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, 2003

                 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 (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, an 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. [ ]

<PAGE>


Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes [ ]         No [X]

Aggregate market value of voting stock held by non-affiliates: $5,780,242
(computed by reference to the last sales price of such common stock on June 30,
2003 as reported in the American Stock Exchange consolidated trading index).

Number of shares of common stock outstanding at March 11, 2004:  4,214,315

Documents incorporated by reference:
  Annual Report to Stockholders for the year ended December 31, 2003:
    Parts I, II and IV
  Proxy Statement for the 2003 annual meeting of stockholders: Part III

<PAGE>

                                     PART I

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

General

     Valpey-Fisher Corporation ("Valpey" or "Registrant") is incorporated under
the laws of Maryland. As used herein the term "Company" refers to Valpey-Fisher
and its subsidiaries.

     On May 28, 2003, pursuant to an Asset Purchase Agreement dated April 30,
2003, the Company purchased certain assets consisting primarily of inventories,
machinery and equipment and the customer order backlog from MF Electronics Corp.
("MF"), a privately held company located in New Rochelle, NY. In addition, the
Company acquired accounts receivable and assumed certain trade payables. MF
designs and manufactures a wide range of frequency control products. The results
of MF's operations have been included in the consolidated financial statements
since the date of acquisition. During the week of June 30, 2003, the purchased
assets and operations of MF were moved to the Company's facility located in
Hopkinton, Massachusetts.

Financial Information about Industry Segments

     The Company operates in one business segment. Information about export
sales is set forth in Note 14 of the Notes to Consolidated Financial Statements
in Item 8 of this Report, which Note is incorporated by reference.

Narrative Description of Business

  Products
  --------

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

     The 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.

     Valpey provides a wide-frequency range of frequency control devices
including standard and custom-designed product. 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.
     --   high-volume, low cost crystals and oscillators for consumer and
          commercial applications.

<PAGE>

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

     The 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.

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

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


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

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

     Valpey sells its frequency control products primarily to OEMs, electronic
manufacturing services (EMS) companies, and distributors. Valpey's distributors
also sell to both the OEMs and EMS 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 EMS companies. As a result, this has tended to
increase the concentration of sales to the EMS companies. Sales to Solectron
Corporation, an EMS company, accounted for approximately 14%, 22%, and 15% of
Valpey's net sales in 2003, 2002, and 2001, respectively. Sales to Valpey's five
largest customers accounted for approximately 35% of its sales in 2003, compared
to 46% in 2002 and 45% in 2001. Sales to EMS companies accounted for
approximately 39% of Valpey's sales in 2003, compared to 43% in 2002, and 38% in
2001.

<PAGE>

     Export sales amounted to approximately 34% of Valpey's sales in 2003, 27%
in 2002 and 23% in 2001. Information about export sales is set forth in Note 14
of the Notes to Consolidated Financial Statements included in Item 8 of this
Report, which Note is incorporated by reference. Valpey's international sales
are transacted in U. S. dollars.

  Backlog
  -------

     Valpey's backlog of firm orders was $1,816,000 at December 31, 2003 and
$1,054,000 at December 31, 2002. Approximately 55% of the increase in backlog is
due to of the acquisition of MF and the remaining increase is from the increase
in demand for the Company's other products sold primarily to the information
technology (IT) market. Valpey expects to ship the entire December 31, 2003
backlog during 2004.

  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 the Company. In addition, foreign competitors, particularly from the Far
East, continue to dominate the U.S. markets. However, Valpey believes it can
maintain a competitive position in its business based on its quality, strong
design and application engineering, responsive customer service and a
willingness to provide specialty small quantity orders.


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

     Valpey's manufacturing facility is located in Hopkinton, Massachusetts.
Valpey has been by ISO-9001 certified for the design and manufacture of crystals
and crystal oscillators since 1997. During 2001, Valpey installed a
semi-automatic production line in order to increase its internal manufacturing
capacity for frequency control products and to improve on customer delivery
demands.

     Valpey imports certain raw material and finished product from a supplier in
Omsk, Russia. At December 31, 2003, Valpey had approximately $290,000 of its
equipment being used by this supplier located in Russia.

     Valpey imports completed products from various Far East (including China,
Japan, South Korea, Philippines, and Taiwan) suppliers for resale to its
customers.

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

     To the knowledge of the Company 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 its Bergen Cable subsidiary in 1998, the Company
is performing environmental clean up at that site. See Note 4 of the Notes to
Consolidated Financial Statements included in Item 8 of this Report, which Note
is incorporated by reference.

<PAGE>

  Employees
  ---------

     At December 31, 2003, the Company employed 65 full-time employees. No
employees of the Company are represented by a collective bargaining unit. The
Company considers its relations with its employees to be satisfactory.

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

     Valpey files 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 Valpey) 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 the Company's
website is not incorporated by reference into this report.


Foreign and Domestic Operations and Export Sales

     Financial information about export sales is set forth in Note 14 of the
Notes to Consolidated Financial Statements included in Item 8 of this Report,
which Note is incorporated by reference.

<PAGE>

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

     Valpey owns its 32,000 square foot facility located in Hopkinton,
Massachusetts that contains office and manufacturing space and serves as the
Company's corporate headquarters.

     The Company believes its facility is suitable for its current use and is in
good repair. The Company believes that its facility is adequate to satisfy its
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.

<PAGE>

Executive Officers of the Registrant
------------------------------------

     The names, ages and offices of the executive officers of the Company are as
follows:

<TABLE>
<CAPTION>
       Name                                   Age                           Office

<S>                                           <C>             <C>
Ted Valpey, Jr.                               71              Chairman
Michael J. Ferrantino                         61              President and Chief Executive Officer
Michael J. Kroll                              55              Vice President, Treasurer and Chief Financial Officer

</TABLE>

     The term of office for each officer of the Registrant is until the first
meeting of the Board of Directors following the Annual Meeting of Stockholders
and until a successor is chosen and qualified.

     Mr. Valpey has been Chairman of the Company since 1982 and was President
and Chief Executive Officer of the Registrant from April 28, 1997 until
September 29, 2002.

     Mr. Ferrantino was named President and Chief Executive Officer of the
Company on September 30, 2002 and was elected to the Board of Directors of the
Company on October 23, 2002. From January 2002 to September 2002, he was
President of Micro Networks Division (manufacturer of high frequency and filter
components and subsystems) of Integrated Circuit Systems, Inc. Mr. Ferrantino
was President and Chief Executive Officer of Micro Networks Corporation (MNC)
from December 1998 until January 2002 and was Chairman of the Board of MNC from
April 2000 to January 2002.

     Mr. Kroll has been Vice President and Treasurer of the Registrant since
1982 and was named Chief Financial Officer in May 2002.

<PAGE>

                                     PART II

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

     Valpey-Fisher 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:

<TABLE>
<CAPTION>

For the years ended December 31,                                              2003                         2002
====================================================================================================================================
                                                                                   High          Low           High          Low
====================================================================================================================================
<S>          <C>                                                                   <C>         <C>            <C>            <C>
             4th quarter                                                           $3.27       $2.83          $3.10          $2.40
------------------------------------------------------------------------------- ----------- -------------- ------------- -----------
             3rd quarter                                                            3.59        2.15           3.65           2.90
------------------------------------------------------------------------------- ----------- -------------- ------------- -----------
             2nd quarter                                                            3.75        2.30           7.19           3.20
------------------------------------------------------------------------------- ----------- -------------- ------------- -----------
             1st quarter                                                            2.75        2.40           6.09           3.10
====================================================================================================================================

</TABLE>

    No dividend was paid in 2003 or 2002.

     The number of stockholders of record on February 27, 2004 was 789. 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, 2003 regarding
the number of shares of the Registrant's common stock that may be issued under
the Registrant's equity compensation plans.

<TABLE>
<CAPTION>


                                                                                                     Number of securities
                                                                                                     remaining available for
                                                                                                     future issuance under equity
                                   Number of securities to be       Weighted-average exercise        compensation plans (excluding
                                   issued upon exercise of          price of outstanding options,    securities reflected in the
                                   outstanding options, warrants    warrants and rights              first column)
     Plan Category                 and rights
---------------------------------- -------------------------------- -------------------------------- -------------------------------
---------------------------------- -------------------------------- -------------------------------- -------------------------------

Equity compensation plans
<S>                          <C>          <C>                            <C>                               <C>
approved by security holders (1)          578,438                        $3.41                             293,166

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 the Company.

<PAGE>

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

     As an inducement to becoming an employee of the Company, pursuant to a
Restricted Stock Agreement dated December 19, 2002 between the Company and
Michael J. Ferrantino, a director and President and Chief Executive Officer of
the Company, on December 24, 2002, the Company 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 may not be sold
or transferred, encumbered or otherwise disposed of for a period of five years
from October 23, 2002 except that said restrictions will terminate as to 20% of
the Restricted Stock upon each of October 23, 2003, 2004, 2005, 2006 and 2007.
In addition, the Restriction shall 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 the outstanding
Common Stock of the Company by anyone other than Ted Valpey, Jr. or certain
mergers or reorganization of the Company. 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.

     The Company made no repurchases of its common stock in the fourth quarter
of 2003.

<PAGE>

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

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------
Years Ended December 31,                           2003     2002      2001     2000      1999
================================================================================================
                                                        (in thousands, except per share data)
================================================================================================
  Continuing operations:
-----------------------------------------------------------------------------------------------
<S>                                              <C>      <C>      <C>       <C>       <C>
      Net sales                                  $8,496   $7,294   $16,897   $26,408   $14,026
-----------------------------------------------------------------------------------------------
      Gross profit (loss)                           883   (1,346)    2,287     7,861     3,332
-----------------------------------------------------------------------------------------------
      Earnings (loss) before income taxes        (2,423)  (3,988)    4,294     5,019       226
-----------------------------------------------------------------------------------------------
      Income (taxes) benefit                       1,023   1,198    (1,543)   (1,950)     ( 68)
-----------------------------------------------------------------------------------------------
      Earnings (loss)                            (1,400)   (2,790)    2,751     3,069      158
-----------------------------------------------------------------------------------------------
Discontinued operations- net of income
-----------------------------------------------------------------------------------------------
     tax expense (benefit)                            -      (99)        -       (90)      809
===============================================================================================
Net earnings (loss)                            $(1,400)  $(2,889)   $2,751    $2,979      $967
===============================================================================================

Basic earnings (loss) per share: (1)
-----------------------------------------------------------------------------------------------
      Continuing operations                      $(.33)    $(.67)     $.66      $.75      $.04
-----------------------------------------------------------------------------------------------
      Discontinued operations                         -     (.02)        -      (.02)      .20
===============================================================================================
                                                 $(.33)    $(.69)     $.66      $.73      $.24
===============================================================================================
Diluted earnings (loss) per share: (1)
-----------------------------------------------------------------------------------------------
      Continuing operations                      $(.33)    $(.67)     $.64      $.70      $.04
-----------------------------------------------------------------------------------------------
  Discontinued operations                             -     (.02)        -      (.02)      .20
===============================================================================================
                                                 $(.33)    $(.69)     $.64      $.68      $.24
===============================================================================================
Cash dividends per share (1)                         $-       $-        $-      $.13        $-
===============================================================================================
Total assets, end of year                      $12,744   $15,151   $18,841   $19,654   $16,352
===============================================================================================
Long-term debt, end of year                          $-       $-    $1,277        $-        $-
===============================================================================================

(1) Amounts reflect the 3 for 2 stock split distributed on November 27, 2000.

</TABLE>

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 - The Company performs on-going credit evaluations of
its customers and assesses the collectability of its 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 - The Company estimates the carrying value of its 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 - The Company has recorded deferred tax assets and liabilities
resulting from differing treatment of items for tax and financial statement
reporting purposes. The Company must estimate its 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, the
Company has recorded a valuation allowance of $704,000 at December 31, 2003. In
reaching our conclusion, we evaluated the existence of deferred tax liabilities
that can be used to absorb deferred tax assets, realizability of refundable
income taxes, the deductibility of the disposal of scrap and worthless
inventory, 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, the Company may need to establish an additional
valuation allowance or reduce the valuation allowance, which could materially
impact our financial position and results of operations.

<PAGE>



Financial Condition and Liquidity

     Cash and cash equivalents amounted to $4,209,000 at December 31, 2003, a
decrease of $1,549,000 from the December 31, 2002 level. During 2003, the
Company's continuing operations provided cash of $642,000, investing activities
used cash of $854,000 and financing activities used cash of $1,337,000.

     Cash provided from operations of $642,000 resulted mainly from the net loss
of $1,400,000 adjusted for the non-cash effect of depreciation and deferred
income taxes of $1,120,000 and an $886,000 reduction in working capital,
excluding the effects of the acquisition of MF Electronics Corp.(MF). This net
reduction in working capital, excluding the effects of the acquisition of MF,
was mainly due to a $582,000 decrease in inventory, a $136,000 increase in
accounts payable and an $88,000 decrease in refundable income taxes. The 29%
reduction in inventory was mainly due to orders being filled from existing
inventory and a continuing control of inventory levels. The increase in accounts
payable is mainly due to the increased business level.

     During 2003, the Company acquired certain assets and assumed certain trade
payables of MF for $799,000 in cash. Capital expenditures amounted to $154,000
in 2003. The Company `s budget for 2004 capital expenditures is approximately
$250,000.

     The Company used $1,277,000 of cash in 2003 to pay-off the remaining
balance on its term note with a bank. During 2003, the Company used $59,000 of
cash to purchase and retire 22,300 shares of its common stock.

     While the Company is projecting a loss in 2004 based on the current
conditions in the telecom market, management believes that based on its current
working capital and the expected cash flows from operations, the Company's
resources are sufficient to meet its financial needs and to fund the capital
expenditures for the projected levels of business in 2004.

Results of Operations - 2003 versus 2002

     Net sales from continuing operations increased $1,202,000 or 16% over 2002.
The sales increase is mainly due to the sales from the MF product line acquired
at the end of May 2003. The 2002 net sales amount includes sales cancellation
charges of approximately $723,000 from two customers. Excluding the effect on
net sales from these sales cancellation charges and the 2003 sales generated
from the MF product line, sales increased 10% over 2002. The book-to-bill ratio
for 2003 was 1.05 versus .95 in 2002. The Company's backlog amounted to $1.8
million at December 31, 2003 compared to $1.1 million at December 31, 2002.
Capital spending in the telecom market, the largest market for our products,
continued to decline until the fourth quarter of 2003 when we saw a slight
increase in order activity. During 2003, the Company saw increased order
activity in the IT markets (servers, switches and storage) and military
avionics. At this time, we are not sure of the potential impact on the Company's
future operations from the current continuing telecom market uncertainties and
our industry's over capacity issues.

     The Company reported an $883,000 gross profit in 2003 compared to a
$1,346,000 gross loss in 2002. The main reasons for the improvement in the 2003
gross profit were a reduction in the provision for excess and obsolete inventory
of $868,000, a $348,000 decrease in overhead expenses mainly due to reductions
in personnel expense and operating supplies compared to 2002 and the $557,000 of
gross profit generated by the MF sales in 2003. Raw material costs, as a
percentage of sales, decreased about 6% from 2002 mainly as a result of product
mix changes and 2003 direct labor remained fairly consistent as a percentage of
sales with 2002.

<PAGE>

     Selling and advertising expenses decreased $50,000 (3%) from 2002.
Reductions in advertising and promotional expenses ($118,000) and bad debt
expense ($37,000) partially offset by higher sales commission expense of $62,000
to the Company's outside manufacturers' representatives were the main reasons
for the expense decrease.

     General and administrative expenses increased $537,000 (38%) over 2002.
Increased personnel expenses mainly due to the hiring of a new president in the
fourth quarter of 2002 and approximately $160,000 of personnel expenses
associated with the acquisition of the MF product line, were the primary reasons
for this higher expense.

     The decrease in interest income of $59,000 from 2002 was mainly due to
lower average cash balances and lower interest rates during the current year.
The $70,000 decrease in interest expense from the 2002 amount is mainly due to
the Company paying-off the balance of its outstanding term-debt in the first
quarter of 2003. During 2002, the Company received $187,000 in cash as the final
proceeds from the sales of a former subsidiary in 2000 and the related real
estate in 2001 and recorded a total pre-tax gain of $187,000 on these sales.

     The combined federal and state effective income tax rate for 2003 is 42%
compared to 30% in 2002. The difference in the rates is mainly due to the
recording of an income tax valuation allowance for certain deferred tax assets
in 2002. During both years, a valuation allowance has been recorded for the full
amount of the state income tax benefit due to the uncertainty of realization.

     Based on the increases in sales and gross profit over 2002, offset in part
by the higher operating expenses in 2003, the Company reported an operating loss
of $2,460,000 in 2003 compared to an operating loss of $4,201,000 in 2002.
Nonoperating income amounted to $37,000 during 2003 versus $213,000 in 2002. As
a result, the Company reported a pre-tax loss from continuing operations of
$2,423,000 during 2003 compared to a pre-tax loss of $3,988,000 in 2002. The
loss from continuing operations amounted to $1,400,000 in 2003 versus $2,790,000
in 2002. Discontinued operations, net of the income tax benefit, reported a loss
of $99,000 in 2002. In total, the Company reported a consolidated net loss of
$1,400,000 in 2003 versus a consolidated net loss of $2,889,000 in 2002.


Results of Operations - 2002 versus 2001
----------------------------------------

     Net sales from continuing operations decreased $9,603,000 or 57% from 2001,
primarily due to the continued sharp drop in the demand for the Company's
products from the telecom market. The Company has experienced a drop-off in
market demand for its products beginning in the first quarter of 2001 and
continuing to date as customers have reported slower growth rates and excess
inventory levels. In addition, some customers requested order cancellations. As
a result of the continued decline in market demand, the Company began 2002 with
a backlog of $1.4 million versus a backlog of $16.4 million at the beginning of
2001. We believe that market conditions for our products, in particular the
telecom market, have not "bottomed out", and near-term visibility continues to
be poor. The telecom industry continues to operate at low levels of production
with customers not willing to commit to forecasts and long-term contracts.
Orders for the most part continue to be small with near-term delivery dates. The
Company's backlog at December 31, 2002 was $1.1 million.

<PAGE>

     During 2002, the Company reported a $1,346,000 gross loss on sales compared
to a gross profit of $2,287,000 in 2001. The main reasons causing the negative
gross profit on sales in 2002 were the adverse impact of allocating the fixed
overhead expenses over the lower sales volume and the $1.1 million provision for
excess inventory. During the current year, direct labor and raw material costs,
as percentages of sales, remained fairly equal to those in 2001.

     Selling and advertising expenses decreased $910,000 (38%) from 2001 mainly
due to the lower sales commission expense to the Company's outside
manufacturers' representatives as a result of the decrease in sales and a
reduction in advertising and promotional expenses. General and administrative
expenses remained relatively level with 2001.

     During 2002, the Company received $187,000 in cash as the final proceeds
from the sales of a former subsidiary in 2000 and the related real estate in
2001and recorded a total pre-tax gain of $187,000 on these sales. Interest
income increased $40,000 over 2001 mainly due to the higher average cash
balances in the current year. Interest expense decreased $13,000 from 2001
mainly due to the lower interest rate on the outstanding term-debt. During 2001,
the Company sold its investment in marketable equity securities and its
ownership share of real estate located in New Jersey and recorded a total
pre-tax gain of $5,671,000 on these sales.

     The combined federal and state effective income tax rate for 2002 was 30%
compared to 36% in 2001. The combined tax benefit rate of 30% in 2002 was less
than the combined statutory rate of approximately 40%, mainly due to the Company
providing a valuation allowance for its deferred tax assets. The combined
federal and state tax rate of 36% in 2001 is lower than the statutory rate
mainly due to a lower effective state tax rate in 2001.

     Based on the significant decreases in sales and gross profit in 2002, the
Company reported an operating loss of $4,201,000 in 2002 compared to an
operating loss of $1,458,000 in 2001. Nonoperating income amounted to $213,000
in 2002 versus $5,753,000 in 2001. As a result, the Company reported a pre-tax
loss from continuing operations of $3,988,000 in 2002 compared to pre-tax
earnings of $4,294,000 in 2001. The loss from continuing operations amounted to
$2,790,000 in 2002 versus earnings of $2,751,000 in 2001. Discontinued
operations net of income tax benefit reported a loss of $99,000 in 2002. In
total, the Company reported a net loss of $2,889,000 in 2002 compared to net
earnings of $2,751,000 in 2001.

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 and production supplies based on
our projected requirements. At December 31, 2003, the Company has outstanding
purchase commitments totaling approximately $565,000, all of which are expected
to be fulfilled in 2004. At December 31, 2003, the Company did not have any
contractual obligations for capital leases, operating leases or long-term debt.

<PAGE>


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 the Company's current views and assumptions and involve risks and
uncertainties that include, but not limited to: the Company's ability 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, the ability of the Company and its suppliers to
produce and deliver materials and products competitively, and the ability to
limit the amount of the negative effect on operating results caused by pricing
pressure.

Recent accounting pronouncements

     In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations", effective for years
beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Company adopted this SFAS
effective January 1, 2003. The adoption of this statement had no material effect
on the Company's financial position, results of operations and cash flows.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated With Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, is effective for exit activities initiated after December 31, 2002,
and requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 also
establishes that the liability should initially be measured and recorded at fair
value. Previous accounting guidance recognized a liability for an exit cost at
the date of a commitment to an exit plan. The Company adopted this SFAS
effective January 1, 2003. The adoption of this statement had no material effect
on the Company's financial position, results of operations and cash flows.

     In November 2002, the FASB issued interpretation No. (FIN) 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". The interpretation expands on the
accounting guidance of SFAS Nos. 5, 57, and 107 and incorporates without change
the provisions of FASB FIN 34, which is being superseded. FIN 45 elaborates on
the existing disclosure requirements for most guarantees, including loan
guarantees, such as standby letter of credit. It also clarifies that at the time
a company issues a guarantee, the company must recognize an initial liability
for the fair value, or market value, of the obligations it assumes under that
guarantee and must disclose that information in its interim and annual financial
statements. FIN 45 is effective on a prospective basis to guarantees issued or
modified after December 31, 2002, regardless of the guarantor's fiscal year-end.
The Company adopted this FIN effective January 1, 2003. The adoption of this
statement had no material effect on the Company's financial position, results of
operations and cash flows.

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities". Many variable interest entities have commonly been referred
to as special-purpose entities or off-balance sheet structures. Under the
interpretation, certain entities known as "Variable Interest Entities" (VIE)
must be consolidated by the primary beneficiary of an entity. The primary
beneficiary is generally defined as having the majority of the risks and rewards
arising from the VIE. For VIE's in which a significant (but not majority)
variable interest is held, certain disclosures are required. In December 2003,
the FASB completed deliberations of proposed modifications to FIN 46 (Revised
Interpretations) resulting in multiple effective dates based on the nature as
well as the creation date of the VIE. VIEs created after January 31, 2003, but
prior to January 1, 2004 may be accounted for either based on the original

<PAGE>

interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the first quarter of 2004. VIEs
created after January 1, 2004 must be accounted for under the Revised
Interpretations. The adoption of this FIN in January 2003 had no material effect
on the Company's financial position, results of operations and cash flows and
the Company does not expect the adoption of the Revised Interpretations to have
a material effect on the Company's financial position, results of operations and
cash flows.

     In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition, which codifies, revises and rescinds certain sections of
SAB No. 101, Revenue Recognition, in order to make this interpretive guidance
consistent with current authoritative accounting and auditing guidance and SEC
rules and regulations. The changes noted in SAB 104 did not have a material
effect on the Company's financial position, results of operations and cash
flows.



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

     The Company's 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, 2003, and assuming the balance was totally invested in money market
instruments for the full year, a hypothetical 1% point decline in interest rates
would result in an approximate $42,100 decrease in interest income.

     The Company purchases certain inventory from and sells 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 the Company purchases inventory or sells
product could make the U.S. dollar equivalent of such transactions more or less
favorable to the Company and the other involved parties.

<PAGE>

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

<TABLE>
<CAPTION>

Valpey-Fisher Corporation
Consolidated Balance Sheets

December 31,                                                                             2003         2002
===========================================================================================================
Assets
Current assets:
-----------------------------------------------------------------------------------------------------------
<S>                                                                                <C>          <C>
   Cash and cash equivalents                                                       $4,209,355   $5,758,055
-----------------------------------------------------------------------------------------------------------
   Receivables, net                                                                 2,466,715    2,175,369
-----------------------------------------------------------------------------------------------------------
   Inventories                                                                      1,570,973    2,027,886
-----------------------------------------------------------------------------------------------------------
   Deferred income taxes and other current assets                                     674,932    1,109,408
===========================================================================================================
   Total current assets                                                             8,921,975   11,070,718
===========================================================================================================
Property, plant and equipment, at cost:
-----------------------------------------------------------------------------------------------------------
   Land and improvements                                                              226,505      255,205
-----------------------------------------------------------------------------------------------------------
   Buildings and improvements                                                       2,030,558    1,996,354
-----------------------------------------------------------------------------------------------------------
   Machinery and equipment                                                          8,495,386    7,913,557
===========================================================================================================
                                                                                   10,752,449   10,165,116
-----------------------------------------------------------------------------------------------------------
   Less accumulated depreciation                                                    7,064,497    6,231,296
-----------------------------------------------------------------------------------------------------------
                                                                                    3,687,952    3,933,820
===========================================================================================================
Other assets                                                                          134,565      146,029
===========================================================================================================
                                                                                  $12,744,492  $15,150,567
===========================================================================================================

Liabilities and Stockholders' Equity
Current liabilities:
-----------------------------------------------------------------------------------------------------------
   Current portion of long-term debt                                              $         -   $1,277,402
-----------------------------------------------------------------------------------------------------------
   Accounts payable                                                                   539,936      269,375
-----------------------------------------------------------------------------------------------------------
   Accrued liabilities                                                                900,275      817,931
===========================================================================================================
   Total current liabilities                                                        1,440,211    2,364,708
===========================================================================================================
Deferred income taxes                                                                 646,231      704,145
-----------------------------------------------------------------------------------------------------------
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: 4,184,815 and 4,207,115 shares                       209,241      210,356
-----------------------------------------------------------------------------------------------------------
   Capital surplus                                                                  4,998,453    5,079,416
-----------------------------------------------------------------------------------------------------------
   Retained earnings                                                                5,667,356    7,067,442
-----------------------------------------------------------------------------------------------------------
   Less unearned compensation                                                        (217,000)    (275,500)
===========================================================================================================
   Total stockholders' equity                                                      10,658,050   12,081,714
===========================================================================================================
                                                                                  $12,744,492  $15,150,567
===========================================================================================================

See notes to consolidated financial statements.

<PAGE>


Valpey-Fisher Corporation
Consolidated Statements of Operations

For the Years Ended December 31,                                       2003           2002           2001
===========================================================================================================
Net sales                                                       $8,495,770     $7,294,214    $16,897,138
----------------------------------------------------------------------------------------------------------
Cost of sales                                                    7,613,197      8,640,336     14,609,911
==========================================================================================================
   Gross profit (loss)                                             882,573     (1,346,122)     2,287,227
==========================================================================================================
Selling and advertising expenses                                 1,406,007      1,456,295      2,365,802
----------------------------------------------------------------------------------------------------------
General and administrative expenses                              1,936,248      1,398,775      1,379,880
==========================================================================================================
                                                                 3,342,255      2,855,070      3,745,682
==========================================================================================================
   Operating (loss)                                             (2,459,682)    (4,201,192)    (1,458,455)
----------------------------------------------------------------------------------------------------------
Other income (expense):
----------------------------------------------------------------------------------------------------------
   Interest income                                                  48,537        107,571         67,760
----------------------------------------------------------------------------------------------------------
   Interest expense                                                (11,941)       (81,522)       (94,511)
----------------------------------------------------------------------------------------------------------
   Gains on sales of marketable equity securities and assets             -        187,406      5,670,873
----------------------------------------------------------------------------------------------------------
   Dividend income                                                       -              -        108,681
==========================================================================================================
                                                                    36,596        213,455      5,752,803
==========================================================================================================
Earnings (loss) from continuing operations before income
 taxes                                                          (2,423,086)    (3,987,737)     4,294,348
----------------------------------------------------------------------------------------------------------
Income tax benefit (expense)                                     1,023,000      1,198,000     (1,543,000)
==========================================================================================================
Earnings (loss) from continuing operations                      (1,400,086)    (2,789,737)     2,751,348
----------------------------------------------------------------------------------------------------------
(Loss) from discontinued operations                                      -        (99,000)             -
==========================================================================================================
Net earnings (loss)                                            $(1,400,086)   $(2,888,737)    $2,751,348
==========================================================================================================

Basic earnings (loss) per share:
----------------------------------------------------------------------------------------------------------
    Continuing operations                                            $(.33)         $(.67)          $.66
----------------------------------------------------------------------------------------------------------
    Discontinued operations                                            .00           (.02)           .00
==========================================================================================================
                                                                     $(.33)         $(.69)          $.66
==========================================================================================================

Diluted earnings (loss) per share:
----------------------------------------------------------------------------------------------------------
   Continuing operations                                             $(.33)         $(.67)          $.64
----------------------------------------------------------------------------------------------------------
   Discontinued operations                                             .00           (.02)           .00
==========================================================================================================
                                                                     $(.33)         $(.69)          $.64
==========================================================================================================
See notes to consolidated financial statements.
</TABLE>

<PAGE>

Valpey-Fisher Corporation
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

For the Years Ended December 31,                                   2003         2002         2001
====================================================================================================
Cash Flows from Operating Activities:
<S>                                                         <C>          <C>           <C>
   Earnings (loss) from continuing operations               $(1,400,086) $(2,789,737)  $2,751,348
   Adjustments to reconcile earnings (loss) from
    continuing operations to net cash provided (used)
    by operating activities:
      Depreciation and amortization                             833,201      848,342      700,915
      Changes in deferred income taxes                          287,000      254,516     (491,000)
      Gains on sales of marketable equity securities and
       assets                                                         -     (187,406)  (5,670,873)
      Non-cash restricted stock compensation, net of taxes       35,500      125,400            -
   Changes in assets and liabilities, excluding the
       effects of the purchase of MF Electronics:
      Receivables, net                                          (41,373)   1,054,145    2,340,924
      Inventories                                               581,913    2,441,429    1,943,958
      Other current assets                                       36,460       54,622      (71,313)
      Accounts payable and accrued liabilities                  179,842     (340,755)  (2,942,710)
      Income taxes, net                                         129,385   (1,096,976)    (137,065)
====================================================================================================
   Net cash provided (used) by operating activities             641,842      363,580   (1,575,816)
====================================================================================================
Cash Flows from Investing Activities:
   Capital expenditures                                        (153,863)    (254,987)  (2,176,310)
   Purchase of MF Electronics                                  (798,762)           -            -
   Collection of notes receivable                                24,178      141,729      228,498
   Proceeds from sales of assets                                 82,450      187,406    6,134,257
   Other, net                                                    (8,065)      (8,065)      (8,065)
====================================================================================================
   Net cash provided (used) by investing activities            (854,062)      66,083    4,178,380
====================================================================================================
Cash Flows from Financing Activities:
   Payments on long-term debt                                (1,277,402)    (403,389)    (319,209)
   Purchases of common stock                                    (59,078)    (133,974)     (31,602)
   Proceeds from long-term debt                                       -            -    2,000,000
   Stock options exercised and other                                  -        5,000       81,376
====================================================================================================
   Net cash provided (used) by financing activities          (1,336,480)    (532,363)   1,730,565
====================================================================================================
Cash (Used) by Discontinued Operations                                -      (99,000)           -
====================================================================================================
Net Increase (Decrease) in Cash and Cash Equivalents         (1,548,700)    (201,700)   4,333,129

Cash and Cash Equivalents at beginning of year                5,758,055    5,959,755    1,626,626
====================================================================================================
Cash and Cash Equivalents at end of year                     $4,209,355   $5,758,055   $5,959,755
====================================================================================================
Supplemental Disclosures of Cash Flow Information
   Cash paid during the year by continuing operations for:
      Interest                                                  $11,941      $81,522      $94,511
      Income taxes                                                   $-           $-   $2,281,262

</TABLE>

Noncash Investing and Financing Activities:

In 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.
Unearned compensation, which is shown as a separate component of stockholders'
equity, is being amortized over the five-year vesting period.

See notes to consolidated financial statements.

<PAGE>


Valpey-Fisher Corporation
Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                                                                         Other
                                              Common      Stock       Capital    Retained    Unearned    Comprehensive
                                              Shares      Amount      Surplus    Earnings    CompensationIncome (Loss)
========================================================================================================================
<S>              <C>                            <C>          <C>      <C>         <C>           <C>          <C>
Balance, January 1, 2001                        4,131,015    $206,550 $4,761,522  $7,204,831          $-     $1,686,396
------------------------------------------------------------------------------------------------------------------------
Net earnings                                            -           -          -   2,751,348           -              -
------------------------------------------------------------------------------------------------------------------------
Exercise of stock options                          31,500       1,576     79,800           -           -              -
------------------------------------------------------------------------------------------------------------------------
Purchases and retirement of
   common stock                                   (10,000)       (500)   (31,102)          -           -              -
------------------------------------------------------------------------------------------------------------------------
Reclassification adjustment for realized gain
 included in net earnings                               -           -          -           -           -     (1,686,396)
========================================================================================================================
Balance, December 31, 2001                      4,152,515     207,626  4,810,220   9,956,179           -              -
------------------------------------------------------------------------------------------------------------------------
Net (loss)                                              -           -          -  (2,888,737)          -
------------------------------------------------------------------------------------------------------------------------
Issuance of restricted stock                      100,000       5,000    290,000           -    (290,000)             -
------------------------------------------------------------------------------------------------------------------------
Purchases and retirement of
   common stock                                   (45,400)     (2,270)  (131,704)          -           -              -
------------------------------------------------------------------------------------------------------------------------
Amortization of restricted stock grant                  -           -          -           -      14,500              -
------------------------------------------------------------------------------------------------------------------------
Tax benefit of restricted stock grant                   -           -    110,900           -           -              -
------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002                      4,207,115     210,356  5,079,416   7,067,442    (275,500)             -
------------------------------------------------------------------------------------------------------------------------
Net (loss)                                              -           -          -  (1,400,086)          -              -
------------------------------------------------------------------------------------------------------------------------
Purchases and retirement of
   common stock                                   (22,300)     (1,115)   (57,963)          -           -              -
------------------------------------------------------------------------------------------------------------------------
Amortization of restricted stock grant                  -           -          -           -      58,500              -
------------------------------------------------------------------------------------------------------------------------
Tax effect of restricted stock grant                    -           -    (23,000)          -           -              -
========================================================================================================================
Balance, December 31, 2003                      4,184,815    $209,241 $4,998,453  $5,667,356   $(217,000)            $-
========================================================================================================================

See notes to consolidated financial statements.



Consolidated Statements of Comprehensive Income (Loss)

For the Years Ended December 31,                                                   2003             2002            2001
---------------------------------------------------------------------------- ----------------- --------------- ----------------

Net earnings (loss)                                                           $(1,400,086)     $(2,888,737)     $ 2,751,348
---------------------------------------------------------------------------- ---------------- ----------------  ---------------
Other comprehensive income (loss), before tax:
---------------------------------------------------------------------------- ---------------- ----------------  ---------------
    Less reclassification adjustment for realized gain included in net
      earnings, net of income tax expense of $575,000                                      -                -    (1,686,396)
---------------------------------------------------------------------------- ---------------- ----------------  ---------------

---------------------------------------------------------------------------- ---------------- ----------------  ---------------
Other comprehensive (loss), net of tax                                                     -                -    (1,686,396)
---------------------------------------------------------------------------- ---------------- ----------------  ---------------
Comprehensive income (loss)                                                   $(1,400,086)     $(2,888,737)     $ 1,064,952
---------------------------------------------------------------------------- ---------------- ----------------  ---------------
</TABLE>
See notes to consolidated financial statements.
<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. 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, and deferred income taxes. 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 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. The Company reduces its exposure to credit risk by maintaining such
deposits with high quality financial institutions. At December 31, 2003, the
majority of the Company's cash and cash equivalents balance were in excess of
the applicable insurance limits.
     Inventories - Inventories are stated at the lower of cost or market and are
determined by the first-in, first out method (FIFO).
     Property, plant and equipment - The Company uses the straight-line method
of providing for depreciation and amortization of property, plant and equipment
for financial reporting purposes and accelerated methods for tax purposes. The
estimated lives used to compute depreciation and amortization are as follows:
land improvements - 10 years, building and improvements - 15 to 40 years and
machinery and equipment - 3 to 10 years.
     Revenue recognition - Revenue is recognized when an agreement of sale
exists, product delivery has occurred and title passes, pricing is fixed or
determinable, and collection is reasonably assured.
     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 compensation expense for financial statement and
income tax purposes is charged or credited to capital surplus.
     Earnings (loss) per share - Basic earnings (loss) per share is computed by
dividing net earnings (loss) by the weighted average number of common shares
outstanding. Diluted earnings (loss) per share is computed by dividing net
earnings (loss) by the diluted weighted average shares outstanding. Diluted
weighted average shares includes the weighted average number of common shares
outstanding and the weighted average number of common shares that would have
been outstanding if potentially dilutive common shares relating to stock options
had been issued using the treasury stock method.
     Stock compensation plans - The Company applies the intrinsic value method,
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its stock option plans.
The Company provides the disclosure requirements of Statement of Financial
Accounting Standards (SFAS) Nos. 123 and 148, "Accounting for Stock-Based
Compensation," and related interpretations and amendments.

<PAGE>


Valpey-Fisher Corporation
Notes Continued


     The Company adopted the disclosure-only option under SFAS No.123
"Accounting for Stock-Based Compensation." The following table illustrates the
effect on net earnings (loss) 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,
<TABLE>
<CAPTION>

                                                  2003          2002         2001
                                      ---------------------------------------------
<S>                                         <C>           <C>           <C>
  Net earnings (loss), as reported          $(1,400,086)  $(2,888,737)  $2,751,348
-----------------------------------------------------------------------------------
  Deduct: Total stock-based employee
   compensation
   expense determined under the fair
    value based method
   for all awards, net of related tax
    effects                                    (111,809)     (123,442)     (72,518)
-----------------------------------------------------------------------------------
 Pro forma net earnings (loss)              $(1,511,895)  $(3,012,179)  $2,678,830
-----------------------------------------------------------------------------------


  Basic net earnings (loss) per share,
   as reported                                    $(.33)        $(.69)        $.66
-----------------------------------------------------------------------------------
  Basic net earnings (loss) per share,
   pro forma                                      $(.36)        $(.72)        $.65
-----------------------------------------------------------------------------------

  Diluted net earnings (loss) per
   share, as reported                             $(.33)        $(.69)        $.64
-----------------------------------------------------------------------------------
  Diluted net earnings (loss) per
   share, pro forma                               $(.36)        $(.72)        $.63
-----------------------------------------------------------------------------------

</TABLE>

     For purposes of the above pro forma disclosures, the estimated fair value
of the options is amortized to expense over the five-year vesting period of the
options. The fair value of these options was estimated at the grant date using
the Black-Scholes option pricing model with the following weighted-assumptions:

<TABLE>
<CAPTION>

                                                                 For the Year Ended
                                                                  December 31,
                                                     =================================
                                                           2003      2002        2001
                                                     =================================

<S>                                                           <C>       <C>         <C>
         Expected dividend yield                              0%        0%          0%
--------------------------------------------------------------------------------------
         Risk-free interest rate                            3.3%      3.4%        5.1%
--------------------------------------------------------------------------------------
         Expected life options in years                       7         7           7
--------------------------------------------------------------------------------------
         Assumed volatility                                  59%       61%         55%
--------------------------------------------------------------------------------------
         Estimated fair value per share at date of grant  $1.60     $1.79       $2.60
--------------------------------------------------------------------------------------
</TABLE>

     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, 2003 and 2002, the Company had no items of other comprehensive
income (loss). For the year ended December 31, 2001, the only component of other
comprehensive income (loss) for the Company was unrealized holding gains
(losses) on available for sale marketable equity securities.

     Reclassifications - Certain reclassifications have been made to prior year
financial statements to conform to current year presentation.

     Recent accounting pronouncements - In August 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", effective for years beginning after June 15, 2002. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The Company adopted this SFAS effective January 1, 2003. The adoption of
this statement had no material effect on the Company's financial position,
results of operations and cash flows.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated With Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, is effective for exit activities initiated after December 31, 2002,
and requires that the liability for

<PAGE>

Valpey-Fisher Corporation
Notes Continued

costs associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS No. 146 also establishes that the liability should
initially be measured and recorded at fair value. Previous accounting guidance
recognized a liability for an exit cost at the date of a commitment to an exit
plan. The Company adopted this SFAS effective January 1, 2003. The adoption of
this statement had no material effect on the Company's financial position,
results of operations and cash flows.

     In November 2002, the FASB issued interpretation No. (FIN) 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". The interpretation expands on the
accounting guidance of SFAS Nos. 5, 57, and 107 and incorporates without change
the provisions of FASB FIN 34, which is being superseded. FIN 45 elaborates on
the existing disclosure requirements for most guarantees, including loan
guarantees, such as standby letter of credit. It also clarifies that at the time
a company issues a guarantee, the company must recognize an initial liability
for the fair value, or market value, of the obligations it assumes under that
guarantee and must disclose that information in its interim and annual financial
statements. FIN 45 is effective on a prospective basis to guarantees issued or
modified after December 31, 2002, regardless of the guarantor's fiscal year-end.
The Company adopted this FIN effective January 1, 2003. The adoption of this
statement had no material effect on the Company's financial position, results of
operations and cash flows.

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities". Many variable interest entities have commonly been referred
to as special-purpose entities or off-balance sheet structures. Under the
interpretation, certain entities known as "Variable Interest Entities" (VIE)
must be consolidated by the primary beneficiary of an entity. The primary
beneficiary is generally defined as having the majority of the risks and rewards
arising from the VIE. For VIE's in which a significant (but not majority)
variable interest is held, certain disclosures are required. In December 2003,
the FASB completed deliberations of proposed modifications to FIN 46 (Revised
Interpretations) resulting in multiple effective dates based on the nature as
well as the creation date of the VIE. VIEs created after January 31, 2003, but
prior to January 1, 2004 may be accounted for either based on the original
interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the first quarter of 2004. VIEs
created after January 1, 2004 must be accounted for under the Revised
Interpretations. The adoption of this FIN in January 2003 had no material effect
on the Company's financial position, results of operations and cash flows and
the Company does not expect the adoption of the Revised Interpretations to have
a material effect on the Company's financial position, results of operations and
cash flows.

     In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition, which codifies, revises and rescinds certain sections of
SAB No. 101, Revenue Recognition, in order to make this interpretive guidance
consistent with current authoritative accounting and auditing guidance and SEC
rules and regulations. The changes noted in SAB 104 did not have a material
effect on the Company's financial position, results of operations and cash
flows.

Acquisition:

     On May 28, 2003, pursuant to an Asset Purchase Agreement dated April 30,
2003, the Company purchased certain assets consisting primarily of inventories,
machinery and equipment and the customer order backlog from MF Electronics Corp.
("MF"), a privately held company located in New Rochelle, NY. MF designs and
manufactures a wide range of frequency control products. In addition, the
Company acquired for cash the net of the May 28, 2003 MF's accounts receivable
less trade accounts payable. The total purchase price was $798,762 in cash. The
results of MF's operations have been included in the consolidated financial
statements since the date of acquisition. During the week of June 30, 2003, the
purchased assets and operations of MF were moved to the Company's facility
located in Hopkinton, Massachusetts.

<PAGE>

Valpey-Fisher Corporation
Notes Continued

     The following table presents the allocation of the purchase price,
including transaction costs of $50,000, to the assets acquired and liabilities
assumed, based on their fair values:

<TABLE>
<CAPTION>

<S>                                                             <C>
          (in thousands)
          Accounts receivable                                   $      343
          Inventory                                                    125
          Machinery and equipment                                      516
          Trade accounts payable and accrued expenses                 (135)
                                                                -----------
                                                                $      849
                                                                ===========

</TABLE>

     The following unaudited pro forma financial information presents the
results of the Company as if the acquisition of MF was completed January 1,
2001. This pro forma financial information is presented for informational
purposes and is not necessarily indicative of the Company's operating results if
the acquisition had been in effect for the periods presented. In addition, they
are not intended to be a projection of future results and do not reflect any
anticipated cost savings or operating efficiencies that the Company believes are
achievable.

<TABLE>
<CAPTION>

 (in thousands, except for per share      For the Year ended December 31,
  amounts)
------------------------------------------------------------------------------
                                                 2003        2002        2001
------------------------------------------------------------------------------
<S>                                           <C>         <C>         <C>
Net sales                                     $10,387     $13,767     $26,980
Net earnings (loss)                           $(1,762)    $(3,341)     $4,001
Basic earnings (loss) per share                 $(.42)      $(.80)       $.97
Diluted earnings (loss) per share               $(.42)      $(.80)       $.94

</TABLE>

(4) Gains on Sales of Marketable Equity Securities and Assets:

     As part of the proceeds from the sale of its Bergen Cable Technologies,
Inc. subsidiary, ("BCT") in 1998 (see Note 5), the Company received a 10% stock
and membership interest in the acquiring entities, Bergen Cable Technology, Inc.
("BCTI") and Bergen Real Estate L.L.C. ("BRE"). In the second quarter of 2001,
the real estate owned by BRE was sold and the Company received $182,700 in cash
after estimated expenses for its ownership share in this company and recorded a
pre-tax gain of $151,700 on the sale. In the fourth quarter of 2002, the Company
received $32,400 in cash as its ownership share of the note receivable related
to the sale and recorded a pre-tax gain of $32,400 on the sale. The Company had
deferred any gain on its share of the note receivable pending collection of the
note.

     In 2002, the Company received $155,000 in cash representing its share of
the net escrow balance from the sale of its common stock investment in BCTI in
2000 and reported this amount as a gain on the sale of assets.

     In 2001, the Company sold its investment in marketable equity securities
which consisted of MetroWest Bank common stock for $5,951,600 in cash. The
Company recorded a pre-tax gain of $5,519,200 on the sale. The Company had
valued these securities under SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities" and had classified these securities as "available
for sale". At December 31, 2000, this investment had a net unrealized gain of
$1,686,396 included in "Accumulated Other Comprehensive Income".

<PAGE>


Valpey-Fisher Corporation
Notes Continued

(5) Discontinued Operations:

     In 1998, the Company sold all the assets of BCT (see Note 4). As a result
of this sale, the Company was required to perform environmental cleanup at the
BCT site. During 2002, the Company expensed $150,000 to increase the
environmental expense accrual to reflect the revised estimate to complete the
remediation. This after-tax expense of $99,000 is presented in the Consolidated
Statements of Operations under the caption "(Loss) from discontinued
operations". As of December 31, 2003, a total of $950,000 has been expensed for
the cleanup and $74,000 (see Note 10) is accrued for future payments. These
costs represent the Company's best estimate, but the ultimate costs will not be
known until the remediation is complete.


(6) Receivables, net: Receivables, net of allowances, consist of the following:

<TABLE>
<CAPTION>
                                                                                     2003          2002
-----------------------------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts of $80,000 and
<S>                                                                                <C>            <C>
 $200,000                                                                          $1,160,364     $776,369
-----------------------------------------------------------------------------------------------------------
Refundable income taxes                                                             1,287,000    1,375,000
-----------------------------------------------------------------------------------------------------------
Amount due from the sale of assets                                                     19,351       24,000
===========================================================================================================
                                                                                   $2,466,715   $2,175,369
===========================================================================================================

(7) Inventories, net: Inventories, net of reserves, consist of the following:            2003         2002
-----------------------------------------------------------------------------------------------------------
Raw materials                                                                      $1,110,035   $1,560,364
-----------------------------------------------------------------------------------------------------------
Work in process                                                                       274,583      152,932
-----------------------------------------------------------------------------------------------------------
Finished goods                                                                        186,355      314,590
===========================================================================================================
                                                                                   $1,570,973   $2,027,886
===========================================================================================================

</TABLE>

(8) Income Taxes: The components of the provision (benefit) for income taxes
    are as follows:

<TABLE>
<CAPTION>

                                                                             2003         2002         2001
------------------------------------------------------------------------------------------------------------
Current:
------------------------------------------------------------------------------------------------------------
     Federal (excluding $(51,000) income tax (benefit) from
      discontinued
<S>                   <C>                                            <C>           <C>          <C>
        operations in 2002)                                          $ (1,287,000) $(1,324,000) $ 1,726,000
------------------------------------------------------------------------------------------------------------
     State                                                                      -            -      308,000
------------------------------------------------------------------------------------------------------------
                                                                       (1,287,000)  (1,324,000)   2,034,000
============================================================================================================
Deferred:
------------------------------------------------------------------------------------------------------------
     Federal                                                              418,000      (31,000)    (388,000)
------------------------------------------------------------------------------------------------------------
     State                                                               (227,000)    (474,000)    (103,000)
------------------------------------------------------------------------------------------------------------
                                                                          191,000     (505,000)    (491,000)
------------------------------------------------------------------------------------------------------------
Valuation allowance                                                        73,000      631,000            -
============================================================================================================
     Total                                                           $ (1,023,000) $(1,198,000)  $1,543,000
============================================================================================================

</TABLE>

The total income tax provision (benefit) differs from that computed by applying
the federal income tax rate to income before income taxes. The reasons for the
difference are as follows:

<TABLE>
<CAPTION>

                                                                            2003        2002        2001
---------------------------------------------------------------------------------------------------------
<S>                                                                    <C>       <C>          <C>
Income taxes at statutory rates                                        $(823,850)$(1,355,800) $1,460,100
---------------------------------------------------------------------------------------------------------
State income tax, net of federal tax benefit                            (276,600)   (241,400)    135,300
---------------------------------------------------------------------------------------------------------
Change in valuation allowance                                             73,000     631,000           -
---------------------------------------------------------------------------------------------------------
Reversal of accruals                                                           -    (235,000)          -
---------------------------------------------------------------------------------------------------------
Other, net including dividend exclusion                                    4,450       3,200     (52,400)
---------------------------------------------------------------------------------------------------------
                                                                     $(1,023,000)$(1,198,000) $1,543,000
=========================================================================================================

</TABLE>

Valpey-Fisher Corporation
Notes Continued

     The tax effects of significant items comprising the Company's deferred tax
assets and liabilities as of December 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>

                                                                                         2003         2002
-----------------------------------------------------------------------------------------------------------
Deferred tax assets:
-----------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>        <C>
     Inventory valuation                                                             $662,000   $1,305,700
-----------------------------------------------------------------------------------------------------------
     Accruals and allowances                                                           69,200      123,300
-----------------------------------------------------------------------------------------------------------
     State tax loss carryforward                                                      619,000      246,000
-----------------------------------------------------------------------------------------------------------
     Valuation allowance                                                             (704,000)    (631,000)
===========================================================================================================
     Net deferred tax assets                                                          646,200    1,044,000
===========================================================================================================

-----------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
-----------------------------------------------------------------------------------------------------------
     Depreciation                                                                     376,600      383,000
-----------------------------------------------------------------------------------------------------------
     DISC commissions                                                                 269,600      321,100
===========================================================================================================
     Total deferred tax liabilities                                                   646,200      704,100
===========================================================================================================
Net deferred tax assets                                                                    $-     $339,900
===========================================================================================================

</TABLE>

     At December 31, 2003, the Company has state tax loss benefit carryforwards
of $619,000 that begin to expire in 2007. 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 $704,000 at December 31, 2003.
Other current assets include deferred income taxes of approximately $646,200 in
2003 and $1,044,000 in 2002.

(9)  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 expenses amounted to $ 0 in
2003, 2002 and 2001. 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 $67,000 in 2003, $58,000 in 2002 and
$58,000 in 2001.
<TABLE>
<S>                                                                                             <C>             <C>
(10) Accrued Liabilities: Accrued liabilities consist of the following items:                   2003            2002

----------------------------------------------------------------------------------------- --------------- ---------------
Employee compensation                                                                      $  396,200      $   215,900
----------------------------------------------------------------------------------------- --------------- ---------------
Income taxes                                                                                  105,300          117,000
----------------------------------------------------------------------------------------- --------------- ---------------
Professional fees                                                                              90,000           84,000
----------------------------------------------------------------------------------------- --------------- ---------------
Environmental costs (see Note 5)                                                               74,000          125,000
----------------------------------------------------------------------------------------- --------------- ---------------
Other                                                                                         234,775          276,031
========================================================================================= =============== ===============
                                                                                           $  900,275      $   817,931
========================================================================================= =============== ===============
</TABLE>

(11) Debt: At December 31, 2003, the Company had no outstanding credit
arrangements with banks. On March 18, 2003, the Company paid off its outstanding
term-debt balance with a bank and the Company's borrowing arrangements with that
bank terminated. As a result, the total outstanding amount of the term debt
outstanding at December 31, 2002 was classified as current portion of long-term
debt.


<PAGE>

Valpey-Fisher Corporation
Notes Continued

(12) Stockholders' Equity: The Company has 4,184,815 and 4,207,115 shares of its
$.05 par value Common Stock outstanding at December 31, 2003 and 2002,
respectively.

     During 2003, the Company acquired 22,300 shares of common stock at a cost
of $59,000 and retired the shares. During 2002, the Company acquired 45,400
shares of common stock at a cost of $134,000 and retired the shares. Under prior
authorizations from the Board of Directors, at December 31, 2003, the Company is
authorized to purchase up to an additional 233,500 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. Unearned compensation, which is shown as a separate
component of stockholders' equity, is being amortized over the five year vesting
period. The amount amortized to expense in 2003 and 2002 was $58,500 and
$14,500, respectively. 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, 2003, 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 approved by the Company's Board of Directors. The options
granted may qualify as incentive stock options ("ISO's"). Through December 31,
2003, all options granted except for 90,000 options were ISO's. At December 31,
2003, the 1992 and 1999 Plans had no options available for future grant and
471,604 common shares reserved for issuance upon exercise of the outstanding
stock options. At December 31, 2003, the 2001 Plan has 93,166 options available
for future grants and 106,834 common shares reserved for issuance upon exercise
of the outstanding stock options. At December 31, 2003, the 2003 Plan has
200,000 options available for future grants.

     A summary of the status of the Company's fixed stock option plans as of
December 31, 2003, 2002, and 2001, and changes during the years ended on those
dates is presented below:
<TABLE>
                                            2003                            2002                             2001
-------------------------- ------------------------------- -------------------------------- --------------------------------
                           Number       Weighted-Avg.      Number of     Weighted-Avg.      Number of     Weighted-Avg.
                           of shares    Exercise Price     shares        Exercise Price     shares        Exercise Price
-------------------------- ------------ ------------------ ------------- ------------------ ------------- ------------------
<S>                            <C>               <C>           <C>                <C>           <C>                <C>
Outstanding, January 1        509,938           $3.57         314,438            $3.89         473,188            $3.48
-------------------------- ------------ ------------------ ------------- ------------------ ------------- ------------------
   Granted                     86,500            2.61        207,500              3.24          10,000             4.23
-------------------------- ------------ ------------------ ------------- ------------------ ------------- ------------------
   Exercised                        -               -              -                 -         (31,500)            2.59
-------------------------- ------------ ------------------ ------------- ------------------ ------------- ------------------
   Forfeited                 (18,000)            4.18        (12,000)             6.02        (137,250)            2.81
-------------------------- ------------ ------------------ ------------- ------------------ ------------- ------------------
Outstanding, December 31     578,438            $3.41         509,938            $3.57         314,438            $3.89
========================== ============ ================== ============= ================== ============= ==================
Exercisable, December 31     226,038            $3.56         174,157            $3.55          80,941            $3.40
========================== ============ ================== ============= ================== ============= ==================
</TABLE>


<PAGE>

Valpey-Fisher Corporation
Notes Continued
<TABLE>
<CAPTION>
The following table summarizes information about fixed stock options outstanding at December 31, 2003:

                                         Options Outstanding                                     Options Exercisable
                     --------------------------------------------------------------       ----------------------------------
                                                          Weighted-Average
                                                   ----------------------------
            <S>                 <C>                    <C>                 <C>                    <C>                     <C>
       Range of             Number                Remaining                                    Number               Weighted
       Exercise          Outstanding             Contractual             Exercise            Exercisable          Avg. Exercise
        Prices           at 12/31/03                 Life                  Price             at 12/31/03             Price
-------------------- --------------------- ---------------------- --------------------- --------------------- ------------------
    $1.83 - 1.95            26,188                3.6 years              $ 1.85                26,188               $  1.85
-------------------- --------------------- ---------------------- --------------------- --------------------- ------------------
    $2.39 - 2.80            98,500                9.0                      2.59                 9,600                  2.39
-------------------- --------------------- ---------------------- --------------------- --------------------- ------------------
    $3.24 - 4.28           435,000                7.4                      3.36               179,000                  3.40
-------------------- --------------------- ---------------------- --------------------- --------------------- ------------------
    $11.04                  18,750                6.8                     11.04                11,250                 11.04
==================== ===================== ====================== ===================== ===================== ==================
                           578,438                7.4                    $ 3.41               226,038               $  3.56
==================== ===================== ====================== ===================== ===================== ==================
</TABLE>

     The Company adopted the disclosure-only option under SFAS No.123
"Accounting for Stock-Based Compensation." The following table illustrates the
effect on net earnings (loss), and earnings (loss) per share if the Company had
applied the fair value recognition provisions of SFAS No.123 to stock-based
compensation.

<TABLE>
                                                           For the Year Ended December 31,
                                             ------------------- ------------------- -------------------
                                                     2003                2002               2001
                                             ------------------- ------------------- -------------------
<S>                                                   <C>                  <C>                 <C>
As Reported
   Net earnings (loss)                           $ (1,400,086)      $ (2,888,737)         $ 2,751,348
--------------------------------------------------------------------------------------------------------
   Basic net earnings (loss) per share           $       (.33)      $       (.69)         $       .66
--------------------------------------------------------------------------------------------------------
   Diluted net earnings (loss) per share         $       (.33)      $       (.69)         $       .64
--------------------------------------------------------------------------------------------------------

Pro Forma
   Net earnings (loss)                           $ (1,511,895)      $ (3,012,179)         $ 2,678,830
--------------------------------------------------------------------------------------------------------
   Basic net earnings (loss) per share           $       (.36)      $       (.72)         $       .65
--------------------------------------------------------------------------------------------------------
   Diluted net earnings (loss) per share         $       (.36)      $       (.72)         $       .63
--------------------------------------------------------------------------------------------------------
</TABLE>

     For purposes of the above pro forma disclosures, the estimated fair value
of the options is amortized to expense over the five-year vesting period of the
options. The fair value of these options was estimated at the grant date using
the Black-Scholes option pricing model with the following weighted-assumptions:
<TABLE>
                                                                               For the Year Ended December 31,
                                                                      ------------------------------------------------
                                                                             2003          2002           2001
                                                                      ------------------------------------------------
<S>                                                                            <C>             <C>             <C>
                  Expected dividend yield                                      0%            0%             0%
----------------------------------------------------------------------------------------------------------------------
                  Risk-free interest rate                                    3.3%          3.4%           5.1%
----------------------------------------------------------------------------------------------------------------------
                  Expected life of options in years                            7             7              7
----------------------------------------------------------------------------------------------------------------------
                  Assumed volatility                                          59%           61%            55%
----------------------------------------------------------------------------------------------------------------------
                  Estimated fair value per share at date of grant          $1.60         $1.79          $2.60
----------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Valpey-Fisher Corporation
Notes Continued

(13) Earnings (Loss) Per Share: The computation of basic and diluted earnings
(loss) per share from continuing operations is as follows:
<TABLE>

-------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                   <C>                    <C>
                                                                    2003                  2002                   2001
-------------------------------------------------------------------------------------------------------------------------
Basic:
-------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations                    $ (1,400,086)          $ (2,789,737)           $ 2,751,348
-------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding                              4,187,970              4,165,659              4,138,363
=========================================================================================================================
Basic earnings (loss) per share from continuing operations    $       (.33)           $      (.67)           $       .66
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Diluted:
-------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations                    $ (1,400,086)           $ (2,789,737)          $  2,751,348
-------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding                              4,187,970               4,165,659              4,138,363
-------------------------------------------------------------------------------------------------------------------------
Dilutive effect of stock options outstanding, using the
treasury stock method                                                    -                       -                139,125
-------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding                      4,187,970               4,165,659              4,277,488
=========================================================================================================================
Diluted earnings (loss) per share from continuing operations  $       (.33)           $       (.67)         $         .64
=========================================================================================================================
</TABLE>

     The Company had 578,438 and 509,938 options outstanding in 2003 and 2002,
respectively, not included in the computation of dilutive shares since the
Company had a net loss and the inclusion of such shares would be anti-dilutive.


(14) 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 14%, 22% and 15% of net sales in
2003, 2002 and 2001, respectively. Export sales to foreign markets are as
follows:

<TABLE>

----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                   <C>                 <C>
                                                           2003                  2002               2001
----------------------------------------------------------------------------------------------------------------
Asia Pacific                                      $   1,652,200           $   1,113,900      $     401,100
----------------------------------------------------------------------------------------------------------------
Europe and Middle East                                  670,900               345,600            1,518,500
----------------------------------------------------------------------------------------------------------------
Canada                                                  560,800               374,200            1,889,800
----------------------------------------------------------------------------------------------------------------
Other                                                    20,800                94,900              106,600
----------------------------------------------------------------------------------------------------------------
                                                  $   2,904,700           $ 1,948,600        $   3,916,000
================================================================================================================
</TABLE>

<PAGE>

Valpey-Fisher Corporation
Notes Continued
<TABLE>
<CAPTION>
(15)  Quarterly Financial Data (unaudited): Selected unaudited quarterly financial data for 2003 and 2002 is set forth below:

                                                               First         Second           Third          Fourth
-----------------------------------------------------------------------------------------------------------------------
                                 2003                                  (in thousands, except per share data)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>             <C>             <C>
Net sales from continuing operations                         $ 1,711         $ 2,180         $ 2,190         $  2,415
-----------------------------------------------------------------------------------------------------------------------
Gross profit (loss)                                               48             244             257              334
-----------------------------------------------------------------------------------------------------------------------
(Loss) before income taxes                                      (692)           (637)           (587)            (507)
-----------------------------------------------------------------------------------------------------------------------
Net (loss) from:
   Continuing operations                                        (457)           (429)           (396)            (118)
-----------------------------------------------------------------------------------------------------------------------
   Discontinued operations                                         -               -               -                -
=======================================================================================================================
Net (loss)                                                   $  (457)        $  (429)        $  (396)         $  (118)
=======================================================================================================================

Basic and diluted  (loss) per share:
   Continuing operations                                     $  (.11)        $  (.10)        $  (.09)         $  (.03)
-----------------------------------------------------------------------------------------------------------------------
   Discontinued operations                                         -               -               -                -
=======================================================================================================================
   Continuing operations                                     $  (.11)        $  (.10)        $  (.09)         $  (.03)
=======================================================================================================================

                                 2002
-----------------------------------------------------------------------------------------------------------------------
Net sales from continuing operations                          $ 2,353        $ 1,722         $  1,617         $ 1,602
-----------------------------------------------------------------------------------------------------------------------
Gross profit (loss)                                               163            (24)          (1,071)           (414)
-----------------------------------------------------------------------------------------------------------------------
(Loss) before income taxes                                       (339)          (694)          (1,730)         (1,225)
-----------------------------------------------------------------------------------------------------------------------
Net (loss) from:
   Continuing operations                                         (203)          (418)          (1,092)         (1,077)
-----------------------------------------------------------------------------------------------------------------------
   Discontinued operations                                        (45)             -                -             (54)
=======================================================================================================================
Net  (loss)                                                    $ (248)       $  (418)        $ (1,092)       $ (1,131)
=======================================================================================================================

Basic and diluted (loss) per share:
   Continuing operations                                       $ (.05)       $  (.10)         $  (.26)       $   (.26)
-----------------------------------------------------------------------------------------------------------------------
   Discontinued operations                                       (.01)             -                -            (.01)
-----------------------------------------------------------------------------------------------------------------------
                                                               $ (.06)       $  (.10)         $  (.26)       $   (.27)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

     Earnings (loss) per share calculations for each of the quarters are 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.

     In the fourth quarter of 2003, net loss from continuing operations includes
a tax benefit of $300,000 ($.07 basic and diluted (loss) per share) as a result
of a reduction in the deferred tax asset valuation allowance during the quarter.

     In the fourth quarter of 2002, net loss from continuing operations includes
tax expense of $396,000 ($.09 basic and diluted (loss) per share) as a result
of a provision for a deferred tax asset valuation allowance net of a tax accrual
reversal.

     The third quarter of 2002 gross profit (loss) includes a $.9 million
inventory write-off provision for excess inventory.

(16) Commitments and Contingencies: During the normal course of business, the
Company incurs certain commitments to make future payments for the purchase of
inventory and production supplies based on its projected requirements. At
December 31, 2003, the Company has outstanding purchase commitments totaling
approximately $565,000, all of which are expected to be fulfilled in 2004.

<PAGE>

Report of Independent Certified Public Accountants

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

     We have audited the accompanying consolidated balance sheets of
Valpey-Fisher Corporation and subsidiaries (the "Company") as of December 31,
2003 and 2002, and the related consolidated statements of operations,
comprehensive income (loss), stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Valpey-Fisher Corporation and subsidiaries as of December 31, 2003 and 2002, and
the consolidated results of their operations and their consolidated cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.

Grant Thornton LLP

Boston, Massachusetts
February 13, 2004


Independent Auditors' Report

To the Stockholders and Board of Directors of Valpey-Fisher Corporation
(formerly MATEC Corporation):

     We have audited the accompanying consolidated statement of operations,
comprehensive income (loss) and cash flows of Valpey-Fisher Corporation
(formerly MATEC Corporation) and subsidiaries (the "Company") for the year ended
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Valpey-Fisher
Corporation (formerly MATEC Corporation) and subsidiaries for the year ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
February 15, 2002

<PAGE>


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

     Effective November 6, 2002, the Registrant dismissed Deloitte & Touche LLP
(D&T) as independent accountants and appointed Grant Thornton LLP (GT) as
independent accountants for the Registrant. The Registrant's audit committee
approved these changes and recommended them to the Board of Directors. The
Registrant's Board of Directors approved the changes.

     During the Company's fiscal years ended December 31, 2002 and 2001 and the
subsequent interim period preceding D&T's dismissal, there were no disagreements
between D&T and the Company on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of D&T, would have caused D&T
to make a reference to the subject matter of the disagreements in their report
on financial statements for such year. During such period, there were no
reportable events as defined in Item 304 (a) (1) (v) of Regulation S-K.

     The report of D&T on the Company's consolidated financial statements as of
and for the years ended December 31, 2001 and 2000 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.

     During the Company's fiscal years ended December 31, 2001 and 2000 and
through November 6, 2002, the Company did not consult with GT with respect to
the application of accounting principles to a specific transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's consolidated financial statements, or any other matters or
reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

     The Company provided D&T with a copy of the foregoing disclosures and
requested that D&T furnish it a letter addressed to the Securities and Exchange
Commission stating whether it agrees with the statements and, if not, stating
the respects in which it does not agree. A copy of the letter from D&T to the
Commission filed as Exhibit 16.1 to the Form 8-K dated November 6, 2002 is
incorporated by reference.


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

     Evaluation of disclosure controls and procedures.

     As of December 31, 2003, the Company carried out an evaluation, under the
supervision and with the Company's management, including the Company's President
and Chief Executive Officer and the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's 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 the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings.

     Changes in internal control.

     Such evaluation did not identify any change in the Company's internal
controls over financial reporting that occurred during the quarter ended
December 31, 2003 that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.

<PAGE>

                                    PART III

     The 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", "Executive
Compensation", "Corporate Governance and Board Matters","Principal Accountant
Fees and Services" and "Policy on Audit Committee Pre-Approval" in Registrant's
definitive proxy statement for the 2004 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. In addition, information on Registrant's executive officers has
been included in Part I above under the caption "Executive Officers of the
Registrant". The Company's Board of Directors has adopted a Code of Ethics for
Senior Executive and Financial Officers, a copy of which is filed as Exhibit 14
to this Annual Report on Form 10-K.



                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------------------------------------------------------------------------

(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, 2003 and 2002
     Consolidated Statements of Operations for the Years Ended December 31,
        2003, 2002 and 2001
     Consolidated Statements of Cash Flows for the Years Ended December 31,
        2003, 2002 and 2001
     Consolidated Statements of Stockholders' Equity for the Years Ended
          December 31, 2003, 2002 and 2001
     Consolidated Statements of Comprehensive Income (Loss) for the Years Ended
          December 31, 2003, 2002 and 2001
     Notes to Consolidated Financial Statement
     Report of Independent Certified Public Accountants (Grant Thornton LLP)
     Independent Auditors' Report (Deloitte & Touche LLP)

<PAGE>

2.   The following schedule to the Consolidated Financial Statements, the Report
     of Independent Certified Public Accountant, and the Independent Auditors'
     Report on Schedule are filed as part of this report.


                                                                     Page Number
                                                                     -----------
Report of Independent Certified Public Accountants on Supplementary
Schedule                                                                  38
Independent Auditors' Report                                              39
Schedule II - Valuation Reserves                                          40

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.

3.   The exhibits filed in this report or incorporated by reference, listed on
     the Exhibit Index on pages 41 and 42 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                 Amendment to Article III, Section 1 of the By-Laws
                             effective May 8, 2003
         3.3                 By-Laws effective May 8, 2003
         7.1                 Loan Agreement dated February 27, 2001
         7.2                 Commercial Term Promissory Note
         7.3                 Demand Revolving Line of Credit Promissory Note
        10.1   *             1992 Stock Option Plan
        10.2   *             1999 Stock Option Plan
        10.3   *             Management Incentive Plan
        10.4   *             2001 Stock Option Plan
        10.5   *             Restricted Stock Agreement
        10.6   *             2003 Stock Option Plan
        14.                  Code of Ethics
        16.1                 Letter from Deloitte & Touche LLP to the Securities
                             and Exchange Commission dated November 6, 2002
        21.                  Subsidiaries of the Registrant
        23.                  Independent Certified Public Accountant Consent
        23.1                 Independent Auditors' 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 14(c) of this report.

<PAGE>

(b)  Reports on Form 8-K

     On November 6, 2003, the Registrant filed a report on Form 8-K dated
     November 6, 2003 reporting under Item 7.(c) Exhibits and Item 12. Results
     of Operations and Financial Condition.

<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 12, 2004               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               March 12, 2004
-------------------            and Director
Ted Valpey, Jr.


/s/Michael J. Ferrantino  President, Chief Executive Officer    March 12, 2004
------------------------  and Director (Principal Executive
Michael J. Ferrantino                Officer)


/s/Michael J. Kroll       Vice President, Treasurer and         March 12, 2004
-------------------          Chief Financial Officer
Michael J. Kroll           (Principal Financial Officer
                             and Principal Accounting
                                    Officer)

/s/Richard W. Anderson              Director                    March 12, 2004
----------------------
Richard W. Anderson

/s/Eli Fleisher                     Director                    March 12, 2004
----------------
Eli Fleisher

/s/Lawrence Holsborg                Director                    March 12, 2004
--------------------
Lawrence Holsborg

/s/John J. McArdle III              Director                    March 12, 2004
----------------------
John J. McArdle III

                                    Director                    March   , 2004
----------------------
Robert W. Muir, Jr.

<PAGE>

Report of Independent Certified Public Accountants on Supplementary Schedule

To Valpey-Fisher Corporation:

     We have audited the accompanying consolidated balance sheets of
Valpey-Fisher Corporation and subsidiaries (the "Company") as of December 31,
2003 and 2002, and the related consolidated statements of operations,
comprehensive income (loss), stockholders' equity, and cash flows for the years
then ended, and have issued our report thereon dated February 13, 2004; such
consolidated financial statements and report are included in the Company's 2003
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of the Company as of and
for the years ended December 31, 2003 and 2002, listed in Item 15a(2). This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information therein.


GRANT THORNTON LLP
Boston, Massachusetts
February 13, 2004


<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Valpey-Fisher Corporation (formerly MATEC Corporation)
Hopkinton, Massachusetts

We have audited the consolidated statement of operations, comprehensive
income (loss) and cash flows of Valpey-Fisher Corporation (formerly MATEC
Corporation) and subsidiaries (the "Company") for the year ended December 31,
2001, and have issued our report thereon dated February 15, 2002. Our audit also
included the financial statement schedule, for the year ended December 31, 2001,
of the Company listed in Item 15(a)2. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such financial statement schedule
for the year ended December 31, 2001 when considered in relation to the basic
financial statements for the year ended December 31, 2001, taken as a whole,
presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 15, 2002


<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:

<S>                                   <C>                      <C>                  <C>                  <C>                  <C>
Year Ended:
December 31, 2003            $     200,000        $          2,300     $            -      $       (122,300)    $         80,000
                             ==================== ==================== =================== ==================== ===================

December 31, 2002            $     395,800        $         30,000     $        139,200    $       (365,000)    $        200,000
                             ==================== ==================== =================== ==================== ===================

December 31, 2001            $     175,000        $        148,200     $         88,100    $        (15,500)    $        395,800
                             ==================== ==================== =================== ==================== ===================


Inventory Reserve:

Year Ended:
December 31, 2003            $   5,339,000        $       234,900      $                   $     (4,571,900)    $      1,002,000
                             ==================== ==================== =================== ==================== ===================

December 31, 2002            $  3,854,000         $     1,601,000      $        228,000    $       (344,000)    $      5,339,000
                             ==================== ==================== =================== ==================== ===================

December 31, 2001            $  1,6730,000        $     2,600,000      $            -      $       (419,000)    $      3,854,000
                             ==================== ==================== =================== ==================== ===================

</TABLE>


<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 A to the Proxy Statement of
     Registrant for its Special in Lieu of Annual Meeting of Stockholders held
     on June 18, 1998).

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
     (incorporated by reference to Exhibit 3.2 on Registrant's Form 10-Q for the
     period ended June 30, 2002).

3.2  Amendment to Article III, Section 1 of the By-Laws effective May 8, 2003.
     Filed herewith.

3.3  By-Laws effective May 8, 2003. Filed herewith.

7.1  Loan Agreement dated February 27, 2001 between the Registrant, Valpey
     Fisher Corporation and First Massachusetts Bank, N.A. (incorporated by
     reference to Exhibit 7.1 on Registrant's Form 10-Q for the quarter ended
     April 1, 2001).

7.2  Commercial Term Promissory Note dated February 27, 2001 between the
     Registrant, Valpey Fisher Corporation and First Massachusetts Bank, N.A.
     (incorporated by reference to Exhibit 7.1 on Registrant's Form 10-Q for the
     quarter ended April 1, 2001).

7.3  Demand Revolving Line of Credit Promissory Note dated February 27, 2001
     between the Registrant, Valpey Fisher Corporation and First Massachusetts
     Bank, N.A. (incorporated by reference to Exhibit 7.1 on Registrant's Form
     10-Q for the quarter ended April 1, 2001).

10.1 1992 Stock Option Plan (incorporated by reference to Exhibit 10.1 on
     Registrant's Form 10-K for the year ended December 31, 2002).

10.2 1999 Stock Option Plan (incorporated by reference to Exhibit A to the Proxy
     Statement of Registrant for its Special In Lieu of Annual Meeting of
     Stockholders held on May 13, 1999).

10.3 Management Incentive Plan (incorporated by reference to Exhibit 10.3 on
     Registrant's Form 10-Q for the quarterly period ended July 2, 2000).

10.4 2001 Stock Option Plan (incorporated by reference to Exhibit A to the Proxy
     Statement of Registrant for its Annual Meeting of Stockholders held on May
     10, 2001).

10.5 Restricted Stock Agreement (incorporated by reference to Exhibit 10.5 on
     Registrant's Form 10-K for the year ended December 31, 2003.



<PAGE>

                            EXHIBIT INDEX, continued

Exhibit No.   (inapplicable items are omitted)
-----------
10.6 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).

14.  Code of Ethics of the Chief Executive Officer and the Chief Financial and
     Accounting Officer. Filed herewith.

16.1 Letter from Deloitte & Touche LLP to the Securities and Exchange Commission
     dated November 6, 2002 (incorporated by reference to Exhibit 16.1 on
     Registrant's Form 8-K dated November 6, 2002).

21.  Subsidiaries of the Registrant. Filed herewith.

23.  Independent Certified Public Accountants' Consent. Filed herewith.

23.1 Independent Auditors' Consent. Filed herewith.

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.