Edgar Filing: PRESSTEK INC /DE/

form10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

	For the fiscal year ended January 3, 2009
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 No. 0-17541

PRESSTEK, INC.

(Exact name of registrant as specified in its charter)

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

10 Glenville Street, Greenwich, Connecticut 06831

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code:

(203) 769-8056

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

Title Of Each Class [Missing Graphic Reference]		Name Of Each Exchange On Which Registered [Missing Graphic Reference]
Common stock, par value $0.01 per share		The NASDAQ Global Market

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £ No R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £ No R

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 R No £

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

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

Large accelerated filer £ Accelerated filer R Non-accelerated filer £ Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes£ No R

The aggregate market value of common stock held by non-affiliates of the registrant as of June 28, 2008 was $146,247,060.

The number of shares outstanding of the registrant’s common stock as of March 16, 2009 was 36,664,244.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders scheduled for June 3, 2009 are incorporated by reference into Part III.

PRESSTEK, INC.

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR

ENDED JANUARY 3, 2009*

		PAGE
PART 1
Item
1.	Business.	3
1A.	Risk Factors.**	18
1B.	Unresolved Staff Comments.	26
2.	Properties.	27
3.	Legal Proceedings.	28
4.	Submission of Matters to a Vote of Security Holders.	28

PART II
Item
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	29
6.	Selected Financial Data.	29
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	31
7A.	Quantitative and Qualitative Disclosures About Market Risk.	51
8.	Financial Statements and Supplementary Data.	52
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	87
9A.	Controls and Procedures.	87
9B.	Other Information.	93

PART III
Item
10.	Directors, Executive Officers and Corporate Governance.	93
11.	Executive Compensation.	94
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	94
13.	Certain Relationships and Related Transactions, and Director Independence.	94
14.	Principal Accountant Fees and Services.	95

PART IV
Item
15.	Exhibits and Financial Statement Schedules.	95
	Signatures.	96

*	Capitalized terms not defined herein shall have the same meanings ascribed to them in the Glossary of Item 1.

**	See Part I – Item 1A for cautionary statements regarding forward-looking statements included in this Annual Report on Form 10-K.

PART I

Item 1. Business.

General

Presstek, Inc. and its subsidiaries (collectively, “Presstek,” “we,” “us,” “our,” or the “Company”) maintain principal executive offices at 10 Glenville Street, Greenwich, CT 06831. The Company’s website is www.presstek.com.

Presstek was organized as a Delaware corporation in 1987. The Company is a leading manufacturer and marketer of environmentally-friendly digital-based offset printing solutions. These products are engineered to provide a streamlined workflow that shortens the print cycle time, reduces overall production costs, and meets the market’s increasing demand for fast turnaround high-quality color printing. Presstek’s subsidiary, Lasertel, Inc. (“Lastertel”), manufactures semiconductor laser diodes for Presstek and external customer applications. This subsidiary is now classified as a discontinued operation; please refer to for page 6 for further detail.

Our products include Digital Imaging (DI®) digital offset presses, chemistry-free computer-to-plate (“CTP”) systems, workflow solutions, thermal printing plates, and a complete line of prepress and press room consumables. Presstek also offers a range of technical services for its customers.

Background

Since its incorporation in 1987 Presstek has served the commercial print segment of the graphics communications industry by offering innovative digital offset printing solutions for commercial printing applications. We:

·	invented the technology that enables DI® presses;

·	invented chemistry-free printing plates;

·	have significantly streamlined the print production workflow;

·	have helped transition offset printing from a craft-based manual process to an automated manufacturing process; and

·	plan to continue to innovate by providing high quality fully integrated digital solutions and services while forming all encompassing relationships with our customers.

Primary Markets

Presstek serves the global print market. The two primary opportunities for Presstek’s solutions lie in the commercial and corporate segments.

Commercial markets include companies that provide printing and print-related services, such as design, prepress, and bindery, on a print-for-pay basis. Many firms in the commercial printing industry have some type of process expertise or geographic focus. This market is further segmented by employee size (i.e. < 10, 10 – 19, 20 – 49, 50 – 99, 100 +) and by equipment capability (e.g. format size 2-page, 4-page, 8-page; type of equipment - sheet-fed or web press).

The corporate market includes in-plant print shops and data center printing departments that provide copying and printing services to support the primary business of a company or organization. These are companies whose primary business includes anything other than printing (e.g. insurance, manufacturing, financial services, education, or government).

Historically, Presstek has primarily served smaller commercial printers with less than 20 employees as well as the in-plant printing market.

Presstek believes that new product developments will enable equipment placements in select vertical markets such as mailing and fulfillment and small format packaging.

- 3 -

Market Trends

The printing market is shifting to increasingly faster production of smaller order quantities (shorter runs) with an increasing use of color. Key trends include the following:

·	45% of all printed work in the world is short-run and time sensitive;

·	By 2010, 33% of all print jobs are expected to require a 24-hour turnaround;

·	80% of four-color jobs are now produced in runs of less than 5,000; and

·	Approximately 90% of digital printing is non-personalized, and can be produced on a DI® press

Providing Solutions for New Market Requirements

Presstek offers a range of products to meet these changing market demands including DI® digital offset presses and chemistry-free CTP systems. Presstek’s DI® presses incorporate Presstek’s ProFire® Excel laser imaging technology, unique press design, and thermal plates to create an optimized solution for press runs from 250 to 20,000 sheets.

Market studies indicate the number of print jobs with run lengths of 20,000 and below are increasing, while the frequency of longer run length jobs is decreasing. DI® presses fit well into print businesses that are experiencing this trend. These businesses, which include commercial print shops, quick printers, franchise shops, digital printers and in-plants, utilize DI® presses to profitably meet this run length requirement according to research from industry consulting firm InfoTrends.

Presstek’s DI® presses are automated print production systems. Digital files are sent to the offset printing press where all four printing plates are imaged on press in precise register, resulting in a highly streamlined digital workflow that is designed to allow the fastest way to finished offset press sheets. With our CTP solutions, digital files are sent directly from the prepress workflow to the plate-imaging device; the plates are imaged off line, and then mounted on a conventional offset press. Presstek introduced the concept of chemistry-free printing to the market and continues the active pursuit of this more environmentally friendly and efficient manner of producing offset printing plates.

Organizational Structure

To better address the worldwide print market, Presstek has aligned its resources into three strategic product lines. This structure allows the Company to continue to focus on its traditional base of small commercial and in-plant customers, while expanding the range of products it can bring to market around the world. This structure is also designed to better position the Company to more effectively address the needs of larger commercial printers. These strategic product lines are:

·	Digital Printing, which includes digital presses, consumables and workflow;

·	CTP, which is responsible for digital platemaking systems, consumables and workflow; and

·	Traditional, which operates as a dealer for Presstek products such as polyester CTP platemaking and other partners products for our customers.

Geographic Structure

Presstek supplies equipment, service and supplies to support the worldwide print market; currently 69% of Presstek’s revenues come from North America, 27% from Europe; 2% from Asia Pacific and 2% from other various regions. To facilitate growth Presstek has established three sales regions to bring integrated solutions to local markets. The three sales regions are:

·	EAME (Europe, Africa, Middle East);

·	Americas (North America and Latin America); and

·	Asia Pacific.

- 4 -

Our Business Segments

We operate in two reportable segments: the Presstek segment, and the Lasertel segment. The Presstek segment is primarily engaged in the development, manufacture, sales, distribution, and servicing of digital offset printing solutions for the graphic arts industries. The Lasertel segment is primarily engaged in the manufacture and development of high-powered laser diodes for a variety of industry segments.

On September 24, 2008, the Company’s Board of Directors approved a plan to market the Lasertel subsidiary for sale. The financial statements have been restated to reflect the Lasertel segment as discontinued operations as presented in this Annual Report on Form 10-K.

For an analysis of our revenue from sales to external customers, operating profit and assets by business segment as well as revenue from sales to external customer and long-lived assets by geographic area, see Note 16 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

The Presstek Segment

The Presstek segment provides research, new product development, systems integration, equipment manufacturing and plate manufacturing. It also serves as the center for marketing, sales and service for our digital offset printing solutions as well as the distribution of our third-party products.

Our products are sold to end-user customers through either our direct sales force, our dealer channel, or through original equipment manufacturer (“OEM”) partners. We also have an established portfolio of pressroom supplies and consumables which is sold through our direct sales channel and our web storefront.

Presstek branded equipment is serviced either by our direct service organization or by our dealer channel. Our direct service organization primarily serves customers located in the United States, Canada, and the U.K.

Manufacturing

At our 165,000-square-foot facility in Hudson, NH, we manufacture ProFire® Digital Media, PearlDry® Plus, and PearlDry® printing plates. The ProFire® Excel imaging kits that are incorporated into DI® presses are also assembled in Hudson. The Dimension® Excel series, Vector FL52 and the ABDick®-branded Digital PlateMaster® system are also assembled at our Hudson, NH facility.

Plate manufacturing at our Hudson facility uses vacuum deposition technology to create ultra-thin imaging layers. We have a state-of-the-art solution coater capable of handling aqueous or solvent-based fluids with best available environmental controls throughout the process. Polyethylene terephthalate substrates are laminated to aluminum webs (“spools”) using electron beam curing technology. This eliminates the need for environmental emissions from a drying process. We utilize full converting capability, which provides high-speed slitting, spooling, formatting and final packaging.

At our 100,000-square-foot facility located in South Hadley, MA, we manufacture aluminum-based printing plates, including chemistry-free Presstek-branded Anthem® Pro, Freedom® Pro and Aurora® Pro digital printing plates. The aluminum plate manufacturing includes in-line graining, anodizing, silicating, and multiple layer coatings. Raw aluminum is processed into lithographic printing plates for digital markets.

Distribution

Our sales strategy is designed to emphasize the distribution of Presstek’s DI® presses and CTP solutions and related consumables, as well as a full portfolio of conventional products. These products are offered to customers through our direct sales force, independent graphic arts dealers and strategic OEM partnerships. We have an established distribution network in North America, and in Europe. We are currently strengthening our position by growing our dealer network on a global basis.

- 5 -

Service and Support

Presstek also has an established service organization throughout the United States, Canada and the United Kingdom to service its equipment. In other regions, Presstek authorized dealers are the primary source of service, with Presstek providing training and advanced technical support.

The Lasertel Segment

Our Lasertel segment is a developer and manufacturer of high-powered laser diodes. These diodes are used in Presstek’s DI® presses and the Dimension Series of CTP systems. Lasertel also provides diodes to external customers in a range of industries (i.e. defense, industrial, medical, and graphics).

Lasertel operates in a leased 40,000 square-foot facility located in Tucson, AZ. The facility includes 10,000 square feet of clean room space and complete processing equipment for semiconductor laser manufacturing. Lasertel is a vertically integrated manufacturer of laser diode based components and systems.

In September of 2008, Lasertel received International Organization for Standardization (“ISO”) 13485:2003 certification. In combination with its existing ISO 9001:2000 certification, these certifications enable Lasertel to be a manufacturer of medical components and systems. ISO is a non-governmental federation of the national standard boards of countries from all regions of the world that set the standards and requirements for state-of-the-art products, services, processes, materials and systems, as well as for good conformity assessment, managerial and organizational practice.

Strategy

Our vision is to provide high quality, fully integrated digital solutions and services that enable us to form an all-encompassing relationship with our customers. Our business strategy is to offer innovative digital imaging and plate technologies that address the opportunities of today and tomorrow in the graphic arts and commercial printing markets across the globe.

This strategy includes several imperatives:

1. Focus on the growth of our consumables product line.

Presstek provides digital offset solutions that aid printers in meeting the changing needs of today’s market – shorter run lengths, faster turn-around times, and more color. Our DI® press and CTP solutions use our chemistry-free printing plates. With our direct sales force and network of distribution partners, we feel we are well positioned to expand our installation base of these solutions. Another step in growing our consumables business is to develop printing plates (consumables) that can be imaged on non-Presstek manufactured devices, an open systems approach. The first step in executing this strategy was the launch of Aurora® Pro, our open-platform, chemistry-free printing plate, which is designed to be used on thermal CTP systems marketed by other manufacturers and was introduced at the end of fiscal 2008. We plan to introduce a longer-run positive working digital plate in 2009 that will assist our efforts in moving aggressively up market. The Company also believes that with this strategy, it can stem the erosion of its traditional consumables (ink, pressroom and proofing supplies, etc.) by selling these products along with our digital plates and has dedicated plate resources to this effort.

- 6 -

2. Emphasize attractive market segments.

Large print providers were the first to adopt digital technology, and they have driven the digital transformation of the commercial printing market. Today the benefits of a digital workflow are well understood and all segments of the commercial print market are adopting digital technologies. With our range of digital solutions and the strength of our direct sales and service force, we have experienced most of our success in the following market segments:

Commercial printers (generally those with less than 20 employees) that need to increase their production capacity, level of productivity and output quality while improving profitability have demonstrated success with our digital offset products. These printers are often acquiring their first four-color offset press when they acquire a Presstek product.

Digital printers and copy shops, facilities that primarily operate toner-based digital printing equipment, are acquiring DI® presses as complementary devices. They are using DI® presses for jobs that require run lengths greater than 250 copies, a higher level of quality, or a substrate (coated stock, thick stock, plastics, etc.) that cannot be effectively produced on a toner based device. They are also combining digital toner devices and DI® presses into one workflow to create certain print jobs more profitably. For example, they may produce a high quality four-color direct mail piece on the DI® press, then add a personalized message or pURL (personal URL) using their toner device. The result is a high-quality personalized piece affordably produced.

In-plant print shops that operate within corporations, colleges and universities and government agencies are attracted to the ease-of-use, compact footprint and environmentally responsible nature of our solutions. It is becoming increasing important that these shops be self sustaining. The productivity, efficiency and versatility of Presstek solutions helps in-plants reach this goal.

During 2008 Presstek was successful in placing several DI® presses in a number of larger print shops. We believe this is because DI® presses are engineered to produce runs between 250 and 20,000 images at a very low cost. While at the same time market demands are shifting so that run lengths in this range are increasing, it is leaving a gap in the production portfolio of many larger commercial print shops. They can efficiently produce very short-runs (less than 250) on their toner devices, and runs of 20,000 or more on their conventional offset presses. Larger print shops, however, can be more profitable producing a run of 250 to 20,000 on a Presstek’s DI®. Presstek believes that larger printers will look at DI® presses to fill this production gap in their equipment portfolio.

3. Focus on key growth areas.

Growth within the existing market segments that Presstek serves today. Historically Presstek has served print shops with less than 20 employees, and this segment makes up approximately 75% of the industry (i.e. number of printers). Many of these printers have not yet fully embraced digital printing technologies. In addition, owners of existing DI® presses and CTP systems will be looking to add capacity or to upgrade their capabilities (i.e. upgrade a 34DI® press to a 52DI®, a semi-automated CTP system to a fully automated solution, or add a PathWay web-to-print solution).

Growth up-market to larger print shops. As print buyers request shorter runs with faster turnaround times, larger shops often need to outsource these jobs or run them inefficiently on their larger offset presses or toner presses. A Presstek’s DI® press is a good solution for these shops, because it is an offset printing solution that allows color to be matched to the output of their larger presses. The DI® press may also open up new applications for the larger print shop.

- 7 -

Growth of CTP consumables. It is estimated that the worldwide digital printing plate market in fiscal 2008 was $3.9 billion. This market is expected to grow by as much as 36% to $5.3 billion by 2012 based on research from Vantage Strategic Marketing. Presstek plans to further penetrate this large consumables market by expanding its range of CTP plates. These plates will work on both Presstek and third party imaging devices. Aurora Pro is an example of a product that fits into this area of growth.

Growth in geographic regions. The largest portion of Presstek’s sales has historically come from the United States and Canada. The largest portion of the worldwide print market, however, is outside North America. Presstek has established three sales regions; Americas, EAME, and Asia Pacific, to establish proper distribution by region and to help develop solutions that fit each market’s specific requirements.

4. Enable customers to better compete by offering diverse range of products.

Because our goal is to provide high quality, fully integrated digital solutions and services that form an all-encompassing relationship with our customers, we deliver solutions that allow printers to differentiate their print businesses in a competitive marketplace. Presstek’s products can be divided into two primary categories: DI® presses and CTP systems, along with the supplies and services that they require. Ease of use, environmentally friendly chemistry-free imaging, and a small footprint are common benefits of the two product lines.

Our DI® presses, the Presstek 52DI® and Presstek 34DI®, allow printers to offer high-quality offset printing on a wide range of substrates at run lengths starting at 250 sheets for a highly competitive cost per sheet. DI® presses are able to do this because of their short make-ready time and reduction of production steps, which is possible because of three Presstek technologies—laser imaging, press design, and DI® plate technology—working in unison to create an optimized printing system.

Presstek offers a full range of CTP systems, from a two-page polyester system to an eight-page thermal plate system. In fiscal 2007, Presstek upgraded the Dimension Excel Series to include full automation. In fiscal 2008, Presstek added the Dimension Pro and Compass series platesetters suitable to the needs of larger print providers.

Presstek has also expanded its workflow offerings by partnering with third parties. This allows users to better implement Presstek’s DI® and CTP solutions while improving the flow of jobs through production. An example of this is the agreement signed with Press-sense to offer a web-to-print solution; Presstek markets this product as PathWay. An agreement has also been signed with EskoArtwork to offer an integrated PDF workflow; we have branded this product Latitude.

5. Provide solutions that meet the growth in demand for short-run, fast turnaround high-quality color printing.

According to market research commissioned by Presstek and conducted by industry consultant Dr. Joseph Webb of Strategies for Management, “Much of the print industry’s decline in shipment volume has been in long-run printed documents. Short-run printing is actually mainstream. Short-run printing weighs on the capital base that was purchased to produce long-run printing, and until that installed base is replaced, profits are negatively affected.” Dr. Webb concludes, “Presstek has a unique opportunity and position in the reshaping of the printing industry's workflow and production methods. Presstek as a company, and print as a medium, are at a fascinating crossroads of technology, market opportunities, and competition. The Company's products allow printers to compress their workflow to eliminate costly steps, leveraging the modern content creator’s capabilities to make better, richer, and more predictable printable files.”

- 8 -

6. Provide environmentally responsible solutions through our application of technology.

Our thermally imaged chemistry-free plate technologies are designed to provide both a streamlined workflow and an environmentally responsible solution. Besides contributing to a cleaner and safer printing operation, environmental responsibility is sound business practice in that our DI® and CTP solutions reduce labor needs, reduce space requirement, eliminate plate-oriented waste disposal, and result in fewer manufacturing process errors.

Technology

Imaging Technology

Presstek developed the imaging technology for the world's first DI® press. Over the past 20 years, we have continuously improved on this technology. Today we offer our fourth generation of imaging technology which we call ProFire® Excel. The ProFire® Excel system has three major components: the laser diode system, made up of unique four-beam laser diodes and laser drivers; the integrated motion system that controls the placement of the laser diodes; and the digital controller and data server. The image data board of the ProFire® Excel controls 16-micron diodes with patented Image Plus technology. Among the advantages of Image Plus is a writing mode that increases image quality while significantly reducing moiré patterns in standard screen sets, allowing for a range of FM (stochastic) screening options.

The laser diodes that we use for our imaging system are manufactured at Lasertel. Lasertel manufactures epitaxial wafers, which are subsequently processed into chips or bars. Lasertel then assembles these devices into fiber-coupled modules called multiple emitter packages (“MEPs”), which contain four lasers per module. These MEPs are then sent to our manufacturing facility in Hudson, NH. We assemble Lasertel-manufactured laser imaging modules into imaging kits that are designed for DI® press or Dimension Excel CTP units. These kits are then incorporated into DI® printing presses, by our manufacturing partner, or into CTP systems assembled at our Hudson, NH facility.

Before direct-to-plate imaging, platemaking and pre-press activities had occurred as a separate and specialized activity in the printing operation, primarily using analog film-based technology, chemical processing and manual skill-based processes. Conventional or analog printing plates are produced using labor and chemical-intensive, multi-step processes. By consolidating or eliminating process steps required to prepare a digital file for printing, Presstek’s DI® presses and CTP systems deliver efficiencies that allow increased print productivity at a lower cost and with better quality than conventional offset methods. At the same time, by imaging chemistry-free plates, Presstek products eliminate the reliance on the chemical processing that is generally associated with imaging traditional printing plates. In addition to being more efficient to operate, our solutions are more environmentally responsible than traditional methods of printing. The result is higher quality, faster turnaround offset printing with a lower cost of operation that is also environmentally safe.

Plate Technology

We manufacture digital printing plates for both on-press imaging with DI® presses and CTP printing applications. Our plates are based on our patented chemistry-free thermal imaging technology. Our printing plates respond to heat generated by high-powered lasers (thermal imaging) using ablation and sub-ablation processes.

Thermal ablation refers to the process in which the thermal laser ablates (removes) areas of the emulsion while the plate is being imaged. This is the method employed in Presstek’s plates. Plates that are imaged using thermal ablation typically consist of a basic substrate such as a grained aluminum plate or polyester, an oleophilic (ink receptive) imaging layer, and an ink-rejecting micro porous hydrophilic layer.

- 9 -

The high-powered laser of the imaging system selectively burns tiny holes in the thin plate coating, causing it to burst away from the base. This technique thus requires the imaging system to be equipped with a means of collecting the debris, typically a vacuum with filters. The result is a high-contrast image that can be examined and measured prior to mounting on a printing press.

Products

DI® Presses

Presstek 52DI® Press

The Presstek 52DI® is a landscape format 52cm direct imaging press with a maximum sheet size of 20.47” x 14.76”. The 52DI® has a maximum image area of 20.07” x 14.17”, one of the largest in its class. This press is highly automated and designed to deliver superior economics and faster turnaround times, require lower skilled operators and reduced paper waste. The Presstek 52DI® images all four chemistry-free printing plates on press in 4.5 minutes in precise register at 2540 dpi and supports up to 300 lpi and FM screening. The press design which features Zero Transfer Printing technology, results in consistent quality, an exceptionally fast make-ready time and reliable handling across a wide range of substrates. The 52DI® has a maximum operating speed of 10,000 full size sheets per hour which is the equivalent of 20,000 letter-sized sheets.

Presstek 34DI® Press

The Presstek 34DI® is a portrait format 34cm direct imaging press with a maximum sheet size of 13.39” x 18.11” and a maximum image area of 12.99” x 17.22”. This press is highly automated and designed to deliver superior economics, faster turnaround times, require lower skilled operators and reduced paper waste. The Presstek 34DI® images all four chemistry-free printing plates on press in 4.5 minutes in precise register at 2540 dpi and supports up to 300 lpi and FM screening. The press’ design using Zero Transfer Printing technology, results in consistent quality, an exceptionally fast make-ready time and reliable handling across a wide range of substrates. The 34DI® has a maximum operating speed of 7,000 full size sheets per hour which is the equivalent of 14,000 letter-sized sheets. The 34DI® is available as the 34DI®-X, a high productivity model and the 34DI®-E an entry-level configuration.

Both the Presstek 52DI® and 34DI® can be equipped with the DI® Ultra Violet (“UV”) option. The UV option converts a standard DI® press to a UV press. UV presses are well suited for printing on non-porous materials such as plastics and foils.

DI® Plates

ProFire® Digital Media

ProFire® Digital Media is designed to work as a system with the laser imaging and press components of ProFire® and ProFire® Excel enabled DI® presses (such as the Presstek 34 and 52DI®). ProFire® Digital Media for DI® presses is rated for 20,000 impressions. It is manufactured with an ink-accepting polyester base layer, a middle layer of titanium, and a top layer of silicone. During imaging, the heat from lasers removes the top two layers of the plate, exposing the ink receptive polyester layer. Areas that remain covered with the top layer of silicone will repel the ink. The imaging process is a highly consistent, heat sensitive, physical reaction without the variables of exposure and chemistry. The result is sharper and better-defined details and halftone dots. When operating with ProFire® Excel imaging enabled presses, the Presstek 52DI® and 34DI®, ProFire® Digital Media supports 300lpi and FM screening.

PearlDry® Plus

Formulated in a similar fashion as ProFire® Digital media, PearlDry® Plus is designed to work in conjunction with previous generation DI® presses. In conjunction with Presstek’s DI® imaging, PearlDry® Plus allows presses to produce a high resolution, 21 micron spot and supports print quality up to 200-line screen. For DI® applications PearlDry® Plus is delivered in polyester-based spools. PearlDry® Plus is rated for 20,000 impressions.

- 10 -

PearlDry®

PearlDry® is used for direct-to-press applications that require an aluminum-backed plate such as the 74Karat press manufactured by Koenig & Bauer, AG of Germany (“KBA”). The plate uses a specially formulated silicone material that is coated over the metalized infrared absorbing layer that is then bonded to an aluminum base.

CTP Products

Compass Series

The Compass Series of platesetters includes the 4-page Compass 4000 Series and the 8-page Compass 8000 Series. These highly productive platesetters range in production speeds from 15 to 38 plates per hour. Presstek Compass platesetters, imaging up to 250 lpi (100 l/cm), are optimized for use with Presstek’s Aurora Pro chemistry-free plates and also image a range of other low energy (830 nm laser) third-party thermal plates. Users can add several options to further increase automation and productivity; including single or multiple cassette autoloaders and inline standard or custom plate punches.

Dimension Pro800

The Presstek’s Dimension Pro 800 is an entry-level to mid-range eight-page CTP solution. Dimension Pro images plates up to 45” x 33”, at speeds of up to 11 plates per hour with Presstek’s Anthem® Pro plate and up to 15 plates per hour with Presstek’s Aurora Pro plate.

Dimension Excel

The Dimension Excel series of platesetters are CTP imaging devices that are engineered to image our chemistry-free Anthem® Pro thermal plates in an A2 (4-page) format size. The Dimension Excel is available in both standard (Dimension425) and automated (Dimension450-AL) configurations. The standard model offers operator attended throughput of up to 11 plates per hour, while automated models provide an operating speed of up to 17 plates an hour without any operator intervention.

Vector FL52

The Vector FL52 platesetter is a CTP imaging system that is engineered to image our chemistry-free Freedom thermal plates. The Vector FL52 is a two-page (52 cm and under) metal CTP system that can produce up to 16 plates per hour.

Digital PlateMaster®

Digital PlateMaster® (“DPM”) is an easy-to-use platesetter that is equipped with an integrated Harlequin RIP and uses conventional polyester-based plates. DPM is designed for use with small-format portrait presses. The internal plate processor and daylight-loading materials cassette help facilitate plate production. DPM also supports paper-based printing plates.

CTP Plates

Anthem® Pro

Anthem® Pro delivers improved print performance with the addition of Presstek's exclusive PRO graining technology. Anthem® Pro plates feature our patented polymer-ceramic technology and combine ablative imaging and chemistry-free cleaning (a simple water wash) with run lengths of up to 100,000 impressions. The Anthem® Pro plate runs with a wide range of fountain chemistry and inks.

Freedom Pro

The Freedom Pro plate operates in conjunction with Presstek’s Vector FL52 CTP solution. Like our Anthem® Pro plate, Freedom Pro requires only a simple wash with water before printing. The unique surface structure of the plate results in a fast make-ready and greater ink/water latitude. In addition, Freedom Pro accommodates a wide range of inks and fountain solutions.

- 11 -

Aurora Pro

Aurora Pro is Presstek’s first chemistry-free CTP thermal plate designed to operate with thermal CTP systems from other manufacturers. This further extends the opportunity for printers to leverage innovative Presstek chemistry-free technology with their existing installed base of CTP systems, eliminating the need to purchase, store and dispose of toxic chemicals.

Workflow Products

Latitude

Presstek Latitude is a scalable highly automated and advanced prepress workflow solution powered by EskoArtwork Odystar. Based on native PDF 1.7 format, it supports the latest standards in JDF and Certified PDF. It offers a complete range of prepress tools, from preflight, PDF certification and automated document correction all the way to advanced trapping, imposition, proofing and screening. It is designed to automate the daily work in a prepress production environment. In addition to driving output devices, it provides extremely flexible workflow tools that automate many processes and communications.

Momentum RIP

Momentum RIP is designed to drive Presstek’s CTP and DI® systems as well as ABDick branded CTP systems. Momentum comes complete with input and output mechanisms that allow flexibility for controlling jobs. Momentum is based on Harlequin RIP technology.

Momentum Pro Integrated

Presstek Momentum Pro is a fully integrated workflow and RIP. Building on Momentum RIP technology, the Momentum Pro workflow is designed to streamline and automate the production process using Certified PDF tools. The workflow can be used as a centralized PDF creation and preflight system, ensuring consistent output to multiple devices. Momentum Pro is a simple, easy-to-use and affordable PDF workflow solution for small to mid-size printers.

PathWay

Presstek PathWay is a web-to-print business solution powered by Press-sense. It is designed to create a customer-driven, automated workflow that allows printers to receive, process, print and deliver orders in one low-cost, streamlined operation. It is an end-to-end process that facilitates document creation, customization, quoting, ordering, printing and delivery. PathWay is an ideal way for printers to attract and retain customers, expand the geographic reach of their business, respond to the on demand marketplace, and grow sales volume—while increasing the productivity and profitability of their business.

Lasertel Diode Products

The graphic arts industry continues to demand a high degree of speed, imaging resolution and accuracy without increasing costs. Our high-powered laser diodes are designed to achieve greater imaging power, uniformity and reliability with a low unit cost for the diode array. Writing speed and accuracy are increased, without increasing space and costs, by combining four fiber channels into a single optical module. These diodes, manufactured at our Lasertel subsidiary, also incorporate a number of packaging innovations that reduce the size of the device and facilitate incorporation into the ProFire® Excel imaging module. In addition to manufacturing Presstek products, Lasertel also manufactures products for third-party customers in the industrial, medical, defense and telecommunications sectors.

- 12 -

Competition

The markets for our products are characterized by evolving industry standards and business models, rapid software and hardware technology developments and frequent new product introductions. Our future success will depend on our ability to enhance our existing products, introduce new products in a timely and cost-effective manner, meet changing customer needs, extend our core technology into new applications, and anticipate and respond to emerging standards, business models and other technological changes.

We believe that our patented technologies, other intellectual property, thermal plate manufacturing facilities, strategic alliances, distribution network and knowledge of the marketplace puts us in a strong position to compete in today’s market. Several other companies, however, address markets in which our products are used and have products that are competitive.

Most of the companies marketing competitive products, or with the potential to do so, are well established, have substantially greater financial, marketing and distribution resources than Presstek and its subsidiaries, and have established records in the development, sale and servicing of products. There can be no assurance that Presstek, Lasertel, or any of our products or any products incorporating our technology, will be able to compete successfully in the future.

DI® Presses

Potential competition for DI® presses comes from several areas including manufacturers of high-end electrophotographic technology and manufacturers of conventional offset printing presses.

Manufacturers of high-end electrophotographic technology include, among others, Canon Inc., Hewlett Packard Company, Ricoh Company, Ltd., Eastman Kodak Company (“Kodak”), and Xerox Corporation. These electrophotographic imaging systems use either liquid or dry toners to create one to four (or more) color images on paper and typically offer resolutions of between 400 and 1200 dots per inch. These technologies are generally best suited for ultra-short-runs of less than 250 copies or for printing variable data.

Manufacturers of conventional offset printing presses include Heidelberger Druckmaschinen AG (“Heidelberg”), KBA, Sakurai USA, Inc.'s, Ryobi Limited (“Ryobi”), Manroland AG, and others. The level of automation on new presses is improving and when combined with an automated CTP system an effective workflow can be established. We believe that conventional offset is best suited for production runs of 20,000 or longer. The quality of print from a conventional offset press will depend on the skill of the operator as well as the process the print establishment uses to deliver the plate to the press.

DaiNippon Screen Mfg., Ltd. (“Screen”), offers the TruePress 344 press. This press is an A3 four color digital offset press that prints up to 7,000 impressions per hour and with a conventional wet offset process.

The Presstek 34DI® also competes against the Ryobi 3404DI for end user sales. Ryobi is an OEM partner of Presstek’s and the Ryobi 3404DI uses Presstek’s imaging technology, printing plates and press design.

VIM Technologies, Ltd., an Israeli company (“VIM”), has been selling a plate for DI® presses that the Company believes infringes on the Company’s legally protected patent rights. As discussed below, the Company has initiated patent infringement actions against VIM and others in the United States and Germany for patent infringement.

These competitive plates could have an impact on Presstek’s revenue. They could also lead to downward pricing pressure on our full line of spooled consumable products, which could have a material adverse effect on our business, results of operations and financial condition.

- 13 -

Computer-to-Plate

Most of the major companies in the industry have developed or source off-press CTP imaging systems. Potential competitors in this area include, among others, Agfa, Kodak, Screen, Fuji Photo Film Co., Ltd. (“Fuji”), and Heidelberg, combinations of these companies, and other smaller or lesser-known companies. Many of these devices utilize printing plates that require a post-imaging photochemical developing step and/or other post processing steps such as heat treatment.

We are seeing competition from printing plate companies that manufacture, or have the potential to manufacture, digital thermal plates. Such companies include, among others, Agfa, Kodak, and Fuji. Some companies, including Agfa, Kodak, and Fuji, have announced or released plates that reportedly eliminate the need for post image chemical processing.

Products incorporating our technologies can also be expected to face competition from products using conventional methods of creating and printing plates and producing printed product. While these methods are considered to be more costly, less efficient and not as environmentally conscious as those we implement, they do offer their users the ability to continue to employ their existing means of print and plate production. Companies offering these more traditional means and methods are also refining these technologies to make them more acceptable to the market.

Supplies

The broad portfolio of equipment, supplies, and service added to our portfolio through the acquisition of assets of the A.B. Dick Company (the “A.B. Dick Acquisition”) has several competitors. In addition to those mentioned above, competitors include for Prepress: ECRM and RIPit; for Press: Ryobi, Hamada, Xerox Corporation, Canon Inc., Ricoh Company, Ltd., and Hewlett Packard Company; for Service: General Binding Corp., Kodak, Service On Demand and some independent providers; for Dealers: xpedx, Pitman and Enovation.

Lasertel

Lasertel’s products can also be expected to face competition from a number of companies marketing competitive, high-powered laser diode products such as Coherent Inc. and JDS Uniphase Corporation.

Patents, Trademarks and Proprietary Rights

Our general policy has been to seek patent protection for those inventions and improvements likely to be incorporated into our products and services or where proprietary rights will improve our competitive position. As of January 3, 2009, our worldwide patent portfolio included over 500 patents. We believe these patents, which expire from 2009 through 2026, are material in the aggregate to our business. We have applied for and are pursuing applications for 7 additional U.S. patents and 26 foreign patents. We have registered, or applied to register, certain trademarks in the U.S. and other countries, including Presstek, DI®, Dimension, ProFire®, Anthem®, Applause and PearlDry®. We anticipate that we will apply for additional patents, trademarks, and copyrights, as deemed appropriate.

In addition to the Presstek patents indicated, there is currently one active patent assigned to Lasertel, which will expire in 2012.

We rely on proprietary know-how and to employ various methods to protect our source code, concepts, trade secrets, ideas and the documentation of our proprietary software and laser diode technology. Such methods, however, may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to our know-how, software codes, concepts, trade secrets, ideas, and documentation. We also protect our intellectual property by instituting legal proceedings against parties suspected of infringing on the Company’s legally protected patent and trademark rights.

- 14 -

In February 2008, we filed a complaint with the International Trade Commission (“ITC”) against VIM and its manufacturing partner Hanita Coatings RCA, Ltd. (“Hanita Coatings”) for infringement of certain of our patent and trademark rights. Presstek also sued four U.S. based distributors of VIM products: Spicers Paper, Inc., Guaranteed Service & Supplies, Inc., Ohio Graphco Inc., and Recognition Systems Inc., as well as one Canadian based distributor, AteCe Canada. The Company has settled with Ohio Graphco Inc., which has agreed to cease the importation, use and sale of VIM plates and also agreed to cooperate with the ITC in its investigation of VIM’s alleged patent infringement. Presstek is seeking, among other things, an order from the ITC forbidding the importation and sale of the VIM printing plates in the United States; such an order would be enforced at all U.S. borders by the U.S. Customs Service. In March of 2008, the ITC notified Presstek that it was instituting an investigation related to the Complaint, and a hearing before the ITC is currently scheduled for April 2009. In April 2008 we filed a complaint against VIM in a German court for patent infringement. In addition, in December 2008 we filed a complaint in U.S. District Court in New Hampshire against a VIM distributor for patent infringement associated with the distributor’s sale of infringing product.

Research and Development

Research and development expenses related to our continued development of products incorporating DI® and CTP technologies, were $5.1 million, $5.0 million and $5.3 million in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. These research and development expenditures are related to the continuing operations of the Presstek segment.

Environmental Protection

The Company is subject to various laws and governmental regulations concerning environmental matters. The U.S. federal environmental legislation and state regulatory programs having an impact on the Company include; the Toxic Substances Control Act; the Resource Conservation and Recovery Act; the Clean Air Act;, the Clean Water Act; and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

It is the Company’s policy to carry out its business activities in a manner consistent with sound health, safety and environmental management practices, and to comply with applicable health, safety and environmental laws and regulations. The Company continues to engage in programs for environmental, health and safety protection and control.

Based upon information presently available, future costs associated with environmental compliance are not expected to have a material effect on the Company's capital expenditures, results of operations or competitive position. Such costs, however, could be material to results of operations in a particular future quarter or year.

Backlog

We generally sell our products under standard sales orders and distributor contracts. Orders constituting our backlog are subject to changes in delivery schedules and are typically cancelable by our customers until a specified time prior to the scheduled delivery date. Accordingly, we believe our backlog is not necessarily an accurate indication of future sales.

Employees

At January 3, 2009, we had 622 employees worldwide. Of these, 29 are engaged primarily in engineering, research and development; 159 are engaged in sales and marketing; 245 are engaged in service and customer support; 115 are engaged primarily in manufacturing, manufacturing engineering and quality control; and 74 are engaged primarily in corporate management, administration and finance.

- 15 -

Available Information

Financial and other information about us is available on our website, www.presstek.com. We make available, free of charge on our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the “SEC”).

Glossary

Set forth below is a glossary of certain terms used in this Annual Report on Form 10-K:

A1	a printing term referring to a standard paper size capable of printing eight 8.5” x 11” pages on a sheet of paper

A2	a printing term referring to a standard paper size capable of printing four 8.5” x 11” pages on a sheet of paper

A3/B3	a printing term referring to a standard paper size capable of printing two 8.5” x 11” pages on a sheet of paper

Ablation	a controlled detachment/vaporization caused by a thermal event, this process is used during the imaging of Presstek’s PEARL and Anthem® Pro consumables

Bindery	operations done after printing that are required to finish the job. Can include punching, folding, perforating, trimming and slitting.

Computer-to-plate (CTP)	a general term referring to the exposure of lithographic plate material from a digital database, off-press

Direct Imaging (DI®)	Presstek’s registered trademark for digital imaging systems that allow image carriers (film and plates) to be imaged from a digital database, on and off-press

Dots per inch (dpi)	a measurement of the resolving power or the addressability of an imaging device

FM screening	referred to as stochastic screening. A process that converts images into small dots of variable spacing rather than regularly spaced dots or lined screens. This technique of laying down halftone dots can produce superior color results.

Infrared	light lying outside of the visible spectrum beyond its red-end, characterized by longer wavelengths; used in our thermal imaging process

Lithography	printing from a single plane surface under the principle that the image area carries ink and the non-image area does not, and that ink and water do not mix

Off-press	making a printing plate from either an analog or digital source independent of the press on which it will be used

On-press	the use of Presstek’s direct imaging technologies to make a plate directly from a digital file on the press

PEARL	the name associated with Presstek’s first generation laser imaging technologies and related products and consumables

ProFire® and ProFire® Excel imaging systems	the Presstek components required to convert a conventional printing press into a direct imaging press, including laser diode arrays, computers, electronics

- 16 -

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

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

Ryobi 3404DI	an A3 format size four-color sheet-fed press, incorporating Presstek’s dual plate cylinder concept and PearlDry® Plus spooled plates, a joint development effort between Ryobi and Presstek

Semiconductor laser diode	a high-powered, infrared imaging technology employed in the DI® imaging systems

Short-run markets/printing	a graphic arts classification used to denote an emerging growth market for lower print quantities. InfoTrends, Inc. has examined the market to better understand which run lengths are increasing and which are decreasing. The findings: run lengths above 10,000 sheets are clearly in decline. Run lengths between 5,000 and 9,999 are essentially stable with a slight increase. Run lengths below 5,000 show significant increases, especially in the range of 500 – 999 sheets.

Thermal	a method of digitally exposing a material via the heat generated from a laser beam

Vacuum deposition process	a technology to accurately, uniformly coat substrates in a controlled environment

Waterless	a lithographic printing method that uses dry offset printing plates and inks and does not require a dampening system

- 17 -

Item 1A. Risk Factors.

Certain of the statements contained in this Annual Report on Form 10-K (other than the historical financial data and other statements of historical fact), including, without limitation, statements as to management’s expectations and beliefs, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Words such as “believe(s),” “should,” “plan,” “expect(s),” “project(s),” “anticipate(s),” “may,” “likely,” “potential,” “opportunity” and similar expressions identify forward-looking statements. Forward-looking statements are made based upon management’s good faith expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with such expectations or that the effect of future developments on the Company will be those anticipated by management.

Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made and readers are advised to consider such forward-looking statements in light of the risks set forth below. Presstek undertakes no obligation to update any forward-looking statements contained in this Annual Report on Form 10-K.

Significant factors that could cause actual results to differ materially from management’s expectations or otherwise impact the Company’s financial condition or results of operations include, without limitation, the following:

Current economic conditions and market disruptions may adversely affect the Company’s business and results of operations. Adverse economic conditions in the United States and internationally, leading to reduced capital spending, may adversely impact our business.

A substantial portion of our business depends on our customers’ demand for our products and services, the overall economic health of our current and prospective customers, and general economic conditions. As widely reported, financial markets throughout the world have been experiencing extreme disruption in recent months, including extreme volatility in securities prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others, failure and potential failures of major financial institutions and unprecedented government support of financial institutions. These developments and the related general economic downturn have and will adversely impact the Company’s business and financial condition in a number of ways, including impacts beyond those typically associated with other recent downturns in the U.S. and foreign economies. The slowdown will likely lead to reduced capital spending by end users, which has already adversely affected and may continue to adversely affect the Company’s product sales. If the slowdown is severe enough, it could necessitate further testing for impairment of goodwill, other intangible assets, and long-lived assets and may negatively impact the valuation allowance with respect to our deferred tax assets. In addition, cost reduction actions may be necessary which would lead to additional restructuring charges. The current tightening of credit in financial markets and the general economic downturn will likely adversely affect the ability of the Company’s customers, suppliers, outsource manufacturers and channel partners (e.g., distributors and resellers) to obtain financing for significant purchases. The tightening could result in a decrease in or cancellation of orders for the Company’s products and services, could negatively impact the Company’s ability to collect its accounts receivable on a timely basis, could result in additional reserves for uncollectible accounts receivable being required, and in the event of continued contraction in the Company’s sales, could lead to dated inventory and require additional reserves for obsolescence. Significant volatility and fluctuations in the rates of exchange for the U.S. dollar against currencies such as the euro, the British pound and the Japanese yen could negatively impact the Company’s customer pricing, purchase price of sourced product, and adversely affect the Company’s results.

The Company is unable to predict the duration and severity of the current economic downturn and disruption in financial markets or their effects on the Company’s business and results of operations, but the consequences may be materially adverse and more severe than other recent economic slowdowns.

- 18 -

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

Our business strategy includes working with manufacturing and distribution partners to produce our products on an OEM basis and to aid in developing new market channels for our products. We are dependent on many of these partners for future sales of both existing and planned products. This means that the timetable for finalizing development, commercialization and distribution of both existing and planned products is dependent upon the needs and circumstances of our partners. Any delay in meeting production and distribution targets with our partners may harm our relationships with them and may cause them to terminate their relationship with us. Our partners may not develop markets for our products at the pace or in the manner we expect, which may have an adverse effect on our business. They may also terminate their relationships with us for circumstances beyond our control, including factors unique to their businesses or their business decisions, or due to factors associated with the current global economic downturn. In addition, we may mutually agree with one or more of our partners to terminate our relationship with them for a variety of reasons. We cannot assure you that the termination of any of our relationships with our manufacturing and distribution partners will not have an adverse impact on our business in the future.

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

As part of our business strategy, we may expand our business through the acquisition of other businesses. We will need to integrate acquired businesses with our existing operations. We cannot assure you that we will effectively assimilate the business or product offerings of acquired companies into our business or product offerings. Integrating the operations and personnel of acquired companies into our existing operations may result in difficulties and expense, disrupt our business or divert management’s time and attention. If we are unable to successfully integrate future acquisitions, it could adversely impact our competitiveness and profitability. Acquisitions involve numerous other risks, including potential exposure to unknown liabilities of acquired companies and the possible loss of key employees and customers of the acquired business. In connection with acquisitions or joint venture investments outside the U.S., we may be subject to the risk of foreign currency fluctuations

Our business strategy may include the licensing or acquisition of technologies, which entail a number of risks.

As part of our strategy to grow our business, we may license technologies from third parties. We may not be successful in integrating the acquired technology into our existing business to achieve the desired results.

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

Many of our products have a lengthy and unpredictable sales cycle that contributes to the unpredictability of our operating results; this issue has been compounded by the recent economic downturn. Customers view the purchase of our products as a significant capital outlay and, therefore, a strategic decision. As a result, customers generally evaluate these products and determine their impact on existing infrastructure over a lengthy period of time. The sale of our products may be subject to delays if the customer has lengthy internal budgeting, approval and evaluation processes. The recent severe economic downturn has significantly impacted this decision-making process of many of our customers and prospective customers, and some businesses are either deferring or canceling significant capital purchasing decisions due to the uncertainty of their own financial futures. If revenues anticipated during a particular period are not realized or are delayed, we may experience a shortfall in anticipated revenues, which could have an adverse effect on our business, results of operations and financial condition.

- 19 -

We face risks associated with our efforts to expand into international markets.

We intend to expand our global sales operations and enter additional international markets, in order to increase market awareness and acceptance of our line of products and generate increased revenues, which will require significant management attention and financial resources. International sales are subject to a variety of risks, including difficulties in establishing and managing international distribution channels, in serving and supporting products sold outside the United States and in translating products and related materials into foreign languages. International operations are also subject to difficulties in collecting accounts receivable, staffing and managing personnel and enforcing intellectual property rights. Other factors that can adversely affect international operations include fluctuations in the value of foreign currencies and currency exchange rates, changes in import/export duties and quotas, introduction of tariff or non-tariff barriers and economic or political changes in international markets.

If our international sales increase, our revenues may also be affected to a greater extent by seasonal fluctuations resulting from lower levels of sales that typically occur during the summer months in Europe and other parts of the world. There can be no assurance that these factors will not have an adverse effect on our business, results of operations and financial condition.

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

While the Company achieved a net profit from continuing operations in the fiscal year ending January 3, 2009, the Company has sustained significant losses in prior years. The ability of the Company to generate profits in fiscal year 2009 and beyond is dependent upon its ability to generate revenues and effectively manage costs. We may need to generate significant increases in revenues to generate profits, and we may not be able to do so. If our revenues grow more slowly than we anticipate or decrease, or if our operating expenses increase more than we expect or cannot be reduced in the event of lower revenues, our business will be adversely affected. Even if we maintain profitability in the future on a quarterly or annual basis, we may not be able to sustain or increase such profitability year to year.

We have a material amount of intangible assets, such as goodwill and trademarks, and if we are required to write-down any of these intangible assets, it would reduce our net income, which in turn could have a material adverse effect on our results of operations.

We have a significant amount of intangible assets, such as goodwill and trademarks. Under Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS 142”) goodwill and indefinite lived intangible assets are no longer amortized, but instead are subject to a periodic impairment evaluation. Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). Recoverability of intangible assets with estimated lives and other long-lived assets is measured by comparison of the carrying amount of an asset or asset group to future net undiscounted pretax cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Reductions in our net income caused by the write-down of any of these intangible assets could materially and adversely affect our results of operations. The Company conducts ongoing assessments of its goodwill and other intangible assets and determined no adjustments were necessary at January 3, 2009. The Company will continue to assess the valuation of goodwill and other intangible assets throughout 2009. Depending on market and economic conditions, goodwill and other intangible assets impairment could be identified in 2009, which would result in impairment charges.

- 20 -

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

Our quarterly revenues and operating results are sometimes difficult to predict, have varied in the past, and are likely to fluctuate significantly in the future. We typically realize a significant percentage of our revenues for a fiscal quarter in the third month of the quarter. Accordingly, our quarterly results may be difficult to predict prior to the end of the quarter. In addition, we base our current and future expense levels in part on our estimates of future revenues. Our expenses are largely fixed in the short-term and we may not be able to adjust our spending quickly if our revenues fall short of our expectations. Accordingly, a revenue shortfall in a particular quarter would have an adverse effect on our operating results for that quarter. In addition, our quarterly operating results may fluctuate for many reasons, including, without limitation:

·	a long and unpredictable sales cycle;

·	changes in demand for our products and consumables, including seasonal differences;

·	changes in the mix of our products and consumables; and

·	the continued global economic downturn.

The current capital and credit market conditions may adversely affect our access to capital, cost of capital and business operations.

Recently, the general economic and capital market conditions in the United States and other parts of the world have deteriorated significantly and have adversely affected access to capital and increased the cost of capital. If these conditions continue or become worse, our future cost of debt and equity capital and access to capital markets could be adversely affected. In this regard, the Company may require additional financing following the expiration of our existing credit lines in November 2009. Any inability to obtain adequate financing from debt and equity sources could force us to self-fund capital expenditures and strategic initiatives, forgo some opportunities, or possibly discontinue certain operations.

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

We are dependent on third-party suppliers for critical components and our demand for these components may strain the ability of our third party suppliers to deliver such critical components in a timely manner. For example, we have a requirement for advanced technology laser diodes for use in products incorporating our DI® technology. Although we have established our subsidiary, Lasertel, to help us meet our demand for laser diodes, we are still dependent on other third-party manufacturers to supply us with other necessary components. If we are unable for any reason to secure an uninterrupted source of other critical components at prices acceptable to us, our operations could be materially adversely affected. We cannot be certain that Lasertel will be able to manufacture advanced laser diodes in quantities that will fulfill our future needs, or with manufacturing volumes or yields that will make our operation cost effective. While we are currently marketing Lasertel for sale, and expect that a purchaser of Lasertel will enter into a laser supply agreement with the Company, there can be no assurance that any purchaser of Lasertel will become a dependable supplier of laser diodes and satisfy the Company’s supply requirements. There can be no assurance that we will be able to obtain alternative suppliers for our laser diodes or other critical components should our current supply channels prove inadequate.

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

If demand for our products grows beyond our expectations, our current manufacturing capabilities may be insufficient to meet this demand, resulting in production delays and a failure to deliver products in a timely fashion. We may be forced to seek alternative manufacturers for our products. There can be no assurance that we will successfully be able to do so. As we introduce new products, we may face production and manufacturing delays due to technical and other unforeseen problems. Any manufacturing delay could have a material adverse effect on our business, the success of any product affected by the delay, and our revenue.

- 21 -

In addition, many of our manufacturing processes are extremely sophisticated and demand specific environmental conditions. Though we take precautions to avoid interruptions in manufacturing and to ensure that the products that are manufactured meet our exacting performance standards, our yields may be affected by difficulties in our manufacturing processes. If such an effect occurred, it could increase manufacturing costs, detrimentally impacting margins, or cause a delay in the finishing and shipping of products. Any manufacturing delay could have a materially adverse effect on our business, the success of any product affected by the delay, and our revenue.

New products may not be commercially successful and may not gain market acceptance.

Achieving market acceptance for any product requires substantial marketing and distribution efforts and expenditure of significant sums of money and allocation of significant resources. We may not have sufficient resources to do so. Additionally, there can be no assurance that our existing and new product offerings will maintain/achieve market acceptance or that any of our other current products or any future products that we may develop or any future products produced by others that incorporate our technologies will achieve market acceptance or become commercially successful. In addition, if our new product offerings do not achieve anticipated market acceptance, we may not achieve anticipated revenue.

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

Introducing new products carries substantial risk. While we do extensive testing on our new products before introducing them to our customers, no amount of testing can replace or approximate actual field conditions at our customer locations. As a result, when we introduce new products we can incur increased expenditures in ensuring that the new product meets and performs in accordance with its specifications. We cannot, however, always estimate precisely the expected costs that may arise out of new product installations. There can be no assurance that we will not incur increased warranty, support and other costs associated with new product introductions in the future.

If we fail to establish and maintain an effective system of internal and disclosure controls, we may not be able to accurately report our financial results or prevent fraud. As a result, investors may lose confidence in our financial reporting and disclosures.

The Sarbanes-Oxley Act of 2002 and SEC rules require that management report annually on the effectiveness of our internal control over financial reporting. Among other things, management must conduct an assessment of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to audit, the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. A “significant deficiency” is defined as “a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the company's financial reporting.” A “material weakness” is defined as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.”

Management’s Report on Internal Control over Financial Reporting included in this Annual report on Form 10-K, concludes that as of January 3, 2009 our internal control over financial reporting was not effective. Accordingly, as set forth in Item 9A of this Annual report on Form 10-K, our Chief Executive Officer and our Chief Financial Officer also determined that our disclosure controls and procedures were not effective. In addition, in the future, our continued assessment, or the subsequent assessment by our independent registered public accounting firm, may reveal additional deficiencies in our internal control over financial reporting and our disclosure controls or procedures, some of which may require disclosure in future reports.

- 22 -

Although we have remediated three of the four material weaknesses reported in our 2007 Annual Report on Form 10-K and are continuing to make improvements in our internal control over financial reporting, if we are unsuccessful in remediating the material weakness impacting our internal control over financial reporting, or if we discover other deficiencies, it may adversely impact our ability to report accurately and in a timely manner our financial condition and results of operations in the future, which may cause investors to lose confidence in our financial reporting. Moreover, effective internal and disclosure controls are necessary to produce accurate, reliable financial reports and to detect or prevent fraud. If we continue to have deficiencies in our internal control over financial reporting and disclosure controls and procedures, that may negatively impact our business and operations

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

Lasertel, which was formed for the purpose of supplying us with laser diodes, has also explored other markets for its laser technology. Lasertel has developed laser products for the defense industry and has continued its plans to develop laser prototypes for qualification in the medical and industrial industries. There can be no assurance that these products or prototypes will gain acceptance in these industries and likewise, there can be no assurance that these products will be commercially successful.

The failure of Lasertel to develop, commercialize or sell its products or future products to various other industries could distract its management’s attention and/or have an adverse impact on its financial condition or results of operations, any of which could materially adversely affect our financial condition. Conversely, any success that Lasertel achieves in developing, commercializing or selling its products or future products to various other industries could cause delays in manufacturing of the laser diodes that it supplies to us, which could harm our business and could have an adverse effect on our financial condition or results of operations.

We may be unsuccessful in our efforts to sell our Lasertel subsidiary

We are currently marketing Lasertel for sale and expect to complete the sale during 2009. It is possible that the marketing and sales process could be disruptive to the management of both Lasertel and the Company and could have an adverse effect on the customer relationships and financial results of Lasertel. It is also possible that the Company will be unable to sell Lasertel and that the Lasertel financial results will continue to be consolidated into the Company’s results. Since Lasertel has historically operated at a loss, this could have an adverse effect on the consolidated financial results of the Company.

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

Our future success will depend, in large part, upon our intellectual property rights, including patents, trademarks, trade secrets, proprietary know-how, source codes and continuing technological innovation. We have been issued a number of U.S. and foreign patents and we intend to register for additional patents where we deem appropriate. We also hold several registered trademarks and we may register additional trademarks where we deem appropriate. There can be no assurance, however, as to the issuance of any additional patents or trademarks or the breadth or degree of protection that our patents, trademarks or other intellectual property may afford us. The steps we have taken to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products. Further, the laws of certain territories in which our products are or may be developed, manufactured or sold, may not protect our products and intellectual property rights to the same extent as the laws of the United States.

There is rapid technological development in the electronic image reproduction industry, resulting in extensive patent filings and a rapid rate of issuance of new patents. Although we believe that our technology has been independently developed and that the products we market do not infringe the patents or violate the proprietary rights of others, it is possible that such infringement of existing or future patents or violation of proprietary rights may occur.

- 23 -

In this regard, third parties may in the future assert claims against us concerning our existing products or with respect to future products under development by us. In such event, we may be required to modify our product designs or obtain a license. No assurance can be given that we would be able to do so in a timely manner, upon acceptable terms and conditions or even at all. The failure to do any of the foregoing could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we have agreements with several of our partners which require us to indemnify the partner from claims made by third parties against them concerning our intellectual property, and to defend the validity of the patents or otherwise ensure the technology’s availability to the partner. The costs of an indemnification claim under any such agreement could have a material adverse effect on our business.

We have taken, are currently taking, and may take in the future, legal action to protect our patent and trademark rights from infringement by others. We have also defended actions brought against us relating to the validity of our patent rights. In the course of pursuing or defending any of these actions we could incur significant costs and diversion of our resources. Due to the competitive nature of our industry, it is unlikely that we could increase our product prices to cover such costs. There can be no assurance that we will have the financial or other resources necessary to successfully defend a patent infringement or proprietary rights violation action. Moreover, we may be unable, for financial or other reasons, to enforce our rights under any patents we may own. Such litigation is costly and is subject to uncertain results that could have a material effect on our business, results of operations and financial condition.

We also rely on proprietary know-how and employ various methods to protect the source codes, concepts, trade secrets, ideas and documentation relating to our proprietary software and laser diode technology. Such methods, however, may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to our know-how or software codes, concepts, trade secrets, ideas and documentation. Although we have and expect to have confidentiality agreements with our employees and appropriate vendors, there can be no assurance, however, that such arrangements will adequately protect our trade secrets and proprietary know-how.

We use hazardous materials in the production of many of our products at our various manufacturing facilities.

As a manufacturing company, we are subject to environmental, health and safety laws and regulations, including those governing the use of hazardous materials. The cost of compliance with environmental, health and safety regulations is substantial. Some of our business activities involve the controlled use of hazardous materials and we cannot eliminate the risk or potential liability of accidental contamination, release or injury from these materials. In the event of an accident or environmental discharge, we may be held liable for any resulting damages, which may exceed our financial resources and the limits of any insurance coverage, and our production of plates could be delayed indefinitely, which could materially harm our business, financial condition and results of operations.

We face competition in the sale of our products.

We compete with manufacturers of conventional presses and products utilizing existing plate-making technology, as well as presses and other products utilizing new technologies, including other types of direct-to-plate solutions such as companies that employ electrophotography as their imaging technology. Canon Inc., Hewlett Packard Company, Kodak and Xerox Corporation are companies that have introduced color electrophotographic copier products. Various companies are marketing product versions manufactured by these companies.

We also compete with stand-alone CTP imaging devices for single and multi-color applications. Most of the major corporations in the graphic arts industry have developed and are marketing off press CTP imaging systems. To date, devices manufactured by our competitors, for the most part, utilize printing plates that require a post imaging photochemical developing step, and in some cases, also require a heating process. Competitors in this area include, among others, Agfa Gevaert N.V., Screen, Heidelberg and Kodak.

- 24 -

We also have competition from plate manufacturing companies that manufacture printing plates, including digital thermal plates. These companies include Agfa Gevaert N.V., Kodak and Fuji. The introduction of a competitive plate could reduce the revenue generated by Presstek and could have a material adverse effect on our business, results of operations and financial condition.

Products incorporating our technologies can also be expected to face competition from conventional methods of printing and creating printing plates. Most of the companies marketing competitive products, or with the potential to do so, are well established, have substantially greater financial, marketing and distribution resources than us and have established reputations for success in the development, sale and service of products. There can be no assurance that we will be able to compete successfully in the future.

While we believe we have strong intellectual property protection covering many of our technologies, there is no assurance that the breadth or degree of such protection will be sufficient to prohibit or otherwise delay the introduction of competitive products or technologies. The introduction of competitive products and technologies may have a material adverse effect on our business, results of operations and financial condition.

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

The printing and publishing industry has been characterized in recent years by rapid and significant technological changes and frequent new product introductions. Current competitors or new market entrants could introduce new or enhanced products with features, which render our technologies, or products incorporating our technologies, obsolete or less marketable. Our future success will depend, in part, on our ability to respond to changing technology and industry standards in a timely and cost-effective manner. We may not be successful in effectively using new technologies, developing new products or enhancing our existing products and technology on a timely basis. Our new technologies or enhancements may not achieve market acceptance. Our pursuit of new technologies may require substantial time and expense.

We may need to license new technologies to respond to technological change. These licenses may not be available to us on terms that we can accept. Finally, we may not succeed in adapting our products to new technologies as they emerge.

A pending investigation by the SEC could have an adverse impact on our business.

The SEC has initiated a formal investigation primarily relating to our announcement of preliminary financial results for the third quarter of fiscal 2006. The SEC investigation requires management time and the expenditure of significant legal expense. In addition, the Company faces the risk that the investigation will result in fines and/of penalties assessed against the Company for which there is inadequate insurance coverage. The result of this matter could have a material adverse effect on our business, results of operations and financial condition.

Changes in accounting standards could affect our financial results.

New accounting standards or pronouncements that may become applicable to us from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported results for the affected periods.

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

Our success is largely dependent on the personal efforts of our senior management team. The loss or interruption of the services of any or all of these individuals could have an adverse effect on our business and prospects.

Our success is also dependent on our ability to hire and retain additional qualified engineering, technical, sales, marketing, accounting and finance and other personnel. The success of our transition of certain accounting functions to our Greenwich, CT offices from Hudson, NH is highly dependent on the hiring of qualified personnel. Competition for qualified personnel in our industry can be intense, and there can be no assurance that we will be able to hire or retain additional qualified personnel.

- 25 -

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

The market price of our common stock has been subject to significant fluctuations. The securities markets have experienced, and may experience in the future, significant price and volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. In addition, the trading price of our common stock could be subject to significant fluctuations in response to:

·	actual or anticipated variations in our quarterly operating results;

·	significant announcements by us or other industry participants;

·	changes in national or regional economic conditions;

·	changes in securities analysts’ estimates for us, our competitors or our industry, or our failure to meet analysts’ expectations; and

·	general market conditions.

These factors may materially and adversely affect our stock price, regardless of our operating performance.

Item 1B. Unresolved Staff Comments.

None.

- 26 -

Item 2. Propertie.s

The following table summarizes our significant occupied properties:

Location(1)	Functions	Square footage (approximate)	Ownership status/ lease expiration

Hudson, NH	Manufacturing, research and development, marketing, demonstration activities, administrative and customer support	165,000	Owned

South Hadley, MA (two buildings)	Manufacturing, research and development, administrative support	100,000	Owned

Tucson, AZ(2)	Manufacturing, research and development, administrative support	40,000	Lease expires in July 2018

Greenwich, CT	Corporate headquarters, executive offices	11,500	Lease expires in May 2013

Des Plaines, IL	Distribution center	127,000	Lease expires in February 2013

Heathrow, United Kingdom	European headquarters, sales, service	20,000	Lease expires in November 2020, with an option to cancel in November 2010

(1) Our Presstek segment utilizes the facilities in NH, MA, CT, IL, and the United Kingdom.

(2) Our discontinued Lasertel segment utilizes the facilities in AZ.

In addition to the properties referenced above, we also lease a number of small sales and marketing offices in the United States and internationally. At January 3, 2009, we were productively utilizing all of the space in our facilities. We believe that our existing facilities are adequate for our needs for at least the next twelve months.

All of the properties we own are pledged as security for our five-year, $80.0 million credit facilities.

We believe that our existing facilities are well maintained, in good operating condition and are adequate for our current and expected future operations.

- 27 -

Item 3. Legal Proceedings.

On October 26, 2006, the Company was served with a complaint naming the Company, together with certain of its former executive officers, as defendants in a purported securities class action suit filed in the United States District Court for the District of New Hampshire. The suit claims to be brought on behalf of purchasers of Presstek’s common stock during the period from July 27, 2006 through September 29, 2006. The complaint alleges, among other things, that the Company and the other defendants violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated there under based on allegedly false forecasts of fiscal third quarter and annual 2006 revenues. As relief, the plaintiff seeks an unspecified amount of monetary damages, but makes no allegation as to losses incurred by any purported class member other than himself, court costs and attorneys’ fees. On September 25, 2008, the parties reached a settlement of the action, subject to confirmatory discovery by plaintiffs and court approval.

On September 10, 2008, a purported shareholder derivative claim against certain current and former directors and officers of the Company was filed in the United States District Court for the District of New Hampshire. The complaint alleges breaches of fiduciary duty by the defendants and seeks unspecified damages. On September 25, 2008, the parties reached agreement on a settlement of the claim, subject to receipt of court approval.

On June 4, 2008, the Commonwealth of Massachusetts filed a complaint in the Superior Court of Massachusetts, Hampshire County against the Company and one of its subsidiaries seeking recovery of response costs related to the October 30, 2006 chemical release in South Hadley, MA noted above. In October 2008, the case was settled and the complaint was dismissed.

In February 2008 we filed a complaint with the ITC against VIM and its manufacturing partner Hanita Coatings for infringement of Presstek’s patent and trademark rights. Presstek also sued four U.S. based distributors of VIM products: Spicers Paper, Inc., Guaranteed Service & Supplies, Inc., Ohio Graphco Inc., and Recognition Systems Inc., as well as one Canadian based distributor, AteCe Canada. The Company has settled with Ohio Graphco Inc., which has agreed to cease the importation, use and sale of VIM plates and also agreed to cooperate with the ITC in its investigation of VIM’s alleged patent infringement. Presstek is seeking, among other things, an order from the ITC forbidding the importation and sale of the VIM printing plates in the United States; such an order would be enforced at all U.S. borders by the U.S. Customs Service. In March of 2008, the ITC notified Presstek that it was instituting an investigation related to the Complaint, and a hearing before the ITC is currently scheduled for April 2009. In April 2008 we filed a Complaint against VIM in a German court for patent infringement. In addition, in December 2008 we filed a complaint in U.S. District Court in New Hampshire against a VIM distributor for patent infringement associated with the distributor’s sale of infringing product.

On February 4, 2008, the Company received from the SEC a formal order of investigation relating to the previously disclosed SEC inquiry regarding the Company's announcement of preliminary financial results for the third quarter of fiscal 2006. The Company is cooperating fully with the SEC’s investigation.

Presstek is a party to other litigation that it considers routine and incidental to its business however it does not expect the results of any of these actions, nor the settlement actions as noted above, to have a material adverse effect on its business, results of operation or financial condition.

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

Not applicable.

- 28 -

PART II

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

Our common stock is quoted on The NASDAQ Global Market under the symbol “PRST”. The following table sets forth the high and low closing sales prices per share of common stock for each full quarterly period within the two most recently completed fiscal years as reported by The NASDAQ Global Market.

	High		Low
Fiscal year ended January 3, 2009
First quarter	$	5.12	$	4.28
Second quarter	$	6.57	$	4.00
Third quarter	$	6.28	$	4.48
Fourth quarter	$	5.64	$	1.18

Fiscal year ended December 29, 2007
First quarter	$	6.53	$	5.47
Second quarter	$	8.38	$	5.88
Third quarter	$	8.70	$	6.14
Fourth quarter	$	7.50	$	4.60

On March 16, 2009, there were 2,183 holders of record of our common stock. The closing price of our common stock was $1.64 per share on March 16, 2009.

Dividend Policy

To date, we have not paid any cash dividends on our common stock. Under the terms of our credit facilities, we are prohibited from declaring or distributing dividends to shareholders. The payment of cash dividends in the future is within the discretion of our Board of Directors, and will depend upon our earnings, capital requirements, financial condition and other relevant factors, including the current prohibition on such dividends described above. The Board of Directors does not intend to declare any cash dividends in the foreseeable future, but instead intends to retain all earnings, if any, for use in our business operations.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during fiscal 2008.

Item 6. Selected Financial Data.

The selected consolidated financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Part II Item 7 of this Annual Report on Form 10-K and our consolidated financial statements and notes thereto included in Part II Item 8 of this Annual Report on Form 10-K. On December 28, 2006, the Audit Committee of the Company’s Board of Directors ratified a plan submitted by management to terminate production in South Hadley, MA of Precision-branded analog plates used in newspaper applications. On September 24, 2008, the Company’s Board of Directors approved a plan to market the Lasertel subsidiary for sale. The results of operations for the years ended December 30, 2006 and December 29, 2007 have been restated to reflect the analog newspaper business and Lasertel segment as discontinued operations for all periods presented. The historical results provided below are not necessarily indicative of future results.

- 29 -

(in thousands, except per-share data)
	Fiscal year ended
	January 3,			December 29,			December 30,			December 31,			January 1,
	2009			2007			2006			2005			2005 (1)

Revenue	$	193,252		$	246,573		$	258,936		$	255,344		$	118,576
Cost of revenue		124,511			177,346			181,799			172,208			74,054

Gross profit		68,741			69,227			77,137			83,136			44,522

Operating expenses
Research and development		5,144			4,969			5,320			6,452			5,903
Sales, marketing and customer support		29,937			39,194			39,451			39,808			17,136
General and administrative		25,496			33,172			18,879			20,135			11,491
Amortization of intangible assets		1,084			2,168			2,697			2,388			1,261
Restructuring and special charges (credits)		2,108			2,714			5,481			874			(392	)
Total operating expenses		63,769			82,217			71,828			69,657			35,399

Operating income (loss)		4,972			(12,990	)		5,309			13,479			9,123

Other income (expense), net		938			(1,254	)		(984	)		(1,345	)		(872	)

Income (loss) from continuing operations
before income taxes		5,910			(14,244	)		4,325			12,134			8,251
Provision (benefit) for income taxes		2,780			(3,889	)		(9,891	)		2,727			1,382

Income (loss) from continuing operations		3,130			(10,355	)		14,216			9,407			6,869
Income (loss) from discontinued operations, net of income tax		(2,606	)		(1,849	)		(4,472	)		(3,321	)		(3,004	)

Net income (loss)	$	524		$	(12,204	)	$	9,744		$	6,086		$	3,865

Earnings (loss) per share - basic
Income (loss) from continuing operations	$	0.09		$	(0.29	)	$	0.40		$	0.27		$	0.20
Income (loss) from discontinued operations		(0.08	)		(0.05	)		(0.13	)		(0.10	)		(0.09	)
	$	0.01		$	(0.34	)	$	0.27		$	0.17		$	0.11

Earnings (loss) per share - diluted
Income (loss) from continuing operations	$	0.09		$	(0.29	)	$	0.40		$	0.26		$	0.19
Income (loss) from discontinued operations		(0.08	)		(0.05	)		(0.13	)		(0.09	)		(0.08	)
	$	0.01		$	(0.34	)	$	0.27		$	0.17		$	0.11

Weighted average shares outstanding
Basic		36,596			36,199			35,565			35,153			34,558
Diluted		36,605			36,199			35,856			35,572			35,357


	As of
	January 3,			December 29,			December 30,			December 31,			January 1,
	2009			2007			2006			2005			2005 (1)

Working capital	$	35,199		$	35,337		$	43,151		$	37,558		$	37,179
Total assets	$	157,513		$	192,827		$	198,014		$	181,487		$	171,318
Total debt and capital lease obligations	$	16,489		$	35,535		$	37,572		$	35,643		$	41,822
Stockholders' equity	$	102,531		$	106,892		$	111,237		$	98,633		$	89,402




(1) Amounts include results of operations of ABD International, Inc. (which acquired certain assets and assumed certain liabilities of
The A.B. Dick Company on November 5, 2004) and Precision Lithograining Corp. (acquired July 30, 2004) for the periods subsequent
to their respective acquisitions.

- 30 -

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

The following Management’s Discussion and Analysis should be read in connection with “Item 1. Business”, “Item 1A. Risk Factors”, “Item 6. Selected Financial Data”, “Item 7A. Quantitative and Qualitative Disclosures about Market Risks” and the Company’s Consolidated Financial Statements and Notes thereto included in this Annual Report on Form 10-K. Certain terms used in the discussion below are defined in Item 1 of this Annual Report on Form 10-K.

Overview of the Company

The Company is a provider of high-technology, digital-based printing solutions to the commercial print segment of the graphics communications industry. The Company designs, manufactures and distributes proprietary and non-proprietary solutions aimed at serving the needs of a wide range of print service providers worldwide. Our proprietary digital imaging and advanced technology consumables offer superior business solutions for commercial printing focusing on the growing need for short-run, high quality color applications. We are helping to lead the industry’s transformation from analog print production methods to digital imaging technology. We are a leader in the development of advanced printing systems using digital imaging equipment, workflow and consumables-based solutions that economically benefit the user through streamlined operations and chemistry-free, environmentally responsible solutions. We are also a leading sales and service channel across a broadly served market in the small to mid-sized commercial, quick and in-plant printing segments.

Presstek’s business model is a capital equipment and consumables model. In this model, approximately two-thirds of our revenue is recurring revenue. Our model is designed so that each placement of either a DI® press or a CTP system generally results in recurring aftermarket revenue for consumables and service.

Through our various operations, we:

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

We have developed DI® solution, a proprietary system by which digital images are transferred onto printing plates for direct imaging on-press applications. Our advanced DI® technology is integrated into a direct imaging press to produce a waterless, easy to use, high quality printing press that is fully automated and provides our users with competitive advantages over alternative print technologies. We believe that our process results in a DI® press which, in combination with our proprietary printing plates and streamlined workflow, produces a superior print solution. By combining advanced digital technology with the reliability and economic advantages of offset printing, we believe our customers are better able to grow their businesses, generate higher profits and better serve the needs of their customers.

Similar digital imaging technologies are used in our CTP systems. Our Presstek segment also designs and manufactures CTP systems that incorporate our technology to image our chemistry-free printing plates. Our chemistry-free digital imaging systems enable customers to produce high-quality, full color lithographic printed materials more quickly and cost effectively than conventional methods that employ more complicated workflows and toxic chemical processing. This results in reduced printing cycle time and lowers the effective cost of production for commercial printers. Our solutions make it more cost effective for printers to meet the increasing demand for shorter print runs, higher quality color and faster turn-around times.

- 31 -

We have executed a major transformation in the way we go to market. In the past, we had been reliant on OEM partners to deliver our business solutions to customers. Today, more than 90% of our sales are through our own distribution channels.

In addition to marketing, selling and servicing our proprietary digital products, we also market, sell and service traditional (or analog) products for the commercial print market. This analog equipment is manufactured by third party strategic partners and the analog consumables are manufactured by either us or our strategic partners. The addition of these non-proprietary products and our ability to directly sell and service them was made possible by the A.B. Dick Acquisition and Precision acquisition, which we completed in 2004.

Our operations are currently organized into two segments: (i) Presstek and (ii) Lasertel. Segment operating results are based on the current organizational structure as reviewed by our management to evaluate the results of each business. A description of the types of products and services provided by each business segment follows.

·	Presstek is primarily engaged in the development, manufacture, sale and servicing of our business solutions using patented digital imaging systems and patented printing plate technologies. We also provide traditional, analog systems and related equipment and supplies for the graphic arts and printing industries.
·	Lasertel manufactures and develops high-powered laser diodes and related laser products for Presstek and for sale to external customers.

On September 24, 2008, the Board of Directors approved a plan to market the Lasertel subsidiary for sale; as such the Company has presented the results of operations of this subsidiary within discontinued operations.

We generate revenue through four main sources: (i) the sale of our equipment and related workflow software, including DI® presses and CTP devices, (ii) the sale of high-powered laser diodes for the graphic arts, defense and industrial sectors; (iii) the sale of our proprietary and non-proprietary consumables and supplies; and (iv) the servicing of offset printing systems and analog and CTP systems and related equipment.

Strategy

Our business strategy is centered on maximizing the sale of consumable products, such as printing plates, and therefore our business efforts focus on the sale of “consumable burning engines” such as our DI® presses and CTP devices, as well as the servicing of customers using our business solutions. Our strategy centers on increasing the number of our DI® and CTP units, which increases the demand for our consumables.

To complement our direct sales efforts, in certain territories, we maintain relationships with key press manufacturers such as Ryobi, Heidelberg, and KBA, who market printing presses and/or press solutions that use our proprietary consumables.

Another method of growing the market for consumables is to develop consumables that can be imaged by non-Presstek devices. In addition to expanding the base of our DI® and CTP units, an element of our focus is to reach beyond our proprietary systems and penetrate the installed base of CTP devices in all market segments with our chemistry-free and process-free offerings. The first step in executing this strategy was the launch of our Aurora chemistry-free printing plate designed to be used with CTP units manufactured by thermal CTP market leaders, such as Screen and Kodak. We continue to work with other CTP manufacturers to qualify our consumables on their systems. We believe this shift in strategy fundamentally enhances our ability to expand and control our business.

Since 2007, management has been taking steps to improve the Company’s cost structure and strengthen its balance sheet in order to enable Presstek to increase profitability on improved revenue growth when economic conditions in the United States and elsewhere recover. Our improved level of profitability and balance sheet improvements to date are, in large part, the result of our Business Improvement Plan (the “BIP”) as described in more detail below, as well as our review and strengthening of inventory and accounts receivable.

- 32 -

2008 Highlights

In fiscal 2008, deteriorating worldwide economic conditions caused significant volatility in many markets which adversely impacted our business. Overall commercial print industry volume is down as companies have cut back on general advertising and promotional materials, and uncertainty regarding the economy and tightening credit markets have led to delays in capital purchase decisions. As a result of this volatility, as well as continuing erosion due to technological changes in our traditional product business, revenues in fiscal 2008 of $193.3 million were down $53.3 million, or 21.6%, compared to the prior year.

The BIP plan resulted in significant reductions in costs, improved operating efficiencies, greater cash flow, and helped reduce debt levels. The cost benefits from this plan, as discussed below, have been very important in returning the Company to profitability in fiscal 2008 despite the challenging economic headwinds. Additional cost reduction actions, however, were implemented during the latter part of fiscal 2008 as the Company aggressively addressed current and expected future economic conditions.

Management Objectives

This strategy includes several imperatives: (1) focus on the growth of our consumables product line; (2) emphasize attractive market segments such as larger print providers; (3)focus on growing existing segments such as print shops with less than 20 employees, (4) enable customers to better compete by offering a more diverse range of products; (5) continue to expand solutions that meet the growth in demand for short-run, fast turnaround high-quality color printing; and (6) provide environmentally responsible solutions through our application of technology.

Business Improvement Plan

In the fourth quarter of fiscal 2007, we announced the BIP. The plan involves virtually every aspect of the business and includes pricing actions, improved manufacturing efficiencies, increased utilization of field service resources, right-sizing of operating expenses, and cash flow improvements driven by working capital reductions and the sale of selected real estate assets.

The BIP plan, as well as additional cost actions implemented during the fourth quarter of fiscal 2008, accounted for a majority of the $2.1 million of restructuring charges recorded during fiscal 2008. Since the second quarter of fiscal 2007, headcount has been reduced by 16.3%, leased facilities have been consolidated; operating expenses, excluding special charges, have been reduced from $21.5 million in the second quarter of fiscal 2007 to $16.4 million in the fourth quarter of fiscal 2008, a decline of 23.6%; working capital has decreased from $39.8 million at June 30, 2007 to $35.2 million at January 3, 2009; short term debt decreased by 41% ($11.5 million) ; and in the third quarter of fiscal 2008 the Company completed the sale of real estate located in Tucson, AZ for $8.75 million, of which the net proceeds were used to pay down debt. The sale of this property included a leaseback of a portion of the facility for the Lasertel operations.

- 33 -

Internal Review

Beginning in the third quarter of fiscal 2007, we commenced a self-initiated internal review of certain practices and procedures surrounding inventory, accounts receivable and commercial receivable terms. We conducted a worldwide review of accounts receivable; conducted a worldwide physical inventory to assess the existence and valuation of inventory; and reviewed revenue practices surrounding the commercial terms granted in certain transactions, resulting in an enhanced revenue recognition policy. The culmination of these actions resulted in increased professional fees during the latter part of fiscal 2007 and a negative impact to revenue in the fourth quarter of fiscal 2007 and the first quarter of fiscal 2008 largely due to the disruption in our European operations related to the business reviews, as well as tightened commercial receivable terms.

General

We operate and report on a 52- or 53-week, fiscal year ending on the Saturday closest to December 31. Accordingly, the consolidated financial statements include the financial reports for the 53-week fiscal year ended January 3, 2009, which we refer to as “fiscal 2008”, the 52-week fiscal year ended December 29, 2007, which we refer to as “fiscal 2007” and the 52-week fiscal year ended December 30, 2006, which we refer to as “fiscal 2006”.

We intend the discussion of our financial condition and results of operations that follows to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements.

- 34 -

The discussion of results of operations at the consolidated level is presented below.

Result of Operation

Results of operations in dollars and as a percentage of revenue were as follows (in thousands of dollars):

	Fiscal year ended
	January 3, 2009						December 29, 2007						December 30, 2006
				% of revenue						% of revenue						% of revenue
Revenue
Product	$	158,743			82.1		$	207,605			84.2		$	213,966			82.6
Service and parts		34,509			17.9			38,968			15.8			44,970			17.4
Total revenue		193,252			100.0			246,573			100.0			258,936			100.0

Cost of revenue
Product		99,088			51.2			145,724			59.1			149,333			57.7
Service and parts		25,423			13.2			31,622			12.8			32,466			12.5
Total cost of revenue		124,511			64.4			177,346			71.9			181,799			70.2

Gross profit		68,741			35.6			69,227			28.1			77,137			29.8

Operating expenses
Research and development		5,144			2.6			4,969			2.0			5,320			2.1
Sales, marketing and customer support		29,937			15.5			39,194			15.9			39,451			15.2
General and administrative		25,496			13.2			33,172			13.4			18,879			7.3
Amortization of intangible assets		1,084			0.6			2,168			0.9			2,697			1.0
Restructuring and other charges		2,108			1.1			2,714			1.1			5,481			2.1
Total operating expenses		63,769			33.0			82,217			33.3			71,828			27.7

Operating income (loss)		4,972			2.6			(12,990	)		(5.3	)		5,309			2.1
Interest and other income (expense), net		938			0.5			(1,254	)		(0.5	)		(984	)		(0.4	)
Income (loss) from continuing operations before income taxes		5,910			3.1			(14,244	)		(5.8	)		4,325			1.7
Provision (benefit) for income taxes		2,780			1.4			(3,889	)		(1.6	)		(9,891	)		(3.8	)

Income (loss) from continuing operations		3,130			1.6			(10,355	)		(4.2	)		14,216			5.5
Loss from discontinued operations, net of income taxes		(2,606	)		(1.3	)		(1,849	)		(0.7	)		(4,472	)		(1.7	)

Net income (loss)	$	524			0.3		$	(12,204	)		(4.9	)	$	9,744			3.8

- 35 -

Fiscal 2008 Compared to Fiscal 2007

Revenue

Consolidated revenues were $193.3 million in fiscal 2008, a decrease of $53.3 million, or 21.6%, from $246.6 million in fiscal 2007, due in large part to deterioration in the global economy, as well as the continuing decline in our traditional lines of business. Specifically, sales of Presstek’s “growth” portfolio of products, defined as 34DI® and 52DI® digital offset solutions and the Presstek family of chemistry free CTP solutions, decreased $24.3 million, or 20.3%, from $119.8 million in fiscal 2007 to $95.5 million in fiscal 2008. The global economic issues have heavily impacted the sale of capital equipment, particularly the smaller size printers. It has also resulted in lower volumes of printed materials, and thus impacted consumable and service revenues. Sales of Presstek branded DI® plates increased by $0.9 million, or 5%, during 2008, as the number of DI® installations continues to grow.

Equipment revenues were $52.7 million in fiscal 2008 compared to $87.7 million in fiscal 2007, a decrease of $35.0 million, or 39.9%, resulting primarily from the impact of the global economic downturn. In addition, European sales were negatively impacted in the first quarter of fiscal 2008 due to a disruption in operations related to the company’s business reviews conducted in the fourth quarter of fiscal 2007. Revenues from the sale of DI® equipment in fiscal 2008 of $42.0 million reflect a decrease of $22.0 million, or 34.4%, compared to 2007. Unit sales of DI® presses declined from 177 in fiscal 2007 to 126 in fiscal 2008. Sales of our remaining growth portfolio of equipment, Presstek’s CTP platesetters and Vector TX52 machines, declined from $13.1 million in fiscal 2007 to $9.2 million in fiscal 2008. Equipment sales of our “traditional” line of products, defined as QMDI® presses, polyester CTP platesetters, and conventional equipment, were all lower in fiscal 2008 compared to 2007 due primarily to the ongoing transition of our customer base to more modern digital technologies. As a percentage of total equipment revenue, net sales of growth portfolio products increased from 82.5% of revenue in fiscal 2007 to 88.9% of revenue in fiscal 2008.

Consumable product revenues decreased from $119.9 million in fiscal 2007 to $106.0 million in fiscal 2008, a reduction of $13.9 million, or 11.6%. The decrease in revenues resulted primarily from the anticipated decline in Presstek’s “traditional portfolio” of product, defined as QMDI® plates, other DI® plates, polyester plates, and conventional consumables, and was consistent with industry trends. Sales of traditional plates declined from $47.2 million in fiscal 2007 to $38.9 million in fiscal 2008, a decrease of 17.6%. Sales of conventional consumables declined from $35.2 million in fiscal 2007 to $30.2 million in fiscal 2008. Presstek’s “growth portfolio” of consumables, defined as 52DI, 34DI, and chemistry-free CTP plates, declined slightly (from $37.5 million in fiscal 2007 to $37.0 million in fiscal 2008) due to lower print volumes related to the economic slowdown. Sales of 52DI® plates, however, increased 84% from $1.6 million in fiscal 2007 to $2.9 million in fiscal 2008.

Service and parts revenues declined from $39.0 million in fiscal 2007 to $34.5 million in fiscal 2008, a decrease of 11.4%. Lower revenues resulted primarily from the anticipated shift away from our less profitable legacy service base which, in the short term, is declining faster than our digital service business is accelerating. In addition, lower print volume, as mentioned above, also had a negative impact on service revenue.

Cost of Revenue

Consolidated cost of revenue was $124.6 million in fiscal 2008, a decrease of $52.7 million, or 29.7%, compared to fiscal 2007.

Cost of product, consisting of costs of material, labor and overhead, shipping and handling costs and warranty expenses, was $99.2 million in fiscal 2008 compared to $145.7 million in fiscal 2007. In fiscal 2007, the Company recorded $6.0 million of charges consisting primarily of $2.3 million for the write-off of excess and obsolete inventory, $2.5 million of inventory write-downs related to the Vector TX52, $0.6 million of warranty-related expenses, and $0.6 million of other adjustments. Lower cost of sales was primarily due to reduced sales volume, benefits resulting from our BIP including manufacturing productivity improvements, procurement savings, and rationalization of our service business, the impact of favorable product mix and lower freight costs.

- 36 -

Cost of service in fiscal 2007, was $31.6 million, including a $1.1 million write down of field service parts inventory, compared to $25.4 million in fiscal 2008. These amounts represent the costs of spare parts, labor and overhead associated with the ongoing service of products. Service costs in fiscal 2008 were favorably impacted by the improved utilization of the field service organization in North America, as well as improved controls over the field service parts inventory. These actions were the result of our BIP which included a realignment of our service organization with a declining analog revenue base.

Gross Profit

Consolidated gross profit as a percentage of total revenue was 35.5% in fiscal 2008 compared to 28.1% in fiscal 2007. The year over year improvement is driven by several factors, including favorable product mix, benefits from the BIP, the improvement of numerous operating disciplines which negatively impacted our 2007 results (ex. excess and obsolete inventory, field service parts inventory charges) and the absence in fiscal 2008 of significant warranty charges recorded during 2007 related to product portfolio changes.

Gross profit as a percentage of product revenue was 37.5% in fiscal 2008 compared to 29.8% in fiscal 2007. This improvement reflects the benefits described in the previous paragraph. 2008 margins were also favorably impacted by a higher mix of DI® revenues, which are predominately higher margin products than our CTP and traditional lines of business, as well as improved production efficiencies in our plate manufacturing.

Gross profit as a percentage of service revenue was 26.3% in fiscal 2008 compared to 18.9% in fiscal 2007. Service margins in 2007 were negatively impacted by charges for losses on field service parts inventory of $1.1 million. Higher service margins in fiscal 2008 also reflect the impact of cost savings resulting from our BIP.

Research and Development

Research and development expenses consist primarily of payroll and related expenses for personnel, parts and supplies, and contracted services required to conduct our equipment, consumables and laser diode development efforts.

Research and development expenses of $5.1 million in fiscal 2008 were essentially unchanged from $5.0 million in the prior year period.

Sales, Marketing and Customer Support

Sales, marketing and customer support expenses consist primarily of payroll and related expenses for personnel, advertising, trade shows, promotional expenses, and travel costs associated with sales, marketing and customer support activities.

Consolidated sales, marketing and customer support expenses were $29.9 million in fiscal 2008 compared to $39.2 million in fiscal 2007, a decrease of $9.3 million, or 23.6%. Lower expenses in fiscal 2008 were due primarily to the favorable impact of our BIP, lower advertising costs, and lower commission expense resulting from lower sales volume.

General and Administrative

Consolidated general and administrative expenses consist primarily of payroll and related expenses for personnel and contracted professional services necessary to conduct our finance, information systems, legal, human resources and administrative activities. General and Administrative costs also include stock based compensation expenses, as well as bad debt reserves.

- 37 -

General and administrative expenses were $25.4 million in fiscal 2008 compared to $33.2 million in the comparable prior year period, a decrease of $7.8 million, or 23.6%. The decrease resulted from lower litigation costs and legal fees of $2.8 million and $0.7 million of lower stock compensation related to stock option grants to officers, directors and employees. In addition, 2007 included a one-time $1.5 million restricted stock grant to our CEO and $2.1 million of audit and accounting costs related to an extensive worldwide review of inventory and receivables, as well as certain European business processes and revenue recognition practices. This was partially offset by additional bad debt expense incurred in fiscal 2008 resulting from the impact of worsening global economic conditions.

Amortization of Intangible Assets

Amortization expense of $1.1 million in fiscal 2008 declined from $2.2 million in the comparable prior year period. These expenses relate to intangible assets recorded in connection with the Company’s 2004 acquisition of assets of the A.B. Dick Company, patents and other purchased intangible assets. The year over year decline in amortization resulted primarily from the A.B. Dick name and A.B. Dick patents, which became fully amortized during the third quarter of fiscal 2007.

Restructuring and Other Charges

Consolidated restructuring and other charges of $2.1 million in fiscal 2008 decreased from $2.7 million in fiscal 2007. Expenses incurred in fiscal 2008 include restructuring costs related to the implementation of our BIP, severance and separation expenses of employment contracts of former executives and other employees, and costs related to the transfer of certain corporate functions from the Hudson, NH facility to the Greenwich, CT facility. Expenses incurred in fiscal 2007 include restructuring costs related to the implementation of our BIP, and cost of severance and separation expenses for employment contracts of former executives.

Interest and Other Income (Expense), Net

Consolidated net interest and other income in fiscal 2008 was $0.9 million compared to expense of $1.3 million in the comparable prior year period. The year over year improvement was due primarily to a $1.2 million reduction in interest expense resulting from lower debt levels, and increased foreign currency transaction gains of $0.9 million.

Provision (Benefit) for Income Taxes

Our effective tax rate was 47.0% in fiscal 2008 and 27.3% in fiscal 2007. The variance from the federal statutory rate for fiscal 2008 was primarily due to an increase in the valuation allowance provided against our net deferred tax assets in the United States.

Fiscal 2007 Compared to Fiscal 2006

Revenue

Consolidated revenues were $246.6 million in fiscal 2007, a decrease of $12.4 million, or 4.8%, from $258.9 million in 2006. Equipment revenues reflected a decrease of $3.1 million, or 3.5%, compared to 2006, as strong sales of 52DI® presses were not enough to offset significant declines in our analog and CTP product lines, particularly lower sales of DPM machines. Consumables revenues declined by $3.2 million, or 2.6%, due primarily to lower sales of QMDI® plates. Revenues in our service business were lower by $6.0 million, or 13.3%, in fiscal 2007 due to lower contract service revenues resulting from the transition of our customer base from analog to digital solutions. Overall, sales of Presstek’s “growth” portfolio of products, defined as 34DI® and 52DI® digital offset solutions, and the Presstek family of chemistry free CTP solutions, increased $16.7 million, or 16.2%, from $103.1 million in 2006 to $119.8 million in fiscal 2007.

- 38 -

Equipment revenues were $87.7 million in fiscal 2007 compared to $90.8 million in 2006, a decrease of $3.1 million, or 3.5%. Gross sales of Presstek’s growth portfolio of equipment increased to $77.1 million in fiscal 2007 from $69.3 million in 2006. Revenues from the sale of DI® equipment in fiscal 2007 of $64.0 million reflects an increase of $10.0 million, or 18.4%, compared to 2006 due to strong marketplace demand for the 52DI® press, which was first introduced in the third quarter of fiscal 2006. Total unit sales of the 52DI® press reached 59 in fiscal 2007, and 52DI® revenues as a percentage of total DI® press revenue increased from 10.0% in fiscal 2006 to 44.1% in fiscal 2007. Sales of our remaining growth portfolio of equipment, Presstek’s CTP platesetters and Vector TX52 machines, declined from $15.3 million in fiscal 2006 to $13.1 million in fiscal 2007, a decrease of 14.2%, due in part to the company’s continued emphasis on marketing higher margin DI® presses, as well as a large decline in the sale of DPM machines consistent with industry trends. In addition, unit sales of the Vector TX52 were negatively impacted early in fiscal 2007 from the carry-over impact of quality issues experienced during the second half of fiscal 2006. These issues have since been successfully resolved. Equipment sales of our “traditional” line of products, defined as QMDI® presses, polyester CTP platesetters, and conventional equipment, were all lower in fiscal 2007 compared to 2006 due to the ongoing transition of our customer base from analog to digital technologies. Gross revenues from our traditional equipment products decreased from $25.8 million in 2006 to $16.2 million in fiscal 2007, a decline of 37.2%. As a percentage of total equipment revenue within the Presstek segment, net sales of growth portfolio products increased from 73.0% of revenue in 2006 to 82.6% of revenue in fiscal 2007.

Consumables product revenues decreased from $123.1 million in 2006 to $119.9 million in fiscal 2007, a reduction of $3.2 million, or 2.6%. The decline in revenues resulted from the anticipated slowdown of certain products in Presstek’s traditional line, including QMDI® plates and conventional consumables, and was consistent with industry trends. QMDI® plates declined from $24.6 million in 2006 to $19.5 million in fiscal 2007, a decrease of 20.5%. Sales of conventional consumables declined from $40.6 million in fiscal 2006 to $35.1 million in the comparable 2007 period. Partially offsetting this decline were sales of Presstek’s “growth portfolio” of consumables, defined as 52DI, 34DI, and chemistry-free CTP plates, which grew from $30.4 million in 2006 to $37.5 million in fiscal 2007, an increase of $7.1 million, or 23.5%.

Service and parts revenues declined from $45.0 million in 2006 to $39.0 million in fiscal 2007, a decrease of 13.3%. Lower revenues resulted primarily from the anticipated shift away from our less profitable legacy service contract base which, in the short term, is declining faster than our digital service business is accelerating.

Cost of Revenue

Consolidated cost of revenue was $177.3 million in fiscal 2007, a decrease of $4.5 million, or 2.5%, compared to fiscal 2006. Product cost of revenue in fiscal 2007 includes $5.4 million of charges related to excess and obsolete inventory, warranty, and accrued purchase commitments related to product portfolio changes, planned changes for the Vector TX52 product line, physical inventory results, and other adjustments. Service and parts cost of revenue in fiscal 2007 includes a charge of $1.1 million related to write-downs of field service parts inventory.

Cost of product was $145.7 million in fiscal 2007 compared to $149.3 million in the same prior year period. In fiscal 2007, the Company recorded inventory-related charges of $4.9 million, consisting of $2.3 million for the write-off of excess and obsolete inventory, $2.5 million of inventory write-downs related to the Vector TX52, $0.6 million of warranty-related expenses, and other adjustments. Offsetting these costs were lower costs related to favorable equipment product mix, production efficiencies in our plate manufacturing processes, and lower freight costs.

Cost of service in fiscal 2007, including the previously discussed $1.1 million write down of field service parts inventory, was $31.6 million compared to $32.5 million same prior year period. These amounts represent the costs of spare parts, labor and overhead associated with the ongoing service of products. Service costs were favorably impacted by the improved utilization of the field service organization in North America, the result of a restructuring plan intended to realign our service organization with a declining analog revenue base.

- 39 -

Gross Profit

Consolidated gross profit as a percentage of total revenue was 28.1% in fiscal 2007 compared to 29.8% in 2006. Gross margins were negatively impacted in fiscal 2007 by excess and obsolete inventory and warranty charges related to product portfolio changes and field service parts inventory changes.

Gross profit as a percentage of product revenue was 29.8% in fiscal 2007 compared to 30.2% in fiscal 2006. Gross margins were negatively impacted in fiscal 2007 by excess and obsolete inventory and warranty charges related principally to product portfolio changes and field service parts inventory changes. Offsetting this somewhat was the favorable impact of a higher mix of DI® revenues, which are predominately higher margin products than our CTP and traditional lines of business, as well as improved production efficiencies in our plate manufacturing.

Gross profit as a percentage of service revenue was 18.9% in fiscal 2007 compared to 27.8% in 2006. Service margins in fiscal 2007 were negatively impacted by charges for losses on field service parts inventory of $1.1 million. Lower service margins also reflect the declining analog contract revenue base, which more than offset cost savings resulting from reductions in field service personnel.

Research and Development

Research and development expenses were $5.0 million in fiscal 2007 compared to $5.3 million in 2006. The decrease was due to lower payroll related expenses resulting from turnover of personnel.

Sales, Marketing and Customer Support

Sales, marketing and customer support expenses of $39.2 million in fiscal 2007 decreased $0.3 million from the comparable prior year period due primarily to lower payroll, commission, and travel and entertainment expenses, offset somewhat by increased marketing costs in Europe necessary to support planned growth.

General and Administrative

General and administrative expenses consist primarily of payroll and related expenses for personnel and contracted professional services necessary to conduct our finance, information systems, legal, human resources and administrative activities. General and Administrative costs also include stock based compensation expenses, as well as bad debt reserves.

General and administrative expenses were $33.2 million in fiscal 2007 compared to $18.9 million in 2006. General and administrative expense increases were primarily the result of higher patent defense and litigation activities of $4.6 million; increased bad debt expense of $2.0 million and increased professional fees of $3.4 million related primarily to various detailed financial reviews conducted during the year. General and administrative expenses in fiscal 2007 also include an increase of $2.1 million in stock compensation related to stock option grants to officers, directors and employees compared to the same period in fiscal 2006, as well as a $1.5 million increase in expense related to restricted stock compensation granted to our CEO.

Amortization of Intangible Assets

Amortization expense of $2.2 million in fiscal 2007 declined from $2.7 million in the comparable prior year period. These expenses relate to intangible assets recorded in connection with the Company’s 2004 acquisition of the business of the A.B. Dick Company, patents and other purchased intangible assets.

- 40 -

Restructuring and Other Charges

Consolidated restructuring and other charges of $2.7 million in fiscal 2007 decreased from $5.5 million in 2006. 2007 restructuring expenses represent the cost of severance and separation expenses for employment contracts of former executives, as well as costs related to implementation of the BIP. The BIP costs include the consolidation of the Canadian back-office operations and certain Des Plaines, IL activities into the Hudson, NH operations, and include restructuring costs relating to severance, operating lease run-out and inventory consolidation.

In fiscal 2006, the Company recognized restructuring and other charges of $5.5 million. These charges included $2.3 million related to impairment of intangible assets associated with patent defense costs on the Creo/Kodak litigation matter, $2.8 million related to impairment of goodwill resulting from SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets (“SFAS 144”) valuation adjustments of long lived assets at Precision as a result of the decision to discontinue its newspaper analog business, $0.5 million for merger-related costs primarily related to additional professional fees, and $0.3 million related to the impairment of other assets. In addition, approximately $0.4 million of previously established accruals at the Presstek segment were recognized in income in fiscal 2006 due principally to changes in the scope of previously announced severance programs.

Interest and Other Income (Expense), Net

Consolidated net interest and other expense in fiscal 2007 was ($1.3) million compared to ($1.0) million in the comparable prior year period. Increased expense in fiscal 2007 was due primarily to higher interest expense resulting from higher balances on our revolving credit facility, as well as higher interest rates. Offsetting this somewhat were gains on foreign currency translation.

Provision (Benefit) for Income Taxes

Our effective tax rate was 27.3% in fiscal 2007 and (228.6%) in fiscal 2006. The variance from the federal statutory rate for fiscal 2006 was primarily due to the reversal of valuation allowance provided against our net deferred tax assets in the U.S.

In fiscal 2006, in accordance with SFAS No. 109, “Accounting for Income Taxes”, (“FAS 109”), the Company recognized through its tax provision a $11.2 million deferred tax benefit from the reversal of the previously recorded valuation allowance established on its U.S. federal, state and local deferred tax assets, except for that portion where the evidence does not yet support a reversal. To support the determination that is more likely than not that the Company’s deferred tax assets will be realized in the future, FAS 109 requires that the Company consider all available positive and negative evidence. Based on a detailed analysis, the Company concluded that evidence exists to support the U.S. valuation allowance reversal as of December 30, 2006.

Discontinued Operations

The Company accounts for its discontinued operations under the provisions of SFAS 144. Accordingly, results of operations and the related charges for discontinued operations have been classified as “Loss from discontinued operations, net of income taxes” in the accompanying Consolidated Statements of Operations. Assets and liabilities of discontinued operations have been reclassified and reflected on the accompanying Consolidated Balance Sheets as “Assets of discontinued operations” and “Liabilities of discontinued operations”. For comparative purposes, all prior periods presented have been reclassified on a consistent basis.

- 41 -

Precision

During December 2006, the Company terminated production in South Hadley, MA of Precision-branded analog plates used in newspaper applications.

Results of operations of the discontinued analog newspaper business of Precision consist of the following (in thousands, except per-share data):

	January 3, 2009			December 29, 2007			December 30, 2006
Revenue	$	--		$	196		$	10,816
Income (Loss) before income taxes		93			(108	)		(2,267	)
Provision (benefit) for income taxes		--			(54	)		(771	)
Income (Loss) from discontinued operations		93			(54	)		(1,496	)
Loss from disposal of discontinued operations, net of tax benefit of $915 for the year ended December 30, 2006		--			--			(1,777	)
Net Income (Loss) from discontinued operations	$	93		$	(54	)	$	(3,273	)
Loss per diluted share	$	(0.00	)	$	(0.00	)	$	(0.09	)

As of December 30, 2006, and in accordance with SFAS 144 and SFAS 142, the Company reviewed the potential impairment of long-lived assets associated with the analog newspaper business and goodwill of the Precision reporting unit and determined that impairment charges aggregating $4.0 million were required. Of this amount $2.8 million relates to the impairment of goodwill, $0.3 million relates to the acceleration of depreciation on fixed assets abandoned, $0.6 million relates to the acceleration of amortization on certain intangible assets and $0.3 million relates to the adjustment of inventory on hand to the lower of cost or market. Impairment charges of the reporting unit goodwill resulting from the abandonment of the analog newspaper business are reflected within restructuring and other charges of continuing operations, and the remaining charges included in the loss from discontinued operations for fiscal 2006. There have been no further impairment charges incurred during fiscal years 2008 and 2007 relating to this matter.

Lasertel

On September 24, 2008, the Board of Directors approved a plan to market the Lasertel subsidiary for sale as the Lasertel business is not a core focus for the Presstek graphics business. Although Lasertel is a supplier of diodes for the Company, it has grown its presence in the external market, and management believes that Lasertel would be in a better position to realize its full potential in conjunction with other companies or investors who can focus resources on the external market. The process of identifying and working with interested potential buyers of Lasertel is well underway. The disposal of this asset group is currently anticipated to be a stock sale with a Section 338 election and to occur within a one year period. As such, the Company has presented the results of operations of this subsidiary within discontinued operations, and classified the assets as “Assets of discontinued operations” and liabilities as “Liabilities of discontinued operations”. The Lasertel business will continue to operate as it previously operated, including its marketing and new business/product development activities. Presstek has no intentions to shut down the business.

- 42 -

Results of operations of the discontinued business of Lasertel consist of the following (in thousands, except per-share data):

	January 3, 2009			December 29, 2007			December 30, 2006
Revenue	$	8,686		$	8,270		$	6,758
Loss before income taxes		(4,336	)		(2,924	)		(1,951	)
Provision (benefit) for income taxes		(1,637	)		(1,129	)		(752	)
Net loss from discontinued operations	$	(2,699	)	$	(1,795	)	$	(1,199	)
Loss per diluted share	$	(0.08	)	$	(0.05	)	$	(0.03	)

Liquidity and Capital Resources

We finance our operating and capital investment requirements primarily through cash flows from operations and borrowings. At January 3, 2009, we had $4.7 million of cash and cash equivalents and $35.2 million of working capital, compared to $12.6 million of cash and cash equivalents and $35.3 million of working capital at December 29, 2007.

Continuing Operations

Our operating activities provided $15.2 million of cash in fiscal 2008. Cash provided by operating activities came from net income from continuing operations of $3.1 million; $12.7 million of adjustments to net income from continuing operations including non-cash depreciation, amortization, restructuring, provisions for warranty costs and accounts receivable allowances, stock compensation expense, deferred income taxes, and losses on the disposal of assets; and $0.5 million of other movements. Although a decrease in accounts receivable of $8.6 million plus a decrease in inventories of $7.0 million provided $15.6 million benefit to cash flow, this was more than offset by a decrease of $11.5 million in accrued expenses and a decrease of $5.3 million in accounts payable. The decrease in accounts receivable and inventory reflects the lower revenue in fiscal 2008 compared to 2007 as well as our continued focus on cash management. Accrued expenses decreased primarily due to a reduction in accounting fees and settlement of legal claims.

We used $1.9 million of net cash for investing activities during 2008, comprised of $1.8 million of additions to property, plant and equipment and $0.1 million of investments in patents and other intangible assets. Our additions to property, plant and equipment primarily relate to production equipment and investments in our infrastructure.

We used $18.7 million in our financing activities, comprised of $7.6 million related to payments made under our current line of credit and $11.4 million related to payments on our current Term Loan and capital lease. These amounts were offset by cash received from the exercise of stock options and purchase of common stock under our employee stock purchase program aggregating $0.3 million.

Discontinued Operations

Operating activities of discontinued operations used $3.5 million in cash in fiscal 2008. Cash provided by operating activities came from net income, after adjustments for non-cash depreciation, amortization, provisions for warranty, costs and accounts receivable allowances. In addition, cash used in operating activities consisted of $0.1 million relating to the increase in accounts receivable, $0.4 million relating to the increase in inventory, $0.1 million decrease in other current assets, $0.4 million decrease in accounts payable and a $0.1 million decrease in deferred revenue and $0.2 million decrease in accrued expenses.

Investing activities of discontinued operations provided $7.2 million made up of $7.9 million of net cash proceeds provided through the sale of property and $0.7 of cash used for additions of fixed assets.

- 43 -

Sale-Leaseback

On July 14, 2008, the Company completed a sale-leaseback transaction of its property located in Tucson, AZ (the “Property”). The Company sold the Property to an independent third party for approximately $8.75 million, or $8.4 million net of expenses incurred in connection with the sale, resulting in a gain of approximately $4.6 million. Concurrent with the sale, the Company entered in to an agreement to lease a portion of the property back from the purchaser for a term of 10 years. The lease, which management deemed to be an operating lease, has approximately $5.8 million in future minimum lease payments. The gain associated with the transaction was deferred at the inception of the arrangement and is expected to be amortized ratably over the lease term.

Liquidity

Our current senior secured credit facilities (the “Facilities”), include a $35.0 million five year secured term loan (the “Term Loan”), and a $45.0 million five year secured revolving line of credit (the “Revolver”). At January 3, 2009, the outstanding balance on the revolver was $12.4 million and we had $1.3 million outstanding under letters of credit, thereby reducing the amount available under the Revolver to $31.3 million. At January 3, 2009 and December 29, 2007, the interest rates on the outstanding balance of the Revolver were 2.69% and 7.5%, respectively. Prior to an amendment to the Facilities in the third quarter of fiscal 2008, principal payments on the Term Loan were payable in consecutive quarterly installments of $1.75 million, with a final settlement of all remaining principal and unpaid interest on November 4, 2009. In the third quarter of fiscal 2008, the Company used the net proceeds of the sale of its Arizona property to pay down the principal balance of the Term Loan and entered into an amendment to the Facilities dated July 29, 2008 which amended the payment schedule of the Term Loan to reduce the required quarterly installments of principal to $810,000, payable in January, March, June, and September of 2009, with no installment due in September of 2008 and a final installment of all remaining principal (approximately $834,000) due on November 4, 2009.

The Facilities were used to partially finance the A.B. Dick Acquisition, and are available for working capital requirements, capital expenditures, acquisitions, and general corporate purposes. Borrowings under the Facilities bear interest at either (i) the London InterBank Offered Rate, or LIBOR, plus applicable margins or (ii) the Prime Rate, as defined in the agreement, plus applicable margins. The applicable margins range from 1.25% to 4.0% for LIBOR, or up to 1.75% for the Prime Rate, based on certain financial performance. At January 3, 2009 and December 29, 2007, the effective interest rates on the Term Loan were 1.30% and 7.5%, respectively.

Under the terms of the Revolver and Term Loan, we are required to meet various financial covenants on a quarterly and annual basis, including maximum funded debt to EBITDA, a non-generally accepted accounting principles in the United States measurement that is defined in the Facilities as earnings before interest, taxes, depreciation, amortization and restructuring and other charges (credits), and minimum fixed charge coverage covenants. At January 3, 2009, we were in compliance with all financial covenants.

The Company entered into interest rate swap agreements with its lenders in October 2003, which were intended to protect the Company’s long-term debt against fluctuations in LIBOR rates. Under the interest rate swaps LIBOR was set at a minimum of 1.15% and a maximum of 4.25%. Because the interest rate swap agreement did not qualify as a hedge for accounting purposes under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), and related amendments, including SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, the Company recorded an increase to the expense of $7,550, in fiscal 2008 and a reduction to expense of $22,500 and $40,000 in fiscal 2007 and fiscal 2006, respectively, to mark these interest rate swap agreements to market. The swap agreements expired in October 2008.

- 44 -

As of January 3, 2009, our Revolver and the Term Loan had outstanding balances of $12.4M and $4.1 M, respectively. These credit facilities will expire in November 2009. The Company is currently evaluating its financing options, and fully intends to have a new revolving line of credit in place by November 2009 to be used for working capital and other operating purposes. In the event that we are unable to have a new revolving line of credit in place by November 2009, we expect to be able to pay off our existing Revolver and Term Loan through a combination of the $4.7 million in cash at January 3, 2009, $1.2 million in cash received in January from our settlement with Continental Casualty Company, net cash generated from operations, and if needed, cash received from other sources. Other sources could include cash received from the sale of our Lasertel business, financing from new asset based lending agreements, and the sale-leaseback of currently owned property.

We believe that existing funds, cash flows from operations, and cash available from other sources as discussed above will be sufficient to satisfy cash requirements through at least the next 12 months. However, any inability to obtain adequate financing from debt and equity sources could force us to self-fund capital expenditures and strategic initiatives, forgo certain opportunities, or possibly discontinue certain of our operations. Similarly, we cannot be assured that such financing, as needed, would be available on acceptable terms.

Contractual Obligations

Our contractual obligations at January 3, 2009 consist of the following (in thousands):

			Payments due by period
	Total		Less than one year		One to three years		Three to five years		Five or more years

Senior Secured Credit Facilities	$	16,489	$	16,489	$	--	$	--	$	--
Purchase Commitments		6,228		4,137		2,091		--		--
Royalty obligation		5,104		766		1,488		1,161		1,689
Operating leases		12,307		2,684		3,982		2,780		2,861

Total contractual obligations	$	40,128	$	24,076	$	7,561	$	3,941	$	4,550

In fiscal 2000, we entered into an agreement with Fuji, whereby minimum royalty payments to Fuji are required based on specified sales volumes of our A3 format size four-color sheet-fed press. The agreement provides for total royalty payments to be no less than $6 million and not greater than $14 million over the life of the agreement. As of January 3, 2009, the Company had paid Fuji $8.9 million related to this agreement.

From time to time we have engaged in sales of equipment that is leased by or intended to be leased by a third party purchaser to another party. In certain situations, we may retain recourse obligations to a financing institution involved in providing financing to the ultimate lessee in the event the lessee of the equipment defaults on its lease obligations. In certain such instances, we may refurbish and remarket the equipment on behalf of the financing company, should the ultimate lessee default on payment of the lease. In certain circumstances, should the resale price of such equipment fall below certain predetermined levels, we would, under these arrangements, reimburse the financing company for any such shortfall in sale price (a “shortfall payment”). The maximum contingent obligation under these shortfall payment arrangements is estimated to be $1.9 million at January 3, 2009.

- 45 -

Effect of Inflation

Inflation has not had a material impact on our financial conditions or results of operations, although this risk is discussed under Item 1 of this Form 10-K.

Net Operating Loss Carryforwards

At January 3, 2009, we had net operating loss carryforwards for tax purposes totaling $77.5 million, of which $61.5 million resulted from stock option compensation deductions for U.S. federal tax purposes and $16.0 million resulted from operating losses. To the extent that net operating losses resulting from stock option compensation deductions result in reduction of current taxes payable, the benefit will be credited directly to additional paid-in capital. The Company’s ability to utilize its net operating loss and credit carryforwards may be limited in the future if the Company experiences an ownership change, as defined by the Internal Revenue Code. An ownership change occurs when the ownership percentage of 5% or greater of stockholders changes by more than 50% over a three year period.

Critical Accounting Policies and Estimates

General

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles as adopted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements. Estimates and assumptions also affect the amount of reported revenue and expenses during the period. Management believes the most judgmental estimates include those related to product returns; warranty obligations; allowances for doubtful accounts; slow-moving and obsolete inventories; income taxes; the valuation of goodwill, intangible assets, long-lived assets and deferred tax assets; stock-based compensation and litigation. We base our estimates and assumptions on historical experience and various other appropriate factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a complete discussion of our accounting policies, see Note 2 to our consolidated financial statements appearing elsewhere herein.

Revenue Recognition

The Company recognizes revenue principally from the sale of products (equipment, consumables, laser diodes) and services (equipment maintenance contracts, installation, training, support, and spare parts). Revenue is recognized when persuasive evidence of a sales arrangement exists, delivery has occurred or services have been rendered, the price to the customer is fixed or determinable and collection is reasonably assured. In accordance with Staff Accounting Bulletin (“SAB”) No. 104 Revenue Recognition (“SAB 104”) and Emerging Issues Task Force (“EITF”) Issue 00-21 Revenue Arrangements with Multiple Deliverables (“EITF 00-21”), when a sales arrangement contains multiple elements, such as equipment and services, revenue is allocated to each element using the residual method.

Product revenue

End-Users - Under the Company’s standard terms and conditions of sale of equipment, title and risk of loss are transferred to end-user customers upon completion of installation and revenue is recognized at that time, unless customer acceptance is uncertain or significant deliverables remain. Sales of other products, including printing plates, are generally recognized at the time of shipment.

- 46 -

OEMs - Product revenue and any related royalties for products sold to Original Equipment Manufacturers (“OEM”) are recognized at the time of shipment as installation is not required and title and risk of loss generally pass at shipment. OEM contracts do not generally include price protection or product return rights; however, the Company may elect, in certain circumstances, to accept returns of product.

Distributors - Revenue for product sold to distributors, whereby the distributor is responsible for installation, is recognized at shipment, unless other revenue recognition criteria have not been met. Revenue for product sold to distributors under contracts which involve Company installation of equipment is recognized upon installation, unless end-user customer acceptance is uncertain, significant deliverables remain, or other revenue recognition criteria have not been met. Except in cases of contract termination (which may include limited product return rights), distributor contracts do not generally include price protection or product return rights; however, the Company may elect, in certain circumstances, to accept returns of product.

Service and parts revenue

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

Leases

The Company may offer customer financing to assist customers in the acquisition of Presstek products. At the time a financing transaction is consummated, which qualifies as a sales-type lease, the Company records equipment revenue equal to the net present value of future lease payments. Any remaining balance is recognized as finance income using the effective interest method over the term of the lease. Leases not qualifying as sales-type leases are accounted for as operating leases. The company recognizes revenue from operating leases on an accrual basis as the rental payments become due.

Multiple element arrangements

In accordance with SAB 104 and EITF 00-21, when a sales arrangement contains multiple elements, such as equipment, consumables or services, revenue is allocated to each element using the residual method.

Rights of return

A general right of return or cancellation does not exist once product is delivered to the customer; however, the Company may elect, in certain circumstances, to accept returns of product. Product revenues are recorded net of estimated returns, which are adjusted periodically, based upon historical rates of return.

Shipping and handling

The Company accounts for shipping and handling fees passed on to customers as revenue. Shipping and handling costs are reported as components of cost of revenue (product) and cost of revenue (service and parts).

Allowance for Doubtful Accounts

The Company’s accounts receivable are customer obligations due under normal trade terms, carried at face value less an allowance for doubtful accounts. The Company evaluates its allowance for doubtful accounts on an ongoing basis and adjusts for potential credit losses when it determines that receivables are at risk for collection based upon the length of time receivables are outstanding, past transaction history and various other criteria. Receivables are written off against reserves in the period they are determined to be uncollectible.

- 47 -

Inventory Valuation

Inventories are valued at the lower of cost or net realizable value, with cost determined using the first-in, first-out method. We assess the recoverability of inventory to determine whether adjustments for impairment are required.

Inventory that is in excess of future requirements is written down to its estimated market value based upon forecasted demand for its products. If actual demand is less favorable than what has been forecasted by management, additional inventory write-downs may be required.

Goodwill and Intangible Assets

In accordance with the provisions of SFAS 142, goodwill is tested at least annually, on the first business day of the third quarter, for impairment, or more frequently, if indicators of potential impairment arise. The Company’s impairment review is based on a fair value test. The Company uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as unexpected adverse business conditions, economic factors, unanticipated technological change or competitive activities, loss of key personnel and acts by governments and courts may signal that an asset has been impaired. Should the fair value of goodwill, as determined by the Company at any measurement date, fall below its carrying value, a charge for impairment of goodwill will be recorded in the period. The Company conducts ongoing assessments of the valuation of goodwill and determined no goodwill impairment existed during the year ended January 3, 2009. The Company will continue to assess the valuation of goodwill throughout 2009. Depending on market and economic conditions, goodwill impairment could be identified in 2009 which would result in a non-cash impairment charge.

Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). Recoverability of intangible assets with estimated lives and other long-lived assets is measured by comparison of the carrying amount of an asset or asset group to future net undiscounted pretax cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future pretax operating cash flows or appraised values, depending on the nature of the asset. The Company determines the discount rate for this analysis based on the expected internal rate of return of the related business and does not allocate interest charges to the asset or asset group being measured. Considerable judgment is required to estimate discounted future operating cash flows.

Patents represent the cost of preparing and filing applications to patent the Company’s proprietary technologies, in addition to certain patent and license rights obtained in the Company’s acquisitions or other related transactions. Such costs are amortized over a period ranging from five to seven years, beginning on the date the patents or rights are issued or acquired.

From time to time, the Company enters into agreements with third parties under which the party will design and prototype a product incorporating Presstek products and technology. The capitalized costs associated with rights or intellectual property under these agreements will be amortized over the estimated sales life-cycle and future cash flows of the product. The Company does not amortize capitalized costs related to either patents or purchased intellectual property until the respective asset has been placed into service.

The Company amortizes license agreements and loan origination fees over the term of the respective agreement.

The amortizable lives of the Company’s other intangible assets are as follows:

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

- 48 -

Stock-Based Compensation

On January 1, 2006, we adopted SFAS No.123(R), Share-Based Payment (“SFAS 123R”), using the modified prospective transition method. We recognize the fair value of stock compensation in our consolidated financial statements over the requisite service period, generally on a straight-line basis for time-vested awards. Under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period. Further, we have elected under SFAS 123R to recognize the fair value of awards with pro-rata vesting on a straight-line basis. Previously, we had followed Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, which resulted in the accounting for employee share options at their intrinsic value in the consolidated financial statements.

Under SFAS 123R, our stock-based compensation is affected by our stock price as well as valuation assumptions, including the volatility of our stock price, expected term of the option, risk-free interest rate and expected dividends. We utilize the Black-Scholes valuation model for estimating the fair value on the date of grant of employee stock options. We estimate volatility primarily using the historical volatility of Presstek common stock over the expected term. Any changes in these assumptions may materially affect the estimated fair value of the stock-based award.

Accounting for Income Taxes

The process of accounting for income taxes involves calculating our current tax obligation or refund and assessing the nature and measurements of temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences and our net operating loss (“NOL”) and credit carryforwards, result in deferred tax assets and liabilities. In each period, we assess the likelihood that our deferred tax assets will be recovered from existing deferred tax liabilities or future taxable income in each jurisdiction. To the extent we believe that we would not meet the test that recovery is “more likely than not”, we would establish a valuation allowance. To the extent that we establish a valuation allowance or change this allowance in a period, we would adjust our tax provision or tax benefit in the consolidated statement of operations. We use our judgment to determine our provision or benefit for income taxes, including estimates associated with uncertain tax positions and any valuation allowance recorded against our deferred tax assets based on the weight of all positive and negative factors, including cumulative trends in profitability.

We have accumulated U.S. federal and state income tax NOL carryforwards, research and experimentation tax credit carryforwards and alternative minimum tax credit carryforwards. In the fourth quarter of fiscal 2006, we reversed the valuation allowance on a deferred tax asset on our balance sheet primarily representing NOLs from our U.S. operations. Previously, we had recorded a valuation allowance against deferred tax assets on our balance sheet until it was “more likely than not” that the tax assets related to either our U.S. or international operations would be realized.

We assess our ability to utilize our NOL and tax credit carryforwards in future periods and record any resulting adjustments that may require deferred income tax expense. In addition, we reduce the deferred income tax asset for the benefits of NOL and tax credit carryforwards utilized currently. The future impact on net income may therefore be positive or negative, depending on the net result of such adjustments and charges.

Based upon a review of historical operating performance through 2008, and our expectation that we will generate profits in the U.S. and our international operations in the foreseeable future, we continue to believe it is more likely than not that the U.S. and international deferred tax assets, net of valuation allowance, will be fully realized.

Recently Issued Accounting Standards

In 2009, the Company will adopt the remaining provisions of Statement of Financial Accounting Standards No. 157, Fair Value Measurements, (“SFAS 157”) for non-financial assets. The adoption of these provisions will not have an impact on the Company’s statements of operations or statement of financial position.

- 49 -

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations. This statement replaces SFAS 141, Business Combinations, but retains the fundamental requirements of the statement that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. The statement seeks to improve financial reporting by establishing principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase option and c) determines what information to disclose. This statement is effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company will apply the provisions of SFAS 141(R) to any acquisition after January 3, 2009.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB 51. This statement amends Accounting Research Bulletin (ARB) 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS 160 will not impact the Company’s consolidated financial position and results of operations because the Company does not have any noncontrolling interests.

In March 2008, the Financial Accounting Standards Boards (“FASB”) issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, (“SFAS 161”), which requires enhanced disclosures related to derivative instruments and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, and the disclosure requirements will be applicable for the Company’s 2009 consolidated financial statements.

Off-Balance Sheet Arrangements

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose. As of January 3, 2009, we were not involved in any unconsolidated SPE transactions.

- 50 -

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to a variety of market risks, including changes in interest rates primarily as a result of our borrowing activities, commodity price risk, and to a lesser extent, our investing activities and foreign currency fluctuations.

Our borrowings are in variable rate instruments, with interest rates tied to either the Prime Rate or the LIBOR. A 100 basis point change in these rates would have an impact of approximately $0.03 million on our annual interest expense, assuming consistent levels of floating rate debt with those held at the end of fiscal 2008.

Commodity price movements create a market risk by affecting the price we must pay for certain raw materials. The Company purchases aluminum for use in manufacturing consumables products and is embedded in certain components we purchase from major suppliers. From time to time, we enter into agreements with certain suppliers to manage price risks within a specified range of prices; however, our suppliers generally pass on significant commodity price changes to us in the form of revised prices on future purchases. The Company has not used commodity forward or option contracts to manage this market risk.

The Company operates foreign subsidiaries in Canada and Europe and is exposed to foreign currency exchange rate risk inherent in our sales commitments, anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the U.S. dollar. Presstek routinely evaluates whether the foreign exchange risk associated with its foreign currency exposures acts as a natural foreign currency hedge for other offsetting amounts denominated in the same currency. The Company has not hedged the net assets or net income of its foreign subsidiaries. In addition, certain key customers and strategic partners are not located in the United States. As a result, these parties may be subject to fluctuations in foreign exchange rates. If their home country currency were to decrease in value relative to the U.S. dollar, their ability to purchase and market our products could be adversely affected and our products may become less competitive to them. This may have an adverse impact on our business. Likewise, certain major suppliers are not located in the United States and thus, such suppliers are subject to foreign exchange rate risks in transactions with us. Decreases in the value of their home country currency, versus that of the U.S. dollar, could cause fluctuations in supply pricing which could have an adverse effect on our business.

- 51 -

PART II

Item 8. Financial Statements and Supplementary Data.

	Page

Report of Independent Registered Public Accounting Firm	53
Consolidated Balance Sheets as of January 3, 2009 and December 29, 2007	54
Consolidated Statements of Operations for the fiscal years ended January 3, 2009, December 29, 2007 and December 30, 2006	55
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income for the fiscal years ended January 3, 2009, December 29, 2007 and December 30, 2006	56
Consolidated Statements of Cash Flows for the fiscal years ended January 3, 2009, December 29, 2007 and December 30, 2006	57
Notes to Consolidated Financial Statements	58

- 52 -

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Presstek, Inc.:

We have audited the accompanying consolidated balance sheets as of January 3, 2009 and December 29, 2007 of Presstek, Inc. and subsidiaries (the Company) and the related consolidated statements of operations, changes in stockholders’ equity and comprehensive income, and cash flows for each of the fiscal years in the three-year period ended January 3, 2009. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule II. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 3, 2009 and December 29, 2007, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended January 3, 2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule II, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of January 3, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 24, 2009 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Boston, Massachusetts

March 24, 2009

- 53 -

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PRESSTEK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	January 3,			December 29,
	2009			2007

ASSETS
Current assets
Cash and cash equivalents	$	4,738		$	12,558
Accounts receivable, net		30,757			41,094
Inventories		37,607			45,010
Assets of discontinued operations		13,332			16,689
Deferred income taxes		7,066			6,740
Other current assets		4,095			4,594
Total current assets		97,595			126,685

Property, plant and equipment, net		25,530			29,049
Intangible assets, net		4,174			5,209
Goodwill		19,114			19,891
Deferred income taxes		10,494			11,124
Other noncurrent assets		606			869

Total assets	$	157,513		$	192,827

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt and capital lease obligation	$	4,074		$	7,035
Line of credit		12,415			20,000
Accounts payable		12,031			17,312
Accrued expenses		13,244			23,212
Deferred revenue		7,300			7,100
Liabilities of discontinued operations		5,748			2,776
Total current liabilities		54,812			77,435

Long-term debt and capital lease obligation, less current portion		-			8,500
Other long-term liabilities		170			-

Total liabilities		54,982			85,935

Commitments and contingencies (See Note 19)

Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued		-			-
Common stock, $0.01 par value, 75,000,000 shares authorized, 36,637,181 and
36,565,474 shares issued and outstanding at January 3, 2009 and
December 29, 2007, respectively		366			366
Additional paid-in capital		117,985			115,884
Accumulated other comprehensive income (loss)		(5,954	)		1,032
Accumulated deficit		(9,866	)		(10,390	)
Total stockholders' equity		102,531			106,892

Total liabilities and stockholders' equity	$	157,513		$	192,827


The accompanying notes are an integral part of these consolidated financial statements.

- 54 -

PRESSTEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share data)

	Fiscal year ended
	January 3,		December 29,		December 30,
	2009		2007		2006

Revenue
Product	$	158,743	$	207,605	$	213,966
Service and parts		34,509		38,968		44,970
Total revenue		193,252		246,573		258,936

Cost of revenue
Product		99,088		145,724		149,333
Service and parts		25,423		31,622		32,466
Total cost of revenue		124,511		177,346		181,799