in-Possession Revolving Credit Agreement by and among
    A.B. Dick Company, Paragon Corporate Holdings, Inc., KeyBank
    National Association and Presstek, Inc. dated July 13, 2004
    (Previously filed as Exhibit 10.1 to Pressteks
    Form 8-K filed on July 13, 2004, hereby incorporated
    by reference)
|        | 10   | (rr)        |  | Amended and Restated Credit Agreement among the Company, the
    Guarantors, Citizens Bank New Hampshire, KeyBank National
    Association and Bank North N.A. dated November 5, 2004
    (Previously filed as Exhibit 99.1 to Pressteks
    Form 8-K filed on November 12, 2004, hereby
    incorporated by reference)    
|        | 10   | (ss)**      |  | Employment Agreement by and between Presstek, Inc. and Susan A.
    McLaughlin dated January 24, 2005 (Previously filed as
    Exhibit 99.1 to Pressteks Form 8-K, filed
    January 28, 2005, hereby incorporated by reference.)                                                                                          
|        | 10   | (tt)**      |  | Employment Agreement by and between Presstek, Inc. and Edward J.
    Marino dated February 2, 2005 (Previously filed as
    Exhibit 99.1 to Pressteks Form 8-K , filed
    February 8, 2005, hereby incorporated by reference.)                                                                                            
|        | 10   | (uu)**      |  | Employment Agreement by and between Presstek, Inc. and Moosa E.
    Moosa dated February 2, 2005 (Previously filed as
    Exhibit 99.2 to Pressteks Form 8-K , filed
    February 8, 2005, hereby incorporated by reference.)                                                                                              
|        | 10   | (vv)**      |  | Employment Agreement by and between Presstek, Inc. and Michael
    McCarthy dated February 2, 2005 (Previously filed as
    Exhibit 10.4 to Pressteks Form 10-Q, filed
    May 12, 2005, hereby incorporated by reference.)                                                                                                
|        | 10   | (ww)**      |  | Employment Agreement by and between Presstek, Inc. and Peter E.
    Bouchard dated July 1, 2005 (Previously filed as
    Exhibit 99.1 to Pressteks Form 8-K, filed
    July 8, 2005, hereby incorporated by reference.)                                                                                                    
|        | 21.1 |             |  | Subsidiaries of the Registrant (filed herewith.)                                                                                                                                                                                                                                                                            
|        | 23.1 |             |  | Consent of BDO Seidman, LLP (filed herewith.)                                                                                                                                                                                                                                                                               
|        | 31.1 |             |  | Certification of Chief Executive Officer Pursuant to
    Section 240.13a-14 or Section 240.15d-14 of the
    Securities Exchange Act of 1934, as amended (filed and furnished
    herewith.)                                                                                                                                
|        | 31.2 |             |  | Certification of Chief Financial Officer Pursuant to
    Section 240.13a-14 or Section 240.15d-14 of the
    Securities Exchange Act of 1934, as amended (filed and furnished
    herewith.)                                                                                                                                
|        | 32.1 |             |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (filed and furnished herewith.)                                                                                                                                                              
|        | 32.2 |             |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (filed and furnished herewith.)                                                                                                                                                              






| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| | * | The SEC has granted Pressteks request of confidential
    treatment with respect to a portion of this exhibit.



|   |                                                               
|-- | --------------------------------------------------------------
|** | Denotes management employment contracts or compensatory plans.