UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

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

For the fiscal year ended December 31, 2007

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

For the transition period from _________ to _________

Commission file number 1-4184

                            Valpey-Fisher Corporation
             (Exact name of registrant as specified in its charter)

            Maryland                                        06-0737363
 (State or other jurisdiction of                         (I.R.S. Employer
  incorporation or organization)                       Identification Number)

75 South St., Hopkinton, Massachusetts                        01748
  (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code: (508) 435-6831

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

    Title of each class:              Name of each exchange on which registered:
    --------------------              ------------------------------------------
Common Stock $.05 par value                             American Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ]  No [X]

Indicate by check mark whether the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]  No [X]

                                       1
<PAGE>

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec.229.405 of this chapter) 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]

Indicate by check mark whether the registrant is large accelerated filer, an
accelerated filer, or a non-accelerated filer, or a smaller reporting company.
See definitions of "large accelerated filer", "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act: (Check one):

           Large accelerated filer [ ]     Accelerated filer [ ]
           Non-accelerated filer [ ]       Smaller reporting company [X]
                  (Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [ ]  No [X]

The aggregate market value of voting stock held by non-affiliates: $12,333,352
(computed by reference to the last sales price of such common stock on June 29,
2007, the last business day of the Registrant's most recently completed second
fiscal quarter, as reported in the American Stock Exchange consolidated trading
index).

Number of shares of common stock outstanding at March 21, 2008: 4,280,383

Documents incorporated by reference:

Portions of the Registrant's Proxy Statement for the 2008 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report.



                                       2
<PAGE>


                                     PART I

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

General

Valpey-Fisher Corporation is incorporated under the laws of Maryland.

Financial Information about Industry Segments

We operate in one business segment. Information about our export sales is set
forth in Note 11 of the Notes to Consolidated Financial Statements in Item 8 of
this Report, which Note is incorporated by reference.

Description of Business

Products
--------

We are involved in the design, production, import, and sale of frequency control
devices and ultrasonic transducer devices.

Our frequency control devices include quartz crystals and oscillators
incorporating these crystals and are used as integral components in electronic
circuitry to assure precise timing and frequency reference. Except for more
costly atomic standards, quartz crystals and oscillators continue to be one of
the most stable references for accurately controlling electronic frequencies and
time.

We provide a wide-frequency range of frequency control devices including
standard and custom-designed product. Our capabilities include:
     -    high-reliability, precision crystals and oscillators used in
          sophisticated industrial, military and aerospace applications.
     -    ultra-high frequency crystals used in crystal filters and oscillators
          for original equipment manufacturers ("OEMs") telecommunications and
          microwave applications.
     -    highly-customized timing modules including jitter attenuators and
          frequency translators for microwave and wireless markets.
     -    high-volume, low cost crystals and oscillators for consumer and
          commercial applications.

Our frequency control products are used by the telecommunications, computer and
computer peripheral equipment, scientific, instrumentation, industrial, and
aerospace markets. The majority of our revenue is generated by the
telecommunications markets including the wireless, networking and optical
networking segments. Our frequency control products are used in
telecommunications infrastructure equipment such as bandwidth multipliers,
networking switches and routers, cellular base stations, transceivers and
multiplexers.

                                       3
<PAGE>

Our ultrasonic transducer devices are sold to the NDT (nondestructive testing),
industrial, research and bio-medical markets. Applications include weld testing,
flaw detection, thickness gauging, and corrosion inspection.

Raw Materials
-------------

Quartz crystal bases, ceramic packages and integrated circuits ("ICs") are the
principal raw materials and are available from a number of domestic and foreign
suppliers.

We import sub-assemblies and completed products from various Far East (including
China, Japan, South Korea, Philippines, and Taiwan) and Russian suppliers for
use in our domestically manufactured products and for resale to its customers.

In order to eliminate the effects of currency fluctuations, we currently and
historically have purchased products from our foreign suppliers in U.S. dollars.
As exchange rates fluctuate, our cost for these materials may become more
expensive than our competitors that have taken measures to protect against
exchange rate fluctuations. In addition, we are subject to the inherent risks
involved in international trade such as political instability and restrictive
trade policies.

Marketing and Customers
-----------------------

Our direct sales personnel, independent manufacturers' representatives and
distributors sell the frequency control products. Our ultrasonic transducer
devices are sold primarily by our direct sales personnel.

We sell our frequency control products primarily to OEMs, contract manufacturing
(CM) companies, and distributors. Our distributors also sell to both the OEMs
and CM companies. Ultrasonic transducer devices are sold primarily to OEMs,
colleges and universities and research facilities.

In recent years, OEMs have outsourced a significant amount of their
manufacturing capability to CM companies. As a result, this has tended to
increase the concentration of sales to the CM companies. Sales to Solectron
Corporation, a CM company, accounted for approximately 11%, 11%, and 12% of our
net sales in 2007, 2006, and 2005, respectively.

Sales to our five largest customers accounted for approximately 30% of our sales
in 2007, compared to 31% in 2006 and 33% in 2005. Sales to CM companies
accounted for approximately 38% of our sales in 2007, compared to 33% in 2006,
and 36% in 2005.

Export sales amounted to approximately 29% of our sales in 2007, 26% in 2006 and
34% in 2005. Information about export sales is set forth in Note 11 of the Notes
to Consolidated Financial Statements included in Item 8 of this Report, which
Note is incorporated by reference. Our international sales are transacted in U.
S. dollars.

                                       4
<PAGE>

Seasonal Fluctuations
---------------------

During the last few years, we have noticed that some of our customers, most
notably the CM companies and the larger OEMs, have closed their manufacturing
facilities during the last two or three weeks in December. These facility
closures reduce the number of available days to ship these customers in the 4th
quarter.

Research and Development
------------------------

Research and development expenses amounted to $495,000 in 2007, $482,000 in 2006
and $352,000 in 2005. During 2008, we intend to increase our efforts to develop
new products which would leverage off our expertise in the timing area.

Backlog
-------

Our backlog of firm orders was approximately $2,134,000 at December 31, 2007
compared to $2,028,000 at December 31, 2006. We expect to ship the entire
December 31, 2007 backlog during 2008.

Competition
-----------

There are many domestic and foreign suppliers of quartz crystals and
oscillators. A number of the competitors are larger and have greater resources
than we have including Vectron International (a division of Dover Corporation)
and CTS Corporation. In addition, foreign competitors, particularly from the Far
East, continue to dominate the U.S. markets. However, we believe we can maintain
a competitive position in our business based on our quality, strong design and
application engineering, responsive customer service and a willingness to
provide specialty small quantity orders.

Manufacturing
-------------

Our manufacturing facility is located in Hopkinton, Massachusetts. We have been
ISO-9001 certified for the design and manufacture of crystals and crystal
oscillators since 1997.

Environmental Regulations
-------------------------

To the best of our knowledge compliance with Federal, state and local provisions
which have been enacted or adopted regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment, has
not had, nor will have a material effect upon capital expenditures, earnings
from continuing operations or competitive position.

As a result of the sale of our Bergen Cable subsidiary in 1998, we are
performing environmental clean up at that site. See Note 3 of the Notes to
Consolidated Financial Statements included in Item 8 of this Report, which Note
is incorporated by reference.

                                       5
<PAGE>

Employees
---------

At December 31, 2007, we employed 55 full-time employees. None of our employees
are represented by a collective bargaining unit. We consider our relations with
our employees to be satisfactory.

Available Information
---------------------

We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document we file at the SEC's public reference room at Room
1024, 450 Fifth Street, NW, Washington, DC 20549. Please call the SEC at
1-800-SEC-0330 for information on the public reference room. The SEC maintains a
website (www.sec.gov) that contains annual, quarterly and current reports, proxy
statements and other information that issuers (including us) file electronically
with the SEC.

Our Internet website address is www.valpeyfisher.com. Our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to reports filed or furnished pursuant to Sections 13(a) and 15 (d)
of the Securities Exchange Act of 1934, as amended, are available free of charge
on our website as soon as reasonably practicable after we electronically file
such material with, or furnish it to, the SEC. The information on our website is
not incorporated by reference into this report.


Foreign and Domestic Operations and Export Sales

Financial information about our export sales is set forth in Note 11 of the
Notes to Consolidated Financial Statements included in Item 8 of this Report,
which Note is incorporated by reference.



                                       6
<PAGE>

Item 1A.  Risk Factors
----------------------

Our business, financial condition and results of operations can be affected by a
number of factors, including but not limited to those set forth below and
elsewhere in this Annual Report on Form 10-K, any one of which could cause our
actual results to vary materially from past results or from our anticipated
future results.

WHILE WE REPORTED AN OPERATING PROFIT OF $1,300,237 IN 2007, $491,300 IN 2006
AND $350,500 IN 2005, WE HAD INCURRED OPERATING LOSSES IN THE FOUR YEARS
PRECEDING 2005 AND OUR RESULTS COULD FLUCTUATE IN THE FUTURE.

While we reported an operating profit of $1,300,237 in 2007, $491,300 in 2006
and $350,500 in 2005, we had incurred operating losses in the four years
preceding 2005 and our results could fluctuate in the future. A wide variety of
factors affect our operating results. Factors that could affect our future
operating results include:

     o    changes in sales volume and mix,
     o    price compression,
     o    declines in gross margin,
     o    increased research and development expenses associated with new
          product development, and
     o    costs to comply with changing laws and regulations and standards,
          including the Sarbanes-Oxley Act of 2002, new SEC regulations and
          American Stock Exchange rules.

IF WE ARE UNABLE TO INTRODUCE NEW PRODUCTS, INCLUDING MORE-VALUE ADDED PRODUCTS,
OUR FUTURE OPERATING RESULTS MAY DECREASE.

Our future operating results are dependent on the timely development, customer
acceptance, production, introduction and marketing of new products, including
more-value added products. The time lag between our customer's acceptance of our
product (a design win) and the receipt of production orders affects the timing
of our sales growth and operating results. We have continuing sales of
older/mature products that tend to decline in average selling prices over the
product life cycle. By developing these new products, we can replace and/or
offset the impact of the lower average selling prices of the older/mature
products.

THE FUTURE DEMAND FOR OUR PRODUCTS DEPENDS IN A LARGE PART TO GROWTH OF THE
MARKETS THAT INCORPORATE OUR FREQUENCY CONTROL PRODUCTS. THESE MARKETS ARE
CYCLICAL AND HAVE EXPERIENCED A MODEST INCREASE IN PRODUCT DEMAND IN RECENT
YEARS.

The future demand for our products depends in a large part to growth of the
markets that incorporate our frequency control products. These markets include
telecommunications equipment, computers and computer peripheral and scientific
instrumentation. A decline in the demand for products in these markets could
negatively affect our operating results and financial condition.

                                       7
<PAGE>

A SIGNIFICANT PORTION OF OUR REVENUES IS DERIVED FROM SALES TO A FEW CUSTOMERS.
THE LOSS OF ONE OR MORE OF OUR SIGNIFICANT CUSTOMERS COULD HAVE AN ADVERSE
IMPACT ON OUR OPERATING RESULTS AND FINANCIAL CONDITION.

In 2007, sales to our top five customers accounted for approximately 30% of our
sales. The loss of one or more of our significant customers or a reduction in
sales to any one of them could have an adverse impact on our operating results
and financial condition. All our sales are made on a purchase order basis and we
do not have long-term purchase contracts with our customers. As a result, our
customers may cancel or change delivery dates within a specific period of time
without penalty.

A SIGNIFICANT PORTION OF OUR REVENUES ARE TO CONTRACT MANUFACTURERS (CMS). IF WE
FAIL TO SUCCESSFULLY OBTAIN ORDERS FROM THE CMS, OUR OPERATING RESULTS AND
FINANCIAL CONDITION COULD BE NEGATIVELY AFFECTED.

Approximately 38% of the Company's sales in 2007 were to Contract Manufacturers
(CMs). There is a continuing trend among original equipment manufacturers (OEMs)
to outsource the manufacture of their product to CMs. We first work with and
receive design wins from OEMs. We then have to negotiate pricing, quantities and
delivery with the CMs. If we fail to successfully obtain orders from the CMs,
our operating results and financial condition could be negatively affected.

THERE IS A LIMITED MARKET AND LIMITED TRADING ACTIVITY FOR OUR COMMON SHARES.
THE PURCHASE OR SALE OF A RELATIVELY SMALL NUMBER OF SHARES COULD RESULT IN
SIGNIFICANT SHARE PRICE FLUCTUATIONS.

There is a limited public market and limited trading activity for our common
shares. Directors and executive officers currently beneficially own 50% of the
outstanding shares on a fully diluted basis. Institutional and other 5% holders
own approximately 18% of the outstanding shares. During 2007, the average
trading volume of our common stock was 5,900 shares per day. As a result of the
low trading volume and the limited outstanding float, the purchase or sale of a
relatively small number of shares could result in significant share price
fluctuations.

WE MAY MAKE AN ACQUISITION THAT IS NOT SUCCESSFUL.

As part of our business strategy, we continue to evaluate acquisition
opportunities that could complement, enhance or expand our current business or
provide additional product offerings or technologies. We may have difficulty
finding these opportunities or, if we do find an opportunity, we may not be able
to complete the transaction for reasons including a failure to secure financing,
if necessary. Any transaction we are able to complete may involve a number of
risks including, but not limited to:

     o    the diversion of our management's attention from our existing business
          to integrate the operations and personnel of the acquired business,
     o    the possible adverse effects on the Company's operating results during
          the integration period,
     o    the loss of key employees, customers and vendors as a result of the
          change in management, and

                                       8
<PAGE>

     o    our possible inability to achieve the intended objectives of the
          transaction.

In addition, future acquisitions may result in dilutive issuances of equity
securities or the incurrence of debt.

OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR EXISTING MANAGEMENT AND
TECHNICAL TEAM AND TO RECRUIT AND RETAIN QUALIFIED TECHNICAL, SALES AND
MARKETING AND MANAGEMENT PERSONNEL.

Our future growth and success will depend in a large part on our ability to
retain our existing management and technical team and to recruit and retain
qualified technical, sales and marketing and management personnel. Competition
for qualified employees in our industry is at times intense. The loss of any of
these key personnel or our inability to attract and retain these key employees
to operate and expand our business could adversely affect our operations.

WE FACE GLOBAL BUSINESS, POLITICAL AND ECONOMIC RISKS WHICH MAY ADVERSELY AFFECT
US.

We sell our products to customers and purchase inventory from vendors located
outside of the United States. As a result, we face global business, political
and economic risks which may adversely affect us. These risks include, but are
not limited to:

     o    political and economic instability in countries where our products are
          sold or manufactured,
     o    expropriation or the imposition of government controls,
     o    export license requirements,
     o    trade restrictions,
     o    high levels of inflation or deflation,
     o    greater difficulty in collecting our accounts receivable and longer
          payment terms,
     o    less favorable intellectual property laws, and
     o    increases in duties.

In addition, these same factors may also place us at a competitive disadvantage
to some of our foreign competitors.

To date, very few of our international transactions have been denominated in
foreign currency. As a result, a change in the value of the US dollar relative
to the foreign currencies could make our products more expensive, and thus less
competitive. We may find it necessary in the future from a competitive position
to complete transactions denominated in foreign currency. This will subject us
with the risks associated with fluctuations in these foreign currencies.

OUR MARKETS ARE HIGHLY COMPETITIVE, AND WE MAY LOSE BUSINESS TO LARGER AND
BETTER FINANCED COMPETITORS.

Our markets are highly competitive worldwide with few import barriers. Foreign
competitors, particularly from the Far East, continue to dominate the U.S. and
world markets. We compete primarily on our quality, strong design and
application engineering, responsive customer service and a willingness to
provide specialty small quantity orders. Our major competitors, most of which
are larger than we are, have substantially greater financial resources and more
extensive engineering, manufacturing, marketing and customer support
capabilities than we have.

                                       9
<PAGE>

CERTAIN DIRECTORS AND EXECUTIVE OFFICERS BENEFICIALLY OWN A SUBSTANTIAL PORTION
OF OUR COMMON STOCK AND MAY BE IN A POSITION TO DETERMINE THE OUTCOME OF OUR
CORPORATE ELECTIONS

Members of the Board of Directors and Executive Officers, beneficially own 50%
of the currently outstanding shares of Common Stock on a fully diluted basis. By
virtue of such ownership, such members of the Board and Management including Ted
Valpey, Jr. may have the practical ability to determine the election of all
directors and control the outcome of substantially all matters submitted to our
stockholders. Such concentration of ownership could have the effect of making it
more difficult for a third party to acquire, or discourage a third party from
seeking to acquire, control of us.


Item 1B.  Unresolved Staff Comments
-----------------------------------

Not applicable.


                                       10
<PAGE>


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

We own our 32,000 square foot facility located in Hopkinton, Massachusetts that
contains office and manufacturing space and serves as our corporate
headquarters.

We believe our facility is suitable for our current use and is adequate to
satisfy our current production capacity needs.


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

Not applicable.


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

No matters were submitted to a vote of the Registrant's security holders during
the last quarter of the fiscal year covered by this report.



                                       11
<PAGE>


                                     PART II

Item 5.   Market for the Registrant's Common Equity, Related Stockholder Matters
--------------------------------------------------------------------------------
and Issuer Purchases of Equity Securities
-----------------------------------------

Our common stock is listed and traded on the American Stock Exchange under the
symbol VPF. The range of high and low prices each quarter for the past two years
is shown below:

For the years ended December 31,                 2007                 2006
--------------------------------------------------------------------------------
                                            High      Low        High      Low
--------------------------------------------------------------------------------
         4th quarter                       $5.90     $4.55      $3.60     $3.29
--------------------------------------------------------------------------------
         3rd quarter                        6.15      4.75       3.84      3.41
--------------------------------------------------------------------------------
         2nd quarter                        7.25      4.31       4.00      3.30
--------------------------------------------------------------------------------
         1st quarter                        4.30      3.21       3.59      3.00
--------------------------------------------------------------------------------

No dividend was paid in 2007 or 2006.

The number of stockholders of record on March 20, 2008 was 692. This number does
not include stockholders for whom shares are held in a "nominee" or "street"
name.


Equity Compensation Plan Information

The following table presents information as of December 31, 2007 regarding the
number of shares of our common stock that may be issued under our equity
compensation plans.

<TABLE>
<CAPTION>
                                                                                Number of securities
                                                                                remaining available
                                                                                for future issuance
                                Number of securities     Weighted-average       under equity
                                to be issued upon        exercise price of      compensation plans
                                exercise of              outstanding options,   (excluding securities
                                outstanding options,     warrants and rights    reflected in the first
      Plan Category             warrants and rights                             column)
------------------------------------------------------------------------------------------------------
<S>                                   <C>                       <C>                     <C>
Equity compensation
plans approved by
security holders (1)                  460,250                   $3.43                   172,666
Equity compensation
plans not approved by
security holders (2)                    -0-                      -0-                      -0-
</TABLE>

(1) Includes the 2003, 2001, 1999 and 1992 Stock Option Plans.
(2) Does not include 100,000 shares of Restricted Stock awarded pursuant to the
Restricted Stock Agreement dated December 19, 2002 between Mr. Ferrantino and
us.

                                       12
<PAGE>

Material Feature of Restricted Stock Agreement between Us and Mr. Ferrantino Not
Approved by Shareholders

As an inducement to becoming our employee, pursuant to a Restricted Stock
Agreement dated December 19, 2002 between us and Michael J. Ferrantino, our
director and President and Chief Executive Officer, on December 24, 2002, we
issued Mr. Ferrantino 100,000 shares of Common Stock for a purchase price of
$.05 per share or an aggregate purchase price of $5,000. Pursuant to the
Agreement, the Stock could not be sold or transferred, encumbered or otherwise
disposed of for a period of five years. Said restrictions terminated as to 20%
of the Restricted Stock upon each of October 23, 2003, 2004, 2005, 2006 and
2007. Pursuant to the Agreement, the Restriction was to terminate as to an
additional 20% of the Restricted Stock upon the death of the employee after
October 23, 2003 or entirely upon a change in control of ownership of 70% or
more of our outstanding Common Stock by anyone other than Ted Valpey, Jr. or
certain mergers or reorganization of us. The Restricted Stock Agreement was not
submitted to shareholders for approval.

Sale of Unregistered Securities

The 100,000 shares of Common Stock issued to Mr. Ferrantino pursuant to the
Restricted Stock Agreement described above in this Item 5 have not been
registered under the Securities Act of 1933 (the "Act"). Transfer of the shares
is subject to the restrictions and limitations under the Act. The issuance of
the shares was exempt from registration pursuant to Section 4(2) of the Act as a
transaction not involving any public offering.

Stock Repurchases

At December 31, 2007, under prior authorizations from the Board of Directors, we
are authorized to purchase up to 227,500 shares of common stock through the open
market or negotiated transactions.

We made no repurchases of its common stock in the fourth quarter of 2007.


                                       13
<PAGE>


                                PERFORMANCE GRAPH


The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of the American Stock
Exchange Index, and a peer index ("Peer Group") made up of 33 companies in the
electronic components manufacturing business, for the five years beginning
December 31, 2002 and ending December 31, 2007 (assuming the investment of $100
on December 31, 2002, and the reinvestment of all dividends).



                               [GRAPHIC OMITTED]



<TABLE>
<CAPTION>
                                                  Base                            Years Ending
                                                 Period
Company Name / Index                            12/31/02     12/31/03     12/31/04     12/31/05     12/31/06     12/31/07
--------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S>                                            <C>          <C>          <C>          <C>          <C>           <C>
Valpey-Fisher Corporation                      $  100.00    $  112.77    $  135.04    $  113.87    $  128.47     $  167.88
American Stock Exchange Index                  $  100.00    $  142.36    $  173.99    $  213.38    $  249.45     $  292.29
Peer Group                                     $  100.00    $  216.72    $  229.82    $  292.65    $  272.77     $  349.76
</TABLE>

                                       14
<PAGE>

The Peer Group Index consists of the following companies: Advanced Energy
Industries, Inc., Cherokee International Corporation, Conolog Corporation,
Corning, Incorporated, Digital Power Corporation, eMagin Corporation, Espey Mfg.
& Electronics Corp., Giga-Tronics Incorporated, Hoku Scientific, Inc.,
Hutchinson Technology Incorporated, The JPM Company, LG. Philips LCD Co., Ltd
(ADR), The LGL Group, Inc., Lumenon Innovative Lightwave Technology, Inc.,
Micronetics, Inc., Microvision, Inc., Microwave Filter Company, Inc., MSGI
Security Solutions, Inc., Nortech Systems Incorporated, Photonic Products Group,
Inc., Planar Systems, Inc., Power-One, Inc., Simclar, Inc., Sparton Corporation,
Spectrum Control, Inc., Stoneridge, Inc., Synaptics Incorporated, TDK
Corporation (ADS), Technitrol, Inc., uVuMobile, Inc., Veritec, Inc., and Vicor
Corporation.



                                       15
<PAGE>

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

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                  2007 (1)   2006 (1)   2005       2004       2003
=============================================================================================================
                                                     (in thousands, except per share data)
-------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>        <C>        <C>
Continuing operations:
-------------------------------------------------------------------------------------------------------------
    Net sales                                           $ 13,419   $ 11,782   $ 11,427   $ 11,545   $  8,496
-------------------------------------------------------------------------------------------------------------
    Gross profit                                           5,441      4,469      3,814      3,260        989
-------------------------------------------------------------------------------------------------------------
    Earnings (loss) before income taxes                    1,712        778        499        (55)    (2,423)
-------------------------------------------------------------------------------------------------------------
    Income tax (expense) benefit                            (521)        71       (195)         -      1,023
-------------------------------------------------------------------------------------------------------------
    Earnings (loss)                                        1,191        849        304        (55)    (1,400)
-------------------------------------------------------------------------------------------------------------
Discontinued operations- net of income tax benefit             -       (180)       (60)      (110)         -
=============================================================================================================
Net earnings (loss)                                     $  1,191   $    669   $    244   $   (165)  $ (1,400)
=============================================================================================================

Basic earnings (loss) per share:
-------------------------------------------------------------------------------------------------------------
    Continuing operations                               $    .28   $    .20   $    .07   $   (.01)  $   (.33)
-------------------------------------------------------------------------------------------------------------
    Discontinued operations                                    -       (.04)      (.01)      (.03)         -
=============================================================================================================
                                                        $    .28   $    .16   $    .06   $   (.04)  $   (.33)
=============================================================================================================

Diluted earnings (loss) per share:
-------------------------------------------------------------------------------------------------------------
    Continuing operations                               $    .27   $    .20   $    .07   $   (.01)  $   (.33)
-------------------------------------------------------------------------------------------------------------
    Discontinued operations                                    -       (.04)      (.01)      (.03)         -
=============================================================================================================
                                                        $    .27   $    .16   $    .06   $   (.04)  $   (.33)
=============================================================================================================

=============================================================================================================
Cash dividends per share                                $      -   $      -   $      -   $      -   $      -
=============================================================================================================
Total assets, end of year                               $ 15,950   $  14,529  $ 13,617   $ 12,864   $ 12,744
=============================================================================================================
Long-term debt, end of year                             $      -   $       -  $      -   $      -   $      -
=============================================================================================================
</TABLE>


(1) As discussed in Note 2 in the Notes to Consolidated Financial Statements,
effective January 1, 2006, we changed our method of accounting for stock-based
compensation to conform to Statement of Financial Accounting Standards No. 123R
"Share-Based Payment".


                                       16
<PAGE>

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

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates, judgments, and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the related disclosure of
contingent assets and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.

Management believes that judgments and estimates related to the following
critical accounting policies could materially affect its consolidated financial
statements.

     Accounts receivable - We perform on-going credit evaluations of our
customers and assess the collectibility of our accounts receivable based on a
number of factors including the customer's financial condition and collection
history, and current economic trends when evaluating the adequacy of the
allowance for doubtful accounts.

     Inventory - We estimate the carrying value of our inventory based upon
historic usage and management's assumptions relating to projected customer
purchases, product design changes and product obsolescence. The changing
technology markets that we supply also affect these estimates. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

     Income Taxes - We have recorded deferred tax assets and liabilities
resulting from differing treatment of items for tax and financial statement
reporting purposes. We must estimate our income tax valuation allowance by
assessing which deferred tax assets are more likely than not to be recovered in
the future. Based on our assessment of the realization of these assets, we have
recorded a valuation allowance of $190,000 at December 31, 2007. In reaching our
conclusion, we evaluated the existence of deferred tax liabilities that can be
used to absorb deferred tax assets, taxable income in prior carryback years and
taxable income by jurisdiction in which we operate and the period over which the
deferred tax assets would be recoverable. In the event that actual results
differ from these estimates in future periods, we may need to establish an
additional valuation allowance or reduce the valuation allowance, which could
materially impact our financial position and results of operations.

                                       17
<PAGE>

Financial Condition and Liquidity

Cash and cash equivalents amounted to $10,001,000 at December 31, 2007, an
increase of $817,000 over the December 31, 2006 level. During 2007, our
continuing operations provided cash of $1,269,000, investing activities used
cash of $341,000, financing activities provided cash of $70,000, and
discontinued operations used cash of $181,000.

Cash provided from continuing operations amounted to $1,269,400 in 2007 compared
to $1,478,000 in 2006. Operating cash flows during 2007 resulted from net
earnings of $1,191,000, increased by net adjustments of $572,000 for the
non-cash effects of depreciation, deferred income taxes, stock compensation
expense and stock option income tax benefits and decreased by $493,000 due to an
increase in components of working capital.

The increase of $324,000 in accounts receivable over the 2006 amount was mainly
due to an increase in the days sales outstanding and, to a lesser extent, to an
increase in the current year's fourth quarter sales over the 2006 comparable
period. The days sales outstanding amounted to 54 days at December 31, 2007
compared to 48 days at December 31, 2006. The inventory increase of $286,000 is
mainly due to a combination of the lead times for certain raw material items and
the necessary inventory to support the current level of shipments and backlog
and to meet customer delivery requirements.

Capital expenditures amounted to $323,000 in 2007. Our budget for 2008 capital
expenditures is approximately $600,000.

We believe that based on our current working capital and the expected cash flows
from operations, our resources are sufficient to meet our financial needs and to
fund our capital expenditures for the projected levels of business in 2008.

Results of Operations - 2007 versus 2006

Our 2007 net sales increased $1,637,000 or 14% over 2006. This sales increase is
mainly attributable to a $1,486,000 or 54% sales increase in our high precision
product line as unit sales increased 91% over the 2006 level. We continue to
pursue sales of these more value-added, higher performance and higher average
selling price products. Sales in our transducer product line increased
approximately 13% over the 2006 amount and sales in our standard and high
reliability oscillator product lines remained flat with 2006. The sales increase
is mainly attributable to a combination of the higher backlog at the beginning
of 2007 versus 2006 and the increased bookings in 2007. Our backlog amounted to
$2,028,000 at January 1, 2007 compared to $1,602,000 at January 1, 2006. Total
bookings for 2007 amounted to $13,435,000 versus $12,316,000 in 2006. At
December 31, 2007, our backlog amounts to $2,134,000, a 5% increase over the
December 31, 2006 amount.

We reported a $5,441,000 gross profit (41% of net sales) in 2007 versus a
$4,469,000 gross profit (38% of net sales) in 2006. The increase in margin
percentage was mainly due to the overall higher percentage of sales from our
high precision product line and the favorable effect of spreading the fixed
overhead costs over the increased sales volume. Raw material costs as a
percentage of overall sales in 2007 increased about 10% over 2006 period due to
changes in product mix.

Selling and advertising expenses amounted to $1,756,000 (13.1% of sales) in 2007
compared to $1,718,000 (14.6% of sales) in 2006. The selling and advertising
expenses increase of $38,000 or 2% over 2006 was mainly due to higher personnel
costs ($54,000) and commission expense to outside sales representatives
($52,000). These increases in 2007 were partially offset by decreases in bad
debt expense ($38,000), travel and entertainment expenses ($15,000) and
depreciation expense ($13,000).

                                       18
<PAGE>

General and administrative expenses amounted to $1,890,000 (14.1% of sales)
compared to $1,777,000 (15.1% of sales) in 2006. The $113,000 expense increase
over 2006 is mainly due to an increase of $128,000 in professional fees
resulting primarily from our decision to consider possible strategic
alternatives to increase shareholder value. This increase was partially offset
by a reduction of $17,000 in stock-based compensation expense.

Research and development expenses amounted to $495,000 (3.7% of sales) compared
to $482,000 (4.1% of sales) in 2006. The $12,000 increase results primarily from
higher personnel costs.

The 2007 increase in interest income over 2006 is due to a combination of higher
average cash balances and higher interest rates during the current year.

The combined federal and state income tax rate for 2007 is 30% compared to 9% in
2006. The 2007 rate is higher than the 2006 rate as the 2006 rate received more
benefit from the reduction in the valuation allowance for deferred income taxes,
the reversal of accrued income taxes and the net effect of state NOL
carryforwards. We reduced the valuation allowance by $281,000 in 2007 and
$257,500 in 2006 based on our assessment of the realization of certain deferred
tax assets. As we have state income tax NOL carryforwards available, there is no
current state income tax provision for 2007 and 2006.

We reported an operating profit of $1,300,000 during 2007 compared to an
operating profit of $491,000 in 2006. The current year increase in operating
profit over last year results from the increased sales and the corresponding
increase in gross profit offset in part by a $164,000 increase in operating
expenses. Interest income amounted to $412,000 in 2007 compared to $293,000 in
2006. We reported a pre-tax profit of $1,712,000 from continuing operations in
2007 compared to a pre-tax profit of $778,000 in 2006. For 2007, we reported net
earnings of $1,191,000 from continuing operations versus net earnings of
$849,000 in 2006. In 2006, we reported an after-tax loss of $180,000 from
discontinued operations. In total, we reported net earnings of $1,191,000 in
2007 versus net earnings of $669,000 in 2006.

Results of Operations - 2006 versus 2005

Net sales increased $355,000 or 3% over 2005. The sales increase is mainly
attributable to higher sales in the buy and resell product line resulting from
higher bookings in the year. The overall actual number of units sold in this
product line increased about 23% over 2005, however, the average selling price
decreased about 7%. Sales of our domestic products increased slightly over last
year as the number of units sold decreased 27% from the 2005 level while the
overall average selling price increased 38%. For 2006, total bookings were
$12,316,000 or 9% higher than 2005. The backlog at December 31, 2006 amounted to
$2,028,000 versus $1,602,000 million at December 31, 2005. We continue to see
price compression in the buy and resell product line and in our older domestic
products and we believe this pricing pressure will continue in the future. In
addition, our near-term visibility continues to be poor and we continue to see
customer orders for small quantities with near-term delivery dates. We are not
sure of the potential impact on its future operations from the current
continuing telecom market uncertainties, the industry-wide over capacity issues,
and the effects of the continuing pricing compression.

We reported a $4,469,000 gross profit (38% of net sales) in 2006 versus a
$3,814,000 gross profit (33% of net sales) in 2005. The higher margin was mainly
attributable to an 11% decrease in raw material costs due to changes in product
mix toward the more value-added, high-reliability, and higher margin products
and product yield improvements. Direct labor as a percentage of sales decreased
18% from 2005 mainly as a result of changes in product mix. Overhead costs as a
percentage of sales in 2006 remained fairly consistent with that in 2005.

                                       19
<PAGE>

Selling and advertising expenses increased $291,000 or 20% over 2005. This
overall expense increase was mainly due to higher personnel expenses of
$252,000, a $34,000 increase in sales commission expense to outside
manufacturers' representatives, a $33,000 increase in travel and entertainment
expense, and the recognition of $28,000 of stock-based compensation expense
partially offset by expense reductions of $36,000 in advertising, and $17,000 in
telephone expense.

General and administrative expenses increased $93,000 or 6% over 2005 mainly as
a result of the recognition of $99,000 of stock-based compensation expense.

Research and development expenses increased $131,000 or 37% over 2005 primarily
as a result of increased personnel expenses. The expense increases are
consistent with our plans to make significant engineering investments in new
product development in 2006.

The increase in interest income over 2005 is due mainly to higher interest rates
during the current year and to a lesser extent higher average cash balances.

The combined federal and state income tax rate for 2006 was 9% compared to 39%
in 2005. The lower rate in 2006 is due to a combination of a reduction in the
valuation allowance for deferred taxes and the reversal of accrued income taxes
offset by the effect of the nondeductible stock compensation expense resulting
from the adoption of SFAS No. 123R. The majority of the stock option expense
results from incentive stock options and under SFAS No. 123R, the expense does
not generate a tax deduction and related tax benefit. We reduced the valuation
allowance by $257,500 in 2006 based on our assessment of the realization of
certain deferred tax assets. As we have state income tax NOL carryforwards
available, there is no estimated state income tax provision for 2006 and 2005.

We reported an operating profit of $491,000 during 2006 compared to an operating
profit of $351,000 in 2005. The operating profit in 2006 was reduced by $170,000
for stock option expense resulting from our adoption of SFAS No. 123R. As we
adopted SFAS No. 123R on a modified prospective method, 2005 does not include
any stock option expense. Interest income amounted to $293,000 in 2006 compared
to $148,000 in 2005. We reported a pre-tax profit of $778,000 from continuing
operations in 2006 compared to a pre-tax profit of $499,000 in 2005. For 2006,
we reported net earnings of $849,000 from continuing operations versus net
earnings of $304,000 in 2005. We reported after-tax losses of $180,000 in 2006
and $60,000 in 2005 from discontinued operations. In total, we reported net
earnings of $669,000 in 2006 versus net earnings of $245,000 in 2005.


                                       20
<PAGE>

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet financing arrangements.

Contractual Obligations

During the normal course of business, we incur certain commitments to make
future payments for the purchase of inventory, machinery and equipment and
production supplies based on our projected requirements. At December 31, 2007,
we had outstanding purchase commitments approximating $849,000, all of which are
expected to be fulfilled in 2008. At December 31, 2007, we did not have any
contractual obligations for capital leases, operating leases or long-term debt.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Words such as "expects",
"believes", "estimates", "plans" or similar expressions are intended to identify
such forward-looking statements. The forward-looking statements are based on our
current views and assumptions and involve risks and uncertainties that include,
but not limited to: our ability to continue to achieve profitability, the
current production over-capacity within the suppliers of frequency control
devices, the ability to develop, market and manufacture new innovative products
competitively, the fluctuations in product demand of the telecommunications
industry, our ability, including our suppliers to produce and deliver materials
and products competitively, the ability to limit the amount of the negative
effect on operating results caused by pricing pressure, and our ability to
comply with Section 404 of the Sarbanes-Oxley Act.

Recent accounting pronouncements

Effective January 1, 2007, the Company adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 48 "Accounting for Uncertainty in Income
Taxes" ("FIN 48"). FIN 48 prescribes how a company should recognize, measure,
present and disclose in its financial statements uncertain tax positions that a
company has taken or expects to take on a tax return. Adoption of FIN 48 on
January 1, 2007 did not result in a cumulative effect adjustment to retained
earnings. At January 1, 2007 and December 31, 2007, the Company had no reserves
for unrecognized tax benefits on the balance sheet.

In September 2006, the FASB issued SFAS No. 157 "Fair Value Measurements" ("SFAS
No. 157"), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. The provisions of
SFAS No. 157 are effective for fiscal years beginning after November 15, 2007.
The Company has not yet determined the impact of adopting SFAS No. 157 on our
consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115 ("SFAS No. 159") which permits an entity to elect to measure
certain assets and liabilities at fair value at specified election dates. The
provisions of SFAS No. 159 are effective for fiscal years beginning after
November 15, 2007. The Company has not yet determined the impact of adopting
SFAS No. 159 on our consolidated financial statements.

                                       21
<PAGE>

In December 2007, the FASB issued SFAS 141 (revised 2007), "Business
Combinations", (SFAS 141R). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, including goodwill, the liabilities assumed and
any non-controlling interest in the acquiree. The Statement also establishes
disclosure requirements to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141R is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The impact of adopting SFAS 141R will be dependent on the
future business combinations that the Company may pursue after its effective
date.

In December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 110, extending under certain circumstances the provisions
of SAB 107 relating to the use of the "simplified method" in developing
estimates of the expected term of "plain vanilla" share options in accordance
with SFAS No. 123R, Share-Based Payment. Through December 31, 2007, we used the
"simplified method" to determine the expected life of option grants. SAB 110 is
effective for stock option grants after December 31, 2007. We are evaluating
what, if any, impact SAB 110 will have on our results of operations or financial
position.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk
--------------------------------------------------------------------

Our cash balances in excess of operating requirements are currently invested in
money market accounts. These money market accounts are subject to interest rate
risk and interest income will fluctuate in relation to general money market
rates. Based on the cash and cash equivalent balance at December 31, 2007, and
assuming the balance was totally invested in money market instruments for the
full year, a hypothetical 1% point increase or decline in interest rates would
result in an approximate $100,010 increase or decrease in interest income.

We purchase certain inventory from and sell product in foreign countries. As
these activities are currently transacted in U.S. dollars, they are not subject
to foreign currency exchange risk. However, significant fluctuation in the
currencies where we purchase inventory or sell product could make the U.S.
dollar equivalent of such transactions more or less favorable to us and the
other involved parties.



                                       22
<PAGE>

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

<TABLE>
<CAPTION>
Valpey-Fisher Corporation
Consolidated Balance Sheets

December 31,                                                                                 2007             2006
=======================================================================================================================
<S>                                                                                      <C>              <C>
Assets
Current assets:
-----------------------------------------------------------------------------------------------------------------------
   Cash and cash equivalents                                                             $10,001,022      $ 9,184,060
-----------------------------------------------------------------------------------------------------------------------
   Accounts receivable, less allowance for doubtful accounts of
    $105,000 in 2007 and $115,000 in 2006                                                  1,937,951        1,613,713
-----------------------------------------------------------------------------------------------------------------------
   Inventories, net                                                                        1,095,498          809,854
-----------------------------------------------------------------------------------------------------------------------
   Deferred income taxes                                                                     959,422          797,923
-----------------------------------------------------------------------------------------------------------------------
   Other current assets                                                                       61,570           69,147
=======================================================================================================================
     Total current assets                                                                 14,055,463       12,474,697
=======================================================================================================================
Property, plant and equipment, at cost:
-----------------------------------------------------------------------------------------------------------------------
   Land and improvements                                                                     226,505          226,505
-----------------------------------------------------------------------------------------------------------------------
   Buildings and improvements                                                              2,042,975        2,042,975
-----------------------------------------------------------------------------------------------------------------------
   Machinery and equipment                                                                 8,772,658        8,449,500
=======================================================================================================================
                                                                                          11,042,138       10,718,980
-----------------------------------------------------------------------------------------------------------------------
   Less accumulated depreciation                                                           9,326,536        8,825,859
=======================================================================================================================
                                                                                           1,715,602        1,893,121
=======================================================================================================================
Other assets                                                                                 178,459          160,902
=======================================================================================================================
                                                                                         $15,949,524      $14,528,720
=======================================================================================================================


Liabilities and Stockholders' Equity
Current liabilities:
-----------------------------------------------------------------------------------------------------------------------
   Accounts payable                                                                      $   619,746      $   648,570
-----------------------------------------------------------------------------------------------------------------------
   Accrued liabilities                                                                     1,757,467        1,673,938
=======================================================================================================================
     Total current liabilities                                                             2,377,213        2,322,508
=======================================================================================================================
Deferred income taxes                                                                        249,222          343,367
-----------------------------------------------------------------------------------------------------------------------
Commitments and contingencies                                                                      -                -
-----------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
-----------------------------------------------------------------------------------------------------------------------
   Preferred stock, $1.00 par value-Authorized 1,000,000 shares; issued, none                      -                -
-----------------------------------------------------------------------------------------------------------------------
   Common stock, $.05 par value-Authorized 10,000,000 shares;
    issued and outstanding: 4,282,503 and 4,256,503 shares, respectively                     214,125          212,825
-----------------------------------------------------------------------------------------------------------------------
   Capital surplus                                                                         5,502,538        5,276,189
-----------------------------------------------------------------------------------------------------------------------
   Retained earnings                                                                       7,606,426        6,415,331
-----------------------------------------------------------------------------------------------------------------------
   Less unearned compensation                                                                      -          (41,500)
=======================================================================================================================
     Total stockholders' equity                                                           13,323,089       11,862,845
=======================================================================================================================
                                                                                         $15,949,524      $14,528,720
=======================================================================================================================
</TABLE>

See notes to consolidated financial statements.



                                       23
<PAGE>

<TABLE>
<CAPTION>
Valpey-Fisher Corporation
Consolidated Statements of Operations

For the Years Ended December 31,                                               2007             2006             2005
==========================================================================================================================
<S>                                                                        <C>              <C>              <C>
Net sales                                                                  $13,419,213      $11,781,851      $11,426,673
--------------------------------------------------------------------------------------------------------------------------
Cost of sales                                                                7,978,044        7,313,214        7,612,645
==========================================================================================================================
   Gross profit                                                              5,441,169        4,468,637        3,814,028
==========================================================================================================================
Selling and advertising expenses                                             1,756,465        1,718,223        1,427,612
--------------------------------------------------------------------------------------------------------------------------
General and administrative expenses                                          1,889,826        1,776,863        1,684,203
--------------------------------------------------------------------------------------------------------------------------
Research and development expenses                                              494,641          482,283          351,687
==========================================================================================================================
                                                                             4,140,932        3,977,369        3,463,502
==========================================================================================================================
   Operating profit                                                          1,300,237          491,268          350,526
--------------------------------------------------------------------------------------------------------------------------
Other income (expense):
--------------------------------------------------------------------------------------------------------------------------
   Interest income                                                             411,858          293,399          148,322
--------------------------------------------------------------------------------------------------------------------------
   Gain (loss) on sales of assets                                                    -           (6,916)               -
==========================================================================================================================
                                                                               411,858          286,483          148,322
==========================================================================================================================
Earnings from continuing operations before income taxes                      1,712,095          777,751          498,848
--------------------------------------------------------------------------------------------------------------------------
Income tax (expense) benefit                                                  (521,000)          71,400         (194,600)
==========================================================================================================================
Earnings from continuing operations                                          1,191,095          849,151          304,248
--------------------------------------------------------------------------------------------------------------------------
(Loss) from discontinued operations, net of income tax benefit                       -         (180,338)         (59,700)
==========================================================================================================================
Net earnings                                                               $ 1,191,095      $   668,813      $   244,548
==========================================================================================================================

Basic earnings (loss) per share:
--------------------------------------------------------------------------------------------------------------------------
   Continuing operations                                                   $       .28      $       .20      $       .07
--------------------------------------------------------------------------------------------------------------------------
   Discontinued operations                                                           -             (.04)            (.01)
==========================================================================================================================
                                                                           $       .28      $       .16      $       .06
==========================================================================================================================

Diluted earnings (loss) per share:
--------------------------------------------------------------------------------------------------------------------------
   Continuing operations                                                   $       .27      $       .20      $       .07
--------------------------------------------------------------------------------------------------------------------------
   Discontinued operations                                                           -             (.04)            (.01)
==========================================================================================================================
                                                                           $       .27      $       .16      $       .06
==========================================================================================================================
</TABLE>

See notes to consolidated financial statements.



                                       24
<PAGE>

<TABLE>
<CAPTION>
Valpey-Fisher Corporation
Consolidated Statements of Cash Flows

For the Years Ended December 31,                                               2007             2006             2005
==========================================================================================================================
<S>                                                                        <C>              <C>              <C>
Cash Flows from Operating Activities:
--------------------------------------------------------------------------------------------------------------------------
   Earnings from continuing operations                                     $ 1,191,095      $   849,151      $   304,248
--------------------------------------------------------------------------------------------------------------------------
   Adjustments to reconcile earnings from continuing
    operations to net cash provided by operating activities:
--------------------------------------------------------------------------------------------------------------------------
     Depreciation                                                              500,677          644,495          751,966
--------------------------------------------------------------------------------------------------------------------------
     Changes in deferred income taxes                                         (128,046)        (365,738)         (72,382)
--------------------------------------------------------------------------------------------------------------------------
     Stock based compensation                                                  148,579          164,625                -
--------------------------------------------------------------------------------------------------------------------------
     Non-cash restricted stock compensation, net of taxes                       24,800           33,753           35,000
--------------------------------------------------------------------------------------------------------------------------
     Stock option income tax benefit                                            25,800                -           10,000
--------------------------------------------------------------------------------------------------------------------------
     (Gain) loss on sales of assets                                                  -            6,916                -
--------------------------------------------------------------------------------------------------------------------------
   Changes in assets and liabilities:
--------------------------------------------------------------------------------------------------------------------------
     Accounts receivable, net                                                 (324,238)        (118,803)        (357,473)
--------------------------------------------------------------------------------------------------------------------------
     Inventories, net                                                         (285,644)         218,249          472,592
--------------------------------------------------------------------------------------------------------------------------
     Other current assets                                                        7,577          (18,668)             331
--------------------------------------------------------------------------------------------------------------------------
     Accounts payable and accrued liabilities                                  108,848           64,126          430,197
==========================================================================================================================
   Net cash provided by operating activities of continuing operations        1,269,448        1,478,106        1,574,479
--------------------------------------------------------------------------------------------------------------------------
   (Loss) from discontinued operations                                               -         (180,338)         (59,700)
--------------------------------------------------------------------------------------------------------------------------
   Change in deferred income taxes                                              27,400           70,384          (30,000)
--------------------------------------------------------------------------------------------------------------------------
   Change in accrued expenses                                                 (209,141)          53,860           67,415
==========================================================================================================================
   Net cash (used) by operating activities of discontinued operations         (181,741)         (22,285)         (22,285)
==========================================================================================================================

   Net cash provided by operating activities                                 1,087,707        1,422,012        1,552,194
==========================================================================================================================

Cash Flows from Investing Activities:
--------------------------------------------------------------------------------------------------------------------------
   Capital expenditures                                                       (323,158)        (299,302)        (120,843)
--------------------------------------------------------------------------------------------------------------------------
   Proceeds from sales of assets                                                     -          122,500                -
--------------------------------------------------------------------------------------------------------------------------
   Other                                                                       (17,557)          (8,065)         (10,207)
==========================================================================================================================
   Net cash (used) by investing activities                                    (340,715)        (184,867)        (131,050)
==========================================================================================================================
Cash Flows from Financing Activities:
--------------------------------------------------------------------------------------------------------------------------
   Stock options exercised                                                      69,970           26,680           61,750
--------------------------------------------------------------------------------------------------------------------------
   Purchases of common stock                                                         -                -          (17,932)
==========================================================================================================================
   Net cash provided by financing activities                                    69,970           26,680           43,818
==========================================================================================================================
Net Increase in Cash and Cash Equivalents                                      816,962        1,263,825        1,464,962
--------------------------------------------------------------------------------------------------------------------------

Cash and Cash Equivalents at beginning of year                               9,184,060        7,920,235        6,455,273
==========================================================================================================================
Cash and Cash Equivalents at end of year                                   $10,001,022      $ 9,184,060      $ 7,920,235
==========================================================================================================================

Supplemental Disclosures of Cash Flow Information
   Cash paid during the year by continuing operations for income taxes     $   667,500      $   525,000      $    83,000
</TABLE>

See notes to consolidated financial statements.



                                       25
<PAGE>

<TABLE>
<CAPTION>
Valpey-Fisher Corporation
Consolidated Statements of Stockholders' Equity


                                                      Common          Stock        Capital      Retained       Unearned
                                                -------------- --------------
                                                      Shares         Amount        Surplus      Earnings     Compensation
==========================================================================================================================
<S>                                                <C>          <C>              <C>           <C>           <C>
Balance, January 1, 2005                           4,222,519    $   211,126      $ 5,076,082   $ 5,501,970   $  (158,500)
--------------------------------------------------------------------------------------------------------------------------
Net earnings                                               -              -                -       244,548             -
--------------------------------------------------------------------------------------------------------------------------
Amortization of restricted stock grant                     -              -                -             -        58,500
--------------------------------------------------------------------------------------------------------------------------
Tax effect of restricted stock grant                       -              -          (23,500)            -             -
--------------------------------------------------------------------------------------------------------------------------
Exercise of stock options                             29,984          1,499           60,251             -             -
--------------------------------------------------------------------------------------------------------------------------
Purchases and retirement of common stock              (6,000)          (300)         (17,632)            -             -
--------------------------------------------------------------------------------------------------------------------------
Stock option income tax benefit                            -              -           10,000             -             -
==========================================================================================================================
Balance, December 31, 2005                         4,246,503        212,325        5,105,201     5,746,518      (100,000)
==========================================================================================================================
Net earnings                                               -              -                -       668,813             -
--------------------------------------------------------------------------------------------------------------------------
Amortization of restricted stock grant                     -              -                -             -        58,500
--------------------------------------------------------------------------------------------------------------------------
Tax effect of restricted stock grant                       -              -          (24,747)            -             -
--------------------------------------------------------------------------------------------------------------------------
Exercise of stock options                             10,000            500           26,180             -             -
--------------------------------------------------------------------------------------------------------------------------
Stock based compensation                                   -              -          169,555             -             -
==========================================================================================================================
Balance, December 31, 2006                         4,256,503        212,825        5,276,189     6,415,331       (41,500)
==========================================================================================================================
Net earnings                                               -              -                -     1,191,095             -
--------------------------------------------------------------------------------------------------------------------------
Amortization of restricted stock grant                     -              -                -             -        41,500
--------------------------------------------------------------------------------------------------------------------------
Tax effect of restricted stock grant                       -              -          (16,700)            -             -
--------------------------------------------------------------------------------------------------------------------------
Exercise of stock options                             26,000          1,300           68,670             -             -
--------------------------------------------------------------------------------------------------------------------------
Stock option income tax benefit                            -              -           25,800             -             -
--------------------------------------------------------------------------------------------------------------------------
Stock based compensation                                   -              -          148,579             -             -
==========================================================================================================================
Balance, December 31, 2007                         4,282,503    $   214,125      $ 5,502,538   $ 7,606,426   $         -
==========================================================================================================================
</TABLE>

See notes to consolidated financial statements.



                                       26
<PAGE>


Valpey-Fisher Corporation
Notes to Consolidated Financial Statements


(1)  Description of Business - Valpey-Fisher Corporation (the Company), a
Maryland corporation, is involved in the design, production, import, and sale of
quartz crystals and oscillators marketed primarily to customers operating in the
telecommunications industry and the design, production and sale of ultrasonic
transducer devices.

(2)  Summary of Significant Accounting Policies:

     Principles of consolidation - The accompanying consolidated financial
statements include the accounts of Valpey-Fisher Corporation and its wholly
owned subsidiaries. In 2005, the Company dissolved all the consolidating
subsidiaries, except for Matec International, Inc. Significant intercompany
balances and transactions have been eliminated in consolidation

     Use of estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates. Estimates include reserves
for accounts receivable and inventory, useful lives of property, plant and
equipment, accrued liabilities, deferred income taxes and assumptions used to
calculate stock compensation expense. Actual results could differ from those
estimates.

     Fair value of financial instruments - The carrying amounts of cash, cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximate fair value because of their short-term nature.

     Cash equivalents - The Company considers all highly liquid money market
investments with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost plus accrued interest, which
approximates market value.

     Accounts receivable - Trade accounts receivable are recorded at the
invoiced amount and do not bear interest. An allowance for doubtful accounts is
maintained for potential credit losses based upon the Company's expected
collectibility of all accounts receivable. The Company determines the allowance
based on numerous factors including the customer's financial condition and
collection history, and current economic trends. Account balances are
charged-off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote.

     Concentration of credit risk - Financial instruments that potentially
subject us to concentrations of credit risk consist principally of cash and cash
equivalents and accounts receivable. The Company places its cash and cash
equivalents primarily in money market accounts and reduces its exposure to
credit risk by maintaining such accounts with high quality financial
institutions. At December 31, 2007, approximately $1,333,000 of the Company's
cash and cash equivalents balance were in excess of the applicable insurance
limits. Concentrations of credit risk with respect to accounts receivable are
primarily due to customers with large outstanding balances. At December 31,
2007, two customers represented about 18% and 11%, respectively, of the
Company's accounts receivable. At December 31, 2006, three customers each
represented about 10% of the Company's accounts receivable. To reduce credit
risk, the Company performs ongoing credit evaluations of its customers, but
generally does not require advance payments or collateral. The Company maintains
an allowance for doubtful accounts based upon the expected collectibility of
such receivables.

     Inventories - Inventories are stated at the lower of cost or market and are
determined by the first-in, first out method (FIFO).

                                       27
<PAGE>

     Property, plant and equipment - The Company uses the straight-line method
of providing for depreciation of property, plant and equipment for financial
reporting purposes and accelerated methods for tax purposes. The estimated lives
used to compute depreciation are as follows: land improvements - 10 years,
building and improvements - 15 to 40 years and machinery and equipment - 3 to 10
years. Expenditures for additions, renewals and betterments of property and
equipment are capitalized. Expenditures for repairs and maintenance are charged
to expense as incurred. As assets are retired or sold, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in the results of operations.

     Revenue recognition - Revenue is recognized when an agreement of sale
exists, product delivery has occurred, title has passed, pricing is fixed or
determinable, and collection is reasonably assured.

     Research and development - Research and development costs are expensed as
incurred.

     Advertising - Advertising costs are expensed as incurred. Advertising
expenses were $79,500 in 2007, $81,600 in 2006, and $117,300 in 2005.

                                       28
<PAGE>

Valpey-Fisher Corporation
Notes Continued


      Income taxes - The Company computes deferred income taxes based on the
differences between the financial statement and tax basis of assets and
liabilities using enacted rates in effect in the years in which the differences
are expected to reverse. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. The tax effect
of the differences between stock compensation expense for financial statement
and income tax purposes is charged or credited to capital surplus.

     Earnings per share - Basic earnings per share is computed by dividing net
earnings by the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed using the weighted average number
of common shares outstanding during the period, plus the net incremental shares
that would be issued using the treasury stock method assuming dilutive
outstanding stock options were exercised and dilutive unvested restricted stock
were vested. The assumed proceeds under the treasury stock method include:
     o    the amount paid to the Company upon exercise of the option;
     o    compensation expense for future services that the Company has not yet
          recognized; and
     o    the amount of excess tax benefits, if any, that would be credited to
          additional paid-in capital upon exercise of the options.

     The computation of diluted earnings per share excludes stock options and
restricted stock with an exercise price in excess of the average market price as
they are antidilutive. In calculating diluted earnings per share, the dilutive
effect of stock options and restricted stock are computed using the average
market price for the respective period.

     Stock compensation plans - Effective January 1, 2006, the Company began
recording compensation expense associated with stock-based payments in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 123R,
"Share-Based Payment". Prior to January 1, 2006, the Company applied the
intrinsic value method, Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock-based payments. Accordingly, the Company did not recognize compensation
expense for stock-based payments granted with exercise prices equal to or
greater than the market value on the date of grant. The Company has adopted the
modified prospective method as permitted under SFAS No. 123R. Under this
transition provision, compensation expense associated with stock-based payments
recognized beginning January 1, 2006 includes: (a) expense related to the
remaining unvested portion of all stock-based payment awards granted prior to
December 31, 2005, based on the grant date fair value estimated in accordance
with the provisions of SFAS No. 123, and (b) expense related to all stock- based
payment awards granted subsequent to December 31, 2005, based on the grant date
fair value estimated in accordance with the provisions of SFAS No. 123R. In
accordance with the modified prospective method of adoption, the Company's
results of operations and financial position for prior periods have not been
restated.

                                       29
<PAGE>

As a result of the adoption of SFAS No. 123R, the Company recorded the following
stock-based compensation expense in the Consolidated Statement of Operations (in
thousands):

     For the Year Ended December 31,                         2007        2006
================================================================================
     Cost of sales                                       $      27   $      31
--------------------------------------------------------------------------------
     Selling and advertising                                    29          29
--------------------------------------------------------------------------------
     General and administrative                                 82          99
--------------------------------------------------------------------------------
     Research and development                                   11          11
================================================================================
     Pre-tax stock-based compensation expense                  149         170
--------------------------------------------------------------------------------
     Income tax (benefit)                                       (5)         (5)
================================================================================
     Net stock-based compensation expense                $     144   $     165
================================================================================

                                       30
<PAGE>

Valpey-Fisher Corporation
Notes Continued


The following table illustrates the effect on net earnings and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based compensation:

For the Year Ended December 31,                                          2005
================================================================================
Net earnings, as reported                                            $ 244,548
--------------------------------------------------------------------------------
Deduct: Total stock-based employee compensation expense determined
        under the fair value based method for all awards, net of
        related tax effects                                           (173,271)
================================================================================
Pro forma net earnings                                               $  71,277
================================================================================

Basic and diluted earnings per share, as reported                    $     .06
================================================================================
Basic and diluted earnings per share, pro forma                      $     .02
================================================================================

See Note 9 for further information regarding the Company's stock-based
compensation assumptions.


     Comprehensive income (loss) - Comprehensive income (loss) is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. For the years ended
December 31, 2007, 2006, and 2005, the Company had no items of other
comprehensive income (loss).

     Recent accounting pronouncements - Effective January 1, 2007, the Company
adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48
"Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 prescribes how a
company should recognize, measure, present and disclose in its financial
statements uncertain tax positions that a company has taken or expects to take
on a tax return. Adoption of FIN 48 on January 1, 2007 did not result in a
cumulative effect adjustment to retained earnings. At January 1, 2007 and
December 31, 2007, the Company had no reserves for unrecognized tax benefits on
the balance sheet.

In September 2006, the FASB issued SFAS No. 157 "Fair Value Measurements" ("SFAS
No. 157"), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. The provisions of
SFAS No. 157 are effective for fiscal years beginning after November 15, 2007.
The Company has not yet determined the impact of adopting SFAS No. 157 on our
consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115 ("SFAS No. 159") which permits an entity to elect to measure
certain assets and liabilities at fair value at specified election dates. The
provisions of SFAS No. 159 are effective for fiscal years beginning after
November 15, 2007. The Company has not yet determined the impact of adopting
SFAS No. 159 on our consolidated financial statements.

                                       31
<PAGE>

In December 2007, the FASB issued SFAS 141 (revised 2007), "Business
Combinations", (SFAS 141R). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, including goodwill, the liabilities assumed and
any non-controlling interest in the acquiree. The Statement also establishes
disclosure requirements to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141R is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The impact of adopting SFAS 141R will be dependent on the
future business combinations that the Company may pursue after its effective
date.

In December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 110, extending under certain circumstances the provisions
of SAB 107 relating to the use of the "simplified method" in developing
estimates of the expected term of "plain vanilla" share options in accordance
with SFAS No. 123R, Share-Based Payment. Through December 31, 2007, we used the
"simplified method" to determine the expected life of option grants. SAB 110 is
effective for stock option grants after December 31, 2007. We are evaluating
what, if any, impact SAB 110 will have on our results of operations or financial
position.

                                       32
<PAGE>

Valpey-Fisher Corporation
Notes Continued


(3)  Discontinued Operations:

In 1998, the Company sold all the assets a subsidiary located in New Jersey. As
a result of this sale, the Company was required to perform environmental cleanup
at this site. During 2006 and 2005, the Company recorded pre-tax expenses of
$285,500 and $100,000, respectively, to increase the environmental expense
accrual to reflect the then revised estimate to complete the remediation. These
expense amounts, net of income tax benefit, are presented in the Consolidated
Statements of Operations under the caption "(Loss) from discontinued operations,
net of income tax benefit". As of December 31, 2007, a total of $1,560,000 has
been expensed for the cleanup and $381,900 (see Note 7) is accrued for expenses
relating to the cleanup.

(4) Inventories, net: Inventories, net of reserves, consist of the following:
                                                             2007         2006
================================================================================
Raw materials                                           $  757,625   $  480,830
--------------------------------------------------------------------------------
Work in process                                            101,012      106,011
--------------------------------------------------------------------------------
Finished goods                                             236,861      223,013
================================================================================
                                                        $1,095,498   $  809,854
================================================================================

                                       33
<PAGE>

Valpey-Fisher Corporation
Notes Continued

(5)  Income Taxes: The provision (benefit) for income taxes for continuing
operations consisted of the following:

                                              2007         2006         2005
================================================================================
Current:
--------------------------------------------------------------------------------
   Federal                                $ 612,600    $ 399,700    $ 278,100
--------------------------------------------------------------------------------
   State                                          -      (80,800)        (800)
================================================================================
                                            612,600      318,900      277,300
================================================================================
Deferred:
--------------------------------------------------------------------------------
   Federal                                   16,700     (101,100)     (93,000)
--------------------------------------------------------------------------------
   State                                    172,900      (31,700)      55,800
================================================================================
                                            189,600     (132,800)     (37,200)
================================================================================
Valuation allowance                        (281,000)    (257,500)     (45,500)
================================================================================
   Total                                  $ 521,000    $ (71,400)   $ 194,600
================================================================================

The Company recorded an income tax benefit relating to the discontinued
operations of $105,000 in 2006 and $40,300 in 2005.

The total income tax provision (benefit) for continuing operations differs from
that computed by applying the federal income tax rate to income before income
taxes. The reasons for the difference are as follows:
                                              2007         2006         2005
================================================================================
Income taxes at statutory rates           $ 582,100    $ 264,400    $  169,600
--------------------------------------------------------------------------------
State income taxes, net of federal tax
 effect                                      31,200      (62,900)       36,300
--------------------------------------------------------------------------------
Federal tax effect of state tax operating
 losses utilized                            115,700       41,800        31,200
--------------------------------------------------------------------------------
Stock based compensation                     46,400       53,500             -
--------------------------------------------------------------------------------
Change in valuation allowance              (281,000)    (257,500)      (45,500)
--------------------------------------------------------------------------------
Reversal of accruals                              -      (80,800)            -
--------------------------------------------------------------------------------
Other, net                                   26,600      (29,900)        3,000
================================================================================
                                          $ 521,000    $ (71,400)   $  194,600
================================================================================

                                       34
<PAGE>

     The tax effects of significant items comprising the Company's deferred tax
assets and liabilities as of December 31, 2007 and 2006 are as follows:
                                                            2007          2006
================================================================================
Deferred tax assets:
--------------------------------------------------------------------------------
   Inventory valuation                                 $  538,600    $  585,000
--------------------------------------------------------------------------------
   State tax loss carryforward                            356,200       575,500
--------------------------------------------------------------------------------
   Accruals and allowances                                244,700       103,500
--------------------------------------------------------------------------------
   Stock compensation                                       9,900         4,900
--------------------------------------------------------------------------------
   Valuation allowance                                   (190,000)     (471,000)
================================================================================
   Net deferred tax assets                                959,400       797,900
================================================================================

--------------------------------------------------------------------------------
Deferred tax liabilities:
--------------------------------------------------------------------------------
   Depreciation                                           186,200       216,600
--------------------------------------------------------------------------------
   DISC commissions                                        63,000       126,800
================================================================================
   Total deferred tax liabilities                         249,200       343,400
================================================================================
Net deferred tax assets                                $  710,200    $  454,500
================================================================================

At December 31, 2007, the Company has state tax loss benefit carryforwards
of $356,200 that expire in 2008. During 2007 and 2006, the Company reduced the
valuation allowance based on the Company's ability to utilize state tax loss
carryforwards previously reserved for. Due to the uncertainty of the realization
of this state tax benefit and management's estimate that operating income and
the reversal of future taxable temporary differences will more likely than not
be sufficient to recognize all of the other deferred tax assets, the Company has
established a valuation allowance of $190,000 at December 31, 2007.

(6)  Profit Sharing and Savings Plan: The Company has a trusteed profit sharing
401(k) plan that covers all qualified employees. Under the profit sharing
section of the plan, the Company may make contributions to the plan at the
discretion of the Board of Directors. Profit sharing expense amounted to $60,000
in 2007, $25,700 in 2006 and $0 in 2005. Under the 401(k) section of the plan,
the Company matched 50% of employee contributions up to 6% of compensation.
Total Company contributions charged to operations were approximately $55,000 in
2007, $81,000 in 2006 and $76,000 in 2005.

                                       35
<PAGE>

Valpey-Fisher Corporation
Notes Continued


(7)  Accrued Liabilities: Accrued liabilities consist
of the following items:                                     2007          2006
================================================================================
Employee compensation                                  $  833,800    $  693,400
--------------------------------------------------------------------------------
Income taxes                                                    -        19,000
--------------------------------------------------------------------------------
Professional fees                                         165,000       145,000
--------------------------------------------------------------------------------
Environmental costs (see Note 3)                          381,900       450,000
--------------------------------------------------------------------------------
Commissions                                               115,000       118,400
--------------------------------------------------------------------------------
Other                                                     261,767       248,138
--------------------------------------------------------------------------------
                                                       $1,757,467    $1,673,938
================================================================================

(8)  Debt: At December 31, 2007, the Company had no outstanding credit
arrangements with banks or any other financial institution.

(9)  Stockholders' Equity: The Company has 4,282,503 and 4,256,503 shares of its
$.05 par value Common Stock outstanding at December 31, 2007 and 2006,
respectively.

At December 31, 2007, under prior authorizations from the Board of Directors,
the Company is authorized to purchase up to an additional 227,500 shares of
stock through the open market or negotiated transactions.

In the fourth quarter of 2002, the Company granted 100,000 shares of restricted
stock to the President and Chief Executive Officer for $5,000. The shares issued
under a Restricted Stock Agreement vest over a period of five years. Unearned
compensation was recorded at the date of the grant based on the market value of
$295,000 or $2.95 per share. Unearned compensation, which is shown as a separate
component of stockholders' equity, is being amortized over the five year vesting
period. At December 31, 2007 all shares were vested and at December 31, 2006,
20,000 of these shares were nonvested. During 2007, 20,000 of these shares
vested and no shares of restricted stock were granted or forfeited. The amount
amortized to expense was $41,500 in 2007, $58,500 in 2006, and $58,500 in 2005.
The tax effect of the differences between compensation expense for financial
statement and income tax purposes is charged or credited to capital surplus.

At December 31, 2007, the Company has four Stock Option Plans that allow for the
granting of options to officers, key employees, and other individuals to
purchase a maximum of 1,000,000 shares of the Company's common stock. The option
price and terms are recommended by the Company's Compensation Committee to the
Company's Board of Directors for approval. The options granted may qualify as
incentive stock options ("ISO's"). Options granted prior to December 31, 2005
generally vested 20% on each of the first, second, third, fourth, and fifth
anniversaries of the date of grant with a contractual life of ten years. The
options granted in 2006, vest 33% on each of the first, second and third
anniversaries of the date of grant and have a contractual life of five years.
The Company issues new shares upon the exercise of stock options. At December
31, 2007, options for 172,666 shares remain available for future grants under
the Plans and 460,250 common shares are reserved for issuance upon exercise of
the outstanding stock options.

                                       36
<PAGE>

Valpey-Fisher Corporation
Notes Continued


There were no options granted in 2007. The estimated fair value of each option
granted in 2006 and 2005 was determined on the grant date using the
Black-Scholes option pricing model with the following weighted-average
assumptions for stock option grants:

     For the Year Ended December 31                         2006          2005
================================================================================

--------------------------------------------------------------------------------
Weighed-average grant date fair value                     $ 1.06        $ 1.84
--------------------------------------------------------------------------------
Assumptions:
--------------------------------------------------------------------------------
             Expected dividend yield                           0%            0%
--------------------------------------------------------------------------------
             Risk-free interest rate                         4.6%          4.0%
--------------------------------------------------------------------------------
             Expected life of options in years               3.5             7
--------------------------------------------------------------------------------
             Assumed volatility                               36%           57%
--------------------------------------------------------------------------------

The risk-free interest rate is based on the yield on zero-coupon U.S. treasury
securities at the time of grant for a period commensurate with the expected
term. The expected volatility is calculated using the Black-Scholes model based
on weighted-average historic prices for a period commensurate with the expected
term. For options granted in 2006, the expected term of the option is determined
based on historical experiences by using the "simplified method" as provided for
in Staff Accounting Bulletin No. 107. Prior to 2006, the expected term of the
option was determined by taking the average of the vesting term and the
contractual life of the option.

A summary of the status of the Company's fixed stock option plans as of December
31, 2007, 2006, and 2005, and changes during the years ended on those dates is
presented below:

<TABLE>
<CAPTION>
                                           2007                            2006                             2005
                              ===============================================================================================
                                                 Weighted-                       Weighted-                        Weighted-
                                                 Average                         Average                          Average
                                 Number of       Exercise        Number of       Exercise        Number of        Exercise
                                  shares          Price           shares          Price           shares           Price
-----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>            <C>              <C>            <C>               <C>
Outstanding, January 1             486,250          $3.39          488,750          $2.98          532,234           $3.40
-----------------------------------------------------------------------------------------------------------------------------
   Granted                               -              -           10,000           3.25          121,500            2.99
-----------------------------------------------------------------------------------------------------------------------------
   Exercised                       (26,000)          2.69          (10,000)          2.67          (29,984)           2.06
-----------------------------------------------------------------------------------------------------------------------------
   Forfeited                             -              -           (2,500)          2.96         (135,000)           3.42
=============================================================================================================================
Outstanding, December 31           460,250          $3.43          486,250          $3.39          488,750           $3.38
=============================================================================================================================
Exercisable, December 31           343,683          $3.59          281,004          $3.68          203,658           $3.89
=============================================================================================================================
</TABLE>

As of December 31, 2007, the intrinsic value (the difference between the
exercise price and the market price) for all outstanding options was $659,445
and the intrinsic value for all options exercisable was $469,259. The total
intrinsic value of all options exercised during the years ended December 31,
2007, 2006, and 2005 was $87,690, $11,820, and $28,680, respectively.

                                       37
<PAGE>

Valpey-Fisher Corporation
Notes Continued


The following table summarizes information about fixed stock options outstanding
and exercisable at December 31, 2007:

<TABLE>
<CAPTION>
                              Options Outstanding                     Options Exercisable
                   =======================================  =======================================
                                              Weighted                                 Weighted
                                 Weighted     Average                     Weighted     Average
Range of                         Average      Remaining                   Average      Remaining
exercise                         Exercise     Life in                     Exercise     Life in
prices                Number     Price        Years            Number     Price        Years
==========================================================  =======================================
<C>                   <C>          <C>            <C>           <C>         <C>            <C>
----------------------------------------------------------  ---------------------------------------
$2.48 - 2.96          144,500      $ 2.83         6.6           71,200      $ 2.77         6.3
----------------------------------------------------------  ---------------------------------------
$3.05 - 4.28          297,000        3.24         5.2          253,733        3.26         5.0
----------------------------------------------------------  ---------------------------------------
$11.04                 18,750       11.04         2.8           18,750       11.04         2.8
                   =======================================  =======================================
                      460,250      $ 3.43         5.5          343,683      $ 3.59         5.2
                   =======================================  =======================================
</TABLE>


A summary of the status of the Company's nonvested stock options as of December
31, 2007 and the changes during the year then ended is as follows:

<TABLE>
<CAPTION>
                                                                          Weighted-Average
                                                                             Grant-Date
                                                       Shares                Fair Value
=============================================================================================
<S>                                                    <C>                     <C>
Nonvested at December 31, 2006                         205,246                 $ 1.76
---------------------------------------------------------------------------------------------
Granted                                                      -                      -
---------------------------------------------------------------------------------------------
Vested                                                 (88,679)                  1.75
---------------------------------------------------------------------------------------------
Forfeited                                                    -                      -
=============================================================================================
Nonvested at December 31, 2007                         116,567                 $ 1.77
=============================================================================================
</TABLE>

At December 31, 2007, there was approximately $149,000 of total unrecognized
compensation cost related to nonvested stock options granted. That cost is
expected to be recognized over a weighted-average period of 1.6 years.

                                       38
<PAGE>

Valpey-Fisher Corporation
Notes Continued


(10) Earnings Per Share: The computation of basic and diluted earnings per share
from continuing operations is as follows:

<TABLE>
<CAPTION>
                                                                                       2007           2006           2005
=============================================================================================================================
<S>                                                                               <C>            <C>            <C>
Basic:
-----------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations                                               $ 1,191,095    $   849,151    $   304,248
-----------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding                                                 4,254,807      4,216,558      4,183,328
=============================================================================================================================
Basic earnings per share from continuing operations                               $       .28    $       .20    $       .07
=============================================================================================================================
Diluted:
-----------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations                                               $ 1,191,095    $   849,151    $   304,248

-----------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding                                                 4,254,807      4,216,558      4,183,328
-----------------------------------------------------------------------------------------------------------------------------
Diluted effect of stock options outstanding, using the treasury stock method          132,721          7,863         68,629
-----------------------------------------------------------------------------------------------------------------------------
Dilutive effect of unvested restricted stock, using the treasury stock method          12,892         16,267         20,102
=============================================================================================================================
Diluted weighted average shares outstanding                                         4,400,420      4,240,688      4,272,059
=============================================================================================================================
Diluted earnings per share from continuing operations                             $       .27    $       .20    $       .07
=============================================================================================================================
</TABLE>


The computation of diluted earnings per share excluded stock options to purchase
18,750 shares in 2007 and 28,750 shares in 2006 and 2005 as the exercise prices
were greater than the average market price. In 2006, the computation of diluted
earnings per share excluded stock options to purchase 378,000 shares as the
assumed proceeds exceeded the average market price during the period.

                                       39
<PAGE>

Valpey-Fisher Corporation
Notes Continued


(11) Industry Segment: The Company operates in one segment: the design,
production, import, and sale of quartz crystals and oscillators and ultrasonic
transducer devices.

One customer accounted for approximately 11%, 11% and 12% of net sales in 2007,
2006 and 2005, respectively. Export sales to foreign markets are as follows:

<TABLE>
<CAPTION>
                                                       2007           2006           2005
=============================================================================================
<S>                                               <C>            <C>            <C>
Asia Pacific                                      $ 2,272,200    $ 1,581,500    $ 1,955,900
---------------------------------------------------------------------------------------------
Europe and Middle East                                828,500        875,900      1,190,600
---------------------------------------------------------------------------------------------
Canada                                                499,200        607,600        704,200
---------------------------------------------------------------------------------------------
Mexico                                                315,100         18,300         12,400
---------------------------------------------------------------------------------------------
Other                                                  13,700          7,200         21,500
---------------------------------------------------------------------------------------------
                                                  $ 3,928,700    $ 3,090,500    $ 3,884,600
=============================================================================================
</TABLE>

(12) Quarterly Financial Data (unaudited): Selected unaudited quarterly
financial data for 2007 and 2006 is set forth below:

<TABLE>
<CAPTION>
                                                            First       Second      Third      Fourth
========================================================================================================
                                                               (in thousands, except per share data)
--------------------------------------------------------------------------------------------------------
                         2007
--------------------------------------------------------------------------------------------------------
<S>                                                       <C>         <C>         <C>         <C>
Net sales from continuing operations                      $  3,242    $  3,425    $  3,386    $  3,366
--------------------------------------------------------------------------------------------------------
Gross profit                                                 1,321       1,371       1,398       1,351
--------------------------------------------------------------------------------------------------------
Earnings before income taxes                                   373         442         488         409
--------------------------------------------------------------------------------------------------------
Net earnings from:
   Continuing operations                                       280         336         343         232
--------------------------------------------------------------------------------------------------------
   Discontinued operations                                       -           -           -           -
========================================================================================================
Net earnings                                              $    280    $    336    $    343    $    232
========================================================================================================

Basic and diluted earnings per share:
   Continuing operations                                  $    .07    $    .08    $    .08    $    .05
--------------------------------------------------------------------------------------------------------
   Discontinued operations                                       -           -           -           -
========================================================================================================
                                                          $    .07    $    .08    $    .08    $    .05
========================================================================================================

                                                            First       Second      Third      Fourth
========================================================================================================
                         2006
--------------------------------------------------------------------------------------------------------
Net sales from continuing operations                      $  2,872    $  2,927    $  2,875    $  3,107
--------------------------------------------------------------------------------------------------------
Gross profit                                                 1,011       1,072       1,062       1,324
--------------------------------------------------------------------------------------------------------
Earnings before income taxes                                    77         119         179         403
--------------------------------------------------------------------------------------------------------
Net earnings (loss) from:
   Continuing operations                                        33          62          98         656
--------------------------------------------------------------------------------------------------------
   Discontinued operations                                       -           -           -        (180)
========================================================================================================
Net earnings                                              $     33    $     62    $     98    $    476
========================================================================================================

Basic and diluted (loss) per share:
   Continuing operations                                  $    .01    $    .01    $    .02    $    .15
--------------------------------------------------------------------------------------------------------
   Discontinued operations                                       -           -           -        (.04)
========================================================================================================
                                                          $    .01    $    .01    $    .02    $    .11
========================================================================================================
</TABLE>

                                       40
<PAGE>

Valpey-Fisher Corporation
Notes Continued


Earnings per share calculations for each of the quarters is based on the
weighted average number of shares outstanding for each period and the sum of the
quarters may not necessarily be equal to the full year earnings per share
amounts.

The fourth quarter of 2007 general and administrative expense includes $75,000
of professional fees incurred by the Company in considering possible strategic
alternatives to increase shareholder value. This amount had previously been
classified as a current asset. Of the $75,000 expense correction recorded in the
fourth quarter, $8,000, $25,000 and $42,000 relates to the first, second, and
third quarters, respectively, of 2007. This correction did not affect cash flow
and its effect on the Company's current years net income and stockholders'
equity is not material.

In the fourth quarter of 2006, the Company reduced the valuation allowance for
deferred tax assets based on the assessment of the realization of deferred tax
assets and reversed income tax accruals. As a result, income tax expense was
reduced by $338,300 or $.08 per share.

(13) Commitments and Contingencies: During the normal course of business, the
Company incurs certain commitments to make future payments for the purchase of
inventory, machinery and equipment and production supplies based on its
projected requirements. At December 31, 2007, the Company has outstanding
purchase commitments approximating $849,000, all of which are expected to be
fulfilled in 2008.

In connection with the sale of its Bergen Cable Technologies, Inc. subsidiary in
1998, the Company was required to perform environmental cleanup at this site
(see Note 3).



                                       41
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Valpey-Fisher Corporation

We have audited the accompanying consolidated balance sheets of
Valpey-Fisher Corporation (a Maryland corporation) and subsidiaries (the
"Company") as of December 31, 2007 and 2006, and the related statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2007. Our audits of the basic financial statements
included the financial statement schedule listed in the index appearing under
Item 15(a)(2). These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 Valpey-Fisher
Corporation and subsidiaries as of December 31, 2007 and 2006, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2007 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.

As discussed in Notes 2 and 9 to the consolidated financial statements, the
Company changed its method of accounting for Share-Based Payments under SFAS No.
123(R) as of January 1, 2006.

/s/ Grant Thornton LLP
Boston, Massachusetts
March 31, 2008

                                       42
<PAGE>

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

     Not applicable.


Item 9A(T).  Controls and Procedures
------------------------------------

Evaluation of disclosure controls and procedures.

We carried out an evaluation, under the supervision and with our management,
including our President and Chief Executive Officer and our Company's Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934). Based upon that evaluation, the
President and Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures are effective as of December 31, 2007 in
timely alerting them to material information relating to us required to be
included in our periodic SEC filings.

 Management recognizes that a control system, no matter how well conceived and
operated, can provide only reasonable, not absolute assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.

Management's Annual Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as such term is defined in Rules 13a-15(f) and
15d-15(f) of the Securities Exchange Act of 1934. Under the supervision and with
the participation of our management, including our President and Chief Executive
Officer and our Company's Chief Financial Officer we conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the
framework in Internal Control - Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO Framework"). Based on
our evaluation , our management concluded that our internal control over
financial reporting was effective as of December 31, 2007.

This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.

                                       43
<PAGE>

Changes in internal control.

Our evaluation did not identify any change in our internal controls over
financial reporting that occurred during the quarter ended December 31, 2007
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.


                                       44
<PAGE>

Item 9B.  Other Information
---------------------------

     None




                                    PART III

We have adopted a Code of Business Conduct and Ethics that applies to our board
of directors, officers, employees and consultants. In addition, we have adopted
a Code of Ethics for our chief executive officer and our chief financial and
accounting officer. These codes are posted in the Corporate Governance section
of our website (www.valpeyfisher.com). If we make any substantive changes or
grant any waivers to these codes, we will disclose the nature of such change or
waiver on our website and in a report on Form 8-K.

The remaining information called for by Part III is hereby incorporated by
reference from the information set forth and under the headings "Common Stock
Ownership of Certain Beneficial Owners and Management", "Election of Directors",
"Corporate Governance", "Executive Compensation" and "Principal Accountant Fees
and Services" in Registrant's definitive proxy statement for the 2008 Annual
Meeting of Stockholders, which meeting involves the election of directors, such
definitive proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.


                                       45
<PAGE>


                                     PART IV

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

(a)    The following are filed as part of this Annual Report on Form 10-K:

1.  The following Consolidated Financial Statements are included in Item 8:

    Consolidated Balance Sheets, December 31, 2007 and 2006
    Consolidated Statements of Operations for the Years Ended December 31,
     2007, 2006 and 2005
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2007,
     2006 and 2005
    Consolidated Statements of Stockholders' Equity for the Years Ended
     December 31, 2007, 2006 and 2005
    Notes to Consolidated Financial Statement
    Report of Independent Registered Public Accounting Firm


2.  The following schedule to the Consolidated Financial Statements is filed as
    part of this report.

Schedule II - Valuation Reserves

All other schedules are omitted because they are not applicable, not required or
because the required information is included in the Consolidated Financial
Statements or notes thereto.

                                       46
<PAGE>

3.  The exhibits filed in this report or incorporated by reference, listed on
the Exhibit Index are as follows:


Exhibit No.                                  Description
-----------    -----------------------------------------------------------------

   2.            Agreement of Merger and Recapitalization
   2.1           Asset Purchase Agreement dated April 30, 2003 between Seller,
                  William Stein, Martin Finkelstein and the Company
   3.1           Restated and Amended Articles of Incorporation
   3.2           By-Laws effective May 8, 2003
  10.1       *   1992 Stock Option Plan
  10.2       *   1999 Stock Option Plan
  10.3       *   2001 Stock Option Plan
  10.4       *   Restricted Stock Agreement
  10.5       *   2003 Stock Option Plan
  10.6       *   Key Employee Bonus Plan for 2007
  10.7       *   Amendment dated April 4, 2007 to Letter Agreement dated
                  September 10, 2002, between the Company and Michael J.
                  Ferrantino
  10.8       *   Change in Control Severance Agreement, dated April 4, 2007,
                  between the Company and Michael J. Kroll
  10.9       *   Change in Control Retention Agreement, dated April 4, 2007,
                  between the Company and Michael J. Ferrantino, Jr.
  10.10      *   Change in Control Retention Agreement, dated April 4, 2007,
                  between the Company and Walt Oliwa.
  10.11      *   Retention Bonus Plan
  14             Code of Ethics of the Chief Executive Officer and the Chief
                  Financial and Accounting Officer
  14.1           Code of Business Conduct and Ethics
  21             Subsidiaries of the Registrant
  23             Independent Registered Public Accounting Firm's Consent
  31.1           Certification of the Chief Executive Officer Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002
  31.2           Certification of the Chief Financial Officer Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002
  32.1           Certification of the Chief Executive Officer and Chief
                  Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002


* Management contract or compensatory plan or arrangement required to be filed
 as an Exhibit pursuant to Item 15(c) of this report.


                                       47
<PAGE>

                                   SIGNATURES

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


                                           Valpey-Fisher Corporation

Date: March 31, 2008                   By: /s/ Michael J. Ferrantino
                                           -------------------------
                                           Michael J. Ferrantino
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)

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/ Ted Valpey, Jr.            Chairman of the Board and         March 31, 2008
-------------------             Director
Ted Valpey, Jr.

/s/ Michael J. Ferrantino      President, Chief Executive        March 31, 2008
-------------------------        Officer and Director
Michael J. Ferrantino            (Principal Executive Officer)

/s/ Michael J. Kroll           Vice President, Treasurer and     March 31, 2008
--------------------            Chief Financial Officer
Michael J. Kroll                (Principal Financial Officer
                                and Principal Accounting
                                Officer)

/s/ Mario Alosco               Director                          March 31, 2008
----------------
Mario Alosco

/s/ Richard W. Anderson        Director                          March 31, 2008
-----------------------
Richard W. Anderson

/s/ Eli Fleisher               Director                          March 31, 2008
----------------
Eli Fleisher

/s/ Lawrence Holsborg          Director                          March 31, 2008
---------------------
Lawrence Holsborg

/s/ John J. McArdle III        Director                          March 31, 2008
-----------------------
John J. McArdle III


                                       48
<PAGE>

<TABLE>
<CAPTION>
                   Valpey-Fisher Corporation and Subsidiaries

                 Schedule II - Valuation and Qualifying Accounts
                 -----------------------------------------------

                                            Additions
                                      ---------------------
                           Balance at      Charged to      Charged to                        Balance at
                           Beginning       Costs and         Other                              End
     Description           of Period        Expenses        Accounts       Deductions        of Period
-----------------------------------------------------------------------------------------------------------

Allowance for
Doubtful Accounts:
Year Ended:

<S>                   <C>                <C>             <C>            <C>                <C>
December 31, 2007     $      115,000     $       600     $       -      $  (10,600) (1)    $     105,000
                      -------------------------------------------------------------------------------------

December 31, 2006     $      115,000     $    38,575     $       -      $  (38,575) (1)    $     115,000
                      -------------------------------------------------------------------------------------

December 31, 2005     $      100,000     $    36,100     $       -      $  (21,100) (1)    $     115,000
                      -------------------------------------------------------------------------------------


Inventory Reserve:

Year Ended:

December 31, 2007     $    1,051,000     $    25,184     $       -      $ (151,184) (2)    $     925,000
                      -------------------------------------------------------------------------------------

December 31, 2006     $    1,163,100     $   109,600     $       -      $ (221,700) (2)    $   1,051,000
                      -------------------------------------------------------------------------------------

December 31, 2005     $    1,019,500     $   351,800     $       -      $ (208,200) (2)    $   1,163,100
                      -------------------------------------------------------------------------------------
</TABLE>



(1) Amounts written-off, less recoveries.
(2) Inventory disposed of.

                                       49
<PAGE>


                                  EXHIBIT INDEX

Exhibit No.      (inapplicable items are omitted)
-----------      --------------------------------

   2.            Agreement of Merger and Recapitalization between MATEC
                  Corporation a Delaware corporation and MATEC Corporation, a
                  Maryland corporation. (incorporated by reference to Exhibit 2
                  on Registrant's Form 10-K for the year ended December 31,
                  2004).
   2.1           Asset Purchase Agreement dated April 30, 2003 between Seller,
                  William Stein, Martin Finkelstein and the Company
                  (incorporated by reference to Exhibit 2 on Registrant's Form
                  8-K dated May 28, 2003).
   3.1           Restated and Amended Articles of Incorporation as of June 3,
                  2002. Filed herewith.
   3.2           By-Laws effective May 8, 2003 (incorporated by reference to
                  Exhibit 3.3 on Registrant's Form 10-K for the year ended
                  December 31, 2003).
  10.1           1992 Stock Option Plan. Filed herewith.
  10.2           1999 Stock Option Plan. (incorporated by reference to Exhibit
                  10.2 on Registrant's Form 10-K for the year ended December 31,
                  2004).
  10.3           2001 Stock Option Plan. (incorporated by reference to Exhibit
                  10.3 on Registrant's Form 10-K for the year ended December 31,
                  2006).
  10.4           Restricted Stock Agreement (incorporated by reference to
                  Exhibit 10.5 on Registrant's Form 10-K for the year ended
                  December 31, 2003).
  10.5           2003 Stock Option Plan (incorporated by reference to Exhibit
                  10.1 on Registrant's Form 10-Q for the quarterly period ended
                  June 29, 2003).
  10.6           Key Employee Bonus Plan for 2007. (incorporated by reference to
                  Exhibit 10.1 on Registrant's Form 10-Q for the quarterly
                  period ended April 1, 2007).
  10.7           Amendment dated April 4, 2007 to Letter Agreement dated
                  September 10, 2002, between the Company and Michael J.
                  Ferrantino. (incorporated by reference to Exhibit 10.2 on
                  Registrant's Form 10-Q for the quarterly period ended April 1,
                  2007).
  10.8           Change in Control Severance Agreement, dated April 4, 2007,
                  between the Company and Michael J. Kroll. (incorporated by
                  reference to Exhibit 10.3 on Registrant's Form 10-Q for the
                  quarterly period ended April 1, 2007).
  10.9           Change in Control Retention Agreement, dated April 4, 2007,
                  between the Company and Michael J. Ferrantino, Jr.
                  (incorporated by reference to Exhibit 10.4 on Registrant's
                  Form 10-Q for the quarterly period ended April 1, 2007).
  10.10          Change in Control Retention Agreement, dated April 4, 2007,
                  between the Company and Walt Oliwa. (incorporated by reference
                  to Exhibit 10.5 on Registrant's Form 10-Q for the quarterly
                  period ended April 1, 2007).
  10.11          Retention Bonus Plan. incorporated by reference to Exhibit 10.6
                  on Registrant's Form 10-Q for the quarterly period ended April
                  1, 2007).
  14             Code of Ethics of the Chief Executive Officer and the Chief
                  Financial and Accounting Officer (incorporated by reference to
                  Exhibit 14 on Registrant's Form 10-K for the year ended
                  December 31, 2003).
  14.1           Code of Business Conduct and Ethics. (incorporated by reference
                  to Exhibit 14.1 on Registrant's Form 10-K for the year ended
                  December 31, 2004).
  21             Subsidiaries of the Registrant. Filed herewith.
  23             Consent of Independent Registered Public Accounting Firm. Filed
                  herewith.

                                       50
<PAGE>

  31.1           Certification of the Chief Executive Officer Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
  31.2           Certification of the Chief Financial Officer Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
  32.1           Certification of the Chief Executive Officer and Chief
                  Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002. Filed herewith.


                                       51