SECURITIES AND EXCHANGE COMMISSION
 
                          Washington, D.C. 20549
                    ..................................    

                                FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934
                    ..................................

     For the fiscal year ended       Commission File Number 0-19306
         December 31, 1997

                         EXCEL TECHNOLOGY, INC.
         (Exact name of Registrant as specified in its Charter)

            Delaware                               11-2780242  
 (State or other jurisdiction of                (I.R.S. Employer
  Incorporation or Organization)               Identification No.)

         41 Research Way                        (516) 273-6900
       E. Setauket NY 11733             (Registrant's Telephone Number)
      (Address of Principal
        Executive Offices)

       Securities registered pursuant to Section 12(b) of the Act:
                                  None.
       Securities registered pursuant to Section 12(g) of the Act:
                 Common Stock, par value $.001 per share
                           (Titles of Classes)

Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

                           Yes  [X]   No  [ ]

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

The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $118,332,130 based on the average bid and ask price as
reported by NASDAQ on March 19,1998.

The number of shares of the Registrant's common stock outstanding as of
March 18, 1998 was: 11,336,667.  


                  DOCUMENTS INCORPORATED BY REFERENCE:
  Proxy Statement to be filed in connection with the Registrant's 1998 
Annual Meeting of Stockholders (incorporated by reference under Part III)

                                 PART I
                                 ......

	This Annual Report on Form 10-K (and other reports issued by the 
Company and its officers from time to time) contain certain statements 
concerning the Company's future results, future performance, intentions, 
objectives, plans, and expectations that are or may be deemed to be 
"forward-looking statements".  Such statements are made in reliance upon 
safe harbor provisions of the Private Securities Litigation Reform Act of 
1995.  The Company's actual results may differ significantly from the 
results discussed in the forward looking statements.  Such forward 
looking statements are subject to a number of known and unknown risks and 
uncertainties that, in addition to general economic and business 
conditions, could cause the Company's actual result, performance, and 
achievements to differ materially from those described or implied in the 
forward looking statements.  Factors that could cause or contribute to 
such differences include, but are not limited to those discussed below 
and in  "Management's Discussion and Analysis of Financial Condition and 
Results of Operations."

ITEM 1.  BUSINESS

General

Excel Technology, Inc. (the "Company") designs, develops, 
manufactures and markets laser systems and electro-optical components for 
industry, science, and medicine.  The word laser is an acronym for "Light 
Amplification by Stimulated Emission of Radiation."  The essence of the 
laser is the ability of a photon (light energy) to stimulate the emission 
of other photons, each having the same wavelength (color) and direction 
of travel.  The laser beam is so concentrated and powerful that it can 
produce power densities millions of times more intense than that found on 
the surface of the sun, capable of cutting, welding and marking 
industrial products, yet can be precisely controlled and directed, 
capable of performing delicate surgery on humans.

Since 1992, the Company has focused its business activities on two 
basic business strategies: (a) diversification and (b) industry 
consolidation.  Through its diversification strategy, the Company expects 
to manufacture and market core solid state laser and optical products and 
systems tailored to a variety of industrial, scientific and medical 
applications.   The Company believes that its acquisition strategy should 
provide added opportunity for growth.

In October 1992, the Company acquired Quantronix Corporation, a 
Delaware corporation ("Quantronix"), for Common Stock and warrants of the 
Company valued at approximately $9 million, in a transaction pursuant to 
which Quantronix became a wholly-owned subsidiary of the Company.  The 
acquisition of Quantronix and its wholly-owned subsidiaries, Control 
Laser Corporation, located in Orlando, Florida ("Control Laser"), 
Quantronix GmbH, located  in Germany ("Quantronix GmbH"), and The Optical 
Corporation, located in Oxnard, California ("Optical"), provided the 
Company with its industrial, scientific and semiconductor product lines, 
supplemented the Company's dental products and provided the Company with 
a significant revenue base as well as established manufacturing, 
engineering, marketing and customer service capabilities. 

On February 14, 1995, the Company acquired Cambridge Technology, 
Inc. ("Cambridge"), located in Cambridge, Massachusetts.  Cambridge is 
engaged primarily in the manufacture of laser scanners, essential 
components to moving a laser beam with precision at a specified speed.  
These products  have both industrial and consumer applications, such as 
laser marking and etching, high density laser printing and writing, 
digitized x-ray imaging and entertainment laser light shows and displays. 
 This acquisition allowed the Company to expand into new markets as well 
as enhance its present market position in the industrial business.  The 
Company acquired all of the outstanding shares of capital stock of 
Cambridge in exchange for $4.75 million, consisting of $4.5 million in 
cash (of which $3.5 million was paid on February 14, 1995) and 
$250 thousand in shares of Common Stock (which was paid on February 14, 
1995).  Of the balance due, $600 thousand was paid in March 1996 and $400 
thousand was paid in February 1997.  Pursuant to the acquisition 
agreement, additional payments were  made due to Cambridge meeting 
certain performance goals during the first two fiscal years after the 
acquisition.  In connection therewith, the Company paid $731 thousand for 
1995 and $323 thousand for 1996.

On October 2, 1995, the Company acquired the Photo Research Division 
("The  Photo Research Division") of Kollmorgen Instruments Corporation 
("Kollmorgen").  The Photo Research Division is engaged primarily in the 
business of developing, manufacturing and marketing photometric and 
spectroradiometer instruments and systems (the "Business").  In 
accordance with an Asset Purchase Agreement, the Company purchased 
substantially all of the net assets and properties utilized in connection 
with the Business, in consideration of $3.5 million in cash.  The Company 
utilized its own cash to finance the acquisition.  Subsequently, the 
Company obtained a $3.5 million five-year term loan, from U.S.Trust (the 
"Bank"), the proceeds of which were utilized by the Company to replenish 
its own cash used in financing the acquisition.

Excel was organized under the laws of Delaware in 1985.

CURRENT PRODUCTS AND APPLICATIONS

Industrial
    ..........
Control Laser, the Company's subsidiary located in Orlando, Florida, 
designs, manufactures and markets industrial laser systems for material 
marking and engraving.  Control Laser contributed approximately 34% of 
the Company's total sales in 1997.   With more than 1,650 systems 
installed worldwide, including 1,300 in North America, Control Laser had 
over 40% of the domestic market share in 1997.  Control Laser's InstaMark 
laser systems allow for permanent, high speed, computer-controlled 
product marking  for the aerospace, automotive, medical device, 
electronic, tooling and consumer industries.  Customers include 
Honeywell, ITT Bosch, Nissan, Ford, Kodak, General Electric and General 
Motors.  Control Laser's marking products can be used manually or can be 
utilized as part of an automated assembly line system.  During 1997, 
Control Laser introduced a new marking system designed to "mark on the 
fly" for the packaging industry.

Scanners
    .........

Cambridge, the Company's subsidiary based in Cambridge, 
Massachusetts, manufactures high speed mirror positioning components and 
sub-systems used to direct laser energy. Cambridge contributed 
approximately 18% to the Company's sales in 1997.  These optical scanning 
products are key to a variety of applications where visible or invisible 
laser energy is positioned quickly and precisely.  An increasingly broad 
base of laser system applications are served, by these products including 
laser marking, machining, heat treating, welding and cutting, 
semiconductor wafer inspection and processing, laser entertainment, 
corporate advertising and a growing number of laser based medical 
applications, which include digital radiography, skin resurfacing, eye 
treatment and others.  With patented designs, Cambridge is a technology 
leader in galvanometer-based optical scanning and supports research and 
development of new applications through a wide range of academic 
institutions, private firms and government agencies.

Semiconductor
 .............

Quantronix, the  Company's subsidiary located in Hauppauge, New 
York, manufactures and markets Defect Repair Systems (DRS) which are 
laser based systems for use in semiconductor production.  The DRS 
provides a means to repair defects on the complex photomasks used to 
produce integrated circuits.

A pioneer in this field, Quantronix has provided laser mask repair 
systems to the industry since 1975.  Currently, the DRSII Model 840e 
system is the industry standard, with over 100 installed Quantronix 
repair systems in operation. 

In recognition of the demand for smaller, denser features on next 
generation integrated circuits, the Company has embarked on a development 
program to produce the next generation machines (DRS II Model 850) that 
will support circuit production through the 0.35 microns, 0.25 microns 
and 0.18 microns design generations, promoting product viability in the 
future. 

The initial shipment of a DRSII 850 system took place in November of 
1996.  The Company is currently working on a new updated machine to be 
called the DRS II Model 855.

The DRSII 850 and DRSII 855 are being developed in close contact 
with leaders within the semiconductor industry.  This Quantronix product 
line accounted for approximately 10% of the Company's total sales in 
1997.

Scientific and OEM Products
    ............................
 
Quantronix also manufactures and markets solid-state lasers for 
science, industry and OEM uses.  On a worldwide basis, scientific lasers 
represent one of the most stable and long-established laser markets.  
Scientific lasers are used by chemists, biologists, physicists and other 
scientists and engineers.  In this market, end-users are generally 
familiar with the various product specifications, features and 
reliability, which are the major factors  in choosing between competing 
products. 

Quantronix's current scientific line includes the Series 4800 
Ultrafast Amplifiers and the Series 527 High Power Green pulsed lasers.  
Quantronix's Ultrafast Amplifiers incorporate a material called Titanium 
Sapphire ("Ti:Sapphire") which has created opportunities for a greater 
volume of research than previous materials.  Ultrafast Amplifiers  
deliver high energy short pulses on the picosecond time scale.  (A 
picosecond is one trillionth of a second.)  These short pulses enable the 
investigation of a wide range of physical, chemical and biological 
phenomena.

The system utilizes the Nd:YLF laser to produce high energy pulses 
at a rate of 1kHz (1000 pulses per second).  These pulses drive the 
Ti:Sapphire Amplifier that can then pump other optical systems (also 
marketed by Quantronix) which deliver tunable light from Ultraviolet to 
Infrared regions of the spectrum.  The material properties to be studied 
vary over this range.

Industrial and OEM markets play host to a number of diversified 
Nd:YAG lasers.  Some of the markets are for diamond drilling, micro-
machining and material processing.  Recent developments based on the 
scientific product line have increased Quantronix's high end market share 
and should enable further applications in material processing.

Quantronix 's scientific, industrial and OEM products accounted for 
approximately 13% to the Company's total 1997 sales.

Optical Products
 ................

Optical, a subsidiary of the Company based in Oxnard, California, 
specializes in the manufacture of custom precision optical flats used for 
measurement in optical scanners, laser systems, professional motion 
picture cameras and other industrial and scientific applications.  
Optical contributed approximately 3% to the Company's sales in 1997.

Light and Color Measurement
 ...........................

Photo Research, the Company's Chatsworth, California subsidiary, is 
a leader in high precision, state of the art electro-optical 
instrumentation and systems for light and color measurement.  Photo 
Research contributed approximately 9% to the Company's total 1997 sales. 
 The Spectra product line offers systems to a wide variety of industries 
for research, quality control and on-line testing.  Video Instrumentation 
provides high resolution CRT and flat panel inspection.  The Photo 
Research Optical Metrology Laboratory is a supplier of and service 
provider to optical radiation standards, calibration and measurement for 
major manufacturers of instruments, displays, devices and materials.

Spare Parts
    ...........
 
The Company derives a portion of its revenues from the sale of spare 
parts and related consumable materials used primarily in its 
semiconductor, industrial and scientific systems. This operation is based 
in Hauppauge, New York.  Spare parts and consumables include replacement 
optical elements, lamps and electronic components.  This Quantronix 
product line contributed approximately 10% of the Company's total sales 
in 1997.

Dental Products
 ...............

Quantronix manufactures and markets in its Hauppauge, New York 
facility,  a series of solid-state lasers for the treatment of dental 
soft tissue.  The Quantronix dental product line contributed 
approximately 3% to the total sales of the Company in 1997.  Soft-tissue 
procedures include treatments of diseased gums, biopsies, control of 
bleeding and preparation of gums for crown and bridge impressions.  
Quantronix's existing line of dental laser systems contain Nd:YAG and 
Ho:YAG lasers in a single unit.  The systems utilize a fiber optic cable 
and a handpiece, are internally air cooled, and can be operated from 
standard 110 volt electrical outlets.  

In November 1993, Quantronix received clearance from the German 
government, under applicable "MedGV" regulations, to market its dental 
laser system in Germany.  In connection therewith, Quantronix has engaged 
experienced product marketing teams with an established nationwide 
network in Germany.  Quantronix began export of the dental laser to 
Germany in December 1993.  

In June 1994, Quantronix  introduced a laser based welding system to 
be used in the fabrication and repair of crowns, bridges, partials, 
implants and other devices for dental laboratories.  Quantronix's laser 
welding system contains a pulsed Nd:YAG laser with input power of 220 
volts AC, 50/60 Hz and 4 kilowatts peak power and 20 watts average power. 
 The dental laser welder was developed in conjunction with several 
leading dental laboratories in the United States and is capable of 
directly welding different metals and alloys used in connecting bridges, 
crowns, loops, clasps, etc. without the need for external soldering 
materials.  The biggest advantages of laser welding, as compared to 
soldering, are the stronger bonds and reduced labor costs.

Marketing and Sales
 ...................

Marketing  activities for the Company's product lines include the 
presentation of its product lines at domestic and international trade 
shows and advertising.  The marketing and sales staff conduct 
professional meetings, conferences and in-person and telephone sales 
calls.  The Company also engages independent manufacturers' 
representatives for the sale of its products.  Foreign sales of its 
products are made primarily through foreign equipment distribution 
organizations and representatives, and by Quantronix GmbH, its German 
subsidiary.  Quantronix GmbH is engaged in the business of marketing, 
distributing, integrating and servicing laser systems (for industrial, 
semiconductor, scientific  and dental products) manufactured at the 
Company's Hauppauge, New York and Orlando, Florida facilities.  The sales 
territory covered by Quantronix GmbH is primarily in Europe.  The staff 
of twenty-three includes seven engineers who install and service all 
products including complex semiconductor, scientific, and other 
industrial systems.  In addition, Quantronix GmbH provides spare parts 
for its installed base.  

The following table represents a breakdown between the 
Company's domestic and foreign revenues for the years ended December 31, 
1997, 1996 and 1995 (in thousands of dollars).  

                            1997             1996              1995
                      Dollars Percent   Dollars Percent   Dollars Percent
                      ....... .......   ....... .......   ....... .......
DOMESTIC              $42,186   64%     $37,781   66%     $27,513   63%
FOREIGN                23,762   36%      19,681   34%      16,401   37%
                      ....... .......   ....... .......   ....... .......
TOTAL                 $65,948  100%     $57,462  100%     $43,914  100%
                      ....... .......   ....... .......   ....... .......
                      ....... .......   ....... .......   ....... .......

Manufacturing
 .............

     The Company assembles its products at its facilities  in Hauppauge, 
New York; Orlando, Florida; Oxnard, California; Cambridge, Massachusetts; 
and Chatsworth, California.  The Company relies upon unaffiliated 
suppliers for the material components and parts used to assemble its 
products.  Most parts and components purchased from suppliers are 
available from multiple sources.  To date, the Company has not 
experienced any significant delays in obtaining parts and components for 
its products.  The Company believes that it will be able to continue to 
obtain most required components and parts from a number of different 
suppliers, although there can be no assurance thereof.  Lack of 
availability of certain components could require major redesign of the 
products and could result in production delays.

WARRANTY AND CUSTOMER SERVICES

     The Company's warranty for all of its new products varies between 
three months and twelve months.  The Company also provides field support 
services on an individual call basis, services maintenance contracts and 
provides customer support services by telephone to customers with 
operational and service problems. 

RESEARCH AND DEVELOPMENT

     Due to the intense competition and rapid technological change in the 
laser and optical industries, the Company believes that it must continue 
to improve and refine its existing products and systems and develop new 
applications for its technology.  Research and development expenses for 
the years ended December 31, 1997, 1996, and 1995 were  $4,860,903, 
$4,406,364 and $3,096,934, respectively.

COMPETITION

     The laser industry is subject to intense competition and rapid 
technological change.  Several of the Company's competitors are 
substantially larger and have greater financial and other resources than 
the Company.  Competition among laser manufacturers extends to attracting 
and retaining qualified technical personnel.  The overall competitive 
position of the Company will depend primarily upon a number of factors, 
including the price and performance of its products, the compatibility of 
its products with existing laser systems and the Company's overall 
reputation in the laser industry.

     In the scientific market, a number of competitors, including 
Spectra-Physics, Inc. and Coherent, Inc., which are believed to be the 
industry's two largest companies, produce Ti:Sapphire lasers.

     The Company's industrial laser products for material marking 
applications compete primarily with those manufactured by A.B. Laser and 
Lumonics. These products have generally been subject to intense price 
competition in recent years.

     In the semiconductor photomask repair market, the Company primarily 
competes with NEC.  Semiconductor products have recently been subject to 
market saturation conditions and the rapid advances in miniaturization of 
integrated circuits and computers.  These factors are behind the 
Company's commitment to continue developing its next generation mask 
repair products.

     In the dental laser market, the Company competes with several 
manufacturers including American Dental Technologies.

     In light and color measurement, the major competitor to the 
Company's Spectra product is Minolta.  Minolta has approximately a 30% to 
35% worldwide market share compared with Photo Research's 20% to 25% 
share.  In the on-line video inspection market, the Company is a 
technical leader with Dynacolor and EeRise as its key competitors.
 
     In the laser scanner market, General Scanning, which has an 
estimated current market share of 50%, is a significant competitor of the 
Company.  This competitor was also one of the Company's largest U.S. 
customers for scanners in 1997 and 1996.  The Company has a significant 
market presence in Europe and Japan with 50% of laser scanner sales being 
outside the United States. 

BACKLOG

     As of December 31, 1997, the Company had a backlog of firm orders of 
approximately $14 million as compared to a backlog of $13.5 million as of 
December 31, 1996.  The Company believes that the current backlog will be 
filled during the present fiscal year.  Historically, backlog is shipped 
within 90 days from the order date.

PATENTS AND LICENSES

     The Company has several United States patents covering a wide 
variety of its products and has applications pending in the United States 
patent office.  There can be no assurance that any other patents will be 
issued to the Company or that such patents, if and when issued, will 
provide any protection or benefit to the Company.  Although the Company 
believes that its patents and its pending patent applications are 
valuable, the Company does not consider the ownership of patents 
essential to its business.  The Company believes that, in general, the 
best protection of proprietary technology in the laser industry will come 
from market position, technical innovation and product performance.  
There is no assurance that any of these advantages will be realized by 
the Company.

GOVERNMENT REGULATION

     The Company is subject to the laser radiation safety regulations of 
the Radiation Control for Health and Safety Act administered by the 
National Center for Devices and Radiological Health of the FDA.  Among 
other things, these regulations require a laser manufacturer to file new 
product and annual reports, to maintain quality control, product testing 
and sales records, to distribute appropriate operating manuals, to 
incorporate certain design and operating features in lasers sold to end-
users and to certify and label each laser sold to end-users as one of 
four classes (based on the level of radiation from the laser that is 
accessible to users).  Various warning labels must be affixed and certain 
protective devices installed depending on the class of product.  The 
National Center for Devices and Radiological Health is empowered to seek 
fines and other remedies for violations of the regulatory requirements.  
The Company believes that it is currently in compliance with these 
regulations.

     There are two principal methods by which FDA regulated products may 
be marketed in the United States.  One method is an FDA pre-market 
notification filing under Section 510(k) of the Food, Drug and Cosmetics 
Act (a "510(k) Application").  Applicants under the 510(k) procedure must 
demonstrate that the device for which approval is sought is substantially 
equivalent to devices on the market prior to the Medical Device 
Amendments of 1976 or devices approved thereafter pursuant to the 510(k) 
procedure.  The review period for a 510(k) Application is 90 days from 
the date of filing the application.  While applications not rejected 
within the 90-day period are deemed approved, applicants typically defer 
marketing until a favorable response to the 510(k) Application is 
received from the FDA.  In 1992, the Company's three dental products 
received 510(k) approval for use in soft tissue applications.

     The alternate method, where section 510(k) is not available, is to 
obtain pre-market approval ("PMA") from the FDA.  Under the PMA 
procedure, the applicant must obtain an investigational device exemption 
before beginning the substantial clinical testing required to determine 
the safety, efficacy and potential hazards of the product.  The 
preparation of a PMA application is significantly more complex and time 
consuming than the 510(k) Application.  The review period under a PMA 
application is 180 days from the date of filing but the application is 
not automatically deemed approved if not rejected during the period and 
the FDA often responds with requests for additional information or 
clinical reports.  The PMA approval process can take up to several years.

     The FDA also imposes various requirements on manufacturers and 
sellers of products under its jurisdiction, such as labeling, 
manufacturing practices, record keeping and reporting requirements.  The 
FDA also may require post-market testing and surveillance programs to 
monitor a product's effects.  There can be no assurance that the 
appropriate approvals from the FDA will be granted, that the process to 
obtain such approvals will not be excessively expensive or lengthy or 
that the Company will have sufficient funds to pursue such approvals at 
the time they are sought.  The failure to receive requisite approvals for 
the Company's products or processes, when and if developed, or 
significant delays in obtaining such approvals, would prevent the Company 
from commercializing its products as anticipated and would have a 
materially adverse effect on the business of the Company.

FOREIGN REGULATORY REQUIREMENTS

     Foreign sales of the Company's dental and medical laser systems are 
or will be subject in each case to approval by the recipient country.  
Regulatory requirements vary widely among the countries, from electrical 
approvals to clinical applications similar to the PMA applications filed 
with the FDA for sales in the United States.  The Company has obtained 
appropriate approvals for its dental products in Japan, Korea and certain 
European countries including Germany.


EMPLOYEES

     As of December 31, 1997, the Company had 300 full-time employees, 
consisting of 2 executive officers, 7 subsidiary executive officers, 91 
engineering and technical personnel and 200 manufacturing, administrative 
and sales support personnel.  The Company believes that its relations 
with its employees are satisfactory.  None of the Company's employees is 
represented by a union.

FINANCIAL INFORMATION ABOUT FOREIGN AND
     DOMESTIC OPERATIONS AND EXPORT SALES

     For the years ended December 31, 1997, 1996 and 1995, the Company 
had net sales to customers in foreign countries amounting to 
approximately $23.8 million, $19.7 million and $16.4 million, 
respectively (approximately 36%, 34% and 37% of total net sales and 
services, respectively).  These sales included sales by Quantronix GmbH, 
the Company's German subsidiary.  Quantronix GmbH buys laser systems, 
spare parts and related consumable materials from Quantronix and Control 
Laser, the Company's New York and Florida  subsidiaries, for resale to 
European and other foreign customers, and also furnishes field repair 
services.  See Note 13 of the "Notes to Consolidated Financial 
Statements."

     Foreign currency translation for Quantronix GmbH, the Company's 
subsidiary in Germany, is performed utilizing the current rate method 
under which assets and liabilities are translated at the exchange rate on 
the balance sheet date, except for property, plant and equipment which is 
translated at historical rates, while revenues, costs and other expenses 
are translated at the average exchange rate for the reporting period.  
The resulting translation adjustment of $(256) thousand and $(78) 
thousand at December 31, 1997 and 1996, respectively, is included as a 
component of stockholders' equity.  Currency and exchange rate 
fluctuations from transaction gains and losses resulted in net losses of 
$167 thousand and $178 thousand for the years ended December 31, 1997 and 
1996, respectively, and a net gain of approximately $115 thousand for the 
year ended December 31, 1995.  Such amounts are based upon the accounting 
treatment of foreign intercompany balances and transaction gains and 
losses.


ITEM 2.  PROPERTIES

     Excel leases approximately 2,900 square feet in New York City from 
an unaffiliated landlord for its corporate offices.  The lease is for a 
five-year period at an average annual rent of $108,000, and expires in 
November 2001.  

     Quantronix leases approximately 28,000 square feet in Hauppauge, New 
York from an unaffiliated landlord for its executive offices and for 
sales, service and manufacturing.  The lease is for a five-year period 
which ended in November 1997, at an average annual rent of approximately 
$230,000. Excel's principal executive office is maintained in the 
Hauppauge facility, where financial and accounting functions of the 
Company are performed.  Quantronix is in the process of constructing its 
own building, at a cost of approximately $3.7 million, which is scheduled 
for completion February 28, 1998.

     Control Laser leases a building containing approximately 50,000 
square feet in Orlando, Florida from an unaffiliated landlord, which it 
utilizes for administrative offices and laser manufacturing operations.  
Annual rent is approximately $240,000.  The lease expires in December 
2001.

     Optical leases a 14,000 square foot building in Oxnard, California 
from an unaffiliated landlord for manufacturing purposes, at an annual 
rent of approximately $90,000.  The lease term expires in December 1998.

     Cambridge leases a 17,000 square foot building in Cambridge, 
Massachusetts from an unaffiliated landlord for manufacturing operations 
and administrative offices.  The lease is for a ten-year period ending in 
October 2006, at an annual rent of approximately $150,000 through October 
2003 and $175,000 from November 2003 through October 2006. 

     Quantronix GmbH leases approximately 7,500 square feet of office 
space, used for sales and service, in Darmstadt, Germany from an 
unaffiliated landlord at an average annual rent of approximately 
$106,000.  The lease expires in June 2005.

     Photo Research leases a 36,000 square foot facility located in 
Chatsworth, California from an unaffiliated landlord for manufacturing 
operations and administrative offices, at an annual rent of approximately 
$480,000.  The lease expires in June 1998.  


ITEM 3.  LEGAL PROCEEDINGS


     From time to time, the Company has disputes that arise in the 
ordinary course of its business, none of which the Company believes 
should have a material impact on its business.  There are no material 
pending legal proceedings to which the Company or its subsidiaries is a 
party or to which any of their property is subject.


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

                                  None.

                                 PART II
                                 .......

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
         RELATED STOCKHOLDER MATTERS

     The Company's Common Stock has been traded on the National 
Association of Securities Dealers Automated Quotation System ("NASDAQ") 
under the symbol "XLTC" since May 1991, the date of the Company's initial 
public offering, and on the NASDAQ National Market System since October 
2, 1992.  The following table sets forth the high and low bid quotations 
reported on NASDAQ for the Common Stock for the periods indicated.

                Year ended:            High      Low

                December 31, 1997
                    First Quarter     10-1/8     7-1/4
                    Second Quarter     9-1/4     7-1/2
                    Third Quarter     13-3/8     8-5/8
                    Fourth Quarter    15-3/8     8-3/4

                December 31, 1996
                    First Quarter      9-3/8     6-1/2
                    Second Quarter    11-3/4     7-7/8
                    Third Quarter      9-5/8     6-3/4
                    Fourth Quarter     9-1/8      7

     The above quotations represent prices between dealers, do not 
include retail mark-ups, markdowns or commissions and do not necessarily 
reflect actual transactions.

     As of  March 18, 1998, there were approximately 926 holders of 
record of Common Stock.  Since many shares are registered in street name, 
the number of beneficial owners is considerably higher.

     The Company has never paid cash dividends on its Common Stock.  In 
April 1996 the Company paid a $0.40 per share dividend on its Preferred 
Stock.  In May 1996, the Company exercised its option to redeem all 
Preferred Shares that were not converted.  Therefore, after May 1996, no 
cash dividends were paid to holders of the Preferred Stock.  Payment of 
dividends to holders of the Common Stock is within the discretion of the 
Company's Board of Directors and will depend, among other factors, on 
earnings, capital requirements, limitations on dividends under the 
Company's revolving line of credit agreement and the operating and 
financial condition of the Company.  At the present time, the Company's 
anticipated capital requirements are such that it intends to follow a 
policy of retaining earnings, if any, in order to finance the development 
of its business.


ITEM 6.  SELECTED FINANCIAL DATA

     The following tables summarize certain consolidated financial data 
which should be read in conjunction with the reports of the Company's 
independent auditor and the more detailed consolidated financial 
statements and notes thereto which appear elsewhere herein.


Statement of Operations Data
 ............................


<TABLE>

<CAPTION>

STATEMENT OF OPERATIONS DATA

                                                                   YEARS ENDED DECEMBER 31, 
                                            ......................................................................
                                                1997          1996          1995           1994           1993
                                            ...........   ...........   ...........   ............    ............
<S>                                         <C>           <C>           <C>            <C>            <C>

Net sales and services                      $65,947,896   $57,462,263   $43,914,222    $33,550,842    $29,027,825
Net earnings (loss)                         $ 8,234,697   $ 4,892,826   $(1,595,835)   $ 1,890,279    $ 2,878,419

Net earnings (loss) per share
  Basic                                     $0.77         $0.55         $(0.21)        $0.22          $0.43
  Diluted                                   $0.73         $0.50         $(0.21)        $0.22          $0.38

Weighted average common and common
  equivalent shares outstanding
    Basic                                   10,686,763    9,862,217     8,281,194      7,632,230      6,071,327
    Diluted                                 11,327,086    9,757,411     8,281,194      8,563,600      7,456,927

Common stock cash dividends                          0            0             0              0              0
Preferred stock cash dividends                       0            0       162,137        187,981        268,258

<CAPTION>

BALANCE SHEET DATA
                                                                       DECEMBER 31,
                                            .......................................................................

                                            1997          1996          1995           1994           1993          
<S>                                         <C>           <C>           <C>            <C>            <C>        

Total assets                                $59,219,681   $39,816,442   $43,007,614    $33,082,983    $23,909,913
Total liabilities                             8,316,574    10,800,102    20,948,036      9,727,602      8,959,774
Working capital                              37,166,960    17,492,287    17,609,490     20,963,663     12,196,774
Stockholders' equity                         50,903,107    29,016,340    22,059,578     23,355,381     14,950,139
Long-term liabilities                                 0             0     7,573,320      3,348,141      2,958,880

</TABLE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

General
 .......

     The following discussion should be read in conjunction with the 
consolidated financial statements of the Company and notes thereto set 
forth elsewhere herein.


Summary
 .......

     The Company achieved revenues of approximately $66 million for the 
year ended December 31, 1997 as compared to approximately $57.5 million 
and $43.9 million for the years ended December 31, 1996 and 1995, 
respectively.  Earnings (loss) before provision for income taxes were 
approximately $12.6 million, $7.1 million, and ($1.1) million for the 
years ended December 31, 1997, 1996 and 1995, respectively.  The net 
earnings (loss) and earnings (loss) per share on a diluted basis were 
approximately $8.2 million and $0.73 per share in 1997 $4.9 million and 
$0.50  per share in 1996 and ($1.6) million and ($0.21) per share in 
1995.  Due to the loss in 1995, common stock equivalents and the 
conversion of preferred shares were antidilutive and were not included in 
the diluted earnings per share in 1995.

     The following table presents consolidated financial data for the 
years ended December 31, 1997, 1996 and 1995 (in thousands of dollars and 
as a percentage of total net sales and services.)

<TABLE>

<CAPTION>


RESULTS OF OPERATIONS
                                                1997                  1996                   1995
                                         Dollars    Percent     Dollars   Percent     Dollars    Percent
                                         ..................     .................     ...................

<S>                                       <C>       <C>         <C>       <C>         <C>       <C>
Net Sales and Services                    $65,948   100.0       57,462    100.0       43,914    100.0
Cost of Sales                              33,245    50.4       31,004     54.0       24,863     56.6
                                          .......   .....       ......    .....       ......    ......

Gross Margin                               32,703    49.6       26,458     46.0       19,051     43.4
Operating Expense:
Selling and Marketing                      10,639    16.1        9,743     17.0        7,204     16.4
General and Administrative                  4,805     7.3        4,212      7.3        4,450     10.1
Research and Development                    4,861     7.4        4,406      7.7        3,097      7.1
Amortization of Goodwill                      370     0.6          508      0.9          469      1.1
Litigation Settlement                           0     0.0            0      0.0        3,400      7.7
                                          .......   .....       ......    .....       ......    ......

Earnings from Operations                   12,028    18.2        7,589     13.1          431      1.0
Non-Operating expense (income)               (615)   (1.0)         511      0.8        1,552      3.5
                                          .......   .....       ......    .....       ......    ......
Earnings (loss) before provision
  for income taxes                         12,643    19.2        7,078     12.3       (1,121)    (2.5)

Provision for Income taxes                  4,408     6.7        2,185      3.8          475      1.1
                                          .......   .....       ......    .....       ......    ......

Net Earnings (loss)                        8,235     12.5        4,893      8.5        (1,596)   (3.6)
                                          .......   .....       ......    .....       .......   ......
                                          .......   .....       ......    .....       .......   ......
</TABLE>


Net Sales and Services
 ......................

     Net sales and services for the year ended December 31, 1997 
increased to $65.9 million from $57.5 million in 1996 and from $43.9 
million in 1995.  The increase from 1996 to 1997 of $8.4 million or 14.6 
percent was  attributable to increased sales of all products with the 
exception of dental.  The increase from 1995 to 1996 of $13.6 million or 
31.0 percent was primarily attributable to the inclusion of Photo 
Research's operations for an entire year (increase of approximately $5 
million) and increased sales of industrial and scientific/OEM products, 
offset in part by reduced medical product revenues.

Gross Margins and Cost of Sales
 ...............................

     Gross margins as a percentage of sales increased to 49.6 percent 
from 46.0 percent in 1996 and 43.4 percent in 1995.  Cost of sales and 
services increased to $33.2 million in 1997 from $31.0  million in 1996 
and $24.9 million in 1995.  The increase in gross margins as a percentage 
of sales was primarily due to improved efficiencies in manufacturing and 
product mix.  The increase from 1995 to 1996 was primarily due to the 
inclusion of an entire year of operations of Photo Research which 
experiences higher gross margins.

Operating Expenses
 ..................

     Selling and Marketing

     Selling and marketing expenses increased to $10.6 million in 1997 
from $9.7 million in 1996 and $7.2 million in 1995.  The increase of 900 
thousand or 9.2 percent was primarily attributable to increased sales. 
Selling and marketing expenses as a percentage of sales increased from 
16.4 percent in 1995 to 17.0 percent in 1996 and decreased to 16.1 
percent in 1997.  The increase of $2.5 million or 34.7 percent from 1995 
to 1996 was primarily attributable to the acquisition of Cambridge and 
Photo Research and increased sales.

     General and Administrative

     General and administrative expenses increased to $4.8 million in 
1997 from $4.2 million in 1996 and $4.5 million in 1995.  The increase in 
1997 is primarily due to the added operating expenses associated with 
opening the New York City office.  The decrease of $240 thousand or 5 
percent from 1995 to 1996 was due to the one time $300 thousand 
compensation charge in 1995 related to the resignation of the former 
Chairman and CEO, partially offset by the addition of Photo Research.  
General and administrative expenses as a percentage of sales remained the 
same at 7.3 percent in 1996 and 1997.

     Research and Development

     Research and development costs for the year ended December 31, 1997 
were 4.9 million as compared to $4.4 million and $3.1 million for the 
years ended December 31, 1996 and 1995, respectively.  The increase from 
1996 to 1997 is primarily attributable to increased research and 
development activity in all products with the exception of dental.  The 
primary reason for the increase of $1.3 million or 42 percent from 1995 
to 1996 was due to the inclusion of a full year's R&D for Photo Research 
and increased R&D efforts in all subsidiaries.

     Amortization of Goodwill

     The amortization of the excess of cost over fair value of the net 
assets of businesses acquired of $370 thousand, $508 thousand and $469 
thousand for the years ended December 31, 1997, 1996 and 1995, 
respectively, was a result of the acquisition of Quantronix in October 
1992, Cambridge in February 1995 and Photo Research in October 1995.  The 
increase from 1995 to 1996 was due to the full year of amortization for 
Photo Research.  The decrease in 1997 is primarily a result of a 
reduction in goodwill due to the establishment of a deferred tax asset in 
1996.

     Litigation Settlement

     Litigation settlement costs for the year ended December 31, 1995 
were $3.4 million of which $2.7 million was for the SBIR settlement with 
the U.S. Department of Justice and $700 thousand for legal expenses 
related to the SBIR investigation.

     Other Income/Expense

     Interest expense was $160 thousand, $608 thousand and $691 thousand 
for the years ended December 31, 1997, 1996 and 1995, respectively.  
Interest expense decreased $448 thousand or 74 percent from 1996 to 1997 
due to the Company's prepayment of all its term loans with U.S. Trust and 
repayment of other long-term debt and notes payable.  Interest expense 
decreased $83 thousand or 12.0 percent from 1995 to 1996 due to the 
reduced debt level in 1996.

     The increase in interest income of $578 thousand from $294 thousand 
in 1996 to $872 thousand in 1997 was due to increased average 
investments.  The decrease in interest income of $102 thousand from $395 
thousand in 1995 to $294 thousand in 1996 was due to the reduced average 
investment levels in 1996 that resulted from prepayments in long- term 
debt.

     Other income/expense for the year ended December 31, 1997 was $97 
thousand of expense compared to $200 thousand in 1996.  The expense was 
due primarily to foreign exchange losses.  The decrease in expense from 
1995 to 1996 was primarily due to investment losses in 1995. 

Liquidity and Capital Resources
 ...............................

     Working capital at December 31, 1997 and 1996 was $37.2 million and 
$17.5 million, respectively.  Cash, cash equivalents and investments 
increased by approximately $13.6 million from December 31, 1996 to 
December 31, 1997.  Such increase is primarily attributable to the 
proceeds from the exercise of options and warrants of $17.2 million and 
cash flows from operations of $6.8 million, partially offset by capital 
expenditures of $3.9 million, repayment of debt of $2.3 million and the 
purchase of treasury stock of $3.3 million.  Increases in accounts 
receivable and inventory in 1997 were primarily attributable to the 
Company's increased  sales volume.

     The Company had capital expenditures of approximately $3.9 million 
for the year ended December 31, 1997 and has plans to expend 
approximately $2.5 million in 1998.  The Company had capital expenditures 
of $1.6 million for the year ended December 31, 1996. 

     The Company commenced its year 2000 date conversion plans to address 
all necessary code changes, testing and implementation. Project 
completion is planned for the beginning of 1999.  Management anticipates 
that the cost of the conversion plan will not be material to the 
Company's results of operations or liquidity in 1998 or 1999.  Management 
anticipates that the Company's year 2000 date conversion project will be 
completed on a timely basis.  However, there can be no assurance that the 
systems of other companies which the Company interacts with will be 
timely converted or that any such failure to convert by another company 
would not have an adverse effect on the Company.

     On June 30, 1994, the Company entered into a $5 million revolving 
line of credit agreement with U S Trust, (the "Bank") which matures in 
March 1998.  At December 31, 1997 the Company had no borrowings and had 
all $5.0 million available for borrowing under the line of credit. 

     On February 14, 1995, the Company acquired all of the outstanding 
shares of capital stock of Cambridge in exchange for $4.75 million, 
consisting of $4.5 million in cash (of which $3.5 million was paid on 
February 14, 1995) and $250 thousand in shares of Common Stock (which was 
paid on February 14, 1995).  On March 31, 1995, the Company borrowed $4.0 
million from the Bank, requiring monthly payments of $67 thousand plus 
interest through April 2000.  Such term loan has been fully repaid as of 
December 31, 1997. Of the balance due, $600 thousand was paid in March 
1996 and $400 thousand was paid in February 1997.  Pursuant to the 
acquisition agreement, additional payments were  made due to Cambridge 
meeting certain performance goals during the first two fiscal years after 
the acquisition.  In connection therewith, the Company paid $731 thousand 
for 1995 and $323 thousand for 1996.

     On October 2, 1995, the Company acquired substantially all of the 
net assets and property utilized in connection with the business of Photo 
Research from Kollmorgen Instruments Corporation for $3.53 million in 
cash.  The Company utilized its own cash to finance the Photo Research 
acquisition.  Subsequently, the Company obtained a $3.5 million five-year 
term loan from the Bank, which has been fully repaid as of December 31, 
1997.

     As of December 31, 1997, the Company had prepaid all its debt on its 
term loans with the Bank and has no outstanding long-term debt.

     In December 1997, the Company purchased 375,000 shares of its common 
shares as treasury stock.  On January 23, 1998 the Board of Directors 
authorized the Company to repurchase up to 2,000,000 of its common shares 
in the open market at prevailing market prices.

     The Company estimates that its current resources and anticipated 
cash to be generated from operations will be sufficient to meet its cash 
requirements for at least the next 12 months.

     In the opinion of management, inflation has not had a material 
effect on the operations of the Company.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                                Not applicable

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                              Follow on next page.

EXCEL TECHNOLOGY, INC. 

               Index to Consolidated Financial Statements and
             Financial Statement Schedule filed with the Annual
                    Report of the Company on Form 10-K
                   For the Year Ended December 31, 1997.


                                                                     Page

Independent Auditors' Report                                          19

Consolidated Financial Statements:

     Balance Sheets as of December 31, 1997 and 1996                  20

     Statements of Operations for each of the three years in the 
          period ended December 31, 1997.                             21

     Statements of Stockholders' Equity for each of the three years
          in the period ended December 31, 1997.                      22

     Statements of Cash Flows for each of the three years in the
          period ended December 31, 1997.		                    23

     Notes to Consolidated Financial Statements.                    24-39

     
Additional Financial Information Pursuant to the
     Requirements of Form 10-K: 

     Schedule II - Valuation and Qualifying Accounts and Reserves	40
 .............

Schedules not listed above have been omitted because they are either not 
applicable or the required information has been given elsewhere in the 
consolidated financial statements or notes thereto.

<AUDIT-REPORT>

                     Independent Auditors' Report
                     ............................

Board of Directors and Stockholders
Excel Technology, Inc. and Subsidiaries

     We have audited the accompanying consolidated balance sheets of 
Excel Technology, Inc. and subsidiaries as of December 31, 1997 and 1996, 
and the related consolidated statements of operations, stockholder's 
equity and cash flows for each of the years in the three-year period 
ended December 31, 1997.  In connection with our audit of the 
consolidated financial statements, we have also audited the financial 
statement schedule as listed in the accompanying index.  These 
consolidated financial statements and financial statement schedule are 
the responsibility of the Company's management.  Our responsibility is to 
express an opinion on these consolidated financial statements and 
financial statement schedule based on our audits.

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

     In our opinion, the consolidated financial statements referred to 
above present fairly, in all material respects, the financial position of 
Excel Technology, Inc. and subsidiaries as of December 31, 1997 and 1996, 
and the results of their operations and their cash flows for each of the 
years in the three-year period ended December 31, 1997, in conformity 
with generally accepted accounting principles.  Also, in our opinion, the 
related financial statement schedule, when considered in relation to the 
basic consolidated financial statements taken as a whole, presents 
fairly, in all material respects, the information set forth therein.


                                               KPMG PEAT MARWICK LLP

Jericho, New York
January 23, 1998

</AUDIT-REPORT>

<TABLE>

<CAPTION>

                                       EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
                                             Consolidated Balance Sheets
                                              December 31, 1997 and 1996

                                                                          1997                       1996
<S>                                                                   <C>                         <C>
                        Assets
                        ...... 
Current assets:
   Cash and cash equivalents                                          $ 6,331,159                 2,910,982
   Investments                                                         14,209,854                 4,076,045
                                                           
   Accounts receivable, less allowance for doubtful accounts
     of $254,000 in 1997 and $276,000 in 1996                          11,522,041                 9,145,460
   Inventories                                                         12,143,140                10,977,407
   Deferred income taxes                                                  692,500                   650,200
   Other current assets                                                   584,840                   532,295
                                                                      ...........               ...........

                        Total current asset                            45,483,534                28,292,389

                                                                      ...........               ...........

Property, plant and equipment, net                                      5,392,955                 2,475,586
Other assets                                                              545,725                   701,896
Deferred income taxes                                                   1,674,600                 1,854,000
Excess of cost over fair value of net assets of businesses
   acquired, net of accumulated amortization of $1,849,332 in
      1997 and $1,479,628 in 1996                                       6,122,867                 6,492,571
                                                                      ...........               ...........

                                                                      $59,219,681                39,816,442
                                                                      ...........               ...........
                                                                      ...........               ...........

         Liabilities and Stockholders' Equity
         ....................................

Current liabilities:
   Current portion of long-term debt                                            0                 1,923,024
   Notes payable, current                                                 182,888                 1,288,282
   Accounts payable                                                     2,235,109                 2,161,740
   Accrued expenses and other current liabilities                       5,898,577                 5,427,056
                                                                      ...........               ...........

                        Total current liabilities                       8,316,574                10,800,102
                                                                      ...........               ...........

Stockholders' equity:
   Preferred stock, par value $.001 per share
        2,000,000 shares authorized; none issued                                0                         0
   Common stock, par value $.001 per share: 20,000,000 shares
      authorized, 11,714,471 and 9,189,265 shares issued
        in 1997 and 1996                                                   11,714                     9,189
   Additional paid-in capital                                          48,726,078                31,559,063
   Retained earnings (accumulated deficit)                              5,760,370                (2,474,327)
   Treasury stock, 375,000 shares                                      (3,339,375)                        0
   Foreign currency translation adjustment                               (255,680)                  (77,585)
                                                                      ...........               ...........              
            
                                                                       50,903,107                29,016,340
                                                                      ...........               ...........
                                                                      $59,219,681                39,816,442
                                                                      ...........               ........... 
                                                                      ...........               ...........

See accompanying notes to consolidated financial statements.

<CAPTION>

                                      EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
                                       Consolidated Statements of Operations
                                    Years Ended December 31, 1997, 1996 and 1995
         
                                                                      1997             1996             1995
<S>                                                                <C>              <C>             <C>
Net sales and services                                             $65,947,896      57,462,263      43,914,222

Cost of sales and services                                          33,245,432      31,004,440      24,862,687
                                                                   ...........      ..........      ..........

Gross profit                                                        32,702,464      26,457,823      19,051,535
                                                                   ...........      ..........      ..........
Operating expenses:
   Selling and marketing                                            10,639,570       9,742,409       7,204,268
   General and administrative                                        4,805,284       4,212,261       4,449,637
   Research and development                                          4,860,903       4,406,364       3,096,934
   Amortization of excess cost over fair value
     of net assets of businesses acquired                              369,704         508,124         468,681
   Litigation settlement and related expenses                                0               0       3,400,018
                                                                   ...........      ..........      ..........
                                                                    20,675,461      18,869,158      18,619,538
                                                                   ...........      ..........      ..........

Earnings from operations                                            12,027,003       7,588,665         431,997

Non operating expenses (income):
   Interest expense                                                    159,888         608,349         691,415
   Interest income                                                    (872,481)       (294,114)       (395,429)
   Other expense (income), net                                          96,814         196,902       1,256,506
                                                                   ...........      ..........      ..........

Earnings (loss) before provision for income taxes                   12,642,782       7,077,528      (1,120,495)

Provision for income taxes                                           4,408,085       2,184,702         475,340
                                                                   ...........      ..........      ..........

Net earnings (loss)                                                  8,234,697       4,892,826      (1,595,835)

Preferred stock dividends                                                    0          54,273         162,137
                                                                   ...........      ..........      ..........

Net earnings (loss) available to common shareholders               $ 8,234,697       4,838,553      (1,757,972) 
                                                                   ...........      ..........      ..........
                                                                   ...........      ..........      ..........

Basic earnings (loss) per share                                          $0.77            0.55           (0.21)
                                                                   ...........      ..........      ..........
                                                                   ...........      ..........      ..........

Weighted average common shares outstanding                          10,686,763       8,862,217       8,281,194

Diluted earnings (loss) per share                                        $0.73            0.50           (0.21)
                                                                   ...........      ..........      ..........
                                                                   ...........      ..........      ..........
Weighted average common and common equivalent
   shares outstanding                                               11,327,086       9,757,411       8,281,194
                                                                   ...........      ..........      ..........
                                                                   ...........      ..........      ..........
See accompanying notes to consolidated financial statements

<CAPTION>

                                                       EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
                                                  Consolidated Statements of Stockholders' Equity
                                                    Years Ended December 31, 1997, 1996 and 1995

                                                                                     Retained    Foreign    Unrealized
                                                                        Additional   earnings    currency    gain on       
                      Preferred   Stock     Common Stock     Treasury    paid-in   (accumulated translation marketable
                       Shares    Amounts   Shares  Amounts    stock       capital     deficit)   adjustment  securities   Total
                       .......   .......  ........ .......  .......... ........... ........... ........... .......... ...........

<S>                    <C>       <C>     <C>        <C>     <C>        <C>        <C>          <C>          <C>        <C>      

Balance at
  December 31, 1994     469,952   470     8,189,825  8,190          0  29,041,693 (5,609,181)  (25,220)     (60,571)   23,355,381
Common stock issued to 
  acquire Cambridge           0     0        62,500     62          0     249,938          0          0           0       250,000
Exercise of common
  stock options
    and warrants              0     0        30,518     30          0      68,647          0          0           0        68,677
Conversion of
  preferred stock       (64,610)  (65)       64,610     65          0           0          0          0           0             0
Preferred stock
  dividend                    0     0             0      0          0           0   (162,137)         0           0      (162,137)
Unrealized gain on mar-
  ketable securities          0     0             0      0          0           0          0          0      60,571        60,571
Foreign currency trans-
  lation adjustment           0     0             0      0          0           0          0     82,921           0        82,921
Net loss for the year         0     0             0      0          0           0 (1,595,835)         0           0    (1,595,835)
                       ......... .....   .......... ...... ........... .......... ...........  .........    ........   ...........
Balance at
  December 31, 1995     405,342   405     8,347,453  8,347          0  29,360,278 (7,367,153)    57,701           0    22,059,578
Exercise of common
  stock options and
    warrants                  0     0       436,470    437          0   2,198,785          0          0           0     2,199,222
Conversion of
  preferred stock      (405,342) (405)      405,342    405          0           0          0          0           0             0
Foreign currency trans-
  lation adjustment           0     0             0      0          0           0          0   (135,286)          0      (135,286)
Net income for the year       0     0             0      0          0           0  4,892,826          0           0     4,892,826
                       ......... .....   .......... ...... ........... .......... ...........  .........    ........   ...........
Balance at
  December 31, 1996           0     0     9,189,265  9,189          0  31,559,063 (2,474,327)   (77,585)          0    29,016,340
Exercise of common
  stock options
    and warrants              0     0     2,525,206  2,525          0  17,167,015          0          0           0    17,169,540
Acquisition of
  treasury  stock             0     0             0      0 (3,339,375)          0          0          0           0    (3,339,375)
Foreign currency trans-
  lation adjustment           0     0             0      0          0           0          0   (178,095)          0      (178,095) 
Net income for the year       0     0             0      0          0           0  8,234,697          0           0     8,234,697  
                       ......... .....   .......... ...... ........... .......... ...........  .........    ........   ...........
Balance at
  December 31, 1997           0     0    11,714,471 11,714 (3,339,375) 48,726,078  5,760,370   (255,680)          0    50,903,107   
                       ......... .....   .......... ...... ........... .......... ...........  .........    ........   ........... 
                       ......... .....   .......... ...... ........... .......... ...........  .........    ........   ...........

See accompanying notes to consolidated financial statements

<CAPTION>

                                      EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
                                       Consolidated Statements of Cash Flows
                                    Years Ended December 31, 1997, 1996 and 1995

                                                                      1997             1996             1995
<S>                                                                <C>              <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                               $ 8,234,697       4,892,826      (1,595,835)
   Adjustments to reconcile net (loss) income to net cash
     provided by (used in) operating activities:
        Depreciation and amortization                                1,479,499       1,371,942       1,247,610
        Provision for bad debts                                         71,722          82,743         102,784
        Deferred income taxes                                          139,000         735,000        (618,000)
        Changes in operating assets and liabilities, net of
          effects from acquisitions:
             (Increase) decrease in accounts receivable             (2,448,303)     (1,874,724)        689,991
             (Increase) decrease in inventories                     (1,165,733)      2,313,322      (3,593,640)
             (Increase) decrease in prepaid and refundable           
                income taxes and other current assets                  (52,545)        157,486         282,437
             Decrease (increase) in other assets                        29,239          92,622          (2,224)
             Increase (decrease) in accounts payable                    73,369        (890,803)        258,434
             Increase (decrease) in accrued expenses and 
                other liabilities                                      471,521      (1,043,627)      1,991,247
             Proceeds from sale of trading securities                        0               0       4,473,779
                                                                   ............     ...........     ...........
                  Net cash provided by operating activities          6,832,466       5,836,787       3,236,583
                                                                   ............     ...........     ...........

Cash flows from investing activities:
   Cash paid for acquisitions, net of cash acquired                   (723,150)     (1,331,237)     (6,775,179)
   Purchases of property, plant and equipment                       (3,902,132)     (1,561,487)       (781,984)
   (Purchase) redemption of investments, net                       (10,133,809)      1,811,648               0
   Proceeds from sale of assets                                              0         522,178               0
                                                                   ............     ..........      ...........
                  Net cash used in investing activities            (14,759,091)       (558,898)     (7,557,163) 
                                                                   ............     ...........     ...........
Cash flows from financing activities:
   Proceeds from exercise of common stock options and warrants       17,169,540      2,199,222          68,677
   Purchase of treasury stock                                        (3,339,375)             0               0
   Payment of preferred stock dividend                                        0       (162,137)       (186,941)
   (Payments of) proceeds from notes payable, net                      (382,244)      (268,501)        370,165 
   (Payments of) proceeds from borrowings on long term debt
      and revolving credit line, net                                 (1,923,024)    (6,327,137)      4,767,542
                                                                   ............     ...........     ...........
                  Net cash provided by (used in)
                     financing activities                            11,524,897     (4,558,553)      5,019,443 
                                                                   ............     ...........     ...........

Effect of exchange rate changes on cash and cash equivalents             (2,797)        (6,721)            930 

Effect of exchange rate changes on assets and liabilities              (175,298)      (128,565)         81,991
                                                                   ............     ...........     ...........
Net increase in cash and cash equivalents                             3,420,177        584,050         781,784 
                                                                  
Cash and cash equivalents - beginning of year                         2,910,982      2,326,932       1,545,148
                                                                   ............     ...........     ...........
Cash and cash equivalents - end of year                            $  6,331,159      2,910,982       2,326,932
                                                                   ............     ...........     ........... 
                                                                   ............     ...........     ...........

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for:
   Interest                                                        $    159,888        606,801         691,415 
                                                                   ............     ...........     ........... 
                                                                   ............     ...........     ...........

   Income taxes                                                    $ 3,989,709       1,577,756         617,338
                                                                   ............     ...........     ........... 
                                                                   ............     ...........     ...........
See accompanying notes to consolidated financial statements.

</TABLE

                  EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
                 Notes to Consolidated Financial Statements
                       December 31, 1997 and 1996


(1)  Summary of Significant Accounting Policies

     a)  Principles of Consolidation
         ............................

     The consolidated financial statements include the accounts of Excel 
Technology, Inc. (Excel), its wholly-owned subsidiaries, Photo Research, 
Inc. (Photo Research), Cambridge Technology, Inc. (Cambridge), Control 
Laser Corporation and Quantronix Corporation (Quantronix), and 
Quantronix's wholly-owned subsidiaries, The Optical Corp., Quantronix 
International Corporation (a FSC) and Quantronix GmbH (collectively 
referred to as the Company).  All material intercompany transactions and 
balances have been eliminated in consolidation.

     b)  Nature of Business
         ..................

     Excel designs, develops, manufactures and markets laser systems and 
electro-optical components,  primarily for the electronic, semiconductor, 
dental, scientific and other industrial markets.

     c)  Revenue Recognition
         ...................

     Net sales and services are generally recognized when the earnings 
process is complete, either upon shipment of products or performance of 
services.

     d)  Investments and Cash Equivalents
         ................................

     Investments, which consist primarily of commercial paper, are 
recorded at fair value. The Company records debt and equity securities 
that have readily determinable fair values at fair value unless they are 
classified as held to maturity.  Investments are classified as held to 
maturity and carried at amortized cost only if the Company has a positive 
intent and ability to hold those securities to maturity.  If not 
classified as held to maturity, investments are classified as trading 
securities or securities available for sale.  Unrealized gains or losses 
for securities available for sale are excluded from earnings and reported 
as a net amount as a separate component of stockholders' equity.  
Unrealized holding gains and losses for trading securities are included 
in earnings.  The Company has classified its investments as trading 
securities as of December 31, 1997 and 1996.  Investments with original 
maturities of three months or less at the time of purchase are considered 
cash equivalents.

     (e)  Inventories
          ...........

     Inventories consist of material, labor and overhead and are stated 
at the lower of average cost or market.  Average cost approximates actual 
cost on a first-in, first-out basis.

     (f)  Depreciation and Amortization
          .............................

     The Company's property, plant and equipment, recorded at cost, are 
depreciated or amortized over their estimated useful lives under the 
straight-line method.  Leasehold improvements are amortized over the life 
of the lease or the estimated life of the asset, whichever is less.

     Patents are amortized over their estimated useful lives, not 
exceeding 17 years, using the straight-line method.

     The excess of cost over fair value of net assets of businesses 
acquired ("goodwill") is amortized on a straight-line basis over twenty 
years.  The Company assesses the recoverability of unamortized goodwill 
based on the undiscounted projected future cash flows of the related 
businesses.

     (g)  Capitalized Software Development Costs
          ......................................

     The Company has capitalized certain computer software development 
costs relating to the development of the Company's third generation 
Defect Mask Repair System (DRS III) in accordance with Statement of 
Financial Accounting Standards No. 86, "Accounting for the Costs of 
Computer Software to be Sold, Leased or Otherwise Marketed."

     Capitalization of computer software development costs begins upon 
the establishment of technological feasibility.  Technological 
feasibility for the Company's computer software products is generally 
based upon achievement of a detail program design free of high risk 
development issues.  The establishment of technological feasibility and 
the ongoing assessment of recoverability of capitalized computer software 
development costs requires considerable judgment by management with 
respect to certain external factors, including, but not limited to, 
technological feasibility, anticipated future gross revenues, estimated 
economic life and changes in software and hardware technology.

     Amortization of capitalized computer software costs is provided on a 
product-by-product basis at the greater of the amount computed using the 
ratio of current gross revenues for a product to the total of current and 
anticipated future gross revenues or the straight-line method over the 
remaining estimated economic life of the product.  An original estimated 
economic life of no more than four years is assigned to capitalized 
computer software development costs.  Approximately $367,000 and $459,000 
of software development costs, included in other long-term assets, were 
capitalized as of December 31, 1997 and 1996, respectively.  During 1997, 
approximately $92,000 of these costs were amortized. 

     (h)  Income Taxes
          ............

     The Company recognizes deferred tax assets and liabilities for the 
future tax consequences attributable to temporary differences between the 
financial reporting bases and the tax bases of the Company's assets and 
liabilities at enacted rates expected to be in effect when such amounts 
are realized or settled.  The effect on deferred tax assets and 
liabilities of a change in tax rates is recognized in income in the 
period that includes the enactment date.

     (i)  Foreign Currency Translation
          ............................

     Foreign currency translation for  the Company's German subsidiary, 
Quantronix GmbH, is performed utilizing the current rate method under 
which assets and liabilities are translated at the exchange rate on the 
balance sheet date, except for property, plant and equipment which is 
translated at historical rates, while revenues, costs, and expenses are 
translated at the average exchange rate for the reporting period.  The 
resulting translation adjustment of $(255,680) and $(77,585) at December 
31, 1997 and 1996 is included as a component of stockholders' equity.  In 
addition, there were transaction gains and losses and intercompany 
balances not deemed long-term in nature at the balance sheet date that 
resulted in a net loss of $166,906, a net loss of $177,506 and a net gain 
of $115,000 during the years ended December 31, 1997, 1996 and 1995, 
respectively, which is reflected in other (income) expense in the 
consolidated statements of operations.

     (j)  Net Earnings Per Share
          ......................

     In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings 
per Share," which the Company adopted during 1997.  Under SFAS 128, the 
Company presents two earnings per share (EPS) amounts.  Basic EPS is 
calculated based on income available to common shareholders and the 
weighted-average number of shares outstanding during the reported period. 
Diluted EPS includes additional dilution from potential common stock 
including stock issuable pursuant to the exercise of dilutive  stock 
options and warrants outstanding and the effect of assuming the 
conversion of convertible preferred stock.  Prior year earnings per share 
data have been restated to apply the provisions of SFAS 128.

     (k)  Fair Value of Financial Instruments
          ...................................

     Statement of Financial Accounting Standards No. 107, "Disclosures 
About Fair Value of Financial Instruments", requires disclosure of the 
fair value of certain financial instruments.  Cash and cash equivalents, 
investments, accounts receivable, notes payable, accounts payable and 
accrued expenses are reflected in the financial statements at fair value 
because of the short-term maturity of these instruments.

     (l)  Use of Estimates
          ................

     Management of the Company has made a number of estimates and 
assumptions relating to the reporting of assets and liabilities and the 
disclosure of contingent assets and liabilities to prepare these 
financial statements in conformity with generally accepted accounting 
principles.  Among the more significant estimates included in these 
financial statements are the estimated allowance for doubtful accounts 
receivable and the estimated valuation allowance reducing the Company's 
deferred tax asset.  Actual results could differ from those and other 
estimates.

     (m)  Accounting for Stock-Based Compensation
          .......................................

     The Company records compensation expense for employee stock options 
 and warrants only if the current market price of the underlying stock 
exceeds the exercise price on the date of the grant.  On January 1, 1996, 
the Company adopted Financial Accounting Standard No. 123, "Accounting 
for Stock-Based Compensation".  The Company has elected not to implement 
the fair value based accounting method for employee and directors' stock 
options and warrants, but has elected to disclose the pro forma net 
earnings and pro forma earnings per share to account for employee and 
directors' stock option and warrant grants beginning in 1995 as if such 
method had been used to account for such stock-based compensation cost.

     (n)  Reclassifications
          .................

     Certain prior year amounts have been reclassified to conform with 
the current year presentation.

(2)   Acquisitions
      ............

     On February 14, 1995, the Company acquired Cambridge Technology, 
Inc. which is engaged primarily in the manufacture of laser scanners, 
essential components to moving a laser beam with precision at a specified 
speed.  These products  have both industrial and consumer applications, 
such as laser marking and etching, high density laser printing and 
writing, digitized x-ray imaging and entertainment laser light shows and 
displays.  The Company acquired all of the outstanding shares of capital 
stock of Cambridge in exchange for $4.75 million, consisting of $4.5 
million in cash and $250,000 in shares of Common Stock.  Pursuant to the 
acquisition agreement, additional payments  were made due to Cambridge 
meeting certain performance goals during the first two fiscal years after 
the acquisition.  In connection therewith, the Company paid $731,000 for 
1995 and $323,150 for 1996.  The amount owed at December 31, 1996 of 
$723,150 is included in notes payable in the accompanying balance sheet. 
 The acquisition was accounted for as a purchase and the operating 
results of Cambridge were included in the consolidated financial 
statements commencing February 1, 1995. 

     On October 2, 1995, the Company acquired substantially all of the 
net assets and property utilized in connection with the business of Photo 
Research, which develops and manufactures light measuring instruments, 
for $3.53 million in cash. The acquisition was accounted for as a 
purchase and the operating results of Photo Research were included in the 
consolidated financial statements from the date of the acquisition.

     The excess of the cost of the acquisitions over the fair value of 
the net assets acquired, amounting to $4,830,000 for Cambridge and 
$1,727,000 for Photo Research, is being amortized over twenty years. 
During 1996 goodwill was reduced by $522,000 as a result of the sale of 
Cambridge's medical product line.  The sales price, net of expenses, 
approximated the net book value of the assets sold.

(3)  Investments
     ...........

     Investments at December 31, 1997 and 1996 consist entirely of 
commercial paper classified as trading securities, which are recorded at 
fair value.

     The Company recorded realized net gains of approximately $600,000 
and unrealized holding losses on equity trading securities of 
approximately $2.2 million included in other expense in the 1995 
consolidated statement of operations.  In January 1996, the Company sold 
all of its equity securities and no further losses were realized.

(4)  Inventories
     ...........
Inventories consist of the following:
                                            December 31,
                                          1997        1996
                                      .......................
                   Raw materials      $ 5,792,455   4,473,246
                   Work-in-process      5,013,691   5,098,370
                   Finished goods         619,316   1,124,538
                   Consigned inventory    717,678     281,253
                                       ..........   .........
                                      $12,143,140  10,977,407
                                      ...........  ..........

(5)  Property, Plant and Equipment
     .............................

     Property, plant and equipment consists of the following:
                                                 December 31,
                        Useful life            1997        1996
                        ...........         ..........  ..........
Land                        0               $  440,408           0
Building                 30 years            1,617,940           0
Leasehold improvements  Lease term             686,014     523,304
Fixtures and computer
  equipment              5-8 years           1,545,797   1,169,811
Machinery and equipment  4-8 years           3,960,658   3,172,736
Laboratory equipment     4-8 years             928,684     675,536
                                            ..........   .........
                                             9,179,501   5,541,387
Less accumulated
  depreciation and
    amortization                            (3,786,546) (3,065,801)
                                            ..........   .........
                                            $5,392,955   2,475,586
                                            ..........   .........
                                            ..........   .........

     Quantronix is in the process of constructing a new building at a 
cost of approximately $3.7 million.  The Company will commence 
depreciation of the building once it is completed which is scheduled to 
be February 28, 1998.  As of December 31, 1997, the Company has paid 
$2,058,348 towards the land and new building.

     Depreciation and amortization expense aggregated approximately 
$985,000, $863,000 and $779,000 for the years ended December 31, 1997, 
1996 and 1995, respectively.

(6)  Income Taxes
     ............

     The income (loss) before provision for income taxes for the years 
ended December 31, 1997, 1996 and 1995 was comprised of domestic income 
(loss) of $12,833,403, $7,416,546, and $(1,507,202), respectively, and 
foreign income (loss) of $(190,621), $(339,018) and $386,707, 
respectively.

The provision for income taxes consists of:
                                          Year ended December 31,
                                          .......................
                                       1997         1996         1995
                                     ..........   .........    ........
                   Current:
                     Federal         $3,477,085   1,202,702     794,340
                     State and local    792,000     280,000     200,000
                     Foreign                  0     (33,000)     99,000
                                     ..........   .........    ........
                                      4,269,085   1,449,702   1,093,340
                                     ..........   .........   .........
                                     ..........   .........   .........
                   Deferred:
                     Federal            139,000     735,000    (763,000)
                     State and local          0           0           0
                     Foreign                  0           0     145,000
                                     ..........   .........    ........
                                        139,000     735,000    (618,000) 
                                     ..........   .........    ........
                                     $4,408,085   2,184,702     475,340
                                     ..........   .........    ........ 
                                     ..........   .........    ........

     The current provision for income taxes includes a tax benefit of 
$281,000 for 1997, 1996 and 1995 from utilizing Federal net operating 
loss carryforwards.  The deferred tax provision for 1996 and 1995 was 
increased by $190,000 and $335,000, respectively, due to allocating 
acquired tax benefits to goodwill.

     The difference between taxes at the Federal statutory income tax 
rate and the Company's provision for income taxes is as follows:


                                          Year ended December 31,
                                          .......................
                                       1997         1996         1995
                                     ..........   .........   .........
Taxes at statutory Federal
  income tax rate                    $4,298,600   2,406,400    (381,000)
Amortization of excess of cost
  over fair value of net assets
    of businesses acquired               96,400     142,800     153,000
Non-deductible litigation
  settlement expenses                         0           0     544,000
Foreign Sales Corporation (FSC)
  benefit                              (343,700)   (110,500)   (118,000)
Net reduction of valuation
  allowance for realization of
    operating loss carryforwards
      and deductible temporary
        differences                    (411,100)   (360,000)    (90,000)
State income taxes net of
  Federal benefit                       523,000     184,500     132,000
Other                                   244,885     (78,500)    235,340
                                     ..........   .........   .........
                                     $4,408,085   2,184,700     475,340
                                     ..........   .........   ......... 
                                     ..........   .........   ......... 

     The tax effects of temporary differences that give rise to 
significant portions of the deferred tax assets and liabilities at 
December 31, 1997 and 1996 are presented below:

                                               December 31
                                         .......................
                                             1997        1996
                                         ..........  ...........
Deferred tax assets:
  Excess of tax over financial statement
    basis of inventory                   $  411,000     351,000
  Allowance for doubtful accounts            50,000      53,000
  Accrued warranty reserve                   98,000     118,000
  Other accrued expenses                    134,000     428,000
  Benefits of U.S. tax net operating loss 
    carryforwards                         2,428,000   2,709,000
  Benefits of foreign net operating loss 
    carryforwards                           120,000     120,000
  Capital loss carryforward                  43,000      63,000
  Plant and equipment depreciation           77,000      98,000
  Other                                       8,000       8,000
                                         ..........  ..........
  Total deferred tax assets               3,369,000   3,948,000
  Less valuation allowance                 (876,900) (1,288,000) 
                                         ..........  ..........
  Net deferred tax assets                 2,492,100   2,660,000
                                         ..........  ..........
Deferred tax liabilities:
  Capitalized software development costs   (125,000)   (156,000) 
                                         ..........  ..........
  Total deferred tax liabilities           (125,000)   (156,000)
                                         ..........  ..........
Net deferred tax asset                   $2,367,100   2,504,000
                                         ..........  .......... 
                                         ..........  ..........

     At December 31, 1997, Excel has available net operating loss 
carryforwards (NOL's), expiring in 2005 through 2007, of approximately 
$2.1 million for income tax purposes.  The utilization of NOL's by Excel 
for income tax purposes is subject to annual limitations imposed by 
Internal Revenue Code Section 382 due to various equity transactions from 
1991 to 1993 and alternative minimum tax limitations.  If the full amount 
of that limitation is not used in any year, the amount not used increases 
the allowable limit in the following year.

     At December 31, 1997, Quantronix and its subsidiaries have available 
for tax purposes utilizable preacquisition NOL's of approximately $5.0 
million expiring in 2005 through 2007.  Such NOL's can only be utilized 
to offset Quantronix's future taxable income and are limited, in a 
similar fashion to Excel's NOL's, in each year to approximately $560,000 
as a result of the change in ownership from the merger with Excel.  
During 1996, the Company reduced goodwill by $1,923,000 for the 
establishment of deferred tax assets and the utilization of Quantronix's 
preacquisition deductible temporary differences and net operating loss 
carryforwards.

     While management believes that the Company's deferred tax asset will 
be realized based on its generation of taxable income in recent years and 
its future projected taxable income, the substantial restrictions on and 
time periods required to realize certain of the Company's NOL's makes it 
appropriate to record a valuation allowance against a portion of those 
NOL's. In addition, a valuation allowance has been provided against the 
Company's capital loss and foreign net operating loss carryforwards.  
Accordingly, Excel has provided a total valuation allowance of $877,000, 
as of December 31, 1997.  There can be no assurance that the Company will 
generate sufficient taxable earnings in future years to fully realize 
recorded tax benefits. 

(7)  Accrued Expenses and Other Current Liabilities
     ..............................................

     Accrued expenses and other current liabilities consists of the 
following:


                                               December 31
                                         .......................
                                             1997        1996
                                         ..........  ...........
Salaries, wages, commissions
  and bonuses                            $1,690,700   1,769,134
Accrued accounts payable                    228,427     110,657
Customer deposits                           869,490     891,043
Accrued royalties payable                    13,037      15,736
Warranty reserve                            415,912     413,513
Unearned service contract revenue           153,315     240,763
Professional fees                           111,918     146,176
Income taxes payable                        931,127     589,813
Other                                     1,484,651   1,250,221
                                         ..........   .........
                                         $5,898,577   5,427,056
                                         ..........   ......... 
                                         ..........   .........


(8)  Long-Term Debt and Notes Payable
     ................................

     Long-term debt and notes payable consist of the following:

                                               December 31
                                         .......................
                                             1997        1996
                                         ..........  ...........
Revolving line of credit (a)                      0            0
Term loan payable (b) (c)                         0    1,850,986
Notes payable - Cambridge
  acquisition (note 2)                            0      723,150
Other                                             0      637,170
                                         ..........  ...........
                                                       3,211,306
                                         ..........  ...........
Less current installments                         0   (3,211,306)

                                         $        0            0
                                         ..........  ...........
                                         ..........  ...........

     (a)  On June 30, 1994, the Company entered into a $5 million 
revolving line of credit agreement with a bank which matures in March 
1998. At December 31, 1997 and 1996 the Company had no borrowings and had 
$5.0 million available for borrowing under the line of credit.  The 
agreement contains certain financial covenants, including minimum 
tangible net worth, and limits the payment of dividends.  The revolving 
line of credit agreement is secured by all the U.S. assets of the Company 
and bears interest at the bank's base lending rate plus 0.75%.

      (b) On March 31, 1995, the Company borrowed $4.0 million from a 
bank requiring monthly payments of $67,000 plus interest through April 
2000.  The Company accelerated principal payments in 1996 and reduced the 
principal balance to $767,000 at December 31, 1996.  Such balance was 
prepaid in January 1997.

     (c)  On October 23, 1995 the Company obtained a $3.5 million five 
year term loan from a bank requiring monthly payments of $58,000 plus 
interest through November 2000.  The Company accelerated principal 
payments in 1996 and reduced the principal balance to approximately $1.08 
million at December 31, 1996.  Such balance was prepaid in January 1997.

     Other debt at December 31, 1996 includes short-term borrowings of 
the Company's subsidiary in Germany at an interest rate of 9.5%, of 
approximately $412,000.  As of December 31, 1997 the Company had no such 
short- term borrowings.

(9)  Stockholders' Equity
     ....................

     (a)  Preferred Stock
          ...............

     Each share of preferred stock was converted into one share of common 
stock and one Class B warrant. During the years ended December 31, 1997, 
1996 and 1995, zero shares, 405,342 and 64,610 shares, respectively, of 
preferred stock were converted to common stock.  While outstanding, the 
Company paid a dividend of $0.40 per share for each year the preferred 
stock was not converted or redeemed.

     (b)  Stock Option Plan
          .................

     In 1990, Excel adopted a stock option plan (the Plan) which provides 
for the granting of incentive stock options and nonincentive stock 
options to certain key employees, including officers and directors of 
Excel, to purchase an aggregate of 2,000,000  shares of common stock, as 
amended, at prices and terms determined by the Board of Directors.  The 
option price per share of incentive stock options must be at least 100% 
of the fair market value of the stock on the date of grant, except in the 
case of shareholders owning more than 10% of the outstanding shares of 
common stock, the option price must be at least 110% of the fair market 
value on the date of grant, and for nonincentive stock options such price 
may be less than 100% of the fair market value of the stock on the date 
of grant.  Options granted under the Plan, which terminates on July 30, 
2000, may be exercisable for a period of up to ten years.  All options 
granted under the Plan have exercise prices equal to the market value of 
the stock on the date of grant, vest ratably over three or five years and 
expire either five or ten years from date of grant.

     The Plan was amended in August 1993 to provide for the automatic 
grant to each member of the Board of Directors, on the date of each 
annual meeting of stockholders, non-incentive options to purchase 10,000 
shares of common stock at the fair market value of the common stock on 
such date.  A  summary of activity related to Excel's stock option plan 
is as follows:

                                         Number       Weighted average
                                       of shares       exercise price
                                      ...........

Outstanding at December 31, 1994       1,786,632           $5.26

Granted                                  432,600            4.69
Exercised                                (25,200)           4.93
Canceled                              (1,096,709)           5.52
                                      ...........
Outstanding at December 31, 1995       1,097,323            5.12

Granted                                  695,600            7.50
Exercised                               (218,215)           5.58
Canceled                                (146,881)           6.03

Outstanding at December 31, 1996       1,427,827            6.17
                                      ...........

Granted                                  307,850            8.73
Exercised                               (643,804)           3.28
Canceled                                 (77,115)           4.77
                                      ...........

Outstanding at December 31, 1997        1,014,758          $7.87
                                      ...........
                                      ...........

     At December 31, 1997, a total of 274,320 options were exercisable at 
a weighted average exercise price of $8.05, and options for the purchase 
of 70,288 common shares were available for future grant under the Plan.

     The options outstanding as of December 31, 1997 are summarized in 
ranges as follows:
                      Weighted         Number of      Weighted
      Range of         average          options        average
   exercise price   exercise price    outstanding   remaining life
   ..............   ..............   ............   ..............

   $3.26 - $  6.00     $  4.86          142,047        2 years
   $6.01 - $  9.00     $  6.99          566,332        4 years
   $9.01 - $ 12.38      $10.36          306,379       8-1/2 years
                                     ............
                                      1,014,758

     (c)  Other
          .....

     In February 1997, Class B Warrants to purchase 1,191,856 shares of 
common stock at  $8.00 per share were exercised, and resulted in net 
proceeds of approximately $9.5 million to the Company.  The remaining 
394,369 Class B Warrants were redeemed by the Company at $.05 per warrant 
in accordance with their terms. An underwriter's warrant was also 
exercised in 1997 that resulted in net proceeds to the Company of 
approximately $2.2 million for the issuance of 280,500 shares of common 
stock.

     In addition, at December 31, 1997, 51,000 warrants were outstanding 
that expire between 1998 and 2000 with exercise prices ranging from $4.00 
to $6.375.  During 1997, 383,100 of these warrants were exercised.

     (d)  Shares Reserved for Issuance
          ............................

     At December 31, 1997 Excel had reserved, authorized and unissued 
common shares for the following purposes:
                                                Shares
                                               .........

                      Stock option plan        1,085,046
                      Stock purchase warrants     51,000
                                               .........
                                               1,136,046
                                               ......... 
                                               .........

     (e)  Stock-based compensation
          ........................

     The per share weighted-average fair value of stock options and 
warrants granted during 1997, 1996  and 1995 was $2.53, $3.76 and $2.41, 
respectively, on the date of grant using the Black Scholes option-pricing 
model with the following weighted-average assumptions: 1997 - expected 
dividend yield of 0%, risk free interest rate of 5.5%, expected stock 
volatility of 31%, and an expected option and warrant life of 2.5 years; 
1996 - expected dividend yield of 0%, risk free interest rate of 6%, 
expected stock volatility of 50%, and an expected option and warrant life 
of 5 years; 1995 - expected dividend yield of 0%, risk free interest rate 
of 5%, expected stock volatility of 50%, and an expected option and 
warrant life of 5 years.

     The Company applies APB Opinion No. 25 in accounting for its Plan 
and, accordingly, no compensation cost has been recognized in the 
financial statements for its stock options and warrants which have an 
exercise price equal to or greater than the fair value of the stock on 
the date of the grant.  Had the Company determined compensation cost 
based on the fair value at the grant date for its stock options under 
SFAS No. 123, the Company's net earnings would have been reduced to the 
pro forma amounts indicated below:

                                     1997          1996         1995
     Net earnings (loss):
              As reported         $8,234,697   $4,892,826   $(1,595,835)
              Pro forma           $7,423,697   $4,305,826   $(1,952,835)

     Net earnings (loss)
       available to common
       shareholders:
              As reported         $8,234,697   $4,838,553   $(1,757,972)
              Pro forma           $7,423,697   $4,251,553   $(2,114,972)

     Basic earnings (loss) per
       common share
              As reported              $0.77        $0.55        $(0.21)
              Pro forma                $0.69        $0.48        $(0.26)

     Diluted earnings (loss) per
       common share:
              As reported              $0.73        $0.50        $(0.21)
              Pro forma                $0.66        $0.44        $(0.24)

     Pro forma net earnings reflects only options and warrants granted 
commencing in 1995. Therefore, the full impact of calculating 
compensation cost for stock options and warrants under SFAS No. 123 is 
not reflected in the pro forma net earnings amounts presented above 
because compensation cost is reflected over the options' vesting period  
and compensation cost for options granted prior to January 1, 1995 was 
not considered. 

(10)  Earnings Per Share
      ..................

     The following is a reconciliation of the numerators and denominators 
of the basic and diluted EPS computations:

                                                      1997
                                                      .... 
                                       Earnings      Shares     Per-Share
                                      (Numerator) (Denominator)   Amount 
                                      ........... ............. .........

Basic EPS:
Net earnings available to common
  shareholders                         $8,234,697   10,686,763    $0.77

Effect of Dilutive Securities:
Options and Warrants                                   640,323
                                                    ..........
Diluted EPS:
Net earnings available to common
  shareholders and assumed conversions $8,234,697   11,327,086   $0.73
                                       ..........   .......... 
                                       ..........   ..........

                                                      1996
                                                      .... 
                                       Earnings      Shares     Per-Share
                                      (Numerator) (Denominator)   Amount 
                                      ........... ............. .........

Net Earnings                           $4,892,826

Less: Preferred stock dividends           (54,273)
                                       ..........

Basic EPS:
Net earnings available to common
  shareholders                         $4,838,553    8,862,217   $0.55

Effect of Dilutive Securities:
Options and Warrants                                   756,244
Convertible preferred stock                54,273      138,950
                                       ..........   ..........

Diluted EPS:	
Net earnings available to common
  shareholders and assumed conversions $4,892,826    9,757,411   $0.50
                                       ..........   .......... 
                                       ..........   ..........

                                                      1995
                                                      .... 
                                       Earnings      Shares     Per-Share
                                      (Numerator) (Denominator)   Amount 
                                      ........... ............. .........
Net loss                               $(1,595,835)
Less: Preferred stock dividends           (162,137)
                                       ...........
Basic EPS:
Net earnings available to common
  shareholders                        $(1,757,972)   8,281,194   $(0.21)

Diluted EPS:
Net earnings available to common
  shareholders and assumed
  conversions                         $(1,757,972)   8,281,194   $(0.21) 
                                       ..........   ..........
                                       ..........   ..........

(11) Employee Benefit Plans
      ......................

     (a)  401(k) Plan
          ...........

     The Company has a voluntary contribution pension plan which complies 
with Section 401(k) of the Internal Revenue Code, as amended.  The Plan 
permits employees to make a voluntary contribution of pretax dollars to a 
pension trust, with a matching contribution by the Company equal to 50% 
of an employee's basic contribution to the Plan up to a maximum of 3% of 
their salaries.  Company contributions to the plan were approximately 
$303,000, $235,000 and $179,000 in 1997, 1996 and 1995, respectively.

     (b)  Health Plans
          ............

     During the years ended December 31, 1997, 1996 and 1995, health 
benefit costs, including premiums, amounted to approximately $1,100,000, 
$778,000 and $955,000 respectively.

(12) Commitments and Contingencies
     .............................

     (a)  Operating Leases
          ................

     Excel and its subsidiaries lease certain buildings, vehicles and 
equipment under noncancellable operating leases.  At December 31, 1997,  
the future minimum lease payments under operating leases are as follows:

                          1998         $1,027,252
                          1999            575,868
                          2000            544,928
                          2001            544,173
                          2002            162,478
                          Thereafter      700,546
                                       ..........
                                       $3,555,245
                                       ..........
                                       ..........

     Rent expense approximated $1.34 million, $1.29 million and $811,000 
for the years ended December 31, 1997, 1996 and 1995, respectively.

     (b)  Employment and Consulting Agreements
          ....................................

     Excel has entered into employment agreements with certain key 
executives that provide for severance upon termination without cause, 
aggregating $1.06 million.

     (c)  Litigation Settlement
          .....................

     Pursuant to a Release and Settlement Agreement (the "Agreement"), 
dated as of November 24, 1995, by and between the U.S. Government, Excel, 
Dr. Rama Rao, the former Chairman and Chief Executive Officer of Excel 
("Dr. Rao"), and Triveni Srinivasan Rao, the wife of Dr. Rao and a former 
director and former officer of Excel ("Mrs. Rao"), and without the 
Company, Dr. Rao or Mrs. Rao admitting to any wrongdoing, the Company 
paid the U.S. Government $2.7 million (reflecting the return of 
$1,093,000 paid by the U.S. Government to the Company during 1985 to 1990 
for Small Business Innovation Research ("SBIR") grants and approximately 
$1,627,000 in statutory damages).  In consideration of such payments and 
agreements, the U.S. Government agreed to refrain from instituting any 
civil or monetary claim, action or suit against the Company, Dr. Rao or 
Mrs. Rao arising in connection with proposals submitted under the SBIR 
grant program during the period July 1985 through November 24, 1995.  In 
connection with the foregoing, the Company recorded a charge of $3.4 
million for the year ended December 31, 1995, including the $2.7 million 
paid to the government and $700,000 of related legal fees expended in 
1995.  Of the $2.7 million paid to the government, only $1.1 million was 
deductible for income taxes.

(13) Foreign and Domestic Operations and Export Sales
     ................................................

     Information concerning foreign and domestic operations and export 
sales is as follows:

                                  As of or the year ended
                                        December 31,
                                1997          1996          1995
                             ...........   ..........   ...........
Net sales and services to 
  unaffiliated customers:
    United States            $58,468,251   50,023,979   34,793,096
    Germany                    7,479,645    7,438,284    9,121,126
                             ...........   ..........   ..........
                             $65,947,896   57,462,263   43,914,222
                             ...........   ..........   ..........
                             ...........   ..........   ..........
Operating earnings (loss):
    United States            $12,088,227    7,695,932      (36,047)
    Germany                     ( 61,224)    (107,267)     468,044
                             ...........   ..........   ..........
                             $12,027,003    7,588,665      431,997
                             ...........   ..........   ..........
                             ...........   ..........   ..........
Identifiable assets:
    United States            $54,508,949   35,466,426   38,302,849
    Germany                    4,710,732    4,350,016    4,704,765
                             ...........   ..........   ..........
                             $59,219,681   39,816,442   43,007,614
                             ...........   ..........   ..........
                             ...........   ..........   ..........

     In determining operating earnings (loss) for each geographic area, 
sales and purchases between areas have been accounted for on the basis of 
internal transfer prices set by the Company.

     Identifiable assets are those tangible and intangible assets used in 
operations in each geographic area.

     During the years ended December 31, 1997, 1996 and 1995, the Company 
had foreign and export sales of approximately $23.8 million, $19.7 
million and $16.4 million, representing 36%, 34% and 37%, respectively, 
of total net sales and services.

     No single customer accounted for more than five percent of the 
Company's net sales and services in fiscal 1997, 1996 and 1995, and no 
account receivable from any customer exceeded five percent of the 
Company's total stockholders' equity at December 31, 1997


Schedule II
                   EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
               Valuation and Qualifying Accounts and Reserves
                Years ended December 31, 1997, 1996 and 1995


      Column A     Column B     Column C     Column D     Column E
      ........     ........     ........     ........     ........

                               Additions
                                Charged
                  Balance at    to cost                  Balance at
                  beginning       and       Deductions-    end of
     Description  of period    expenses      describe      period
     ...........  ..........   .........    ...........  .........

   Allowance for
 doubtful accounts:
    Year ended
    December 31,:


       1997       $  276,000     72,000     (94,000)(1)   254,000
       1996          377,000     83,000    (184,000)(1)   276,000
       1995          200,000    103,000      74,000 (2)   377,000

(1)  Uncollectible accounts written off, net of recoveries.
(2)  Allowance for doubtful accounts of acquired subsidiaries at date of 
     acquisition.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT'S
         ON ACCOUNTING AND FINANCIAL DISCLOSURE

                            None.


                                PART III
                                ........

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required by this Item 10 with respect to the directors 
of registrant is hereby incorporated by reference to registrant's 
definitive proxy statement to be filed pursuant to Regulation 14A 
promulgated by the Securities and Exchange Commission under the 
Securities Exchange Act of 1934, which proxy statement is anticipated to 
be filed within 120 days after the end of registrant's fiscal year ended 
December 31, 1997.  

ITEM 11. EXECUTIVE COMPENSATION

     Information required by this Item 11 is hereby incorporated by 
reference to registrant's definitive proxy statement to be filed pursuant 
to Regulation 14A promulgated by the Securities and Exchange Commission 
under the Securities Exchange Act of 1934, which proxy statement is 
anticipated to be filed within 120 days after the end of registrant's 
fiscal year ended December 31, 1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information required by this Item 12 is hereby incorporated by 
reference to registrant's definitive proxy statement to be filed pursuant 
to Regulation 14A promulgated by the Securities and Exchange Commission 
under the Securities Exchange Act of 1934, which proxy statement is 
anticipated to be filed within 120 days after the end of registrant's 
fiscal year ended December 31, 1997.

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Howard S. Breslow, a director of the Company, is a partner in 
Breslow & Walker, LLP, the Company's legal counsel.  In 1997, the Company 
paid Breslow & Walker, LLP $130,000 for legal services.


                                 PART IV
                                 .......

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND
         REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this report:

     1.  Consolidated Financial Statements (included in Part II, Item 8):

         Independent Auditors' Report

         Consolidated Balance Sheets as of December 31, 1997 and
           December 31, 1996

         Consolidated Statements of Operations for each of the years in  
           the three-year period ended December 31, 1997

         Consolidated Statements of Stockholders' Equity for each of the 
           years in the three-year period ended December 31, 1997

         Consolidated Statements of Cash Flows for each of the years in  
           the three-year period ended December 31, 1997

         Notes to Consolidated Financial Statements

     2.  Consolidated Financial Statement Schedule and Report of
           Independent Auditor (included in Part II Item 8)*

         Schedule

         II  Valuation and Qualifying Accounts and Reserves
 .......................

     *   Financial statement schedules other than those listed are
         omitted because they are either not applicable or not required,
         or because the information sought is included in the
         Consolidated Financial Statements or the Notes thereto.

     3.  Exhibits included herein:

         See Exhibit Index below for exhibits filed as part of this
           Form 10-K annual report.

     (b) Reports on Form 8-K.  No reports on Form 8-K were filed in the
           last quarter of the period covered by this Report.

                            INDEX TO EXHIBITS
                            .................

     Exhibit
      Number                              Document
 ...............                           ........

     2  (a)   Agreement and Plan of Merger, dated March 20, 1992, by and
              among the Company, Excel Merging Corporation and Quantronix
              Corporation, as amended July 16, 1992.(1)

        (b)   Agreement and Plan of Merger, dated as of February 14,
              1995, by and among, the Company, Excel Merging Corporation
              and Cambridge Technology, Inc. (4)

        (c)   Asset Purchase Agreement, dated as of October 29, 1995 by
              and among Kollmorgen Instruments Corporation and Photo
              Research, Inc. (6)

     3  (a)   Restated Certificate of Incorporation dated November 13,
              1990, as amended (3)

        (b)   By-Laws, as amended.(2)

     4  (a)   Specimen Certificate for Company's Common Stock.(2)

    10  (a)   1990 Stock Option Plan, as amended.(3)

        (b)   Loan Agreement, dated as of June 30, 1994, by and among the
              Company and U S Trust.(5)

        (c)   Release and Settlement Agreement, dated November 29, 1995,
              by and between the U. S. Government and the Company (7)

        (d)   Employment Agreement, dated as of January 22, 1996, between
              the Company and J. Donald Hill (8), amended as of
              July 14, 1997.

        (e)   Employment Agreement, dated as of January 22, 1996, between
              the Company and Antoine Dominic (8), amended as of
              July, 14, 1997.

     11       Computation of Net Earnings (loss) per share. 

     23       Consent of KPMG Peat Marwick LLP

    (1)       Incorporated by reference to the Company's Registration
              Statement on Form S-4, File No. 33-47440.

    (2)       Incorporated by reference to the Company's Registration
              Statement on Form S-1, File No. 33-39375.

    (3)       Incorporated by reference to the Company's Registration
              Statement on Form S-1, File No. 33-52612.

    (4)       Incorporated by reference to the Company's Report on Form
              8-K dated February 28, 1995

    (5)       Incorporated by reference to the Company's Annual Report on
              Form 10-K for the year ended December 31, 1994.

    (6)       Incorporated by reference to the Company's Report on Form
              8-K dated October 13, 1995.

    (7)       Incorporated by reference to the Company's Report on Form
              8-K dated December 12, 1995.

    (8)       Incorporated by reference to the Company's Annual Report on
              Form 10-K for the year ended December 31, 1996.


                             SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (d) OF THE SECURITIES 
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE 
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

EXCEL TECHNOLOGY, INC.

                            By:  /s/ J. Donald  Hill
                                 .....................................
                                 J. Donald Hill, Chairman of the Board,
                                 President, and Chief Executive Officer

                            By:  /s/ Antoine Dominic
                                 ......................................
                                 Antoine Dominic, Chief Financial Officer
                                 and Principal Accounting Officer

Date:  March 19,1998

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS 
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE 
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

             Signature            Title                   Date
             .........            .....                   ....

/s/ J. Donald Hill               Director            March 19, 1998
 ........................
    J. Donald Hill

/s/ Antoine Dominic              Director            March 19, 1998
 ........................
    Antoine Dominic

/s/ Steven Georgiev              Director            March 19, 1998
 ........................
    Steven Georgiev

/s/ Howard S. Breslow            Director            March 19, 1998
 ........................
    Howard S. Breslow

/s/ Jan Melles                   Director            March 19, 1998
 ........................
Jan Melles


Exhibit 10(f) Amendment

                                              EXCEL TECHNOLOGY, INC.
                                  45 ADAMS AVE.
                              HAUPPAUGE  NY  11788 

                                                         As of July 14, 1997

Mr. J. Donald Hill
2 Bridgeworth Lane
Sherman  CT  06784

     Re:  Employment Agreement
          .....................

Dear Don:

     Reference is made to the employment agreement (the "Employment 
Agreement"), dated as of January 22, 1996, by and between you and Excel 
Technology, Inc. (the "Corporation").  Capitalized terms not otherwise 
defined herein shall have the meaning ascribed to them in the Employment 
Agreement.

     For good and valuable consideration, the receipt of which is hereby 
acknowledged, the Corporation hereby agrees to the following amendments to 
the Employment Agreement:  (a)  the Base Salary is increased to $250,000 per 
annum for the remainder of the Employment Period,  (b) in addition to the 
Base Salary and other entitlements under the Employment Agreement, during the 
remainder of the Employment Period you shall be entitled to a non-accountable 
incidental expense allowance of $500 per month, and (c) provided that you 
remain in the employ of the Corporation for not less than 60 days after the 
date hereof, Section 6.04 of the Employment Agreement is amended to provide 
that if the Corporation terminates you employment without Cause, you shall be 
entitled to the Base Salary pursuant to Section 4.01 of the Employment 
Agreement for a period of two years after the date of termination.  

     The foregoing modifications shall in no way amend, waive, or modify any 
of the other terms or provisions of the Employment Agreement.

     If you find the foregoing is in accordance with your understanding, 
kindly sign and return to us a counterpart hereof, whereupon this instrument 
along with all counterparts will become part of the Employment Agreement and 
binding between us.  
                                                    Sincerely,

										  EXCEL TECHNOLOGY, INC.


                                                    By:  /s/ Antoine Dominic
                                                    ........................
                                                    Antoine Dominic, Chief
                                                    Financial Officer
AGREED AND ACCEPTED:

/s/ J. Donald Hill
 ......................
J. Donald Hill

Exhibit 10(g) Amendment

                             EXCEL TECHNOLOGY, INC.
                                  45 ADAMS AVE.
                              HAUPPAUGE  NY  11788 

                                                         As of July 14, 1997

Mr. Antoine Dominic
 ...................

     Re:  Employment Agreement
          .....................

Dear Don:

     Reference is made to the employment agreement (the "Employment 
Agreement"), dated as of January 22, 1996, by and between you and Excel 
Technology, Inc. (the "Corporation").  Capitalized terms not otherwise 
defined herein shall have the meaning ascribed to them in the Employment 
Agreement.

     For good and valuable consideration, the receipt of which is hereby 
acknowledged, the Corporation hereby agrees to the following amendments to 
the Employment Agreement:  (a)  the Base Salary is increased to $225,000 per 
annum for the remainder of the Employment Period,  (b) in addition to the 
Base Salary and other entitlements under the Employment Agreement, during the 
remainder of the Employment Period you shall be entitled to a non-accountable 
incidental expense allowance of $500 per month, and (c) provided that you 
remain in the employ of the Corporation for not less than 60 days after the 
date hereof, Section 6.04 of the Employment Agreement is amended to provide 
that if the Corporation terminates you employment without Cause, you shall be 
entitled to the Base Salary pursuant to Section 4.01 of the Employment 
Agreement for a period of two years after the date of termination.  

     The foregoing modifications shall in no way amend, waive, or modify any 
of the other terms or provisions of the Employment Agreement.

     If you find the foregoing is in accordance with your understanding, 
kindly sign and return to us a counterpart hereof, whereupon this instrument 
along with all counterparts will become part of the Employment Agreement and 
binding between us.  
                                                Sincerely,

								        EXCEL TECHNOLOGY, INC.


                                                By: /s/ J. Donald Hill
                                                ......................  
                                                J. Donald Hill, President
                                                and Chief Executive Officer
                                                    
AGREED AND ACCEPTED:

/s/ Antoine Dominic
 ......................
Antoine Dominic


</TABLE>
<TABLE>

<CAPTION>

Exhibit 11

Computation of Net Earnings (Loss) per share

                                                       BASIC                               DILUTED
                                                    Year Ended                           Year Ended
                                                   December 31,                          December 31,

                                        1997          1996         1995           1997        1996         1995    
                                     ..........   ..........   ............    ..........  ..........  .............
<S>                                  <C>          <C>             <C>          <C>         <C>             <C>      

Net (loss) earnings                  $8,234,697   $4,892,826   $(1,595,835)    $8,234,697  $4,892,826  $(1,595,835)

Less: Preferred Stock dividend <F2>           0      (54,273)     (162,137)             0           0     (162,137)
                                    ...........   ..........   ............    ..........  ..........  ............
Net earnings (loss) available to
  common shareholders                $8,234,697   $4,838,553   $(1,757,972)    $8,234,697  $4,892,826  $(1,757,972) 
                                    ...........   ..........   ............    ..........  ..........  ............ 
                                    ...........   ..........   ............    ..........  ..........  ............ 
Weighted average common shares     
  outstanding, net of Treasury stock 10,686,763    8,862,217     8,281,194     10,686,763   8,862,217    8,281,194 

Weighted average common share       
  equivalents:
        Options and warrants                  0             0            0        640,323     756,244           0
        Preferred stock                       0             0            0              0     138,950           0
                                    ...........   ..........   ............    ..........  ..........  ............
Weighted average common and 
  common share equivalents           10,686,763     8,862,217    8,281,194<F1> 11,327,086   9,757,411   8,281,194<F1>
                                    ...........   ..........   ............    ..........  ..........  ............ 
                                    ...........   ..........   ............    ..........  ..........  ............

Net (loss) earnings per share             $0.77         $0.55       $(0.21)         $0.73       $0.50      $(0.21) 
                                    ...........   ..........   ............    ..........  ..........  ............ 
                                    ...........   ..........   ............    ..........  ..........  ............
<FN>
<F1>   Due to the loss in 1995, common stock equivalents and the conversion of preferred shares are antidilutive
       and are not included in the basic and diluted calculation for the year ended December 31, 1995. 
       Diluted net loss per share in 1995 includes the reduction for preferred stock dividends. 

<F2>   In 1996, for basic earnings per share, the Company included preferred stock dividends in its net earnings available to common
       shareholders during the portion of the year the preferred stock was outstanding.
</FN>
</TABLE>

Exhibit 23

                          Consent of Independent Auditors
                          ...............................


The Board of Directors
Excel Technology, Inc. 
   and Subsidiaries

We consent to incorporation by reference in the registration statements 
on Form S-8 (No. 33-71122) and Forms S-3 (No. 33-34523) of Excel 
Technology, Inc. and subsidiaries of our report dated January 23, 1998, 
relating to the consolidated balance sheets of Excel Technology, Inc. and 
subsidiaries as of December 31, 1997 and 1996, and the related 
consolidated statements of operations, stockholders' equity and cash 
flows and related schedule for the three years ended December 31, 1997, 
which report appears in the December 31, 1997 annual report on Form 10-K 
of Excel Technology, Inc. and subsidiaries.  


                                              KPMG PEAT MARWICK LLP

Jericho, New York
March 20, 1998