<SUBMISSION>
<ACCESSION-NUMBER>0001047469-05-023269
<TYPE>424B4
<PUBLIC-DOCUMENT-COUNT>4
<FILING-DATE>20050922
<DATE-OF-FILING-DATE-CHANGE>20050922
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>AXSYS TECHNOLOGIES INC
<CIK>0000206030
<ASSIGNED-SIC>3827
<IRS-NUMBER>111962029
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1228
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B4
<ACT>33
<FILE-NUMBER>333-127506
<FILM-NUMBER>051098028
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>175 CAPITAL BLVD SUITE 103
<CITY>ROCKY HILL
<STATE>CT
<ZIP>06067
<PHONE>2018711500
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>175 CAPITAL BLVD SUITE 103
<CITY>ROCKY HILL
<STATE>CT
<ZIP>06067
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>VERNITRON CORP
<DATE-CHANGED>19920703
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>424B4
<SEQUENCE>1
<FILENAME>a2163159z424b4.htm
<DESCRIPTION>424B4
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05NYC6313_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<UL>
<P ALIGN="RIGHT"><FONT SIZE=2>Filed
Pursuant to Rule 424(b)(4)<BR>
Registration Statement No. 333-127506 </FONT></P>


<P><FONT SIZE=2><B>Prospectus  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>3,000,000 Shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>
<IMG SRC="g266840.jpg" ALT="LOGO" WIDTH="213" HEIGHT="88">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Stock  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>We are offering 3,000,000 shares of our common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Our common stock is quoted on the Nasdaq National Market under the symbol "AXYS." The last reported sale price of our common stock on the Nasdaq National
Market on September&nbsp;21, 2005 was $18.40 per share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=3><B>Investing in the common stock involves risks that are described in the "Risk Factors" section beginning on
page&nbsp;8 of this prospectus.</B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Public Offering Price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>18.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>54,000,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><BR>
Underwriting Discounts and Commissions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,240,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><BR>
Proceeds, Before expenses, to Axsys Technologies, Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
16.92</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
50,760,000</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2>We have granted the underwriters a 30-day option to purchase up to 450,000 additional shares from us to cover any over-allotments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Delivery of shares will be made on or about September&nbsp;27, 2005. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities
or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B><I>Joint-Bookrunning Managers</I></B></FONT></P>

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&nbsp;</B></FONT></TD>
<TD WIDTH="60%"><FONT SIZE=5><B><BR>
&nbsp;</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=5><B>Bear, Stearns &amp; Co. Inc.</B></FONT></TD>
<TD WIDTH="60%" ALIGN="RIGHT"><FONT SIZE=5><B>Banc of America Securities LLC</B></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>The date of this prospectus is September&nbsp;21, 2005. </FONT></P>

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<A NAME="toc_bi6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>ABOUT THIS PROSPECTUS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information contained in this document or to which we have referred you. We have not, and the underwriters have not, authorized anyone
to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the
front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca6313_prospectus_summary"> </A>
<A NAME="toc_ca6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROSPECTUS SUMMARY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that you
should consider before investing in our common stock. We urge you to read this entire prospectus carefully, including the "Risk Factors" section, our consolidated financial statements and the notes to
those statements and the documents incorporated by reference into this prospectus. In this prospectus, unless the context requires otherwise, "we," "us," "our" and "Axsys" refer to Axsys
Technologies,&nbsp;Inc. and its consolidated subsidiaries, including its recently acquired subsidiary, Diversified Optical Products,&nbsp;Inc.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca6313_company_overview"> </A>
<A NAME="toc_ca6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>Company Overview    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Axsys is a leading designer and manufacturer of precision optical solutions for defense, aerospace, homeland security and high-performance commercial
applications. These sophisticated solutions are typically found in applications that demand the finest optical surfaces, highest accuracy and tightest motion control tolerances. Application examples
include thermal weapons systems, long-range surveillance cameras and highly precise medical imagers. We are also a technology leader in the supply of infrared surveillance solutions to
homeland security market customers such as the U.S. Border Patrol, Army, Navy, Air Force, Coast Guard and various port authorities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
solutions are often embedded in larger systems that depend on precise optical control for accurate operation of critical functions. We are involved in many large-scale programs
including the F-16, F-18, Apache, Stryker, M1A2 Abrams and Bradley Fighting Vehicle. Many of the applications with which we are involved include the continuing development of next-generation
targeting, navigation and imaging systems for fighter aircraft, helicopters, aircraft carriers and armored vehicles. We also supply critical guidance and seeker components for platforms such as the
Minuteman intercontinental ballistic missile and the AIM-9X Sidewinder missile. Our products are included on many platforms within the U.S. National Missile Defense program, or NMD. For
the fiscal year ended December&nbsp;31, 2004, we generated approximately 61% of our total sales in the aerospace and defense market. We are well positioned within this market, with a diverse array
of high-profile military programs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to optical solutions, we distribute precision ball bearings used in a variety of industrial and commercial applications. We sell our components, sub-systems and
bearings to a variety of original equipment manufacturers, or OEMs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are organized into two businesses: the Optical Systems Group and the Distributed Products Group. </FONT></P>

<P><FONT SIZE=2><I>Optical Systems Group  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Optical Systems Group designs, manufactures and sells highly precise systems, sub-subsystems and components that are typically used in surveillance,
long-range observation, tracking and targeting and high-performance imaging applications. Customers include both government and commercial organizations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
thermal camera systems are typically used for border surveillance, perimeter security and public safety, while sub-systems and components are usually designed for integration into
our customers' high-performance optical systems. Products can be grouped into four primary areas: reflective optical products, infrared products, motion control products and precision optical and
mechanical structures. However, customer requirements sometimes demand an optical solution that combines products from several of these areas. Our defense products are often designed to be integrated
into stabilized optical platforms, which are highly accurate optical positioning mechanisms. Stabilized optical platforms are essential in applications such as military targeting and imaging systems. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<A NAME="page_ca6313_1_2"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the fiscal year ended December&nbsp;31, 2004, the Optical Systems Group generated $78.2&nbsp;million, or approximately 75.5%, of our total sales. On a pro forma basis, after
giving effect to our acquisitions of Diversified Optical Products,&nbsp;Inc., or DiOP, and Telic Optics,&nbsp;Inc., or Telic, as if each acquisition had occurred on January&nbsp;1, 2004, the
Optical Systems Group would have generated $101.9&nbsp;million, or approximately 80.1%, of our total sales for the fiscal year ended December&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Optical Systems Group has design and manufacturing facilities in San Diego, California, Cullman, Alabama, Rochester Hills, Michigan, North Billerica, Massachusetts and Salem, New
Hampshire. </FONT></P>

<P><FONT SIZE=2><I>Distributed Products Group  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Distributed Products Group distributes precision ball bearings, spherical plain bearings and bushings, which are acquired from various domestic and
international sources, to OEMs&nbsp;and maintenance repair organizations, or MROs. The bearings and bushings are used in a variety of industrial automation and commercial markets. Additionally, the
Distributed Products Group designs, manufactures and sells mechanical-bearing subassemblies for a variety of customers. The Distributed Products Group is comprised of the AST Bearings Division located
in Montville, New Jersey, with a satellite distribution center in Irvine, California. For the fiscal year ended December&nbsp;31, 2004, the Distributed Products Group generated $25.3&nbsp;million,
or approximately 24.5%, of our total sales. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca6313_strengths"> </A>
<A NAME="toc_ca6313_3"> </A>
<BR></FONT><FONT SIZE=2><B>Strengths    <BR>    </B></FONT></P>

<P><FONT SIZE=2><I>Exposure to Growth Areas of the Department of Defense and Homeland Security Budgets  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of the key themes of the Department of Defense is the transformation of the military. This transformation involves making the military a lighter, more mobile
and networked force through a variety of weapons and systems such as smart weapons, advanced weapons control, high-performance thermal imaging systems and space-based reconnaissance and
imaging systems. We believe we are an important supplier of highly-engineered optical and motion control equipment, which are integral components of the weapons and systems required for the
transformation of the military. Our expertise in precision optical solutions positions us well to benefit from the military's transformation. In addition, optical systems are a key technology for the
homeland security market and the recent purchase of DiOP provides us with a strong platform to capture significant growth in the infrared surveillance systems market. </FONT></P>


<P><FONT SIZE=2><I>Significant Portion of Highly Visible, Long-Term Production Programs  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our total sales is generated from continuing, long-term aerospace and defense production programs. A vast majority of our
Optical Systems Group's sales is derived from these programs. We are involved in many large-scale programs including the F-16, F-18, Apache, Stryker, M1A2 Abrams and Bradley Fighting Vehicle. Many of
the applications with which we are involved include the continuing development of next-generation targeting, navigation and imaging systems for fighter aircraft, helicopters, aircraft carriers and
armored vehicles. We also supply critical guidance and seeker components for the Minuteman upgrade and on the production of the
AIM-9X Sidewinder missile. Further, within NMD, our products are included on many current missile defense programs. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we currently have our strongest funded backlog to date, primarily as a result of these production programs. As of July&nbsp;2, 2005, our total funded backlog was
$100.5&nbsp;million. This highly predictable revenue base allows us to better manage our costs and bid more effectively for new business. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2><I>Leading Market Positions  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe we are a leader in three important technology areas, serving the defense and commercial markets throughout the world. These three technology areas are
military-grade optics, high-performance motion control and precision machining. We continue to be a preferred partner for the design of new, sophisticated, highly-engineered precision optical and
motion control solutions found in high-performance defense and commercial systems. For the fiscal year ended December&nbsp;31, 2004, we generated approximately 61% of our total sales in
the aerospace and defense market, where we have applications in leading missile, armored combat vehicle and military aircraft platforms. </FONT></P>


<P><FONT SIZE=2><I>Superior Technology  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide state-of-the-art optical solutions that meet the highest standards and solve the most challenging problems for our
customers. For example, in connection with the production of the James Webb Space Telescope, or JWST, which is the successor to the Hubble Space Telescope, we fabricate highly precise optical mirror
segments using technologically advanced manufacturing processes. Further, our thermal camera systems represent our continued efforts to deliver sophisticated precision optical solutions. Our most
recent electro-optical surveillance system product line provides the market with a range of comprehensive solutions to long-range and ultra long-range surveillance and security needs. Our success in
thermal surveillance is largely due to our expertise in infrared lens production, a critical technology in infrared surveillance cameras. </FONT></P>

<P><FONT SIZE=2><I>Diverse Customer and Program Base  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through our extensive product offering, we have established significant customer and program diversification, including product sales to OEMs&nbsp;and
end-users that design or utilize high-precision performance and high-speed imaging equipment. Our products are integral components used in a substantial number of
guidance and targeting systems that the U.S. military employs today, with a large installed base. Our recent acquisition of DiOP further broadens our exposure to defense and homeland security
customers. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca6313_strategies"> </A>
<A NAME="toc_ca6313_4"> </A>
<BR></FONT><FONT SIZE=2><B>Strategies    <BR>    </B></FONT></P>

<P><FONT SIZE=2><I>Strengthen Positioning within Emerging Homeland Security Market  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are solidly positioned in the homeland security market with customers that include the U.S. Border Patrol, the Coast Guard and various port authorities. Since
September&nbsp;11, 2001, government officials have designed plans to reduce the risk of terrorist attacks within the United States. Many of the preventative efforts of these initiatives involve
surveillance and imaging of people, baggage, cargo and vehicles. We are well positioned to continue participating in this emerging market with our imaging and infrared solutions. </FONT></P>

<P><FONT SIZE=2><I>Capitalize on Increasing Focus on Defense Electronics  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intelligence, surveillance, reconnaissance and targeting, or ISRT, within defense electronics represents one of the fundamental focus areas in the Department of
Defense. This niche includes the growing market for optical sensors and thermal imaging equipment. We have a substantial heritage in this market and continue to focus on protecting and building upon
our position. We are involved in many large-scale programs including the continuing development of the next-generation forward-looking infrared systems for fighter aircraft, helicopters and armored
vehicles. Optics and optical systems are at the core of the military's transformational initiatives. We believe optics and optical systems will receive budget allocations in an environment of new
platform spending or legacy-platform upgrades. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2><I>Increase Technical Sophistication of Solutions  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to increase the complexity of the systems and solutions we sell to customers. For example, our surveillance systems include high-end optical
components along with infrared sensors, all packaged into a complete system. In addition, we intend to leverage our expertise in motion control to deliver even more comprehensive optical systems. By
combining our optical, motion control and machining expertise into a stabilized optical platform, we become more important to our customers and increase our competitive differentiation. </FONT></P>

<P><FONT SIZE=2><I>Explore Strategic Acquisitions  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to continue exploring strategic acquisitions within our markets. For example, we recently completed the acquisitions of DiOP, which establishes our
position as a technology leader of vertically integrated infrared surveillance systems, and Telic, which establishes us as a technology leader in the design and development of military-grade infrared
lenses. We will continue to look for complementary products, expand existing lines of business or enter into related product or market areas. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca6313_recent_developments"> </A>
<A NAME="toc_ca6313_5"> </A>
<BR></FONT><FONT SIZE=2><B>Recent Developments    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;2, 2005, we acquired DiOP for $55.2&nbsp;million in cash. The acquisition of DiOP brings us new, high value technologies, leverages our existing
infrared and motion control technologies, and provides us with a new base of customers. Further, the combination of DiOP and Axsys positions us as a leading independent infrared lens manufacturer. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;2, 2005, we also entered into a new $70.0&nbsp;million credit facility with an affiliate of Bank of America. The facility consists of a five-year term loan A
in the amount of $20.0&nbsp;million, a two-year term loan B in the amount of $35.0&nbsp;million and a three-year revolving line of credit in the maximum amount of
$15.0&nbsp;million. Borrowings under the new credit facility provided a portion of the consideration used to acquire 100% of the capital stock of DiOP. For more information, please see the
description of our new credit facility under "Management's Discussion and Analysis of Financial Condition and Results of Operations&#151;Liquidity and Capital Resources." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca6313_information_about_axsys_technologies,_inc."> </A>
<A NAME="toc_ca6313_6"> </A>
<BR></FONT><FONT SIZE=2><B>Information About Axsys Technologies,&nbsp;Inc.    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were originally incorporated in the State of New York in 1959 and reincorporated in the State of Delaware in 1968. Our principal executive offices are located
at 175 Capital Boulevard, Suite 103, Rocky Hill, Connecticut 06067. Our telephone number at that address is (860)&nbsp;257-0200. Our website is www.axsys.com. The information on our
website is not a part of this prospectus. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cc6313_the_offering"> </A>
<A NAME="toc_cc6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>The Offering    <BR>    </B></FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2>Common stock offered by us</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2>3,000,000 shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2><BR>
Common stock to be outstanding immediately after this offering</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
10,099,266&nbsp;shares</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
Over-allotment option</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
We have granted the underwriters an option to purchase up to an additional 450,000 shares of common stock at the public offering price less the underwriting discounts and commissions, within 30&nbsp;days from the date of this prospectus solely to
cover any over-allotments.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
Use of proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
We expect to use the net proceeds from this offering to repay amounts outstanding under our new credit facility. See "Use of Proceeds."</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
The Nasdaq National Market symbol</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
AXYS</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of our common stock to be outstanding immediately after the offering is based on the number of shares of our common stock outstanding as of July&nbsp;2, 2005.
Unless we specifically state otherwise, the information contained in this prospectus: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>is
based on the assumption that the underwriters will not exercise the over-allotment option granted to them by us; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>excludes
886,094 shares of common stock reserved for issuance upon the exercise of options granted under our Stock Incentive Plan. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cc6313_risk_factors"> </A>
<A NAME="toc_cc6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>Risk Factors    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in our common stock involves substantial risk. You should carefully consider all the information in this prospectus prior to investing in our common
stock. In particular, we urge you to consider carefully the factors set forth in the section of this prospectus entitled "Risk Factors" beginning on page&nbsp;8. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=8,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=400375,FOLIO='5',FILE='DISK124:[05NYC3.05NYC6313]CC6313A.;33',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_cc6313_1_6"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cc6313_summary_consolidated_financial_data"> </A>
<A NAME="toc_cc6313_3"> </A>
<BR></FONT><FONT SIZE=2><B>Summary Consolidated Financial Data    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tables below set forth our summary consolidated financial data for the years ended December&nbsp;31, 2002, 2003 and 2004 and for the six months ended
July&nbsp;3, 2004 and July&nbsp;2, 2005. The summary consolidated financial data as of December&nbsp;31, 2002, 2003 and 2004 and for the years then ended are derived from our audited
consolidated financial statements. The summary consolidated financial data as of July&nbsp;3, 2004 and July&nbsp;2, 2005 and for the six-month periods then ended are derived from our unaudited
consolidated financial statements. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements. In the opinion of management,
our unaudited consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information. Our results of
operations for the six months ended July&nbsp;2, 2005 are not necessarily indicative of our operating results for 2005 or any other future period. You should read the summary consolidated financial
data set forth in the table below in conjunction with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes included elsewhere in this prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
summary unaudited pro forma financial data below are presented to illustrate the effects of (1)&nbsp;our April&nbsp;8, 2004 acquisition of Telic, (2)&nbsp;our May&nbsp;2,
2005 acquisition of DiOP, (3)&nbsp;our borrowing of funds under our new credit facility to fund the acquisition of DiOP, and (4)&nbsp;this offering, on our historical financial position and
operating results. You should read the summary unaudited pro forma financial data set forth in the table below in conjunction with the unaudited pro forma condensed consolidated financial statements
and the related notes included elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002<SUP>(1)(2)(3)(4)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003<SUP>(1)(4)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>2004<SUP>(4)(5)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3, 2004<SUP>(4)(5)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005<SUP>(4)(6)</SUP></B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><I>(In thousands, except per share data)</I></FONT><BR>
<BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1><B>Statement of Operations Data:</B></FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Sales</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>79,586</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>85,109</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>103,530</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>127,281</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>49,135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>62,032</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>69,302</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>20,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>23,073</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>30,656</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>39,557</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>14,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>18,790</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>21,229</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Income (loss) from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(3,014</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4,998</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>9,159</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>10,594</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,309</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,911</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Net income (loss)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(7,061</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4,998</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>8,664</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>10,099</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,159</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,761</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Basic earnings (loss) per share from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(0.43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1.30</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.47</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>0.39</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Basic earnings (loss) per share</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1.23</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1.01</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.45</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>0.37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Weighted-average basic common shares outstanding</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,038</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>6,986</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,020</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>10,020</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>6,994</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,080</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>10,080</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Diluted earnings (loss) per share from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(0.43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.71</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1.03</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.44</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>0.37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Diluted earnings (loss) per share</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.71</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1.19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>0.98</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.42</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>0.36</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Weighted-average diluted common shares outstanding</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,038</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,289</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>10,289</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>7,223</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,459</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>10,459</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><BR><FONT SIZE=1><B>Supplemental Information:</B></FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Capital expenditures</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,380</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,027</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4,239</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>5,662</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,899</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,296</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,805</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%" VALIGN="TOP"><FONT SIZE=1>Depreciation and amortization</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,663</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,920</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,747</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>3,781</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,415</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,776</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,091</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=9,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=629798,FOLIO='6',FILE='DISK124:[05NYC3.05NYC6313]CC6313A.;33',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_cc6313_1_7"> </A>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>As of December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of July&nbsp;2,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Historical</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%" VALIGN="TOP"><FONT SIZE=1><B>Balance Sheet Data (as of period end):</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%" VALIGN="TOP"><FONT SIZE=1>Total assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>62,372</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>66,845</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>85,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>148,628</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>151,100</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%" VALIGN="TOP"><FONT SIZE=1>Long-term capital lease obligations (less current portion)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>568</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%" VALIGN="TOP"><FONT SIZE=1>Long-term debt (less current portion)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>50,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>4,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%" VALIGN="TOP"><FONT SIZE=1>Shareholders' equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>39,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>43,898</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>53,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>56,716</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>106,188</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>In
the second quarter of 2004, the Board of Directors announced the declaration of a 3:2 stock split effected as a stock dividend payable on June&nbsp;30, 2004 to stockholders of
record on June&nbsp;15, 2004. Stockholders received a dividend of one additional share of our common stock for every two shares owned on the record date. Fractional shares were cashed out, and
payments were made to stockholders in lieu of fractional shares on June&nbsp;30, 2004. Share and per share information for all prior periods have been restated to reflect the stock split.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>In
the third quarter of 2002, the Automation Group was divested, which included the Fiber Automation division and Automation Engineering,&nbsp;Inc., a wholly owned subsidiary.
Accordingly, the Automation Group has been accounted for as discontinued operations and the operating results have been reported separately from continuing operations for 2002. Sales applicable to
these discontinued operations were $1.2&nbsp;million in 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>For
2002, certain engineering costs have been reclassified from cost of goods sold to operating expenses to conform to the current presentation.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>In
accordance with Statement of Financial Accounting Standards No.&nbsp;109, or SFAS No.&nbsp;109, "Accounting for Income Taxes," we established a $4.6&nbsp;million valuation
allowance against our deferred income tax asset in 2002. As we reported income, we reduced the valuation allowance and utilized $3.2&nbsp;million in 2004 and $1.4&nbsp;million in 2003 as deferred
income tax assets were realized.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD><FONT SIZE=1>On
April&nbsp;8, 2004, we acquired Telic. We accounted for this acquisition under the purchase method of accounting and, accordingly, the results of Telic's operations have been
included in our Consolidated Statements of Operations since the date of acquisition.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>(6)</FONT></DT><DD><FONT SIZE=1>On
May&nbsp;2, 2005, we acquired DiOP. We accounted for this acquisition under the purchase method of accounting and, accordingly, the results of DiOP's operations have been
included in our Consolidated Statements of Operations since the date of acquisition. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=10,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=1034742,FOLIO='7',FILE='DISK124:[05NYC3.05NYC6313]CC6313A.;33',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_de6313_1_8"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de6313_risk_factors"> </A>
<A NAME="toc_de6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>You should carefully consider the risks described below and all other information contained in or incorporated by reference into this
prospectus before purchasing our common stock. Some of the following risks relate principally to the industries in which we operate and to our business. Other risks relate principally to the
securities markets and ownership of our common stock. Additional risks and uncertainties not presently known to us, or risks that we currently consider immaterial, may also impair our operations or
results. If any of the following risks actually occurs, we may not be able to conduct our business as currently planned, and our financial condition and operating results could be seriously harmed. In
that case, the market price of our common stock could decline, and you could lose all or part of your investment.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de6313_risks_related_to_our_business"> </A>
<A NAME="toc_de6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Related to our Business    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B><I>We depend on contracts with the U.S. federal government for a significant portion of our sales. Most of these contracts are subject to termination and
renegotiation by the U.S. federal government at any time.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aerospace and defense industry, which represents the majority of our sales, is largely dependent upon government contracts. A significant portion of our
business and business development efforts is concentrated in the aerospace and defense industry. Our business depends, in significant part, upon the U.S. government's continued demand in the area of
defense for high-end, high-performance products of the type that we manufacture. Approximately 48% of our sales in 2004, 47% in 2003 and 46% in 2002 were derived directly from
contracts with the U.S. government, or its agencies or departments, or indirectly from subcontracts with U.S. government contractors. On a pro forma basis, after giving effect to our acquisitions of
DiOP and Telic as if they had each occurred on January&nbsp;1, 2004, approximately 55% of our sales in 2004 would have been derived from these government contracts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
majority of these government contracts are subject to termination and renegotiation. Generally, government contracts and subcontracts are subject to oversight audits by government
representatives and contain provisions permitting termination, in whole or in part, without prior notice at the
government's convenience upon the payment of compensation only for work done and commitments made at the time of termination. We can give no assurance that one or more of our government contracts or
subcontracts will not be terminated under these circumstances. Also, we can give no assurance that we would be able to procure new government contracts or subcontracts to offset the revenues lost as a
result of any termination of our contracts. Because our revenues are dependent on our procurement, performance and payment under our contracts, the loss of one or more critical contracts could have a
materially adverse effect on our business, financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>The loss of Raytheon as a customer or a significant reduction in sales to Raytheon could have a materially adverse effect on our business, financial
condition and results of operations.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on key customers. We currently have one customer that represents a significant portion of our sales. During 2004, approximately 18.9% of our sales were to
Raytheon. On a pro forma basis, after giving effect to our acquisitions of DiOP and Telic as if they had each occurred on January&nbsp;1, 2004, approximately 17.2% of our sales during 2004 would
have been to Raytheon. The loss of Raytheon as a customer or a significant reduction in sales to Raytheon could have a materially adverse effect on our business, financial condition and results of
operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Raytheon or any of our other key customers becomes insolvent or files for bankruptcy, our ability to recover accounts receivable from that customer would be adversely affected and any
payments we received in the preference period prior to a bankruptcy filing may be potentially recoverable, which could have a materially adverse effect on our business, financial condition and results
of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_de6313_1_9"> </A>

<P><FONT SIZE=2><B><I>U.S. federal government spending priorities may change in a manner adverse to our business.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We act as a subcontractor for many different government programs. The funding of government programs is subject to congressional appropriations. Although
multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may continue for several
years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The termination of funding for a government
program would result in a loss of anticipated future revenues attributable to that program, which could have a materially adverse effect on our business, financial condition and results of operations.
In addition, the termination of a program or failure to commit additional funds to a program already started could increase our overall costs of
doing business. Among the factors that could materially adversely affect our federal government contracting business are: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>budgetary
constraints affecting federal government spending generally, or defense and intelligence spending in particular, and annual changes in fiscal policies or available
funding;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in federal government programs, priorities, procurement policies or requirements;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>new
legislation, regulations or government union pressures, on the nature and amount of services the government may obtain from private contractors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>federal
governmental shutdowns (such as during the government's 1996 fiscal year) and other potential delays in the government appropriations process; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>delays
in the payment of our invoices by government payment offices due to problems with, or upgrades to, government information systems, or for other reasons. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
or other factors could cause federal governmental agencies, or prime contractors where we are acting as a subcontractor, to reduce their purchases under contracts, to exercise
their right to terminate contracts or to not exercise options to renew contracts, any of which could have a materially adverse effect on our business, financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>We could be suspended or debarred from contracting with the federal government.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We could be debarred or suspended from contracting with the federal government generally, or any significant agency in the intelligence community or Department of
Defense, for, among other things, actions or omissions that are deemed by the government to be so serious or compelling that they affect our contractual responsibilities. For example, we could be
debarred for committing a fraud or criminal offense in connection with obtaining, attempting to obtain or performing a contract, or for embezzlement, fraud, forgery, falsification or other causes
identified in Subpart 9.4 of the Federal
Acquisition Regulation. In addition, our reputation or relationship with the government agencies could be impaired. If we were suspended or debarred, or if our relationship or reputation were
impaired, our business, financial condition and results of operations could be materially adversely affected. </FONT></P>

<P><FONT SIZE=2><B><I>The failure to obtain, or any delays in obtaining, export authorizations from the federal government in connection with the export of our products, or
the imposition of sanctions for failing to comply with the export control laws and regulations, could have a materially adverse effect on our business, financial condition and results of operations.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
must often obtain the prior review and approval of the federal government in connection with the export of our products and technology. Such approvals are provided via licenses or
other authorizations issued by government agencies under the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations and other laws and
regulations that control exports of hardware and technology to foreign countries and the transfer of technology to foreign persons wherever located. We can give no assurance that we will be successful
in obtaining and maintaining the necessary licenses or other authorizations required to conduct business in foreign </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>countries
or with foreign persons. Recently, heightened government enforcement of the export control laws and regulations, and an increasingly restrictive federal government policy with respect to the
export licensing of certain technologies including infrared and night vision systems, has resulted in lengthened review periods for our license applications and increased risks that such requests for
licenses or other authorizations could be denied. The failure to comply with such export control laws and regulations can result in the imposition of sanctions, which may include monetary penalties
and the loss of export privileges. The imposition of such sanctions, or the failure to obtain or delays in obtaining export licenses or other necessary authorizations that would prevent or delay us
from selling our products outside the United States, could have a materially adverse effect on our business, financial condition and results of operations. </FONT></P>


<P><FONT SIZE=2><B><I>We must comply with complex procurement laws and regulations.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must comply with and are affected by laws and regulations relating to the formation, administration and performance of federal government contracts, which
affect how we do business with our customers and may impose added costs on our business. Among the most significant regulations are: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Federal Acquisition Regulation, and agency regulations supplemental to the Federal Acquisition Regulation, which comprehensively regulate the formation, administration
and performance of government contracts;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Cost Accounting Standards and Cost Principles, which impose accounting requirements under certain government contracts; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>laws,
regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products
and technical data. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover,
we are subject to industrial security regulations of the Department of Defense and other federal agencies that are designed to safeguard against foreigners' access to
classified information. If we were to come under foreign ownership, control or influence, our federal government customers could terminate or decide not to renew our contracts, and it could impair our
ability to obtain new contracts. </FONT></P>

<P><FONT SIZE=2><B><I>We may not be able to implement our business plan effectively because the industries in which we operate are subject to fluctuations and other factors
that are difficult to forecast.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating results may vary substantially due to factors that are difficult to forecast. Factors such as announcements of technological innovations or new
products by us or our competitors, domestic and foreign general economic conditions and the cyclical nature of the industries that we serve could cause substantial variations in our operating results.
The aerospace and defense, semiconductor capital equipment, high-performance graphic art, medical imaging capital equipment and industrial automation OEM and MRO industries, each of which
represents a significant market for our products, have historically been subject to substantial economic fluctuations due to changing demands for their products and services, introduction of new
products and product obsolescence. Any future fluctuations arising from these or other conditions could have a materially adverse impact on our business, financial condition and results of operations.
We have experienced, and expect to continue to experience, significant fluctuations in our quarterly and annual operating results due to a variety of factors, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>market
acceptance of new and enhanced versions of our products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>timing
and shipment of significant orders; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>mix
of products sold;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>length
of sales cycles;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>plant
openings and closings;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
timing of acquisitions or dispositions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>delays
in raw materials shipments, as well as other manufacturing delays and disruptions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>completion
of large projects;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
level of backlog of orders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>domestic
and foreign general economic conditions; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>demand
in the markets that we serve</FONT><FONT SIZE=2><I>.</I></FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
some extent, primarily in our bearing distribution division, our net sales and operating results for a specific quarter will depend upon generating orders to be shipped in the same
quarter in which the order is received. The failure to receive anticipated orders or delays in shipments near the end of a particular quarter, due, for example, to unanticipated rescheduling or
cancellations of shipments by our customers or unexpected manufacturing difficulties, may cause our net sales in a particular quarter to fall significantly below expectations, which could have a
materially adverse effect on our business, financial condition and results of operations for such quarter. </FONT></P>

<P><FONT SIZE=2><B><I>If we are unable to adapt to technological change, demand for our products may be reduced.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rapid pace of technological change will require continuous new product development. Our success will continue to depend in substantial part upon our ability
to introduce new products that keep pace with technological developments and evolving industry standards and to apply appropriate levels of engineering, research and development resources necessary to
keep pace with these developments. In addition, our success will depend on how well we respond to changes in customer requirements and achieve market acceptance for our products and capabilities. Any
failure by us to anticipate or respond adequately to technological developments and customer requirements could have a materially adverse effect on our business, financial condition and results of
operations. In order to develop new products successfully, we are dependent upon close relationships with our customers and their willingness to share proprietary information about their requirements
and participate in collaborative efforts with us. We cannot assure you that our customers will continue to provide us with timely access to information or that we will be successful in developing and
marketing new products and services or their enhancements. In addition, we cannot assure you that the new products and services or their enhancements, if any, that we develop will achieve market
acceptance. </FONT></P>

<P><FONT SIZE=2><B><I>We operate in highly competitive markets with competitors who may have greater resources than we possess, which could reduce the volume of products we
can sell and our operating margins.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our markets are extremely competitive. We compete primarily on the basis of our ability to design and engineer our products to meet performance specifications set
by our customers, most of whom are OEMs&nbsp;who purchase component parts or sub-systems for inclusion in their end products. Product pricing and quality, customer support, experience,
reputation and financial stability are also important competitive factors. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are a limited number of competitors in each of the markets for the various types of precision optical and positioning products that we sell. Our competitors, especially those in
the precision optical and positioning product lines, are typically focused on a smaller number of product offerings than we are, and they are often well entrenched. Some of our competitors have
substantially greater resources than we do. Our competitors could develop enhancements to or future generations of competitive products that will offer superior price or performance features to ours.
In addition, new processes or technologies could emerge that render our products less competitive or obsolete. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, a substantial investment is required by an existing or potential customer to integrate components and sub-systems into their product design. We believe that once
a customer has selected particular components or sub-systems from one vendor, the customer generally relies upon that vendor to provide equipment for the specific product application and
may seek to rely upon that vendor to meet other component or sub-system requirements. Accordingly, we may be at a competitive disadvantage with respect to a prospective customer that
chooses to utilize a competitor's components or sub-systems. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further,
there are numerous competitors in markets to which we distribute precision ball bearings. Our competitors, who vary in size, include other ball bearings distributors as well as
ball bearings manufacturers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
basis of competition in the industries in which we compete could shift and we may not be able to compete successfully. </FONT></P>


<P><FONT SIZE=2><B><I>Our backlog is subject to reduction and cancellation.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backlog represents products or services that our customers have committed by contract to purchase from us. Our backlog as of July&nbsp;2, 2005 was
$100.5&nbsp;million. Our backlog is subject to fluctuations and is not necessarily indicative of future sales. Moreover, cancellations of purchase orders or reductions of product quantities in
existing contracts could materially reduce our backlog and, consequently, future revenues. Our failure to replace canceled or reduced backlog could result in lower revenues. </FONT></P>

<P><FONT SIZE=2><B><I>We operate internationally, which exposes us to the risks of doing business abroad.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our levels of international sales and purchases could pose risks to our operating results. Our international sales from continuing operations accounted for
approximately 12.2% of our sales in 2004, 14.2% in 2003 and 18.1% in 2002. In addition, our products are sold to domestic customers who use them in products that they sell into international markets.
Also, we purchase a substantial portion of our ball bearing products from two foreign suppliers and certain other products from other foreign suppliers. Our international sales and purchases are
subject to a number of risks generally associated with international operations, including the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>general
economic conditions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>import
and export duties and restrictions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>currency
fluctuations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in regulatory requirements;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
imposition of tariffs and other barriers;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>political
and economic instability;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>potentially
adverse income tax consequences;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>transportation
delays and interruptions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>labor
unrest and current and changing regulatory environments;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to comply with regulations governing foreign government contracts;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>difficulties
in staffing and managing multi-national operations; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>limitations
on our ability to enforce legal rights and remedies. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
of these factors could have a materially adverse effect on our business, financial condition and results of operations. We cannot assure you that we will continue to operate in
compliance with applicable customs, currency exchange control regulations, transfer pricing regulations or any other laws or regulations to which we may be subject. We also cannot assure you that
these laws will not be modified. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<P><FONT SIZE=2><B><I>Our sales growth and earnings may be reduced if we cannot implement our acquisition strategy.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to successfully manage acquisitions. As part of our business development strategy, we plan to pursue acquisitions in order to expand our
product offerings, add to or enhance our base of technical and sales personnel or provide desirable customer relationships. This growth could result in a significant strain on our managerial,
financial, engineering and other resources. The rate of our future expansion, if any, in combination with the complexity of the technologies involved in our businesses, may demand an unusually high
level of managerial effectiveness in anticipating, planning, coordinating and meeting our operational needs as well as the needs of our customers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may not successfully acquire the most complementary businesses. We cannot assure you that we will be able to acquire complementary businesses on a cost-effective basis,
integrate acquired operations into our organization effectively, retain and motivate key personnel, or retain customers of acquired firms. We compete for attractive acquisition candidates with other
companies or investors, and that competition could increase the cost of pursuing our acquisition strategy or reduce the number of attractive candidates to be acquired. </FONT></P>

<P><FONT SIZE=2><B><I>We may be unable to integrate our acquired companies successfully.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we fail to integrate acquired businesses successfully, especially the recently acquired DiOP, or to manage our growth, that failure could have a materially
adverse effect on our business, financial condition and results of operations. Further, there can be no assurance that we will be able to maintain or enhance the profitability of DiOP or any other
acquired business or consolidate operations to achieve cost savings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, there may be liabilities that we fail, or are unable, to discover in the course of performing due diligence investigations on each company or business we have already
acquired or may acquire in the future. Such liabilities could include those arising from employee benefits contribution obligations of a prior owner or non-compliance with applicable
federal, state or local environmental requirements by prior owners for which we, as a successor owner, may be responsible. In addition, there may be additional costs relating to acquisitions
including, but not limited to, possible purchase price adjustments. We cannot assure you that rights to indemnification by sellers of assets to us, even if obtained, will be enforceable, collectible
or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any such liabilities, individually or
in the aggregate, could have a materially adverse effect on our business, financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>We may experience production delays if suppliers fail to deliver materials to us.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many key product components come from single source suppliers. A significant portion of our precision machining business depends on the adequate supply of
specialty metals, such as beryllium, at competitive prices and on reasonable terms. We currently procure all of our beryllium from Brush Wellman,&nbsp;Inc., or Brush Wellman, the sole U.S. supplier,
and expect to continue to rely on Brush Wellman for beryllium for the foreseeable future. Although we have not experienced significant problems with our supplier in the past, we cannot assure you that
such relationship will continue or that we will continue to obtain such supplies at cost levels that would not adversely affect our gross profit. The partial or complete loss of Brush Wellman as a
supplier of beryllium, or production shortfalls or interruptions that otherwise impair our supply of beryllium, could have a materially adverse effect on our business, financial condition and results
of operations. It is uncertain whether alternative sources of supply could be developed without a material disruption in our ability to provide beryllium products to our customers. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we purchase a substantial amount of the ball bearings that we distribute from two foreign suppliers. Although we have not experienced significant problems with our other
suppliers in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<P><FONT SIZE=2>the
past, we cannot assure you that such relationships will continue or that, in the event of the termination of one or more of our relationships with those other suppliers, we would be able to obtain
alternative sources of supply without a material disruption in our ability to provide products to our customers. Any material disruption in our supply of products could have a materially adverse
effect on our business, financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>Our future growth and continued success are dependent on our key personnel.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends to a significant extent on the continued services of our key executive officers and senior management personnel. The loss of the services of
one or more of these individuals could have a materially adverse effect on our business, financial condition and results of operations. We do not maintain key man life insurance on our executive
officers. In addition, since our continued success is largely dependent upon our ability to design, manufacture and sell high-performance solutions for the high-performance
technology market, we are particularly dependent upon our ability to identify, attract, motivate and retain qualified technical personnel, including engineers and skilled machinists, with the
requisite educational background and industry experience. Our employees may voluntarily terminate their employment with us at any time, and competition for personnel is intense. Accordingly, we cannot
assure that we will be successful in retaining our existing
personnel. The loss of the services of a significant number of our technical or skilled personnel, or the future inability to attract technical or skilled personnel, could have a materially adverse
effect on our business, financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must protect our intellectual property rights. Our ability to compete effectively with other companies will depend, in part, on our ability to maintain the
proprietary nature of our technology. We rely upon a combination of patents, trademarks and trade secrets, non-disclosure agreements and other forms of intellectual property protection to
safeguard our proprietary technology. We cannot assure you as to the degree of protection offered by these patents. We also cannot assure you that we will be able to maintain the confidentiality of
our trade secrets or that our non-disclosure agreements will provide meaningful protection of our trade secrets, know-how or other proprietary information in the event of any
unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
patents of competitors could impact our business. Competitors in the United States and foreign countries, many of which have substantially greater resources than we do and have made
substantial investments in competing technologies, may have applied for or obtained, or may in the future apply for and obtain, patents that will prevent, limit or interfere with our ability to make
and sell some of our products. Although we believe that our existing products do not infringe on the patents or other proprietary rights of third parties, third parties could assert infringement
claims against us and such claims could be successful. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we do not have the right to prohibit the U.S. government from using certain technologies developed by us or to prohibit third-party companies, including our competitors,
from using those technologies in providing products and services to the U.S. government. The U.S. government has the right to royalty-free use of technologies that we have developed under
U.S. government contracts. We are free to commercially exploit those government-funded technologies and may assert our intellectual property rights to seek to block other non-government
users thereof, but we cannot assure you that we could successfully do so. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<P><FONT SIZE=2><B><I>We are subject to significant environmental, health and safety laws and regulations and related compliance expenditures and liabilities.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to a variety of federal, state and local laws, rules and regulations relating to the use, storage, discharge and disposal of hazardous substances
and wastes used or generated during our engineering, research and development and manufacturing activities. Failure to comply with applicable environmental requirements could result in substantial
liability to us, including civil or criminal penalties, suspension or cessation of our operations, restrictions on our ability to expand our operations or requirements for the acquisition of
additional equipment or other significant expense, any of which could have a materially adverse effect on our business, financial condition and results of operations. In addition, environmental laws
also impose obligations and liability for the cleanup of properties affected by hazardous substance spills or releases. These liabilities can be imposed on the parties generating or disposing of such
substances or on the owner or operator of the affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.
Accordingly, we may become liable, either contractually or by operation of law, for remediation costs even if the contaminated property is not presently owned or operated by us, or if the
contamination was caused by third parties. We cannot assure you (1)&nbsp;that changes in federal, state or local laws, regulations or regulatory policy, or the discovery of unknown problems or
conditions, will not in the future require substantial expenditures or (2)&nbsp;as to the extent of our liabilities, if any, for past failures, if any, to comply with applicable environmental laws,
regulations and permits, any of which also could have a materially adverse effect on our business, financial condition and results of operations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have made and continue to make investments in protective equipment, process controls, manufacturing procedures and training in order to minimize the risks to our employees,
surrounding communities and the environment due to the presence and handling of hazardous materials. The failure to properly handle these materials could lead to harmful exposure for employees or to
the discharge of certain hazardous waste materials. Since we do not carry environmental impairment insurance, such a failure could have a materially adverse effect on our business, financial condition
and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>As a result of processing beryllium, we are subject to liability and compliance costs.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The processing of beryllium, one of the materials used in some of our products, may result in the release of beryllium into the workplace and the environment and
in the creation of beryllium oxide as a by-product. Beryllium is classified as a hazardous air pollutant, a toxic substance and a hazardous substance under environmental, safety and health
laws and regulations. Various acute and chronic health effects may result from exposure to beryllium, including the development of a chronic lung disease known as chronic beryllium disease, or CBD.
Because of the health risks associated with beryllium, we may be subject to product liability claims and third-party lawsuits and increased levels of scrutiny from federal, state, foreign and
international regulatory authorities. Concerns over CBD and other potential adverse health effects relating to beryllium, as well as concerns regarding potential liability from the use of beryllium,
may discourage our customers' use of our beryllium-containing products and significantly reduce demand for our products. In addition, we are required to comply with
certain regulatory requirements to process beryllium. In response to these regulatory requirements, we have incurred, and continue to incur, costs for employee training as well as monitoring and
protective equipment. Any future changes in these regulatory requirements may increase our cost of compliance, which could have a materially adverse effect on our business, financial condition and
results of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<A NAME="page_dg6313_1_16"> </A>

<P><FONT SIZE=2><B><I>If we are unable to maintain and upgrade our manufacturing capabilities, our ability to compete could be materially and adversely impacted.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must continue to invest significant resources to maintain and upgrade our manufacturing capabilities. We have invested, and intend to continue to invest, in
state-of-the-art equipment in order to increase, expand, update or relocate our manufacturing capabilities and facilities. Changes in technology or sales growth
beyond currently established manufacturing capabilities would require that we make further investment. We cannot assure you that we will generate sufficient funds from operations to finance any
required investment or that other sources of funding will be available on terms acceptable to us, if at all. In addition, any further expansion could have a materially adverse effect on our business,
financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B><I>Failure to anticipate technical problems, estimate costs accurately or control costs during performance of a fixed-price contract may reduce our profit
or cause a loss.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide our services primarily through firm fixed-price contracts. Substantially all of our net sales for 2004 were derived from firm fixed-price contracts,
which require us to perform services under a contract at a stipulated price. We assume greater financial risk on firm fixed-price contracts. Failure to anticipate technical problems, estimate costs
accurately or control costs during performance of a fixed-price contract will reduce our profit or cause a loss. Although we believe that adequate provision for our costs of performance is reflected
in our financial statements, we can give no assurance that this provision is adequate or that losses on firm fixed-price contracts will not occur in the future. </FONT></P>

<P><FONT SIZE=2><B><I>We are dependent in part upon our relationships and strategic alliances with industry participants in order to generate revenue.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on the strength of our relationships with military industry organizations to form strategic alliances. If any of our existing relationships with our
strategic partners were impaired or terminated, we could experience significant delays in the development of our new products ourselves and we would incur additional development costs. We would need
to fund the development of our new products internally or identify new strategic partners. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
of our likely partners are also potential competitors, which may impair the viability of new strategic relationships. While we must compete effectively in the marketplace, our
future alliances may depend on our strategic partners' perception of us. As a result, our ability to win new and/or follow-on contracts may be dependent upon our relationships within the
military industry. </FONT></P>

<P><FONT SIZE=2><B><I>Restrictive covenants under our new credit facility may reduce our operating and financial flexibility.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our new credit facility requires us to maintain compliance with certain covenants, including covenants regarding minimum EBITDA, a minimum fixed charge coverage
ratio and a maximum leverage ratio. Our ability to comply with these covenants may be affected by events beyond our control. Our inability to comply with the required financial covenants could result
in a default under our new credit facility. In the event of any such default, the lenders under our new credit facility could elect to declare all outstanding debt, accrued interest and fees under the
facility to be due and immediately payable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are unable to repay any of this debt when due, the lenders under our new credit facility could foreclose on our assets pledged to them as security. If the indebtedness under our
new credit facility were to be accelerated, our assets may not be sufficient to repay such indebtedness in full. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<A NAME="page_dg6313_1_17"> </A>

<P><FONT SIZE=2><B><I>The concentration of our common stock ownership with our Chairman of the Board and Chief Executive Officer may limit our ability to influence corporate
matters.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Chairman of the Board and Chief Executive Officer beneficially owned approximately 27.1% of the common stock outstanding as of July&nbsp;2, 2005. After
giving effect to this offering, based on the number of shares of common stock outstanding as of July&nbsp;2, 2005, our Chairman of the Board and Chief Executive Officer will beneficially own
approximately 19.1% of the voting power and outstanding common stock if the underwriters do not exercise their over-allotment option or 18.2% of the voting power and outstanding common
stock if the underwriters fully exercise their over-allotment option. As a result, he will have the ability to exert influence with respect to corporate actions, including the election of
directors and certain sales or mergers and acquisitions. In addition, the interests of our Chairman of the Board and Chief Executive Officer may conflict with the interests of the other holders of our
common stock. </FONT></P>

<P><FONT SIZE=2><B><I>Because we maintain self-insured workers' compensation and health care plans for our employees, increases in workers' compensation claims
and health care costs could have a materially adverse effect on our business, financial condition and results of operations.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain self-insured workers' compensation and health care plans for our employees. Under our self-insured workers' compensation plan,
we are liable for our employees' workers' compensation claims up to a per claim and total policy maximum. Under our self-insured health care plans, we generally share the cost of health
care with our employees. Workers' compensation claims and health care costs have been escalating over the past few years. Accordingly, as workers' compensation claims and health care costs increase,
our workers' compensation claims and health care expenses also increase. </FONT></P>

<P><FONT SIZE=2><B><I>Security breaches in classified government systems could adversely affect our business.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the programs we support and systems we develop, install and maintain involve managing and protecting information involved in intelligence, national
security and other classified government functions. A security breach in one of these systems could cause serious harm to our business, damage our reputation and prevent us from being eligible for
further work on critical classified systems for federal government customers. Losses that we could incur from such a security breach could exceed the policy limits that we have for errors and
omissions insurance. </FONT></P>

<P><FONT SIZE=2><B><I>A portion of our business is dependent upon obtaining and maintaining required security clearances.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our federal government contracts require our employees to maintain various levels of security clearances, and at three of our manufacturing facilities, we
are required to maintain certain facility security clearances complying with federal government requirements. Obtaining and maintaining security clearances for employees involves a lengthy process,
and it is difficult to identify, recruit and retain employees who already hold security clearances. If our employees are unable to obtain or retain security clearances or if our employees who hold
security clearances terminate employment with us, any customer whose work requires cleared employees could terminate its contract or decide not to renew its contract upon its expiration. In addition,
we expect that some of the contracts on which we will bid will require us to demonstrate our ability to obtain facility security clearances and perform work with employees who hold specified types of
security clearances. To the extent we are not able to obtain facility security clearances or engage employees with the required security clearances for a particular contract, we may not be able to bid
on or win new contracts, or effectively re-compete on expiring contracts. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<A NAME="page_dg6313_1_18"> </A>

<P><FONT SIZE=2><B><I>Our employees may engage in misconduct or other improper activities.  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to the risk that employee fraud or other misconduct could occur. Misconduct by employees could include intentional failures to comply with federal
government procurement regulations and failing to disclose unauthorized activities to us. Employee misconduct could also involve the improper use of our customers' sensitive or classified information,
which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent
this activity may not be effective in controlling unknown or unmanaged risks or losses. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg6313_risks_relating_to_this_offering"> </A>
<A NAME="toc_dg6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Relating to This Offering    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B><I>The price of our common stock may fluctuate significantly after this offering.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The price of our common stock has been volatile and may continue to fluctuate substantially. That price volatility may be attributable, at least in part, to the
limited number of shares generally available for sale in the public market. In addition, factors such as actual or anticipated quarterly fluctuations in our financial results, changes in
recommendations or earnings estimates by securities analysts, announcements of technological innovations or new commercial products or services and the timing of announcements of acquisitions or
dispositions by us or our competitors, as well as conditions in our markets generally, may have a materially adverse effect on the market price of our common stock. Furthermore, the stock market
historically has experienced volatility which has particularly affected the market prices of securities of many technology companies and which sometimes has been unrelated to the operating
performances of such companies. </FONT></P>

<P><FONT SIZE=2><B><I>A substantial number of shares of our common stock are eligible for sale by our Chairman of the Board and Chief Executive Officer, which could affect
the market price of our common stock.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After this offering, based on the number of shares of our common stock outstanding as of July&nbsp;2, 2005, approximately 10,099,266 shares of our common stock
will be outstanding. Our Chairman of the Board and Chief Executive Officer will beneficially own 1,930,442 shares, or approximately 19.1% of our outstanding common stock, all of which will be eligible
for sale by him under Rule&nbsp;144 of the Securities Act, subject to the volume restriction and manner of sale requirements imposed on affiliates. However, as a result of the contractual
lock-up restriction described below, our Chairman of the Board and Chief Executive Officer will be restricted from selling any shares for a limited time period after the date of this
prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot predict the effect that any future sales of shares of our common stock by our Chairman of the Board and Chief Executive Officer, or the availability of such shares for sale,
will have on the market price of our common stock. We believe that sales of substantial numbers of shares of our common stock by him, or the perception that such sales could occur, could depress or
otherwise adversely affect the market price of our common stock, which could make it difficult or impossible for us to sell additional shares of common stock when we need to raise capital. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
conjunction with this offering, our Chairman of the Board and Chief Executive Officer has entered into a lock-up agreement with the underwriters pursuant to which he has
agreed, subject to certain exceptions, not to sell, pledge or otherwise dispose of his shares, without the prior written consent of Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc. and Banc of America
Securities LLC, for a period of 90&nbsp;days after the date of this prospectus. After this lock-up agreement expires, his shares can be sold in the public market. Bear, Stearns&nbsp;&amp;
Co.&nbsp;Inc. and Banc of America Securities LLC may release our Chairman of the Board and Chief Executive Officer from his lock-up agreement at any time and without notice, which would
allow for earlier sale of his shares in the public market. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2><B><I>If you purchase shares of common stock sold in this offering, you will experience immediate dilution.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchasers of shares of common stock offered by this prospectus will suffer immediate and substantial dilution in the net tangible book value per share. Our net
tangible book value as of July&nbsp;2, 2005 was approximately $(11.9) million, or approximately $(1.67) per share of common stock. Net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of July&nbsp;2, 2005. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dilution
in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the net tangible
book value per share of common stock immediately after this offering. After giving effect to our sale of 3,000,000 shares of common stock in this offering at the public offering price of $18.00 per
share, and after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of July&nbsp;2, 2005 would have been
approximately $37.9&nbsp;million, or $3.75 per share. This represents an immediate increase in net tangible book value of $5.42 per share to existing stockholders and an immediate dilution of $14.25
per share to purchasers of common stock in this offering. </FONT></P>

<P><FONT SIZE=2><B><I>Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain anti-takeover provisions could cause harm to our stockholders. Our Restated Certificate of Incorporation, as amended, our By-Laws
and the General Corporation Law of the State of Delaware, which we refer to as DGCL in this prospectus, contain various provisions which could delay or impede the removal of incumbent directors and
could make a merger, tender offer or proxy contest involving us more difficult, even if such a transaction would be beneficial to the interests of the stockholders, or could discourage a third party
from attempting to acquire control of us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have authorized 4,000,000 shares of our preferred stock, none of which is currently outstanding, and which we could issue without further stockholder approval and upon terms and
conditions, and having rights, privileges and preferences, as the Board of Directors may determine. We have no current plans to issue any preferred stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
By-Laws include provisions establishing advance notice procedures with respect to stockholder proposals and director nominations, and permitting the calling of special
stockholder meetings only by the written consent of three-quarters of the Board of Directors or the Chairman of the Board. Our Restated Certificate of Incorporation provides that in lieu of a meeting,
action may be taken by written consent of our stockholders only by unanimous consent. These provisions could have the effect of delaying, deterring or preventing a change in control of Axsys, and may
adversely affect the voting and other rights of holders of common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we are subject to section&nbsp;203 of the DGCL, which, among other things and subject to various exceptions, restricts certain business transactions between a corporation
and a stockholder owning 15% or more of the corporation's outstanding voting stock, which we refer to as an interested stockholder in this prospectus, for a period of three years from the date the
stockholder becomes an interested stockholder. These provisions may have the effect of delaying or preventing a change of control of Axsys without action by the stockholders and, therefore, could
adversely affect the price of our common stock. In the event of a change of control of Axsys, the vesting of outstanding options issued under our stock incentive plan may be accelerated at the
discretion of the committee administering the plan or may be required to be accelerated under certain circumstances provided for in incentive agreements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di6313_forward-looking_statements"> </A>
<A NAME="toc_di6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All statements set forth or incorporated by reference in this prospectus that are not historical in nature are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. We have attempted to identify forward-looking statements by using such words as "expect," "anticipate," "plan," "may," "will," "estimate,"
"believe," "can," "continue," "could," "intend," "potential" or "should" or other similar expressions. These forward-looking statements, which are subject to risks and uncertainties, and assumptions
about us, may include, among other things, statements regarding our ability to reduce design and manufacturing lead times and manufacturing costs, our ability to integrate existing technologies, our
ability to implement our strategy to develop and sell, among other things, higher level sub-systems, the changes to be achieved from our cost reduction efforts, our objective to grow
through strategic acquisitions and anticipated expenditures for environmental remediation. These statements are only predictions based on our current expectations and projections about future events.
Because these forward-looking statements involve risks and uncertainties, you should be aware that there are important factors that could cause our actual results, level of activity, performance or
achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements including, but not limited to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
dependence on sales to the U.S. federal government and Raytheon;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
to U.S. federal government spending priorities;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to continue to contract with the federal government or Department of Defense;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to comply with complex procurement laws and regulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to implement effective business plans in the industries in which we operate;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to adapt to technological change;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to compete in the industries in which we operate;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
potential for our backlog to be reduced or cancelled;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
risks of doing business internationally;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to implement our acquisition strategy and integrate our acquired companies successfully;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
timely delivery of materials to us by our suppliers;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to manage costs under our fixed-price contracts effectively;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to attract and retain qualified personnel;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
ability to protect our intellectual property rights;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>fluctuations
in workers' compensation and health care costs for our employees;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to comply with environmental, health and safety laws and regulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to maintain and upgrade our manufacturing capabilities in order to stay competitive;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to comply with restrictive covenants under our new credit facility;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to maintain security clearances for classified government systems; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
other factors that we describe in this prospectus under the heading "Risk Factors." </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, performance or
achievement. Further, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We disclaim any obligation to update any of the forward-looking
statements after the date of this prospectus or to conform these statements to actual results. You should not place undue reliance on forward-looking statements set forth or incorporated by reference
in this prospectus. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di6313_use_of_proceeds"> </A>
<A NAME="toc_di6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>USE OF PROCEEDS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate the net proceeds to us from this offering will be approximately $49.8&nbsp;million after payment of underwriting discounts and commissions and
estimated expenses of this offering. We have assumed that the underwriters will not exercise their over-allotment option. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the terms of our new credit facility, we are required to use the net proceeds to us from this offering to repay all of the amounts outstanding under the term loan&nbsp;B. Under
the terms of the term loan&nbsp;B, we are required to prepay the entire principal balance outstanding under the term loan&nbsp;B with the net proceeds of this offering. Any remaining net proceeds
will be used to repay $12.0&nbsp;million outstanding under the term loan&nbsp;A and for working capital and general corporate purposes. Pending final use, we may invest the net proceeds of this
offering in short-term, investment grade, interest-bearing securities or guaranteed obligations of the United States or its agencies. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
used borrowings under our new credit facility to fund a portion of the purchase price of $55.2&nbsp;million for the DiOP acquisition. As of July&nbsp;2, 2005, we had
$55.0&nbsp;million outstanding under our new credit facility, $20.0&nbsp;million of which was under the term loan&nbsp;A and bore interest at 5.96% per annum and $35.0&nbsp;million of which
was under the term loan&nbsp;B and bore interest at 5.96% per annum. As of July&nbsp;2, 2005, there were no borrowings outstanding under the revolving line of credit. The term loan&nbsp;A
matures on May&nbsp;2, 2010, the term loan&nbsp;B matures on May&nbsp;2, 2007 and the revolving credit line matures on May&nbsp;2, 2008. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di6313_dividend_policy"> </A>
<A NAME="toc_di6313_3"> </A>
<BR></FONT><FONT SIZE=2><B>DIVIDEND POLICY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied and currently intend to continue to apply the retained and current earnings toward the development of our business and to finance growth. We did
not pay cash dividends on the common stock during the three years ended December&nbsp;31, 2004 and do not anticipate paying cash dividends in the foreseeable future. Our ability to declare and make
dividend payments is restricted under our new credit facility. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk6313_price_range_of_common_stock"> </A>
<A NAME="toc_dk6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>PRICE RANGE OF COMMON STOCK    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock trades on the Nasdaq National Market under the symbol "AXYS." The following table sets forth the range of high and low sales prices as reported
by Nasdaq for the periods indicated. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Price Range of<BR>
Common Stock</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>High</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Low</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2><B>Year Ended December&nbsp;31, 2003</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5.633</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.667</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6.667</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.833</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8.697</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6.373</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7.833</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><BR><FONT SIZE=2><B>Year Ended December&nbsp;31, 2004</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.813</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8.333</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>16.160</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9.673</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15.750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11.250</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>19.050</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12.510</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><BR><FONT SIZE=2><B>Year Ended December&nbsp;31, 2005</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22.750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>16.520</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22.640</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>16.450</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Third Quarter (through September&nbsp;21, 2005)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20.600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17.510</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
September&nbsp;21, 2005, the last sales price of the common stock reported on the Nasdaq National Market was $18.40. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
September&nbsp;21, 2005, the approximate number of holders of record of our common stock was 465. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=25,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=268906,FOLIO='22',FILE='DISK124:[05NYC3.05NYC6313]DK6313A.;17',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dm6313_1_23"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm6313_capitalization"> </A>
<A NAME="toc_dm6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>CAPITALIZATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our consolidated cash and cash equivalents and capitalization as of July&nbsp;2, 2005 (1)&nbsp;on an actual basis, and
(2)&nbsp;on a "Pro Forma As Adjusted" basis, which reflects our sale of 3,000,000 shares of common stock at the offering price of $18.00 per share, after deducting underwriting discounts and
commissions and the estimated offering expenses payable by us as well as our repayment of $35.0&nbsp;million under the term loan&nbsp;B and $12.0&nbsp;million under the term loan&nbsp;A. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should read this table together with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial
statements and related notes, included elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
As Adjusted</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,531</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,311</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>Debt:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>New credit facility</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Term loan A</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>20,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Term loan B</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>35,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Revolving line of credit<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Capital lease obligations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>Total debt</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>55,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2><BR>
Shareholders' equity:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Common stock, $.01 par value, 30,000,000 shares authorized; 7,186,734 shares issued, actual and 10,186,734 shares issued, pro forma as adjusted</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>102</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Preferred stock, $.01 par value, 4,000,000 shares authorized; no shares issued and outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Capital in excess of par</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>39,954</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>89,704</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Accumulated other comprehensive loss</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(224</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(224</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17,548</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17,240</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Treasury stock, at cost, 87,468&nbsp;shares, actual and pro forma as adjusted</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(634</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(634</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" VALIGN="TOP"><FONT SIZE=2>Total shareholders' equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>56,716</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>106,188</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Total capitalization</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>111,716</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>114,188</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>As
of August&nbsp;31, 2005, we had approximately $14.3&nbsp;million of availability under our revolving line of credit, net of $0.7&nbsp;million of outstanding letters of
credit. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information in the table above regarding the number of shares of common stock to be outstanding immediately after this offering is based on the number of shares outstanding as of
July&nbsp;2, 2005 and does not include 886,094 shares reserved for issuance upon the exercise of options granted under our Stock
Incentive Plan or any shares that may be sold pursuant to the underwriters' over-allotment option. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=26,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=834615,FOLIO='23',FILE='DISK124:[05NYC3.05NYC6313]DM6313A.;18',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_dm6313_1_24"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>UNAUDITED PRO FORMA FINANCIAL INFORMATION  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Unaudited Pro Forma Condensed Consolidated Financial Statement Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unaudited pro forma condensed consolidated financial statements set forth below are presented to reflect the pro forma effects of (1)&nbsp;our
April&nbsp;8, 2004 acquisition of Telic, (2)&nbsp;our May&nbsp;2, 2005 acquisition of DiOP, (3)&nbsp;our borrowing of $55.0&nbsp;million under the new credit facility to fund the DiOP
acquisition and refinance our old credit facility and (4)&nbsp;this offering. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
unaudited pro forma condensed consolidated statement of operations, or pro forma statement of operations, for the year ended December&nbsp;31, 2004 was prepared as if the Telic
acquisition, the DiOP acquisition and related financing and this offering had taken place on January&nbsp;1, 2004. The pro forma statement of operations for the six months ended July&nbsp;2, 2005
was prepared as if the DiOP acquisition and related financing and this offering had taken place on January&nbsp;1, 2004. The unaudited pro forma condensed consolidated balance sheet as of
July&nbsp;2, 2005 gives effect to this offering as if the transaction occurred on that date. The Telic acquisition and the DiOP acquisition have been accounted for using the purchase method of
accounting. The pro forma statements of operations do not reflect any potential cost savings that we believe would have resulted had the Telic and DiOP acquisitions occurred on January&nbsp;1, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
pro forma adjustments related to the DiOP acquisition are based on the purchase price allocations, which are subject to final adjustments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
audited consolidated financial statements as of and for the year ended December&nbsp;31, 2004, and our unaudited consolidated financial statements as of and for the six months
ended July&nbsp;2, 2005, as well as DiOP's audited financial statements as of and for the year ended December&nbsp;31, 2004 and unaudited financial statements as of and for the three months ended
March&nbsp;31, 2005, are included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not
necessarily indicative of the operating results that would have been achieved had the Telic acquisition, the DiOP acquisition and related financing and this offering been completed on the dates
indicated or of the results of operations that may be attained by us in the future. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=27,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=294640,FOLIO='24',FILE='DISK124:[05NYC3.05NYC6313]DM6313A.;18',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_do6313_1_25"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do6313_unaudited_pro_forma_condensed___una05452"> </A>
<A NAME="toc_do6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>Unaudited Pro Forma Condensed Consolidated Statement of Operations    <BR>    <BR>    For the Year Ended December&nbsp;31, 2004    <BR>    <BR>    (In thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma Adjustments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Acquisitions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Axsys<BR>
Technologies</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Diversified<BR>
Optical<BR>
Products</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Telic<BR>
Optics</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Financing<BR>
Transactions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="7%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Tax<BR>
Adjustments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>DiOP</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Telic</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1,759</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>127,281</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>72,874</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>13,899</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>87,724</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>30,656</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>808</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>39,557</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2><BR>
Selling, distribution and marketing costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
7,576</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9,880</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Research, development and engineering costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,826</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,503</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Administrative and general costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,985</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,220</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12,470</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>73</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>27<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,174</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Operating income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,743</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(1,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,530</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2><BR>
Interest (expense) income, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
(156</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
(152</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
163</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR><SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
146<BR>
(309<BR>
7<BR>
(20</FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;&nbsp;<SUP>(3)</SUP><BR>)<SUP>(4)</SUP><BR>&nbsp;&nbsp;<SUP>(6)</SUP><BR>)<SUP>(7)</SUP></FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
(321</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Other income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(38</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>111</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>73</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>163</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(176</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(248</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,151</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(911</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(176</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,282</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Income tax (benefit) provision</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>229</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(9)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>688</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Income from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,473</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>519</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(911</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(176</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,594</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2><BR>
Basic earnings per share from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1.30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Diluted earnings per share from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.03</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2><BR>
Weighted average common shares outstanding:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,020,184</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,000,000<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,020,184</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="12%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,289,437</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,000,000<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,289,437</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=28,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=39684,FOLIO='25',FILE='DISK124:[05NYC3.05NYC6313]DO6313A.;29',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_do6313_1_26"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do6313_unaudited_pro_forma_condensed___una05634"> </A>
<A NAME="toc_do6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>Unaudited Pro Forma Condensed Consolidated Statement of Operations    <BR>    <BR>    For the Six Months Ended July&nbsp;2, 2005    <BR>    <BR>    (In thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="17%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma Adjustments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="17%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Axsys<BR>
Technologies</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Diversified<BR>
Optical<BR>
Products</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>DiOP<BR>
Acquisition</B></FONT><HR NOSHADE></TH>
<TH WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Financing<BR>
Transactions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Tax<BR>
Adjustments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>62,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,270</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>69,302</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>43,242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,831</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>48,073</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>18,790</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,439</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21,229</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2><BR>
Selling, distribution and marketing costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,492</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
871</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(721</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>)<SUP>(8)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,642</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Research, development and engineering costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,788</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>985</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(335</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>)<SUP>(8)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,438</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Administrative and general costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,327</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,372</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>)<SUP>(8)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,658</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>227</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>184</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;&nbsp;<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>411</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Operating income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,956</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(4,120</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,244</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,080</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2><BR>
Interest (expense) income, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
(697</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
(32</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
44</FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;&nbsp;<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
58<BR>
(121<BR>
606<BR>
57<BR>
(10</FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;&nbsp;<SUP>(3)</SUP><BR>)<SUP>(4)</SUP><BR>&nbsp;&nbsp;<SUP>(5)</SUP><BR>&nbsp;&nbsp;<SUP>(6)</SUP><BR>)<SUP>(7)</SUP></FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
(95</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Other income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>273</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(661</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>205</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>590</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>178</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,295</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,915</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,288</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>590</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,258</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Income tax (benefit) provision</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,725</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(5,485</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>)<SUP>(8)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(9)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,347</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Income from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(9,640</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,773</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>590</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,911</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2><BR>
Basic earnings per share from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
0.47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
0.39</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Diluted earnings per share from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.44</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.37</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2><BR>
Weighted average common shares outstanding:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,079,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,000,000<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,079,769</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="17%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,459,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,000,000<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,459,102</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=29,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=219183,FOLIO='26',FILE='DISK124:[05NYC3.05NYC6313]DO6313A.;29',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dq6313_1_27"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq6313_unaudited_pro_forma_condensed___una03136"> </A>
<A NAME="toc_dq6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>Unaudited Pro Forma Condensed Consolidated Balance Sheet<BR>  <BR>    As of July 2, 2005<BR>  <BR>    (In thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="37%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma Adjusments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="37%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Axsys<BR>
Technologies</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Stock Offering<BR>
Proceeds</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Financing<BR>
Transactions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro-Forma<BR>
Combined</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Current assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Cash and marketable securities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,531</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,780<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(47,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,311</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Accounts receivable, net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,910</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>17,910</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>37,612</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>37,612</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Deferred and refundable income taxes</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Prepaid expenses and other</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,215</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(106</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)<SUP>(11)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,109</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>63,518</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,780</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(47,106</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>66,192</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Property, plant and equipment&#151;net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15,108</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>15,108</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2><BR>
Intangible assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,350</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,350</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Accumulated amortization</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(302</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(302</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>57,549</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>57,549</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,405</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(202</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)<SUP>(11)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>148,628</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,780</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(47,308</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>151,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><BR><FONT SIZE=2><B>Liabilities and shareholders' equity</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Current liabilities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Debt due within one year</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,818</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,818</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11,699</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,699</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Accrued income taxes</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,116</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,116</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Deferred income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,981</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,981</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>37,614</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>36,614</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2><BR>
Long-term debt and capital leases</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
50,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(46,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>)<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2><BR>
Other liabilities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,298</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,298</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2><BR>
Shareholders' equity</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Common stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>30<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>102</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Capital in excess of par value</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>39,954</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,750<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>89,704</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Accumulated other comprehensive loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(224</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(224</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,548</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(308</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)<SUP>(11)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>17,240</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Treasury stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(634</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(634</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>Total shareholders' equity</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>56,716</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,780</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(308</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>106,188</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>148,628</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,780</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(47,308</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>151,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=30,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=149958,FOLIO='27',FILE='DISK124:[05NYC3.05NYC6313]DQ6313A.;34',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_dq6313_1_28"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq6313_notes_to_unaudited_pro_forma_c__not04662"> </A>
<A NAME="toc_dq6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements<BR>  <BR>    (In thousands, except share and per share data)    <BR>    </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Represents
the additional amortization expense for the intangible assets acquired with the Telic and DiOP acquisitions, as if the acquisitions had occurred on January&nbsp;1, 2004,
as follows: </FONT></DD></DL>
<BR>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended July 2, 2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Carrying<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual<BR>
Expense</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
Adjustment</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
Expense</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual<BR>
Expense</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
Adjustment</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
Expense</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2>Telic Acquisition:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>Customer Relationships</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,200</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>22&nbsp;years</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>73</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2><BR>
DiOP Acquisition:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
Customer Relationships</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
18&nbsp;years</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
322</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
322</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
53</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
109</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
162</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>Camera Technology</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,600</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>8&nbsp;years</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>325</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>325</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>109</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>163</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>Order Backlog</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1&nbsp;year</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(67</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>Service Contract</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5&nbsp;years</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>Developed Software</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>9&nbsp;years</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>179</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>184</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>363</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Prior
to the acquisition, DiOP had a five-year $2,700 term loan, which bore interest at an annual fixed rate of 5.5%. On May&nbsp;2, 2005, the balance of this loan of
$2,300 was paid off in connection with the sale. In addition, DiOP had other smaller debt instruments during 2004. This pro forma adjustment represents the elimination of all interest expense incurred
during fiscal year 2004 and from January&nbsp;1, 2005 through May&nbsp;2, 2005.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>To
partially finance the acquisition of Telic, we entered into a credit facility in April&nbsp;2004, which included a $5,000 five-year term loan, bearing interest at a
rate per annum equal to the one-month LIBOR rate plus a margin of 100 to 150 basis points, depending on our consolidated funded debt-to-consolidated EBITDA ratio.
On May&nbsp;2, 2005, utilizing our existing cash, we paid in full the balance of this term loan, which was $4,000. These pro forma adjustments represent the elimination of the interest expense
incurred during fiscal year 2004 and from January&nbsp;1, 2005 through May&nbsp;2, 2005.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>On
May&nbsp;2, 2005, we entered into a new credit facility to finance the purchase of DiOP. The credit facility is comprised of a $15,000 three-year revolving line of credit, a
$20,000 five-year term loan&nbsp;A and a $35,000 two-year term loan&nbsp;B. Term loan A bears interest at a per annum rate equal to the three-month LIBOR rate plus a margin of 100 to
275 basis points, depending on our consolidated funded debt-to-consolidated EBITDA ratio. As of July&nbsp;2, 2005, the balance was $20,000 and the interest rate was 5.96%.
Term loan B bears interest at a per annum rate equal to the LIBOR rate plus a margin of 100 to 275 basis points, depending on our consolidated funded debt-to-consolidated
EBITDA ratio. We have the option of electing the one-month, two-month or three-month LIBOR rate. As of July&nbsp;2, 2005, the balance was $35,000 and the interest
rate was 5.96%. </FONT></DD></DL>
<UL>

<P><FONT SIZE=2>The
Unaudited Pro Forma Condensed Consolidated Statements of Operations assume that this offering and the acquisitions of Telic and DiOP had occurred on January&nbsp;1, 2004. Based on these
assumptions, we would have used our cash on-hand, the cash proceeds from this offering and a $8,000 four-year term loan to finance the acquisitions of Telic and DiOP. These pro forma
adjustments reflect the interest expense that would have been incurred during 2004 and the six months ended July&nbsp;2, 2005 if the $8,000 of financing had occurred on January&nbsp;1, 2004. </FONT></P>

<P><FONT SIZE=2>The
Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes that this offering had occurred on July&nbsp;2, 2005 and that $47,000 of the cash proceeds received was used to pay off the </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=31,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=127995,FOLIO='28',FILE='DISK124:[05NYC3.05NYC6313]DQ6313A.;34',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_dq6313_1_29"> </A>
<UL>
<BR>

<P><FONT SIZE=2>$35,000
term loan B and $12,000 of the $20,000 term loan A, leaving $8,000 of term loan A outstanding. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>As
stated in Note&nbsp;(4) above, the Unaudited Pro Forma Condensed Consolidated Statements of Operations assume that this offering and the acquisitions of Telic and DiOP had
occurred on January&nbsp;1, 2004. Based on these assumptions, we would have used our cash on hand, the cash proceeds for this offering and a term loan of $8,000 to finance the acquisitions of Telic
and DiOP. This pro forma adjustment represents the elimination of the actual interest expense incurred during May&nbsp;2005 and June&nbsp;2005 on the $20,000 term loan&nbsp;A and the
$35,000&nbsp;million term loan B.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>In
conjunction with the $5,000 financing of Telic and the combined $55,000 of financing of DiOP, we incurred amortizable financing costs. These costs were $40 for the Telic financing
and $413 for the DiOP financing. These pro forma adjustments represent the elimination of the amounts expensed during 2004 and the first six months of 2005.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>These
pro forma adjustments represent the expense that we would have incurred for amortizable financing costs if we had borrowed $8,000 on January&nbsp;1, 2004.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Included
in DiOP's Statement of Operations for the four months ended May&nbsp;2, 2005 was $9,913 of non-recurring expenses incurred in conjunction with the sale of DiOP
to Axsys. These expenses included $2,500 of employee bonuses and $1,928 of legal, accounting and other professional costs. In addition, DiOP incurred a built-in federal capital gains tax
of $1,564 as a result of the sale of DiOP occurring only eight&nbsp;years after the Subchapter S election. In addition, DiOP incurred $3,921 of New Hampshire state corporate taxes in conjunction
with the sale of DiOP to Axsys.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD><FONT SIZE=2>Prior
to the acquisitions, Telic and DiOP operated as S corporations. The pro forma tax rate assumes that Telic and DiOP were each taxed as a C corporation and that each was part of
the consolidated tax return of Axsys. The overall pro forma tax rate for the consolidated entity for the year ended December&nbsp;31, 2004 would become 6.1% because Axsys would have continued to
reverse a previously established valuation reserve. The pro forma adjustment to the combined entity for the six months ended July&nbsp;2, 2005 is based on a normalized tax rate of 37.5%.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD><FONT SIZE=2>This
pro forma adjustment represents the financial statement impact of the issuance of an additional 3,000,000 shares of common stock with estimated net cash proceeds from this
offering based on the sales price of $18.00. Gross cash proceeds are estimated to be $54,000 less estimated offering expenses of $4,220 resulting in estimated net cash proceeds of $49,780.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD><FONT SIZE=2>This
pro forma adjustment represents the write-off of the prepaid financing fees for term loan&nbsp;A and term loan&nbsp;B that would have been incurred if the net
proceeds from this offering were used to pay off $47,000 of outstanding debt on July&nbsp;2, 2005. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=32,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=685399,FOLIO='29',FILE='DISK124:[05NYC3.05NYC6313]DQ6313A.;34',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ds6313_1_30"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds6313_selected_consolidated_financial_data"> </A>
<A NAME="toc_ds6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>SELECTED CONSOLIDATED FINANCIAL DATA    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tables below set forth selected consolidated financial data for the years ended December&nbsp;31, 2000, 2001, 2002, 2003 and 2004 and for the six months
ended July&nbsp;3, 2004 and July&nbsp;2, 2005. We derived the selected consolidated financial data as of December&nbsp;31, 2000, 2001, 2002, 2003 and 2004 and for the years then ended from our
audited consolidated financial statements. We derived the selected consolidated financial data as of July&nbsp;3, 2004 and July&nbsp;2, 2005 and for the six-month periods then ended from our
unaudited consolidated financial statements. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements. In the opinion of
management, our unaudited consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information. Our results
of operations for the six months ended July&nbsp;2, 2005 are not necessarily indicative of our operating results for 2005 or any other future period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prospective
investors should read the selected consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and the related notes included elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000<SUP>(1)(2)(3)(4)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001<SUP>(1)(2)(5)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002<SUP>(1)(2)(5)(6)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003<SUP>(1)(6)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004<SUP>(6)(7)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3,<BR>
2004<SUP>(6)(7)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2,<BR>
2005<SUP>(8)</SUP></B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><I>(In thousands, except per share data)</I></FONT><BR>
<BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2><B>Statement of Operations Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>90,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>86,131</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>79,586</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>49,135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>62,032</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>19,213</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13,747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23,073</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>30,656</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,602</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>18,790</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Income (loss) from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,932</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(5,266</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,309</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,523</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,152</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,159</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Basic earnings (loss) per share from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.56</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.47</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Basic earnings (loss) per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.45</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Weighted-average basic common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,038</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,020</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,994</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,080</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Diluted earnings (loss) per share from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.56</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.44</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Diluted earnings (loss) per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.19</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.42</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Weighted-average diluted common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,038</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,289</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,223</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,459</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><BR><FONT SIZE=2><B>Supplemental Information:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Capital expenditures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,268</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,258</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,380</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,027</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,239</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,899</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,296</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,062</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,932</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,663</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,415</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,776</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=33,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=816384,FOLIO='30',FILE='DISK124:[05NYC3.05NYC6313]DS6313A.;25',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<A NAME="page_ds6313_1_31"> </A>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="27%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>As of December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="27%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3,&nbsp;2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2,&nbsp;2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="27%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><I>(In thousands)</I></FONT><BR>
<BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="27%"><FONT SIZE=2><B>Balance Sheet Data (as of period end):</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="27%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>73,592</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>68,636</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>62,372</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>66,845</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>77,384</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>148,628</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="27%"><FONT SIZE=2>Long-term capital lease obligations (less current portion)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,485</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,392</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>568</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>337</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="27%"><FONT SIZE=2>Long-term debt (less current portion)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,833</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>50,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="27%"><FONT SIZE=2>Shareholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>53,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,440</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>39,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>43,898</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>53,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>47,631</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>56,716</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>In
the second quarter of 2004, the Board of Directors announced the declaration of a 3:2 stock split effected as a stock dividend payable on June&nbsp;30, 2004 to stockholders of
record on June&nbsp;15, 2004. Stockholders received a dividend of one additional share of our common stock for every two shares owned on the record date. Fractional shares were cashed out, and
payments were made to stockholders in lieu of fractional shares on June&nbsp;30, 2004. Share and per share information for all prior periods have been restated to reflect the stock split.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>In
the third quarter of 2002, the Automation Group was divested, which included the Fiber Automation division and Automation Engineering,&nbsp;Inc., a wholly owned subsidiary.
Accordingly, the Automation Group has been accounted for as discontinued operations and the operating results have been reported separately from continuing operations for all applicable periods. Sales
applicable to these discontinued operations were $1.2&nbsp;million in 2002, $3.1&nbsp;million in 2001 and $1.4&nbsp;million in 2000.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>In
September&nbsp;2000, we acquired the stock of Westlake Technology Corporation, or Westlake. This acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of Westlake's operations have been included in our Consolidated Statements of Operations since the date of acquisition.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>In
March&nbsp;2000, we sold Beau Interconnect division, or Beau. Accordingly, Beau has been accounted for as a discontinued operation and operating results have been reported
separately from continuing operations in 2000. Sales applicable to this discontinued operation were $846&nbsp;thousand during 2000.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>For
2002 and 2001, certain engineering costs have been reclassified from cost of goods sold to operating expenses to conform to the current presentation.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>In
accordance with SFAS No.&nbsp;109, we established a $4.6&nbsp;million valuation allowance against our deferred income tax asset in 2002. As we reported income, we reduced the
valuation allowance and utilized $3.2&nbsp;million in 2004 and $1.4&nbsp;million in 2003 as deferred income tax assets were realized.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>On
April&nbsp;8, 2004, we acquired Telic. We accounted for this acquisition under the purchase method of accounting and, accordingly, the results of Telic's operations have been
included in our Consolidated Statements of Operations since the date of acquisition.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>On
May&nbsp;2, 2005, we acquired DiOP. We accounted for this acquisition under the purchase method of accounting and, accordingly, the results of DiOP's operations have been
included in our Consolidated Statements of Operations since the date of acquisition. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>31</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=34,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=896129,FOLIO='31',FILE='DISK124:[05NYC3.05NYC6313]DS6313A.;25',USER='CNAPOLE',CD='22-SEP-2005;08:59' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_du6313_1_32"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="du6313_management_s_discussion_and_an__man03466"> </A>
<A NAME="toc_du6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL<BR>  CONDITION AND RESULTS OF OPERATIONS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion and analysis should be read in conjunction with "Selected Consolidated Financial Data" and our consolidated
financial statements and related notes, included elsewhere in this prospectus. Portions of this document that are not statements of historical or current fact are forward-looking statements. This
discussion contains forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this
prospectus should be read as applying to all related forward-looking statements wherever they appear in this prospectus. Our actual results could differ materially from those anticipated in the
forward-looking statements. Factors that could cause our actual results to differ materially from those anticipated include those discussed in "Risk Factors," as well as those discussed elsewhere. See
"Risk Factors" and "Forward-Looking Statements."</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth selected financial data on a consolidated basis (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2,&nbsp;2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3,&nbsp;2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>79,586</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>62,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>49,135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>72,874</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>62,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>59,454</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>43,242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34,533</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>30,656</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23,073</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>18,790</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>18,684</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>16,262</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,046</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Research, development and engineering expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,059</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,788</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,303</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Restructuring and special charges (credits)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,854</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Operating income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,028</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,956</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,083</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(254</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(172</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(212</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(773</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(108</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>98</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>115</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>190</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>76</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Other (expense) income, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(38</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(22</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,151</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,234</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,295</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,987</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>(Benefit from) provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>399</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income (loss) from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Discontinued operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>Loss from discontinued operations, net of income tax benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(495</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4,582</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>535</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the percent of sales by segment: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2,&nbsp;2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3,&nbsp;2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>75.5</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>74.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>74.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>79.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>74.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>24.5</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>25.7</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>25.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_du6313_1_33"> </A>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading designer and manufacturer of precision optical solutions for defense, aerospace, homeland security and high-performance commercial applications.
These sophisticated solutions are typically found in applications that demand the finest optical surfaces, highest accuracy and tightest motion control tolerances. Our solutions are often embedded in
larger systems that depend on precise optical control for accurate operation of critical functions. In addition to optical solutions, we distribute precision ball bearings used in a variety of
industrial and commercial applications. </FONT></P>

<P><FONT SIZE=2><I>Operating Segments  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we modified our segment reporting by combining what were previously referred to as the "Aerospace and Defense" and "Commercial Products" groups into
a new segment, "Optical Systems." This change reflects the increasing collaboration among our facilities in the development of products that serve both the aerospace and commercial markets. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are now organized into two businesses: the Optical Systems Group and the Distributed Products Group. The Optical Systems Group designs, manufactures and sells highly precise
assemblies and components, which are typically embedded in optical systems for both government and commercial applications. The Optical Systems Group plans to continue focusing on growth markets that
require highly precise optical and related motion control solutions. These markets include homeland security
initiatives, unmanned vehicle applications, the national missile defense market, new weapons platforms and performance commercial markets. An example of a target commercial market is the material
processing business, where we are offering a potentially innovative technology called a "fast steering mirror" that has the opportunity to displace existing galvanometer technology in laser
positioning applications. The Optical Systems Group has design and manufacturing facilities in San Diego, California, Cullman, Alabama, Rochester Hills, Michigan, North Billerica, Massachusetts and
Salem, New Hampshire. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Distributed Products Group distributes precision ball bearings, spherical plain bearings and bushings, acquired from various domestic and international sources, to OEMs&nbsp;and
MROs. Additionally, the Distributed Products Group designs, manufactures and sells mechanical-bearing subassemblies for a variety of customers. The Distributed Products Group is comprised of the AST
Bearings Division located in Montville, New Jersey, with a satellite distribution center in Irvine, California. </FONT></P>


<P><FONT SIZE=2><I>Significant Customers  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Raytheon, an aerospace and defense systems supplier, represented 18.9% of our sales in 2004 and 15.5% in 2003. During 2002, we did not have a concentration of
sales of greater than 10% with any one customer. While Raytheon, a prime contractor with the U.S. government, does constitute a significant portion of our business, our sales are diversified since we
sell to 14 separate locations within five of Raytheon's seven segments. Consequently, we do not currently believe that this is at-risk business. </FONT></P>

<P><FONT SIZE=2><I>Backlog and Orders  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We ended the second quarter of 2005 with a backlog of $100.5&nbsp;million, compared to a backlog of $81.7&nbsp;million at July&nbsp;3, 2004, an increase of
$18.8&nbsp;million or 23.0%. We recognized in 2004 bookings in excess of $119.2&nbsp;million, ending the year with record backlog of $88.2&nbsp;million, of which 12.2% will be shipped beyond
twelve months. As we look forward, we expect continued growth in the Optical Systems Group. This group will continue to target orders that require highly precise optical and motion control solutions.
Examples include surveillance, military navigation and targeting, "smart" weapons and medical imaging. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>33</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_du6313_1_34"> </A>

<P><FONT SIZE=2><I>Acquisition of Diversified Optical Products,&nbsp;Inc.  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;2, 2005, we acquired DiOP, a privately owned manufacturer of high-end thermal camera systems and lenses, for $55.2&nbsp;million in
cash plus $1.6&nbsp;million of legal, audit and other acquisition-related costs incurred in connection with the acquisition. DiOP is a technology leader in the supply of infrared surveillance
solutions to homeland security customers, such as the U.S. Border Patrol, Army, Navy, Air Force, Coast Guard and various port authorities. In addition, DiOP manufactures an array of infrared cameras
for law enforcement, firefighting and commercial perimeter security applications. Finally, DiOP is a leading independent OEM of military-grade thermal targeting and imaging lenses. DiOP employs
approximately 120 people at its Salem, New Hampshire headquarters. DiOP's sales for the calendar year 2004 were $22.0&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
acquisition of DiOP provides us with the following strategic benefits: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>This
transaction established us as a leading independent supplier of vertically integrated infrared surveillance systems.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
combination of our existing motion control business and DiOP's camera business will enable our combined company to address new markets, including aerial and shipboard
surveillance, that neither company can address independently.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
integration of DiOP's infrared lens design and manufacturing capabilities with our existing infrared systems business will enable the combined business to better satisfy
demand for military-grade thermal lenses. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the acquisition of DiOP, we entered into a new credit facility with an affiliate of Bank of America on May&nbsp;2, 2005. The credit facility is comprised of a
$15.0&nbsp;million three-year revolving line of credit, a $20.0&nbsp;million five-year term loan A and a $35.0&nbsp;million two-year term loan B. </FONT></P>

<P><FONT SIZE=2><I>Acquisition of Telic  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;8, 2004, we acquired all of the stock of Telic, a privately owned manufacturer of high-end thermal optics and lenses. Telic is
currently operating as Axsys Technologies IR Systems and its financial results are included in our Optical Systems Group's results. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
acquisition of Telic provides us with the following key strategic benefits: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Telic's
leading reputation in the design and manufacture of military-grade infrared lenses enhanced our position as an important supplier of optical solutions.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Telic's
infrared optical design and manufacturing capabilities complement our strong position in metal optics. These expanded capabilities increased our ability to provide
more sophisticated outsourced solutions to our prime contractor customers.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Telic's
embedded position in ground- and sea-based programs complements our historic focus on air- and space-based programs and broadened our overall
program penetration. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
initial purchase price of Telic, after a working capital adjustment, was $14.0&nbsp;million in cash with an additional earn out of up to $4.0&nbsp;million over the
36&nbsp;months following the closing date, based on certain revenue goals. If these revenue goals are achieved, the earn out will increase the amount of excess of cost over net assets acquired, and
the total purchase price could reach $18.0&nbsp;million. In addition, $438&nbsp;thousand of legal, audit and other acquisition-related costs were incurred in connection with the Telic acquisition.
We funded the purchase price and associated transaction costs through a combination of existing cash balances and borrowings under our old credit facility. The balance of the loan of
$4.0&nbsp;million was repaid in full on May&nbsp;2, 2005. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>34</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in our full year 2004 financial results were $5.3&nbsp;million of sales, $2.4&nbsp;million of gross profit and $1.6&nbsp;million of operating income from the operations of
Telic. </FONT></P>

<P><FONT SIZE=2><I>James Webb Space Telescope  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we received an $18.6&nbsp;million definitive contract from Ball Aerospace and Technology Corporation to produce the optical mirror substrates for
the JWST. The contract contains $9.9&nbsp;million of production sales and $8.7&nbsp;million for facilitization. Production revenues are subject to increase pursuant to purchase orders. During
2004, we recognized $1.0&nbsp;million of sales under the percentage of completion method of accounting related to the JWST project. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
JWST, which is currently expected to launch in 2011, will replace the Hubble Space Telescope as NASA's premier space telescope. Northrop Grumman is the prime contractor. The primary
mirror is comprised of 18 individual lightweight beryllium segments, all of which will be fabricated by us. Because of the large size of the primary mirror, JWST will be significantly more sensitive
than ground-based infrared telescopes, enabling it to search for the first stars and galaxies formed in the universe billions of years ago. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
contract includes the production of optical substrates for an engineering development unit, 18 primary mirror segments and support structures. We expect to complete the engineering
development unit in the first quarter of 2005, with delivery of all 18 segments by the end of 2006. </FONT></P>


<P><FONT SIZE=2><I>Divestitures  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, we decided to exit the automation market and focus on our other businesses. As part of this decision, we sold three of our business units: our wholly
owned subsidiary Teletrac,&nbsp;Inc., or Teletrac, our wholly owned subsidiary Automation Engineering,&nbsp;Inc., or AEI, and our Fiber Automation Division, or FAD. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
sold the stock of Teletrac, which serves the data storage business, in exchange for an interest-bearing $850&nbsp;thousand note, which provides for payments equal to ten percent of
the revenues generated from the Teletrac business with the balance, if any, due in five years. Because of the uncertain market conditions for data storage products and the terms of the note, we have
reserved the entire value of this note and will record any principal and interest payments as ordinary income during the period received. As a result of this sale, an asset impairment and cost of sale
charge of $1.0&nbsp;million has been included in our Consolidated Statements of Operations. Under applicable accounting principles, Teletrac has not been treated as a discontinued operation and
results of operations through
the date of sale in 2002 are recognized in continuing operations. Sales applicable to the data storage business were $6&nbsp;thousand in 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the sale, we closed our Santa Barbara manufacturing facility and relocated our micro-positioning stage, laser interferometer and autofocus product lines to our facility
located in Rochester Hills, Michigan during the second quarter of 2002. The total pre-tax cost of $1.1&nbsp;million associated with the relocation and facility closure included a charge
of $436&nbsp;thousand for thirty terminated employees and a charge of $123&nbsp;thousand for the disposal of excess furniture and fixtures. A charge of $136&nbsp;thousand was incurred as a
result of the write-off of certain inventory related to the termination of certain minor product lines. Other costs of $358&nbsp;thousand associated with the relocation included costs
for the equipment relocation, employee training and recruitment and facility upgrades in Michigan, which were expensed as incurred. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
sale of stock of AEI and the sale of the net assets of FAD have been accounted for as discontinued operations and the related net assets and operating results have been reported
separately from continuing operations in all years presented. Sales applicable to these discontinued operations were $1.2&nbsp;million in 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>35</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><B>Results of Segment Operations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables and discussion set forth selected financial information from continuing operations on a segment basis for the three months and six months
ended July&nbsp;2, 2005 and July&nbsp;3, 2004 and for the years ended December&nbsp;31, 2004, 2003 and 2002. The segment tables, shown below, exclude one-time charges, which are
shown separately. </FONT></P>

<P><FONT SIZE=2><B><I>Optical Systems Group Segment<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="17%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="17%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>27,160</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>19,282</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>49,429</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>36,495</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>18,733</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>13,437</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.7</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>34,416</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.6</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>25,763</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>70.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8,427</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>31.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,845</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.3</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15,013</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.4</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10,732</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>29.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
in the Optical Systems Group segment increased 40.9% for the three months ended July&nbsp;2, 2005 as compared to the same period in the prior year. Sales for the six months ended
July&nbsp;2, 2005 increased 35.4% compared to the same period in 2004, of which 21.1% was attributable to the acquisitions of DiOP and Telic. Organic growth of 14.3% was primarily due to an increase
in demand of our products and capabilities on air- and ground-based defense applications. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
profit of 31.1% for the three months and 30.4% for the six months ended July&nbsp;2, 2005 were higher than gross profit for the comparable periods in the prior year. The increase
in gross profit primarily resulted from the acquisitions of DiOP and Telic, which generally carry a higher than average
margin than other product lines within this segment, partially offset by a reduction in margin as a result of recording the acquired inventory from DiOP at fair market value. </FONT></P>

<P><FONT SIZE=2><B><I>Distributed Products Group Segment<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>6,224</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>6,447</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>12,603</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>12,640</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4,317</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.4</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4,471</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.4</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8,826</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>70.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8,770</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,907</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.6</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,976</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.6</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,777</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,870</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
in the Distributed Products Group segment decreased 3.5% for the three months and 0.3% for the six months ended July&nbsp;2, 2005 as compared to the same periods in the prior
year as a result of a decrease in customer demand and pricing pressures. Gross profit as a percentage of sales was consistent with the comparable periods in the prior year. </FONT></P>

<P><FONT SIZE=2><B><I>Operating Expenses<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="97%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="23%"><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5,946</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17.8</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4,868</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18.9</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>11,046</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17.8</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>9,266</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="23%"><FONT SIZE=2>Research, development and engineering expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,044</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>3.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.8</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,788</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.9</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,303</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>36</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=39,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=140588,FOLIO='36',FILE='DISK124:[05NYC3.05NYC6313]DU6313A.;20',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_dw6313_1_37"> </A> </FONT> <FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The spending increase, year over year, was primarily
due to the acquisitions of
DiOP and Telic. Despite the overall increase in selling, general and administrative expenses, spending, as a percentage of sales, was lower than the comparable periods in the prior year primarily due
to higher sales volume and improvements in operating efficiencies. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research, development and engineering expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research, development and engineering expenses increased for the three months
and six months ended July&nbsp;2, 2005 compared to the same periods in the prior year primarily due to additional research and development costs at DiOP along with increased efforts on a variety of
commercial optical projects. </FONT></P>


<P><FONT SIZE=2><B><I>Other Income and Expenses  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense was $706&nbsp;thousand in the second quarter of 2005 and $773&nbsp;thousand in the
first six months of 2005, compared to interest expense of $76&nbsp;thousand and $108&nbsp;thousand in the comparable periods of 2004. The higher interest expense was due to interest on
$55.0&nbsp;million of borrowings outstanding as of July&nbsp;2, 2005, compared to $5.0&nbsp;million of borrowings outstanding as of July&nbsp;3, 2004. This increase in interest expense was
partially offset by lower interest on capital leases, which were paid off in the second quarter of 2005. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income was $34&nbsp;thousand in the second quarter and $76&nbsp;thousand in the first six
months of 2005, compared to interest income of $9&nbsp;thousand and $34&nbsp;thousand in the comparable periods of 2004 primarily due to higher interest rates during 2005. Interest income was
primarily composed of income from cash and cash equivalents. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The consolidated effective tax rate was 37.5% for the three months and six months ended July&nbsp;2, 2005
compared to 10.0% in the comparable periods of 2004. The consolidated effective tax rate for the three months and six months ended July&nbsp;3, 2004 was lower primarily due to the utilization of a
previously established valuation allowance. During the second quarter of 2005, we recorded a tax expense of 34% for federal taxes and 3.5% for state taxes as compared to 6.0% for federal taxes and
4.0% for state taxes during the comparable periods in 2004. A valuation allowance is not required as it is more likely than not that the net deferred income tax assets will be realized in the future. </FONT></P>

<P><FONT SIZE=2><B><I>Optical Systems Group Segment<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>78,189</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>63,246</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>59,438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>55,429</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>70.9</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>73.9</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>44,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>75.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>22,760</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>29.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16,518</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>26.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>14,487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>24.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
in the Optical Systems Group segment increased 23.6% for the year ended December&nbsp;31, 2004 compared to 2003, while sales in this segment increased 6.4% for the year ended
December&nbsp;31, 2003 compared to 2002. Our 2004 sales included $5.3&nbsp;million of sales from our 2004 acquisition of Telic. Telic's capabilities enhance our product offerings to include
sophisticated infrared optical solutions used in sea- and ground-based defense applications. We have also experienced significant growth in sales of our motion control solutions and
beryllium structures, both of which are used in a
variety of highly precise targeting, surveillance and missile defense system platforms. During 2004, we recognized $1.0&nbsp;million of sales from the JWST contract under the percentage of
completion method of accounting. In addition, sales of our airbearing scanners, which are used in medical imaging applications, increased during 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>37</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=40,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=687611,FOLIO='37',FILE='DISK124:[05NYC3.05NYC6313]DW6313A.;24',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
<A NAME="page_dw6313_1_38"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
profit as a percent of sales for the year ended December&nbsp;31, 2004 increased compared to 2003 and 2002 mainly due to increased volume, sales mix and improved efficiencies in
comparison to the past two years. In addition, the acquisition of Telic, which generally earns higher margins, contributed to our continued growth in gross profit for 2004. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Optical Systems Group, as of December&nbsp;31, 2004, had a backlog of definitive orders of $75.6&nbsp;million, of which 12.5% is expected to ship beyond the 2005 fiscal year. </FONT></P>

<P><FONT SIZE=2><B><I>Distributed Products Group Segment<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>25,341</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21,863</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>20,148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>17,445</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15,308</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>70.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>14,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>71.3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,896</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>31.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6,555</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>30.0</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,781</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>28.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
in the Distributed Products Group segment increased for the year ended December&nbsp;31, 2004 in relation to 2003 and 2002 as a result of increased revenues primarily in the
industrial automation and consumer goods markets as well as a general increase in new customer activity across multiple markets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
profit as a percent of sales increased in 2004 compared to the prior two years primarily as a result of production efficiencies, higher sales volume and favorable product mix. </FONT></P>


<P><FONT SIZE=2><B><I>One-Time Charges included in Cost of Sales (Non-allocated)<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

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<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=12 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>One-time charges</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>136</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>0.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, we recognized a one-time charge of $136&nbsp;thousand for the elimination of some small product lines resulting from the closure of the California facility. </FONT></P>

<P><FONT SIZE=2><B><I>Operating Expenses<BR>  </I></B></FONT><FONT SIZE=2><I>(table in thousands and as a percentage of sales)  </I></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="37%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="37%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>18,684</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18.8</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16,262</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Research, development and engineering<BR>
expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.6</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,059</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.4</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Restructuring and special changes (credits)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,854</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2.3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses, or SG&amp;A, were
$18.7&nbsp;million in 2004 compared to $16.0&nbsp;million in 2003 and $16.3&nbsp;million in 2002. Telic incurred $793&nbsp;thousand of SG&amp;A in 2004. Payments for incentives were higher in 2004
compared to the prior two years as a result of increased production. In addition, we spent more on advertising during 2004 than in the prior two years as we attended more trade shows during the year,
and we incurred additional compensation expense of $242&nbsp;thousand as a result of the termination of an </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>38</FONT></P>

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<P><FONT SIZE=2>executive
officer and the modification of stock option grants under the terms of the severance agreement. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research, development and engineering expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research, development and engineering expenses in 2004 increased
$618&nbsp;thousand compared to 2003 primarily due to increased efforts on a variety of projects developed to increase our sales in space and commercial markets. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring and special charges.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During the second quarter of 2004, we reversed a $50&nbsp;thousand reserve associated
with product lines that were either discontinued or sold during 2002. There were no restructuring and special charges in 2003 compared to $1.9&nbsp;million in 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, restructuring charges included $286&nbsp;thousand for termination expenses incurred in connection with the termination of our Chief Operating Officer as a result of a
segment realignment and the subsequent disposal of the Automation Group, $1.0&nbsp;million associated with asset write-downs and severance expenses resulting from the sale of Teletrac and
$559&nbsp;thousand of costs relating to the relocation of some Commercial OEM product lines from Santa Barbara, California to Rochester Hills, Michigan. </FONT></P>

<P><FONT SIZE=2><B>Other Income and Expenses  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense was $254&nbsp;thousand in the year ended December&nbsp;31, 2004, compared to
$172&nbsp;thousand in 2003 and $212&nbsp;thousand in 2002. The increase in expense in 2004 compared to 2003 is primarily due to interest on our $5.0&nbsp;million loan, taken in conjunction with
the acquisition of Telic, which was partially offset by lower interest paid on capital leases compared to 2003. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income was $98&nbsp;thousand in the year ended December&nbsp;31, 2004 compared to
$115&nbsp;thousand in 2003 and $190&nbsp;thousand in 2002. Interest income is primarily composed of income from cash and cash equivalents and short-term investments. In addition, we
received $11&nbsp;thousand in 2003 and $39&nbsp;thousand in 2002 in interest income from a note receivable from the 1998 sale of Sensor Systems,&nbsp;Inc., which was paid in full during the
fourth quarter of 2003. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income and expense, net.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net other expense in 2004 was $38&nbsp;thousand compared to net other income of
$263&nbsp;thousand in 2003 and $10&nbsp;thousand in 2002. Currently, other income and expenses is composed of the effects of foreign exchange transactions partially offset by a return of a legal
escrow. We had recovered $232&nbsp;thousand in 2003 and $298&nbsp;thousand in 2002 from a fully-reserved note from the 1998 sale of Sensor Systems. This note was paid in full during the fourth
quarter of 2003. During 2002, we recognized a charge of $200&nbsp;thousand for the disposal of fixed assets. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The consolidated effective income tax rate was (0.1%) for the year ended December&nbsp;31, 2004 compared to
4.5% in 2003 and 2.6% in 2002. The effective rate for each year was impacted by the creation and utilization of a valuation allowance. In accordance with SFAS No.&nbsp;109, we established a
$4.6&nbsp;million valuation allowance against our deferred income tax asset in 2002. As we reported income, we reduced the valuation allowance and utilized $3.2&nbsp;million in 2004 and
$1.4&nbsp;million in 2003 as deferred income tax assets were realized. Available and prudent tax planning strategies support the deferred income tax asset on the books at December&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2005, we expect our consolidated effective income tax rate to be approximately 37.5%. The 2005 effective income tax rate reflects the provisions in the American Jobs Creation Act of
2004, which phases out the deduction for export sales and creates a new deduction for U.S. production activities. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we incurred an additional charge of $421&nbsp;thousand, net of taxes of
$226&nbsp;thousand, related to the 2002 divestiture of our Automation Group. In 2002, we believed that we would be able to sublease two facilities formerly occupied by our divested businesses.
However, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>39</FONT></P>

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<P><FONT SIZE=2>we
have not been able to locate tenants for these facilities, and the additional charge is sufficient to cover the remaining lease obligations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, during 2004 we recognized a charge of $74&nbsp;thousand, net of taxes of $41&nbsp;thousand, for an environmental-related expense for previously divested operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
completed the disposal of the Automation Group in the fourth quarter of 2002. The sale of the Automation Group resulted in a loss of $1.7&nbsp;million, net of taxes of
$1.0&nbsp;million, which included $729&nbsp;thousand for the impairment of assets and $980&nbsp;thousand of closing-related expenses. In addition, the operating loss from these facilities, which
is also included in discontinued operations, was $2.7&nbsp;million, net of taxes of $1.6&nbsp;million, in 2002. The remainder of the loss from discontinued operations in 2002 included a
$203&nbsp;thousand charge, net of taxes of $123&nbsp;thousand, for an environmental-related expense for a previously divested operation, which was partially offset by $22&nbsp;thousand of
income, net of taxes of $13&nbsp;thousand, from the reversal of unutilized reserves primarily associated with the sale of Beau in 2000. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss).</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We had net income of $8.7&nbsp;million in 2004, net income of $5.0&nbsp;million in 2003 and a net loss
of $7.1&nbsp;million in 2002. Included in the $8.7&nbsp;million net income for 2004 is a loss from discontinued operations of $495&nbsp;thousand as a result of the discontinuation of our
Automation Group and charges incurred for environmental related expenses. During 2002, we sold our Automation Group, which resulted in a net loss of $4.4&nbsp;million including both operating losses
and a loss on the sale. In addition, we recognized an income tax provision of $2.9&nbsp;million from continuing operations, which was primarily the result of the establishment of a valuation
allowance to reduce our net deferred income tax assets. </FONT></P>

<P><FONT SIZE=2><B>Liquidity and Capital Resources  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We fund our operations primarily from cash on hand and cash flow from operations. As of July&nbsp;2, 2005, cash and cash equivalents totaled
$2.5&nbsp;million. We have maintained a high level of liquidity as evidenced by our current ratio (current assets divided by current liabilities), which was 1.7 as of July&nbsp;2, 2005. This ratio
is lower than the prior year as a result of the acquisition of DiOP on May&nbsp;2, 2005. We used cash on hand to repay the $4.0&nbsp;million outstanding under the old credit facility on
May&nbsp;2, 2005. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
completed the acquisition of DiOP on May&nbsp;2, 2005. The purchase price was $55.2&nbsp;million in cash, plus $1.6&nbsp;million of acquisition-related costs. In connection with
the acquisition of DiOP, we entered into a new credit facility on May&nbsp;2, 2005 with an affiliate of Bank of America. The new credit facility provides for a three-year
$15.0&nbsp;million revolving line of credit, a five-year term loan A in the principal amount of $20.0&nbsp;million and a two-year term loan B in the principal amount of
$35.0&nbsp;million. Repayments of amounts borrowed under the new credit facility are secured by a lien on all of our assets and the assets of our subsidiaries, including a pledge of the stock of all
of our subsidiaries. Our new credit facility is also guaranteed by all of our subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
new credit facility requires, among other things, that we maintain certain financial performance covenants, restricts our ability to incur additional indebtedness and contains
various customary provisions, including affirmative and negative covenants, representations and warranties and events of default. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
revolving line of credit is available through May&nbsp;2008, subject to optional and mandatory prepayment in accordance with its terms. Up to $2.0&nbsp;million of the revolving
line of credit may be utilized to issue letters of credit. We may elect to have any borrowing under the revolving line of credit bear interest either at Bank of America's prime rate or the LIBOR rate
plus a margin of 100 to 275 basis points, depending on our consolidated funded debt-to-consolidated EBITDA ratio. We have the option of selecting the one-month, two-month,
three-month or six-month LIBOR rate. As of July&nbsp;2, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>40</FONT></P>

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<P><FONT SIZE=2>2005,
there were no borrowings outstanding under the revolving line of credit. In addition, as of July&nbsp;2, 2005, $657&nbsp;thousand of the revolving line of credit was utilized for outstanding
letters of credit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
term loan A is scheduled to mature in May&nbsp;2010, subject to optional and mandatory prepayment in accordance with its terms, with quarterly principal payments of
$1.0&nbsp;million, which began in August&nbsp;2005. The term loan A bears interest at a rate per annum equal to the three-month LIBOR rate plus a margin of 100 to 275 basis points, depending on
our consolidated funded debt-to-consolidated EBITDA ratio. As of July&nbsp;2, 2005, the balance of the term loan&nbsp;A was $20.0&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
term loan B is scheduled to mature in May&nbsp;2007, subject to optional prepayment in accordance with its terms. We are required to use the net proceeds of this offering to repay
all amounts outstanding under the term loan B. If this offering is not completed, principal payments, which begin in February&nbsp;2006, will be made in five quarterly installments of
$500&nbsp;thousand each and a final installment of $32.5&nbsp;million on May&nbsp;2, 2007. The term loan B bears interest at a rate per annum equal to the LIBOR rate plus a margin of 100 to 275
basis points, depending on our consolidated funded debt-to-consolidated EBITDA ratio. We have the option of selecting the one-month, two-month or
three-month LIBOR rate. As of July&nbsp;2, 2005, the balance of the term loan&nbsp;B was $35.0&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by operating activities for the six months ended July&nbsp;2, 2005 was $3.5&nbsp;million compared to $1.5&nbsp;million for the six months ended July&nbsp;3,
2004. Our net income for the first six months of 2005 was $3.2&nbsp;million, which included $1.8&nbsp;million of depreciation and amortization. Net income and non-cash expenses were
partially offset by cash outflows of $1.6&nbsp;million to fund changes in working capital for the first two quarters of 2005 as described below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the first six months of 2005, excluding the acquired assets and liabilities of DiOP, inventory increased $2.3&nbsp;million as a result of long-lead time production
orders and increased sales volume. Deferred income increased by $1.5&nbsp;million primarily as a result of our strategy to actively negotiate progress payments into certain large dollar contracts
for long-lead time products and long-term programs. Other current assets increased $868&nbsp;thousand primarily due to the recording of a $516&nbsp;thousand receivable
related to the DiOP acquisition and increases in prepaid insurance and loan fees. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by operating activities for the six months ended July&nbsp;3, 2004 was $1.5&nbsp;million. Our net income for the first six months of 2004 was $3.6&nbsp;million,
which included $1.4&nbsp;million of depreciation and amortization and $17&nbsp;thousand of capital asset disposals. Net income and non-cash expenses were partially offset by cash
outflows of $296&nbsp;thousand related to discontinued operations, a $260&nbsp;thousand decrease in long-term legal and environmental reserves and $2.8&nbsp;million in working
capital changes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by operating activities was $7.6&nbsp;million in 2004, $6.8&nbsp;million in 2003 and $1.8&nbsp;million in 2002. In 2004, our primary sources of operating cash
were $8.7&nbsp;million of net income plus non-cash expenses, which primarily consists of $2.7&nbsp;million of depreciation and amortization. These non-cash charges were
partially offset by non-cash benefits, including a $1.8&nbsp;million increase in our net deferred income tax asset, due to the utilization and reversal of a valuation allowance for these
assets. We also paid $902&nbsp;thousand for liabilities related to discontinued operations, which was offset by an additional accrual for discontinued operations of $762&nbsp;thousand. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2004, we utilized $2.2&nbsp;million of cash to fund changes in our operating assets and liabilities. We used $4.5&nbsp;million of cash to fund an increase in our accounts
receivable, which resulted from sales growth and higher deferred income billings in our Optical Solutions Group. We also utilized $4.1&nbsp;million to fund inventory growth in 2004. The inventory
growth was related to certain large long-term programs in our Optical Systems Group. The increases in accounts receivable and inventory were partially offset by a $2.1&nbsp;million
increase in accounts payable and a $2.6&nbsp;million increase in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>41</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>deferred
income. The increase in deferred income was the result of our strategy to actively negotiate progress payments into certain large-dollar contracts for long-lead time products and
long-term programs. This strategy helps to mitigate the near-term negative cash impact of these contracts. The net change in accrued expenses and other liabilities and other
long-term liabilities was a $834&nbsp;thousand increase. The increase was related to increased accruals for compensation-related expenses and an accrual for capital equipment that was
received but not invoiced, which were partially offset by the liquidation of an inactive pension plan and the utilization of the reserve for loss contracts. During 2004, we also received a
$563&nbsp;thousand federal income tax refund. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, our primary sources of operating cash were $5.0&nbsp;million of net income, $2.9&nbsp;million of depreciation and a $1.5&nbsp;million federal income tax refund. The income
tax refund was partially offset by a $563&nbsp;thousand income tax receivable that was recognized in 2003. One of our primary uses of cash was inventory, which grew $2.7&nbsp;million in 2003. The
inventory growth was related to certain large programs in our Optical Systems Group. The cash outflows for inventory were almost entirely offset by a $1.1&nbsp;million increase in accounts payable
and a $1.4&nbsp;million increase in deferred income. In 2003, we reduced accrued expenses and other liabilities and long-term liabilities by $612&nbsp;thousand. This was primarily due
to the utilization of reserves for loss contracts and restructuring. In addition, we utilized $1.3&nbsp;million to fund obligations related to our discontinued operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2002, our net loss of $7.1&nbsp;million included the following non-cash items: a $4.6&nbsp;million deferred income tax valuation allowance, which was partially offset
by a $2.7&nbsp;million increase in our deferred income tax asset, $2.7&nbsp;million of depreciation, $751&nbsp;thousand of losses on capital asset disposals and $888&nbsp;thousand
non-cash restructuring and special charges. We also received a $3.5&nbsp;million federal income tax refund. The impact of the refund was partially offset by an income tax receivable for
$1.6&nbsp;million, which was booked in 2002 but not received until 2003. During 2002, we collected $2.5&nbsp;million in deferred income for our beryllium-based products, which was partially offset
by a $1.5&nbsp;million increase in inventories for these products. Trade accounts payable declined by $1.3&nbsp;million largely due to the timing of inventory receipts in the fourth quarter. In
2002, accrued expenses and other liabilities decreased $643&nbsp;thousand primarily due to payments for state income taxes and our 2001 cost reduction plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, net cash provided by discontinued operations was $2.0&nbsp;million, which was primarily an increase in accrued liabilities and an asset impairment charge taken as a result
of the sale of the Automation Group. During 2002, discontinued operations, including the loss on the sale of the Automation Group, generated net losses of $4.6&nbsp;million. In addition, during
2002, we paid $344&nbsp;thousand in expenses related to the remediation of environmental sites located at former facilities. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in investing activities was $57.7&nbsp;million for the six months ended July&nbsp;2, 2005. In the second quarter of 2005, we utilized $56.4&nbsp;million of cash to
purchase DiOP. Cash used in investing activities was $8.0&nbsp;million for the six months ended July&nbsp;3, 2004. The purchase price plus transaction costs paid less cash acquired in the
acquisition of Telic totaled $13.1&nbsp;million. We liquidated our $7.0&nbsp;million short-term investment portfolio for use in the acquisition. In addition, capital expenditures were
$1.9&nbsp;million in the six-month period ended July&nbsp;3, 2004 primarily for the construction of a building addition related to the JWST order and the purchase of a large machining
center. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in investing activities was $11.0&nbsp;million in 2004, $10.0&nbsp;million in 2003 and $839&nbsp;thousand in 2002. In 2004, we utilized $13.7&nbsp;million to
acquire Telic. The purchase of Telic was partially funded by the sale of $7.0&nbsp;million of short-term investment securities. Capital expenditures were $4.2&nbsp;million in 2004, or
$1.2&nbsp;million more than in 2003. The additional capital was used to construct a 15,000 square foot, climate-controlled manufacturing facility in Cullman, Alabama. The additional space is being
used to produce the beryllium mirror substrates and support structures for an engineering development unit, 18 optical mirror segments and two spare units and support structures that comprise the 6.5
meter primary mirror as well as the secondary mirror for JWST. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>42</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_dy6313_1_43"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, we invested $7.0&nbsp;million in short-term investment securities. The funds were invested in short-term investment securities in order to minimize
interest rate risk and to allow for rapid redeployment when profitable long-term investment or expansion opportunities were identified. In 2003, we also invested $3.0&nbsp;million in
capital equipment. In 2002, we invested $1.4&nbsp;million in capital equipment, net of $905&nbsp;thousand of capital lease proceeds, and we received $541&nbsp;thousand in net proceeds from the
sale of discontinued operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by financing activities was $50.7&nbsp;million for the six months ended July&nbsp;2, 2005. In the second quarter of 2005, we borrowed $55.0&nbsp;million to
purchase DiOP. In addition, we received $483&nbsp;thousand of proceeds from the exercise of stock options and repaid $518&nbsp;thousand of capital lease obligations. Net cash provided by financing
activities was $4.7&nbsp;million for the six months ended July&nbsp;3, 2004, which includes receipt of the $5.0&nbsp;million term loan for the acquisition of Telic less $167&nbsp;thousand of
term loan repayments. In addition, for the first six months of 2004, we received $157&nbsp;thousand of proceeds from the exercise of stock options and repaid the remaining $282&nbsp;thousand of
capital lease obligations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing
activities provided $4.1&nbsp;million of cash in 2004 and used $1.5&nbsp;million of cash in 2003 and $898&nbsp;thousand of cash in 2002. During 2004, we obtained a
$5.0&nbsp;million term loan for the acquisition of Telic and received $360&nbsp;thousand in proceeds from the exercise of stock options. These sources of funds were partially offset by repayments
of $667&nbsp;thousand on the term loan and $473&nbsp;thousand on our capital leases. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003 and 2002, funds were used to repay capital leases. In 2003, we utilized $208&nbsp;thousand to retire five of our capital leases with the highest interest rates before their
maturity date. The prepayment penalties on these leases had expired, which enabled us to achieve a modest interest savings. During 2003, we paid $201&nbsp;thousand to settle litigation regarding our
preferred stock, which was liquidated in 1997. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of July&nbsp;2, 2005, total debt, which consisted of two term loans, was $55.0&nbsp;million. Total debt as a percentage of total capitalization (total debt and shareholders'
equity) was 49.2% at July&nbsp;2, 2005. As of December&nbsp;31, 2004, total debt, which consisted of a term loan and capital leases, was $4.9&nbsp;million. Total debt as a percentage of total
capitalization (total debt and shareholders' equity) was 8.4% at December&nbsp;31, 2004 and 2.2% at December&nbsp;31, 2003. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders'
equity was $53.1&nbsp;million, or $7.52 per common share outstanding, at December&nbsp;31, 2004 compared to $43.9&nbsp;million, or $6.28 per share, at
December&nbsp;31, 2003. The increase in shareholders'
equity was due primarily to net income of $8.7&nbsp;million. Most of the remaining increase in shareholders' equity was related to the exercise of stock options and stock option compensation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2005, we expect to spend between $3.0 and $3.5&nbsp;million on capital equipment. The majority of this capital investment will be used to purchase production and testing equipment,
which will expand our capacity and improve our efficiency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
our existing cash balance, anticipated cash flows from operations and our $15.0&nbsp;million revolving line of credit under our new credit facility, management believes that we
have sufficient liquidity to finance our operations, capital expenditures and working capital requirements and to meet our repayment obligations under the new credit facility for the foreseeable
future. </FONT></P>

<P><FONT SIZE=2><B>Off-Balance Sheet Arrangements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of July&nbsp;2, 2005, we are not involved in any
unconsolidated single-purpose entities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>43</FONT></P>

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<P><FONT SIZE=2><B>Contracts and Commitments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into certain contractual obligations, which will result in material cash outlays over the next several years. A summary of our contractual
obligations and commitments for capital leases, minimum lease payment obligations under non-cancelable operating leases and other obligations as of December&nbsp;31, 2004 are as follows
(in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="98%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Payments Due By Period</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Less Than 1<BR>
Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1 To 3<BR>
Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>3 To 5<BR>
Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>After 5<BR>
Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>Contractual Cash Obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>Notes payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,741</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,165</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>Capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>540</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>387</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>153</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>Operating leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6,348</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,548</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,468</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,206</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>126</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>Purchase obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,114</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>Other long-term obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,522</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>817</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>504</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>123</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>78</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>14,448</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,031</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,511</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>204</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
for the entry into and borrowing under our new credit facility and the repayment of all outstanding capital lease obligations, as described above, our contractual obligations have
not materially changed since December&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2004, we had operating lease commitments for all of our facilities, with the exception of our Cullman, Alabama facility, which is owned. In addition, our
operating lease commitments included leases on some office equipment. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2004, we had various purchase obligations, which included long-distance phone service, ATM lines and other commitments. We did not include cellular
phone service commitments, as we determined the obligation to be minimal. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
in other long-term obligations are commitments related to environmental remediation plans and building leases associated with discontinued operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are involved in the various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to
predict given the uncertainties regarding the extent of cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. As of December&nbsp;31, 2004, we determined
that it was probable that it would incur approximately $603&nbsp;thousand of remedial costs, of which approximately $200&nbsp;thousand is included in current liabilities and $403&nbsp;thousand
is in other long-term liabilities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, we disposed of the Automation Group, which included facilities in Wilmington, Massachusetts and Pittsburgh, Pennsylvania. As part of the terms of the sale, we remained
obligated under the operating leases for these facilities. In the first quarter of 2005, we negotiated an early termination of the remaining lease obligation for the Pittsburgh, Pennsylvania facility.
The lease for the Wilmington facility expires in 2006. Since 2002, we have been sub-leasing a small portion of our Wilmington facility; however, given the uncertainties regarding the real
estate market in Wilmington, we do not believe that we will be able to sublease the entire Wilmington facility at our contractual rates. Therefore, we have fully reserved for our remaining lease
commitment for the Wilmington facility and any remaining costs associated with this site will not have a material adverse effect on our business and financial condition. It is possible, however, that
our results of operations for a particular fiscal period could be materially affected. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>44</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2004, we were contingently liable for $680&nbsp;thousand under outstanding letters of credit. We have issued letters of credit for certain business
transactions including insurance programs and building lease security deposits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2004, we had one pension plan for which benefits and participation have been frozen. Pension benefits under this plan are generally based upon years of service
and compensation. The plan is an unfunded plan with an annual payout of approximately $105&nbsp;thousand. </FONT></P>


<P><FONT SIZE=2><B>Backlog  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A substantial portion of our business is of a build-to-order nature requiring various engineering, manufacturing, testing and other
processes to be performed prior to shipment. As a result, we generally have a significant backlog of orders to be shipped. At July&nbsp;2, 2005, our backlog of orders was $100.5&nbsp;million,
compared to a backlog of $81.7&nbsp;million at July&nbsp;3, 2004, an increase of $18.8&nbsp;million or 23%. On May&nbsp;2, 2005, we acquired DiOP's outstanding backlog of $9.9&nbsp;million.
Our backlog of orders increased by 28%, or $19.3&nbsp;million, to $88.2&nbsp;million at December&nbsp;31, 2004 from $68.9&nbsp;million at December&nbsp;31, 2003. We believe that a
substantial portion of our backlog of orders at July&nbsp;2, 2005 will be shipped over the next twelve months. However, approximately 11.3% of our current backlog will be shipped in the third
quarter of 2006 and beyond. </FONT></P>

<P><FONT SIZE=2><B>Critical Accounting Estimates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts
of assets, liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts for revenues and expenses during the reporting
period. On an ongoing basis, management evaluates estimates, including those related to inventory allowances, contingencies, bad debts, warranties, environmental remediation efforts and income taxes.
We base our estimates on historical data, when available, experience and on various other assumptions that are believed to be reasonable under the circumstances, the combined results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. </FONT></P>

<P><FONT SIZE=2><B>Critical Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. The most significant estimates and assumptions relate to inventory valuation and the adequacy of allowances for doubtful accounts, long-term loss contract
reserves and environmental contingencies. Actual amounts could differ significantly from these estimates. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue recognition.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We manufacture or distribute products, which are either components or subassemblies that are sold to
other manufacturers or OEMs.&nbsp;We do not sell any finished products directly to consumers. Therefore, we are generally not responsible for any installation or customer training. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However,
some of our contracts are subject to customer acceptance and generally the customer will inspect and accept the product at our facility prior to shipment. Generally, legal title
passes to the customer upon shipment. However, occasionally product is shipped FOB destination. When the product is shipped FOB destination, revenues are not recognized until the customer receives the
product. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
policy is to recognize revenues when product is either shipped to or received by the customer. However, certain long-term contracts are accounted for under the percentage
of completion model. Incurred costs and estimated gross profit are recognized as sales as work is performed based on the percentage that incurred costs bear to estimated total costs using our
estimates of costs and contract value. Cost estimates include direct and indirect costs such as labor, materials and overhead. These contracts require judgment relative to assessing risks, estimating
contract revenues and costs and making assumptions for schedule and technical issues. Contract change orders are included when they can be reasonably estimated and realization is probable. We may
receive progress payments that exceed costs incurred on these long-term contracts. Such advances are recognized as billings in excess of costs and are included in accrued expenses and
other current liabilities on our Consolidated Balance Sheets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income primarily results from the advance billings to our customers for the cost of beryllium, known as material only billings. These material only billings are deferred and
subsequently recognized as revenue only when the associated finished product is shipped. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due
to the build-to-order nature of our products, except for the distribution of ball bearings, we do not offer price protection and generally do not offer
discounts. To the extent discounts are offered, they are reflected at the time of the sale as a reduction in revenues. The price is fixed upon acceptance of the purchase order. When customer change
orders occur, any pricing changes are reflected in revised purchase orders. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for doubtful accounts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We periodically review the aging of our accounts receivable over ninety days to identify
potentially uncollectible accounts and establish reserves based on experience and discussion with customers. Actual write-offs could differ from our allowance for doubtful accounts. If
circumstances change (</FONT><FONT SIZE=2><I>i.e.</I></FONT><FONT SIZE=2>, higher than expected defaults or an unexpected material adverse change in a customer's ability to meet its financial
obligations), our estimates of recoverability of amounts due to us could be reduced by a material amount. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory valuation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We value our inventory at the lower of the actual cost to purchase and/or manufacture the inventory or
the current estimated market value of the inventory. We regularly review inventory quantities on hand and record a provision for excess or obsolete inventory based on current requirements and
historical usage. A significant increase in the demand for our products could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand
could result in an increase in the amount of excess or obsolete inventory quantities on hand. In addition, some of our markets are characterized by rapid technological change or frequent new product
development that could result in an increase in the amount of obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have
understated or overstated the provision required for excess or obsolete inventory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the future, if we determine our inventory to be overvalued, we would be required to recognize those costs in our cost of goods sold at the time of such determination. Likewise, if our
inventory is undervalued, we may have over-reported our costs of goods sold in previous periods and would be required to recognize additional operating income at the time of sale.
Therefore, although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a
significant impact on the value of our inventory and our reported operating results. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss contract reserves.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Generally, our customer contracts are completed within one year of receiving the order. However,
occasionally longer lead-time orders are received and we monitor these contracts periodically to determine whether our actual costs are comparable to our cost estimates used at the time of
order acceptance. If we determine that our actual costs are exceeding our anticipated revenues, we will record a loss contract reserve. Currently, one contract is covered by a loss contract reserve.
We accrued for this contract based on the contract price and the current cost structure, </FONT></P>

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<P><FONT SIZE=2>including
estimated cost increases. To the extent future manufacturing costs (</FONT><FONT SIZE=2><I>i.e</I></FONT><FONT SIZE=2>., labor rates and material costs) change, our loss contract reserves
will be impacted. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environmental contingencies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are currently involved in several environmental remediation projects. We accrue for
environmental contingencies when (1)&nbsp;responsibility for cleanup is determined and (2)&nbsp;costs are probable and can be reasonably estimated. When costs are not probable or cannot be
reasonably estimated, no accrual is made. As discussed in Note&nbsp;8 to our audited consolidated financial statements contained elsewhere in this prospectus, we have accrued our estimate of the
probable costs for the resolution of these claims. These estimates have been developed in consultation with outside environmental consultants handling these matters and are based upon an analysis of
the anticipated remediation plans. We do not anticipate these projects will have a material adverse effect on our consolidated financial position. It is possible, however, that future results of
operations could be materially affected by changes in our assumptions. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Self Insurance.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are self-insured for certain losses related to general liability, workers' compensation and
medical claims. Our liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. The estimated liability is established based on an analysis of historical
data and is reviewed by management on a quarterly basis to ensure that the liability is appropriate. While we believe that our estimates are reasonable based on the information currently available, if
actual trends, including the severity and frequency of claims, medical cost inflation or fluctuations in premiums, differ from our estimates, our results from operations could be negatively impacted. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounting for Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As part of the process of preparing the consolidated financial statements, we are required to
estimate the income taxes in each jurisdiction in which we operate. This process involves estimating the actual current tax liabilities together with assessing temporary differences resulting from the
differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Consolidated Balance Sheet. We must then assess
the likelihood that the deferred tax assets will be recovered, and to the extent that we believe that recovery is not more than likely, we are required to establish a valuation allowance. If a
valuation allowance is established or increased during any period, we are required to include this amount as an expense within the tax provision in the Consolidated Statements of Operations.
Significant judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recognized against net deferred assets. The valuation
allowance is based on our estimates of the taxable income in the jurisdictions in which we operate and the period over which the deferred tax assets will be recoverable. In the event that actual
results differ from these estimates or management adjusts these estimates in future periods, we may need to establish an additional valuation allowance, which could materially impact our results of
operations. </FONT></P>

<P><FONT SIZE=2><B>Recently Issued Accounting Standards  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No.&nbsp;123 (revised 2004), or
SFAS No.&nbsp;123&nbsp;(R), "Share-Based Payment," which revised SFAS No.&nbsp;123, "Accounting for Stock-Based Compensation." This statement supercedes APB Opinion No.&nbsp;25, "Accounting
for Stock Issued to Employees." The revised statement addresses the accounting for share-based payment transactions with employees and other third parties, eliminates the ability to account for
share-based compensation transactions using APB&nbsp;25 and requires that the compensation costs relating to such transactions be recognized in the consolidated statement of operations. SFAS
No.&nbsp;123&nbsp;(R) must be adopted no later than January&nbsp;1, 2006 as the result of an extension granted by the SEC on April&nbsp;14, 2005. Early adoption is permitted. We expect to
adopt the statement effective January&nbsp;1, 2006 as required. The impact of adoption of SFAS No.&nbsp;123 (R)&nbsp;cannot </FONT></P>

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<P><FONT SIZE=2>be
predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No.&nbsp;123 (R)&nbsp;in prior periods, the impact of that
standard would have approximated the impact of SFAS No.&nbsp;123 (R)&nbsp;as described in the disclosure of pro forma net income (loss) and net income (loss) per share in the stock-based
compensation accounting policy note included in Note&nbsp;1 to our audited consolidated financial statements included elsewhere in this prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;151, or SFAS No.&nbsp;151, "Inventory Costs, an amendment of ARB No.&nbsp;43,
Chapter&nbsp;4," to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that fixed
production overheads should be allocated to inventory based on normal capacity of production facilities. This statement is effective for our fiscal year 2006. We are in the process of evaluating
whether the adoption of SFAS No.&nbsp;151 will have a significant impact on our overall results of operations or financial position. </FONT></P>

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<BR></FONT><FONT SIZE=2><B>BUSINESS    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading designer and manufacturer of precision optical solutions for defense, aerospace, homeland security and high-performance commercial
applications. These sophisticated solutions are typically found in applications that demand the finest optical surfaces, highest accuracy and tightest motion control tolerances. Application examples
include thermal weapons systems, long-range surveillance cameras and highly precise medical imagers. We are also a technology leader in the supply of infrared surveillance solutions to
homeland security market customers such as the U.S. Border Patrol, Army, Navy, Air Force, Coast Guard and various port authorities. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
solutions are often embedded in larger systems that depend on precise optical control for accurate operation of critical functions. We are involved in many large-scale programs
including the F-16, F-18, Apache, Stryker, M1A2 Abrams and Bradley Fighting Vehicle. Many of the applications with which we are involved include the continuing development of next-generation
targeting, navigation and imaging systems for fighter aircraft, helicopters, aircraft carriers and armored vehicles. We also supply critical guidance and seeker components for platforms such as the
Minuteman intercontinental ballistic missile and the AIM-9X Sidewinder missile. Our products are included on many platforms within the U.S. NMD. Our defense products are often used in
sophisticated stabilized optical platforms, or SOP, which are highly accurate optical positioning mechanisms. The SOP is essential in applications such as military targeting and imaging systems. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to optical solutions, we distribute precision ball bearings used in a variety of industrial and commercial applications. We sell our components, sub-systems and
bearings to a variety of OEMs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are organized into two businesses: the Optical Systems Group and the Distributed Products Group. </FONT></P>


<P><FONT SIZE=2><I>Optical Systems Group  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Optical Systems Group designs, manufactures and sells highly precise systems, sub-systems and components that are typically used in surveillance, long-range
observation, tracking and targeting and high-performance imaging applications. Customers include both government and commercial organizations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
thermal camera systems are typically used for border surveillance, perimeter security and public safety, while sub-systems and components are usually designed for integration into
our customers' high-performance optical systems. Products can be grouped into four primary areas: reflective optical products, infrared products, motion control products and precision optical and
mechanical structures. However, customer requirements sometimes demand an optical solution that combines products from several of these areas. Our defense products are often designed to be integrated
into stabilized optical platforms, which are highly accurate optical positioning mechanisms. Stabilized optical platforms are essential in applications such as military targeting and imaging systems. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Optical Systems Group has design and manufacturing facilities in San Diego, California, Cullman, Alabama, Rochester Hills, Michigan, North Billerica, Massachusetts and Salem, New
Hampshire. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have completed two acquisitions in the past 16&nbsp;months. On May&nbsp;2, 2005, we acquired all of the capital stock of DiOP, a privately owned company that designs, manufactures
and assembles complex thermal imaging optical lens assemblies and cameras and infrared imaging solutions. On April&nbsp;8, 2004, we acquired all of the capital stock of Telic, a privately owned
manufacturer of infrared optical products. The financial results of Telic are included in our Optical Systems Group's results from the date of acquisition. DiOP's financial results are included in our
Optical System Group's results from </FONT></P>

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<P><FONT SIZE=2>the
date of acquisition and its historical financial results are included separately elsewhere in this prospectus and are included in the unaudited pro forma financial information included elsewhere
in this prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the fiscal year ended December&nbsp;31, 2004, the Optical Systems Group generated $78.2&nbsp;million, or approximately 75.5%, of our total sales. On a pro forma basis, after
giving effect to our acquisitions of DiOP and Telic as if each acquisition had occurred on January&nbsp;1, 2004, the Optical Systems Group would have generated $101.9&nbsp;million, or
approximately 80.1%, of our total sales for the fiscal year ended December&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DiOP's
and Telic's broad infrared optics capabilities increase our product offerings and complement our strong position in reflective optical solutions. The complementary additions of
DiOP's and Telic's technical capabilities to our core technical strengths are expected to increase our competitive advantage by broadening our technical offerings to prime contractors who are seeking
to outsource the fulfillment of their optical requirements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
focus markets for our Optical Systems Group are aerospace and defense, homeland security, high-performance graphic arts, medical imaging and semiconductor capital
equipment. Our products are typically sold to OEMs, which in turn supply a variety of government and commercial end-customers. In addition, some of DiOP's thermal imaging cameras and
clip-on night sights are sold directly to equipment integrators as well as government, military and commercial end users. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the fiscal year ending December&nbsp;31, 2004, we generated approximately 61% of our total sales in the aerospace and defense market. On a pro forma basis, after giving effect to
the DiOP and Telic acquisitions as if they had each occurred on January&nbsp;1, 2004, approximately 62% of our total sales for 2004 would have been generated in the aerospace and defense market. We
are well positioned within this market, with a diverse array of high-profile military programs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
core technologies and manufacturing techniques that we use to supply the aerospace and defense industry are transferable to commercial markets. The commercial markets that we serve
include the semiconductor, high-performance graphic arts and medical imaging industries. In all of these markets, highly precise optical and motion control systems are required. For
example, doctors need precise optical performance from medical imaging machines in order to make accurate diagnoses. Similarly, the semiconductor industry demands precise inspection of silicon wafers
to ensure accurate chip performance. </FONT></P>

<P><FONT SIZE=2><I>Distributed Products Group  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Distributed Products Group distributes precision ball bearings, spherical plain bearings and bushings, which are acquired from various domestic and
international sources, to OEMs&nbsp;and MROs. The bearings and bushings are used in a variety of industrial automation and commercial markets. Additionally, the Distributed Products Group designs,
manufactures and sells mechanical-bearing subassemblies for a variety of customers. The Distributed Products Group is comprised of the AST Bearings Division located in Montville, New Jersey, with a
satellite distribution center in Irvine, California. For the fiscal year ended December&nbsp;31, 2004, the Distributed Products Group generated $25.3&nbsp;million, or approximately 24.5%, of our
total sales. </FONT></P>

<P><FONT SIZE=2><B>Strengths  </B></FONT></P>

<P><FONT SIZE=2><I>Exposure to Growth Areas of the Department of Defense and Homeland Security Budgets  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of the key themes of the Department of Defense is the transformation of the military. This transformation involves making the military a lighter, more mobile
and networked force through a variety of weapons and systems such as smart weapons, advanced weapons control, high-performance thermal imaging systems and space-based reconnaissance and
imaging systems. We believe we are an </FONT></P>

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<P><FONT SIZE=2>important
supplier of highly-engineered optical and motion control equipment, which are integral components of the weapons and systems required for the transformation of the military. Our expertise in
precision optical solutions positions us well to benefit from the military's transformation. In addition, optical systems are a key technology for the homeland security market and the recent purchase
of DiOP provides us with a strong platform to capture significant growth in the infrared surveillance systems market. </FONT></P>

<P><FONT SIZE=2><I>Significant Portion of Highly Visible, Long-Term Production Programs  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our total sales is generated from continuing, long-term aerospace and defense production programs. A vast majority of our
Optical Systems Group's sales is derived from these programs. We are involved in many large-scale programs including the F-16, F-18, Apache, Stryker, M1A2 Abrams and Bradley Fighting Vehicle. Many of
the applications with which we are involved include the continuing development of next-generation targeting, navigation and imaging systems for fighter aircraft, helicopters, aircraft carriers and
armored vehicles. We also supply critical guidance and seeker components for the Minuteman upgrade and on the production of the AIM-9X Sidewinder missile. Further, within NMD, our products
are included on many current missile defense programs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we currently have our strongest funded backlog to date, primarily as a result of these production programs. As of July&nbsp;2, 2005, our total funded backlog was
$100.5&nbsp;million. This highly predictable revenue base allows us to better manage our costs and bid more effectively for new business. </FONT></P>


<P><FONT SIZE=2><I>Leading Market Positions  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe we are a leader in three important technology areas serving the defense and commercial markets throughout the world. These three technology areas are
military-grade optics, high-performance motion control and precision machining. We continue to be a preferred partner for the design of new, sophisticated, highly-engineered precision optical and
motion control solutions found in high-performance defense and commercial systems. For the fiscal year ended December&nbsp;31, 2004, we generated approximately 61% of our total sales in
the aerospace and defense market, where we have applications in leading missile, armored combat vehicle and military aircraft platforms. </FONT></P>


<P><FONT SIZE=2><I>Superior Technology  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide state-of-the-art optical solutions that meet the highest standards and solve the most challenging problems for our
customers. For example, in connection with the production of the JWST, which is the successor to the Hubble Space Telescope, we fabricate highly precise optical mirror segments using technologically
advanced manufacturing processes. Further, our thermal camera systems represent our continued efforts to deliver sophisticated precision optical solutions. Our most recent electro-optical surveillance
system product line provides the market with a range of comprehensive solutions to long-range and ultra long-range surveillance and security needs. Our success in thermal surveillance is largely due
to our expertise in infrared lens production, a critical technology in infrared surveillance cameras. </FONT></P>

<P><FONT SIZE=2><I>Diverse Customer and Program Base  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through our extensive product offering, we have established significant customer and program diversification, including product sales to OEMs&nbsp;and
end-users that design or utilize high-precision performance and high-speed imaging equipment. Our products are integral components used in a substantial number of
guidance and targeting systems that the U.S. military employs today, with a large </FONT></P>

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<P><FONT SIZE=2>installed
base. Our recent acquisition of DiOP further broadens our exposure to defense and homeland security customers. </FONT></P>

<P><FONT SIZE=2><B>Strategies  </B></FONT></P>

<P><FONT SIZE=2><I>Strengthen Positioning within Emerging Homeland Security Market  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are solidly positioned in the homeland security market with customers that include the U.S. Border Patrol, the Coast Guard and various port authorities. Since
September&nbsp;11, 2001, government officials have designed plans to reduce the risk of terrorist attacks within the United States. Many of the preventative efforts of these initiatives involve
surveillance and imaging of people, baggage, cargo and vehicles. We are well positioned to continue participating in this emerging market with our imaging and infrared solutions. </FONT></P>

<P><FONT SIZE=2><I>Capitalize on Increasing Focus on Defense Electronics  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ISRT within defense electronics represents one of the fundamental focus areas in the Department of Defense. This niche includes the growing market for optical
sensors and thermal imaging equipment. We have a substantial heritage in this market and continue to focus on protecting and building upon our position. We are involved in many large-scale programs
including the continuing development of the next-generation forward-looking infrared systems for fighter aircraft, helicopters and armored vehicles. Optics and optical systems are at the core of the
military's transformational initiatives. We believe optics and optical systems will receive budget allocations in an environment of new platform spending or legacy-platform upgrades. </FONT></P>

<P><FONT SIZE=2><I>Increase Technical Sophistication of Solutions  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to increase the complexity of the systems and solutions we sell to customers. For example, our surveillance systems include high-end optical
components along with infrared sensors, all packaged into a complete system. In addition, we intend to leverage our expertise in motion control to deliver even more comprehensive optical systems. By
combining our optical, motion control and machining expertise into a stabilized optical platform, we become more important to our customers and increase our competitive differentiation. </FONT></P>

<P><FONT SIZE=2><I>Explore Strategic Acquisitions  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to continue exploring strategic acquisitions within our markets. For example, we recently completed the acquisitions of DiOP, which establishes our
position as a technology leader of vertically integrated infrared surveillance systems, and Telic, which establishes us as a technology leader in the design and development of military-grade infrared
lenses. We will continue to look for complementary products, expand existing lines of business or enter into related product or market areas. </FONT></P>

<P><FONT SIZE=2><B>Market Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are sold mainly to OEMs&nbsp;in a variety of markets that demand the precision and performance that our products and capabilities provide. </FONT></P>

<P><FONT SIZE=2><I>Optical Systems Group  </I></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defense Electronics.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Defense electronics represents one of the largest growth sectors in the Department of Defense budget.
This sector includes the growing market for optical sensors and thermal imaging equipment. We have a substantial heritage in this market and continue to focus on protecting and building upon this
position. We are involved in many large-scale programs including the F-16, F-18, Apache, Stryker, M1A2 Abrams and Bradley Fighting Vehicle. Many of the applications </FONT></P>

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<P><FONT SIZE=2>with
which we are involved include the continuing development of next-generation targeting, navigation and imaging systems for fighter aircraft, helicopters, aircraft carriers and armored vehicles. We
are also involved in contributing to the night vision capabilities of the U.S. military. Night vision devices enable warfighters to better operate at night, creating a distinct advantage over their
enemies. To further enhance its advantage in nighttime operations, the Department of Defense continues to upgrade its infrared equipment, as evidenced by our recent $9.0&nbsp;million
base-contract win on the Thermal Weapon Sight program to supply infrared objective lens assemblies to BAE Systems. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optical
sensors and thermal imaging equipment are vitally necessary for the U.S. military to maintain its battlefield superiority. Planned upgrade and improvement of such optical and
thermal imaging equipment is not dependent upon spending on new platforms. Even as new platform spending is
projected to be challenging over the next few years, we expect that spending to upgrade the sensors on existing platforms will continue to thrive. In addition, we expect to participate in providing
heat sinks, structures, optics and opto-mechanical subassemblies on the next generation of defense communications and surveillance satellites that will support the ground- and
air-based network-centric warfare platforms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have the opportunity to provide value-added solutions by integrating our technologies into sophisticated optical systems. Our integration capabilities would create value for the prime
contractors by reducing the number of suppliers and collapsing the supply chain. We believe we are strategically positioned to design, develop and manufacture these systems for stabilized optical
platforms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we have designed our entire line of thermal cameras using a consistent architecture and are therefore able to easily construct exactly the combination of product features
that best meet a customer's needs. For example, we essentially use the same electronics processing architecture and optics across our suite of different cameras. The common design elements of our
thermal imagers permit us to offer a wide variety of thermal cameras to satisfy specific customer demand. This approach has allowed us to adapt cutting edge focal plane array technologies for both
high-end and low-end market opportunities. Additionally, our software engineering team has made significant strides in proprietary designs that drive our complex thermal camera
integration and allow us to respond to a variety of customer requirements. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Homeland Security.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Since September&nbsp;11, 2001, government officials have increased their focus on designing plans to
reduce the risk of terrorist attacks and prepare for the consequences of terrorist attacks. Many of the preventative efforts of these initiatives involve surveillance and imaging of people, baggage,
cargo and vehicles. We are well positioned to participate in this emerging market with our imaging and infrared solutions, including the expected increase in spending on border security, as the U.S.
Border Patrol upgrades and supplements existing systems on the nation's borders to bolster homeland security efforts. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;National Missile Defense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Restructuring the country's defense and deterrence capabilities to correspond to emerging threats
remains a high priority for the United States. The deployment of missile defenses is an essential component of this effort. We are an integral member of the contractor teams involved in the rollout of
key NMD programs from development to production, including EKV, THAAD, PAC-3, SBIRS-High and Airborne Laser. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Aerospace and Defense Opportunities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In connection with the U.S. government's efforts to continually enhance aging
weaponry, we have the opportunity to be involved in retrofitting the nuclear missile arsenal with advanced gas bearings. We were chosen as the U.S. Air Force's Center of Excellence for gas bearing
production. We also have a long history of involvement with space-based telescopes for use in U.S.-based surveillance applications, as well as weather and astronomical research. We expect to benefit
from the future growth in satellite programs. </FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Health Imaging.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe we have positioned ourselves as a key supplier to the medical imaging sector with an industry
leading airbearing scanner solution. The airbearing scanner that we developed has enabled our customer to reach the highest level of design and performance of any medical imaging systems available on
the market. We have the opportunity to continue expanding our position in the sector as the market moves to develop new systems that require the most advanced imaging technology. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Semiconductor Capital Equipment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our products are used in the precise inspection of semiconductor wafers. These products
include complete auto-focus assemblies, motion control stages and precise distance measuring devices. We have the opportunity to expand our position in this industry by introducing new
products and marketing to new customers. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graphic Arts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We were a pioneer in the development of airbearing laser scanners used for digital imaging of film within the
graphic arts market in the early 1990's. While declining advertising revenues have negatively impacted the graphic arts market, we have expanded our product offering to include marker engines, which
can increase our average selling price to a customer over six-fold. Although we anticipate a moderate decline in the overall graphic arts market, we expect to mitigate this decline with
the introduction of marker engines to our customer base. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thermal Imaging.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Advancements in cooled and uncooled focal plane array technology have improved the quality of infrared
images and drastically reduced the costs of producing thermal imaging camera systems. The development of uncooled focal plane array technology during the mid-1990s has resulted in a
pronounced reduction in the cost of infrared cameras. The market has responded with a number of infrared related products designed for a variety of applications, including firefighting, surveillance,
preventive maintenance and other commercial night vision needs. Furthermore, the availability of more moderately priced alternatives enables manufacturers to employ the same infrared systems or
components for both commercial and military applications. The enhanced total market size accumulated thereby is sufficient to create the economies of scale that permit broad deployment. We have been
at the forefront of developing both cooled and uncooled camera product offerings and, like much of the rest of the infrared market, we have experienced a broad increase in thermal imaging demand as
the cost effectiveness of employing infrared capabilities has escalated. </FONT></P>

<P><FONT SIZE=2><I>Distributed Products Group  </I></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ball Bearings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The markets we serve include industrial automation, semiconductor capital equipment, aerospace and defense and
consumer products. The market for the distribution of ball bearings and related products generally follows worldwide economic trends. In order to position us for growth, we are introducing new
products, lower cost products and value-added services. </FONT></P>

<P><FONT SIZE=2><B>Technologies, Products, and Capabilities  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize several key manufacturing technologies and have developed software and systems integration capabilities that enable us to design, manufacture and
assemble a wide variety of high-performance precision optical and motion control solutions. Our core competencies include: </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thermal Imaging Cameras.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have leveraged our turnkey optical design, manufacturing and integration capabilities into an
extensive and growing line of world-class thermal imaging cameras. We currently have a product line of seven integrated thermal imaging systems, approximately 20 cooled and uncooled cameras and five
clip-on weapon night sights. Our success in thermal cameras is integrally tied to its ability to produce industry-leading optical lens assemblies and coating processes. Our cameras,
including surveillance systems, clip-on weapon night sights and handheld imagers, fill a variety of requirements of the federal and military customers, municipal first responders,
firefighters and commercial entities. We have expanded into the design and manufacture of thermal cameras and systems intended for a wide range of surveillance requirements in the military, homeland
security and </FONT></P>

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<P><FONT SIZE=2>commercial
sectors. We sell weapons sights, both image intensified and uncooled thermal imagers, that are designed to clip onto a soldier's existing day sight eliminating the need to change over from
a day scope to a dedicated night sight while allowing the weapon to retain its boresight after repeated use. We also manufacture a line of handheld thermal cameras that it markets and sell to both
first responders in municipal fire, law enforcement and security departments, as well as to the U.S. Border Patrol and the U.S. military. We also manufacture and sell a line of complementary products,
which are thermal imaging cameras designed specifically for firefighting. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Precision Optics.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe we are a leading designer and manufacturer of custom precision reflective and transmissive
optical solutions and components. We provide complete design, fabrication and testing of glass and metal optics ranging from single and multi-faceted scan mirrors, plano and aspheric mirrors to
complex telescope assemblies and thermal camera lenses. We have designed and/or manufactured numerous optical products for a variety of military and astronomical applications over the past 40 years. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
specialize in the manufacture of diamond-machined aspheric metal optics that are significantly enhanced for optical figure and optical finish by post polishing, typically while using
custom engineered
interferometric null tests. "Bolt together" assemblies with post polished metal aspheres are routine. We produce a variety of aspheric surfaces including conic aspheres, general case aspheres,
cylindrical aspheres and toric aspheres up to 0.80-meter aperture. Our precision metal optic products are used in applications where performance requirements cannot be met with glass
optics. The advantages of our optics include lighter weight, thermal stability and ease of mechanical interface with housing and actuation devices. We sell our precision metal optical components for
use in high speed electro-mechanical scanners, weapons fire control systems, forward-looking infrared, or FLIR, night vision weapons systems and high-performance space-borne instruments
used on weather, mapping and scientific satellites. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also specialize in the production of precision glass lenses using infrared materials through the use of conventional grinding and polishing techniques. We produce aspheric lenses in
glass by hand polishing and aspheric and diffractive lenses in infrared materials by diamond turning. Surfaces are tested using null test and profilometry. These glass lenses are integrated into
sophisticated lens assemblies for use with thermal cameras or imaging systems, or sold as components for use by OEM suppliers in various infrared applications. Our infrared lens assemblies are tested
using infrared interferometry. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Precision Motion Control.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We design a complete line of brushless and brush type torque motors and servomotors that can be
customized to meet customers' unique specifications. The direct drive motor replaces conventional servomotor-gearhead configurations improving the response characteristics of the unit. Motors
incorporate rare earth magnets with outer diameters ranging from 0.5 to 48 inches and provide peak torques up to 1,650 ft-lbs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
gearless DC motor drive is ideally suited for high acceleration applications requiring improved response for rapid start/stop actions such as missile seekers, optical stabilization
and turret control. The absence of gearing also eliminates errors caused by friction and backlash creating high threshold sensitivity. These motors achieve accuracies of one arc second in a high
performance positioning system. Our DC torque motors are designed using premium materials that offer unique space and weight savings while generating maximum power output. Limited angle torque motors
do not require commutation electronics and have near zero cogging. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also manufacture highly reliable multi-speed and segmented positioning sensors, such as resolvers and induction potentiometers, which provide a high degree of angular accuracy and
resolution. These devices typically accompany our motors to provide position feedback within a high performance system. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resolvers
are available with transmitter, differential or receiver functions. These resolvers are specifically designed to withstand high-impact shock and environments
containing dirt,
grease, oil or other contaminants, and are available housed or un-housed in a variety of configurations. Resolvers are either single or multi-speed (up to 64-speed), with outer
diameters ranging from 0.7 to 15 inches, and provide accuracies to five arc seconds. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Induction
potentiometers, also defined as linear transmitters, provide high linearity output over a wide angular range. Induction potentiometers are available in frameless and housed
configurations and brush and brushless designs. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Electronics.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We design and manufacture several key electronic components for the semiconductor capital equipment and
high-end digital imaging markets, including laser interferometers and electronic controllers and drives. Our electronics components control the speed and position of electro-mechanical
systems, such as precision motors, actuators, X-Y positioning stages and laser scanners. Laser interferometers, which are designed to permit precise linear position sensing, are sold to
customers principally in the semiconductor capital equipment market. Electronic controllers coordinate the positioning and speed of electro-mechanical systems by interfacing with other motion control
components. Drives provide power to a motor based on input from the controller in order to achieve a designated position or to achieve a specific speed. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Precision Machining.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are a leading fabricator of precision machined and processed exotic materials. These include
beryllium, AlBeMet, titanium, halfnium, quartz and glass used in the defense, space and high-performance commercial markets. Operating within a 120,000 square foot
environmentally-controlled manufacturing facility, we provide complete fabrication services including manual and CNC milling, turning, EDM, lapping and grinding, chemical and special processing and
mechanical assembly. Using these technologies, we are able to meet our customers' extremely high tolerance requirements. Applications include precision optics, airbearings, heat sinks, structural
housings and gimbals. Our airbearings provide high-speed precision positioning and are used in high-speed scanners for digital imaging and weapons guidance systems. Our heat
sinks are used to dissipate heat in high-performance avionics and satellite electronics, and our gimbals are used in various applications, including positioning optical sensors in FLIR
night vision systems. We also manufacture optical substrates used internally and by our customers in a variety of precision metal optical applications such as weapon fire control systems and
space-borne instruments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes our core engineering and manufacturing capabilities: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Core Engineering and Manufacturing Technologies  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=1><B>Precision Optics<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" ALIGN="CENTER"><FONT SIZE=1><B>Precision Motion Control</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" ALIGN="CENTER"><FONT SIZE=1><B>Electronics</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" ALIGN="CENTER"><FONT SIZE=1><B>Precision Machining</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Infrared Lenses<BR>
Infrared Cameras<BR>
Optical Lens Assemblies<BR>
Telescopes<BR>
Thin Film Coating<BR>
Polygon Mirrors<BR>
Monogon Mirrors<BR>
Aspheric Optics Flat<BR>
Optics Head Mirrors<BR>
Fold Mirrors<BR>
Collimators</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=2>Multi-Axis Gimbals<BR>
AC Motors<BR>
Brush &amp; Brushless<BR>
DC Motors:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;Torque<BR>
&nbsp;&nbsp;&nbsp;&nbsp;Servo<BR>
&nbsp;&nbsp;&nbsp;&nbsp;Limited Angle<BR>
&nbsp;&nbsp;&nbsp;&nbsp;Resolvers<BR>
&nbsp;&nbsp;&nbsp;&nbsp;Synchros</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=2>AC &amp; DC Motors<BR>
Speed Controls<BR>
Custom DSP Motion<BR>
&nbsp;&nbsp;&nbsp;&nbsp;Controllers<BR>
Motor Drives</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=2>Optical Substrates<BR>
Gimbals and Yokes<BR>
Airbearings<BR>
Components<BR>
Structural Housings<BR>
Heat Sinks</FONT></TD>
</TR>
</TABLE>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilizing these core technologies, we have developed an array of solutions to create value-added, vertically integrated solutions for the aerospace, defense and high performance
commercial equipment industries. Examples of these solutions include: </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrared Zoom Lenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We design and manufacture sophisticated zoom and multi-field-of-view thermal
lenses for use in a variety of military applications. These lenses are sold to OEMs&nbsp;who subsequently integrate them with infrared cameras and imagers for military and intelligence purposes. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrared Cameras and Systems.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have developed a broad range of cooled and uncooled camera systems, culminating in the
recently released Electro Optical Sensor Suite, a state-of-the-art integrated system comprised of a cooled or uncooled thermal imager, pan/tilt mounting, joystick
controller, optional visible camera and numerous other features. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Motion-Control Solutions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We provide precision micro-positioning systems. These high-performance systems are used
in a diverse array of high-end commercial applications such as stabilized optical platforms, semiconductor and flat panel process and inspections systems, as well as laser imaging systems. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fast Steering Mirrors.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have applied extensive experience designing and building opto-mechanical systems to
develop fast steering mirror, or FSM, technology. The single-axis and two-axis, flexure mounted FSM represents a compact, low-cost, high-performance design solution for a
variety of emerging optical scanning and beam stabilization applications. Such devices may be used to correct for polygon cross scan errors, acquire and lock beams within free space laser systems,
modulate tilt and cavity control in interferometers, maintain beam stabilization in the presence of thermal drift and vibration, and provide general two-axis beam scanning. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marker Engines.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have leveraged our experience providing high-speed airbearing scanners with our precision
optics and electronics capabilities to produce ultra-high performance flat bed marker engines. Each engine is self-contained, pre-aligned and ready to integrate
into a customer's system. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rotary Airbearing Scanners.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We design and manufacturer rotary airbearing scanners for use in high-precision
graphic arts and medical imaging applications, semiconductor mask production and inspection applications, as well as defense applications. Airbearing scanners provide numerous advantages over
mechanical bearings due to their low noise characteristics, repeatability and ability to rotate at high speeds (up to 100,000 RPMs). When combined with our electronic controllers, our airbearing
scanners provide extremely high cross-scan accuracy and extremely low jitter. </FONT></P>

<P><FONT SIZE=2><B>Competition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The markets for our products are competitive. We compete primarily on the basis of our ability to design and engineer products to meet performance specifications
set by our customers. Most of our customers are OEMs&nbsp;that purchase component parts or subassemblies, which they incorporate into their end products. Although most of our customers are OEMs, our
thermal imaging cameras and clip-on night sights are typically sold directly to equipment integrators, as well as government, military and commercial end users. Product pricing, quality,
customer support, experience, reputation and financial stability are also important competitive factors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are a limited number of competitors in each of the markets for the various types of precision optical, infrared and motion control systems and components that we design,
manufacture and sell. Our competitors are often well entrenched particularly in the aerospace and defense markets. Some of these competitors have substantially greater resources than we do. We believe
that the breadth of our technologies and product offerings provides us with a competitive advantage over certain manufacturers that supply only discrete components or are not vertically integrated
with enabling technologies. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are numerous competitors in markets to which we distribute our precision ball bearings. These competitors vary in size and include bearing manufacturers and other distributors. We
believe that our product breadth and availability, combined with the value-added services we supply, provide competitive advantages. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect our competitors to continue to improve the design and performance of their products. We cannot assure you that our competitors will not develop enhancements to, or future
generations of, competitive products that will offer superior price or performance features, or that new technology or processes will not emerge that render our products less competitive or obsolete.
Increased competitive pressure could lead to lower prices for our products, thereby adversely affecting our business, financial condition and results of operations. We cannot assure you that we will
be able to compete successfully in the future. </FONT></P>

<P><FONT SIZE=2><B>Customers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our customers include OEMs, equipment integrators and end-users that design or utilize high-precision, performance and throughput
equipment. We sell our products primarily to OEM customers in the aerospace and defense, homeland security, high-end graphic art, medical imaging, semiconductor capital equipment and
industrial automation markets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
to Raytheon represented 18.9% of our sales in 2004 and 15.5% in 2003. On a pro forma basis, after giving effect to the DiOP and Telic acquisitions as if they had each occurred on
January&nbsp;1, 2004, our sales to Raytheon in 2004 would have represented 17.2% of our sales. Our accounts receivable for Raytheon as of July&nbsp;2, 2005, December&nbsp;31, 2004 and
December&nbsp;31, 2003 were $927&nbsp;thousand, $4.5&nbsp;million and $696&nbsp;thousand, respectively. During 2002, we did not have a concentration of sales greater than 10% with any one
customer. While Raytheon, a prime contractor with the U.S. government, does constitute a significant portion of our business, our sales are diversified since we sell to 14 separate locations within
five of Raytheon's seven segments. Consequently, we do not currently believe that this is at-risk business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had aggregate sales, both military and non-military, directly to the U.S. government, including its agencies and departments, of approximately $2.4&nbsp;million in 2004,
$3.4&nbsp;million in 2003 and $4.6&nbsp;million in 2002. These sales accounted for approximately 2.3% of total net sales in 2004, 4.0% in 2003 and 5.7% in 2002. On a pro forma basis, after giving
effect to the acquisitions of DiOP and Telic as if they had each occurred on January&nbsp;1, 2004, our aggregate sales, both military and non-military, directly to the U.S. government,
including its agencies and departments, would have been approximately 4.4% of total sales in 2004. Approximately 46.0% of total sales in 2004, 43.0% in 2003 and 40.7% in 2002 were derived from
subcontracts with U.S. government contractors. On a pro forma basis, after giving effect to the acquisitions of DiOP and Telic as if they had each occurred on January&nbsp;1, 2004, approximately 51%
of our total sales would have been derived from subcontracts with U.S. government contractors. The majority of these contracts are subject to termination at the convenience of the U.S. government, and
certain contracts are also subject to renegotiation. Currently, we are not aware of any proposed termination or renegotiation of such contracts that would have a material adverse effect on our
business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
a substantial part of our business is derived directly from contracts with the U.S. government, U.S. government agencies or departments, or indirectly through subcontracts with
U.S. government contractors, our operational results could be materially affected by changes in U.S. government expenditures for projects or programs using our products. However, we believe that the
broad number and diversity of the programs with which we are involved and the breadth of our product applications may lessen our exposure to such risk. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>58</FONT></P>

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<P><FONT SIZE=2><B>Sales, Marketing and Customer Support  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2005, we employed 67 sales, marketing and customer support personnel throughout our organization. We utilize two OEM sales organizations,
one focused on aerospace and defense customers and the other focused on high-performance commercial customers. We have a separate distributed products sales force that is focused on
selling ball bearings, bushings and assemblies, principally to commercial and industrial oriented OEMs&nbsp;as well as MRO distributors. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of July&nbsp;31, 2005, our direct sales organization included 27 direct sales field personnel, most of whom have engineering backgrounds, with the remainder involved in inside
sales, customer service, program management, contract administration and applications engineering. We believe that our sales effort is enhanced by having engineering-trained sales personnel available
to meet with our customers' engineering personnel. Our application and design engineers are also involved in the sales process. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also sell our products through a significant number of manufacturers' sales representatives and agents. Although we believe that we have satisfactory relationships with these sales
representatives and agents, we cannot assure you that these relationships will continue to be satisfactory or will continue at all. </FONT></P>

<P><FONT SIZE=2><I>Domestic and Foreign Sales  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below presents sales from continuing operations to specific geographic regions. Substantially all of our assets are located within the United States. </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><I>(In thousands)</I></FONT><BR>
<BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>91,069</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>73,051</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>65,179</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,672</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,991</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,951</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other foreign</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,789</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,067</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,456</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Total sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>79,586</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
our Distributed Products Group, we purchase a substantial amount of ball bearings that we distribute from two foreign suppliers. While we believe that we could obtain alternate
sources of supply, any interruption in the flow of products from these suppliers, or significant increases in the cost of these products, could have an adverse effect on our business, financial
condition and results of operations. We paid these two suppliers $6.4&nbsp;million in 2004, $5.4&nbsp;million in 2003 and $3.1&nbsp;million in 2002. </FONT></P>


<P><FONT SIZE=2><B>Research, Development and Engineering  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to develop new products and improve existing products in order to keep pace with the increasing performance requirements of our customers. We devote
significant resources, a portion of which is reimbursed by customers, to development programs directed at creating new products and product enhancements, as well as developing new applications for
existing products. Because we believe that our ability to compete effectively depends in part on maintaining and enhancing our expertise in applying new technologies and developing new products, we
dedicate substantial resources to engineering, research and development. As of July&nbsp;31, 2005, we employed 86 individuals in engineering,
research and development functions. We cannot assure you that our product development efforts will be successful in producing products that respond to technological changes or new products introduced
by others. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
costs associated with research, development and engineering expenses were $2.7&nbsp;million in 2004, $2.1&nbsp;million in 2003 and $2.0&nbsp;million in 2002. On a pro forma
basis, after giving effect to our </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>59</FONT></P>

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<P><FONT SIZE=2>acquisitions
of Telic and DiOP as if they had each occurred on January&nbsp;1, 2004, our costs associated with research, development and engineering expenses would have been $4.5&nbsp;million in
2004. We intend to direct our research and development activities toward integrating our various technologies and continuing to develop sub-systems. </FONT></P>

<P><FONT SIZE=2><B>Raw Materials Suppliers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The raw materials and components that we purchase are generally available from multiple suppliers. However, beryllium, a material used extensively by us, is only
available from Brush Wellman, the sole U.S. supplier. Historically, we have had an excellent relationship with Brush Wellman and have not encountered problems in obtaining our supply requirements.
However, the partial or complete loss of Brush Wellman as a supplier of beryllium, or production shortfalls or interruptions that otherwise impair the supply of beryllium, would have a material
adverse effect on our business, financial condition and results of operations. If such conditions were to occur, it is uncertain whether alternative sources could be developed. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we purchase a substantial amount of ball bearings that we distribute from two foreign suppliers. While we believe that we could obtain alternate sources of supply, any
interruption in the flow of products from these suppliers, or significant increases in the cost of these products, could have an adverse effect on our business, financial condition and results of
operations. </FONT></P>

<P><FONT SIZE=2><B>Patents and Trademarks  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not dependent upon any single patent or trademark. We have a combination of patents, trademarks and trade secrets, non-disclosure agreements
and other forms of intellectual property protection covering our proprietary technology. Although we believe that our patents and trademarks may have value, we believe that our future success will
depend primarily on the innovation, technical expertise, manufacturing and marketing abilities of our personnel. We cannot assure you as to the degree of protection offered by our patents. We cannot
assure you that we will be able to maintain the confidentiality of our trade secrets or that our non-disclosure agreements will
provide meaningful protection of our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or other disclosure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competitors
in the United States and foreign countries, many of which have substantially greater resources, may have applied for or obtained, or may in the future apply for and obtain,
patents that will prevent, limit or interfere with our ability to make and sell some of our products. Although we believe that our products do not infringe on the patents or other proprietary rights
of third parties, we cannot assure you that third parties will not assert infringement claims against us or that such claims will not be successful. </FONT></P>

<P><FONT SIZE=2><B>Environmental Regulation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we are currently in compliance, in all material respects, with federal, state and local laws and regulations governing the use and discharge of
hazardous substances and other pollutants into the environment or otherwise relating to the protection of the environment and that any non-compliance with such laws will not have a
material adverse effect upon our business, financial condition, results of operations, capital expenditures, earnings or competitive position. We cannot assure you, however, (1)&nbsp;that changes in
federal, state or local laws, regulations or regulatory policy or the discovery of unknown problems or conditions will not in the future require substantial expenditures or (2)&nbsp;as to the extent
of our liabilities, if any, for past failures, if any, to comply with applicable environmental laws, regulations and permits, any of which also could have a materially adverse effect on our business,
financial condition or results of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>60</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have incurred, and may in the future incur, costs and liabilities under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, or similar state laws for
the investigation and cleanup of hazardous waste or contamination at third party waste disposal sites or at current or former facilities, related in part to historical practices or to waste disposed
of prior to the purchase of facilities by us. We are in the process of remediating two formerly owned sites in Bedford, Ohio and St. Petersburg, Florida and we are participating as a potentially
responsible party, or PRP, at a third-party waste disposal site in Norwalk, Connecticut. Although liability under CERCLA is joint and several, meaning that liability can exceed a PRP's pro rata share
of cleanup costs, we believe, based on currently available information, that costs associated with these sites will not have a material adverse effect on our business and financial condition. It is
possible, however, that our results of operations for a particular fiscal period could be materially affected. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, in 2001, we were notified by the United States Environmental Protection Agency, or the EPA, that it considers us a PRP for the US Cap and Jacket site in Prospect,
Connecticut. Our former
subsidiary, which was merged into us in 1979, operated a screw machine shop at this location from 1961 to 1978. The EPA is demanding reimbursement for its costs incurred in connection with a
time-critical removal action at the site in 2001. In April&nbsp;2004, the EPA notified us that the total amount of these costs was approximately $650&nbsp;thousand, including indirect
costs and interest accrued through that date. We advised the EPA of our position that the contamination must have occurred after our ownership of the site and that, accordingly, we are not responsible
for the EPA's costs or the remediation of the site. The EPA continued its investigation of the site and threatened to commence a CERCLA cost-recovery action against us if we were unable to
amicably resolve the matter. On July&nbsp;18, 2005, we signed a settlement agreement with the EPA, resolving the EPA's claims for past response costs by a one-time payment of settling this matter
for $175&nbsp;thousand, plus accrued interest through the date of payment. Prior to finalizing the settlement agreement, the EPA must, among other things, submit it for public comment for a period
of 30&nbsp;days. We cannot assure you that the EPA will not modify or withdraw its consent to this settlement agreement if comments disclose facts or considerations that convince the EPA to withdraw
or modify the settlement. Upon the finalization of the settlement with the EPA, we will have no further responsibility to the EPA as it relates to the EPA's 2001 removal action at this site. We have
recognized a charge of $150&nbsp;thousand, net of tax of $90&nbsp;thousand in discontinued operations, for the settlement costs and legal expenses associated with the settlement of this matter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;2004, we have an accrual of $711&nbsp;thousand for future remediation costs related primarily to our former sites in Bedford, Ohio and St. Petersburg, Florida.
These estimates have been developed in consultation with outside environmental and legal consultants handling these matters and are based upon an analysis of the anticipated remediation plans. We do
not anticipate these matters will have a material adverse effect on our consolidated financial position. It is possible, however, that our future operations could be materially adversely affected if
our assumptions regarding the anticipated remediation plans are changed, for example, by the discovery of additional contamination, changes in regulatory requirements or the failure of other PRPs to
pay their pro-rata share of the remediation costs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
use or generate certain hazardous substances in our manufacturing and engineering facilities. We believe that our handling of these substances is in compliance with, and exceeds what
is required by, applicable local, state and federal environmental, safety and health regulations at each operating location. For example, we have instituted engineering controls to meet the As Low As
Reasonably Achievable standard with respect to airborne beryllium particulates at our Cullman, Alabama plant. Thus, the air quality standard for our facility is 0.2 micrograms per cubic meter, which
exceeds the standard set by the Occupational Safety and Health Administration's standard of 2 micrograms per cubic meter. We invest in protective equipment, process controls and specialized training
to minimize risks to employees, surrounding communities and the environment due to the presence and handling of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>61</FONT></P>

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<P><FONT SIZE=2>these
hazardous substances. We regularly conduct employee physical examinations and workplace air monitoring related to these substances. When potential or actual exposure problems have been
indicated, we implement corrective actions. In general, re-occurrence has been minimal or non-existent. We do not carry environmental impairment insurance. Accordingly, any
failure by us to properly manage exposure to hazardous substances could have a materially adverse effect on our business, financial condition and our operations. </FONT></P>

<P><FONT SIZE=2><B>Employees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2005, we employed 781 persons, including 554 in manufacturing, 67 in sales, 86 in engineering and 74 in administration. We currently do not
have any unions and we consider our relationship with our employees to be satisfactory. There has been no significant interruption of operations due to labor disputes. </FONT></P>


<P><FONT SIZE=2><B>Legal Proceedings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a defendant in various lawsuits, none of which are expected to have a material adverse effect on our business or financial position. It is possible,
however, that our results of operations for a particular fiscal period could be materially affected. </FONT></P>

<P><FONT SIZE=2><B>Facilities  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We lease approximately 4,740 square feet of office space, located at 175 Capital Boulevard in Rocky Hill, Connecticut, for our corporate headquarters. This lease
expires in 2010. The principal plants and other significant properties at July&nbsp;31, 2005 are: </FONT></P>

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<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1><B>Location<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="39%" ALIGN="CENTER"><FONT SIZE=1><B>Type of Facility</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Square<BR>
Footage</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Leased/Owned;<BR>
Expiration</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Cullman, AL</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Manufacturing, Engineering</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>120,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Owned</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>San Diego, CA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Manufacturing, Engineering</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>64,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Leased; 2010</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Montville, NJ</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Distribution</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Leased; 2009</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Salem, NH</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Administrative, Manufacturing, Engineering</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>30,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Leased; 2006</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Rochester Hills, MI</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Manufacturing, Engineering</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>29,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Leased; 2006</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>North Billerica, MA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Manufacturing, Engineering</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>19,900</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Leased; 2007</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Irvine, CA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Distribution</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Leased; 2005</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that our facilities are generally sufficient to meet our current and reasonably anticipated manufacturing, distribution and related requirements. We, however, periodically
review space requirements to ascertain whether our facilities are sufficient to meet our needs. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>62</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ee6313_1_63"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee6313_management"> </A>
<A NAME="toc_ee6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>MANAGEMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Executive Officers and Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table identifies our executive officers and directors and indicates their ages and positions as of August&nbsp;31, 2005: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="51%" ALIGN="CENTER"><FONT SIZE=1><B>Position</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Stephen W. Bershad</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Chairman of the Board of Directors, Chief Executive Officer and President</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>David A. Almeida</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Vice President&#151;Finance, Chief Financial Officer, Secretary and Treasurer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Scott B. Conner</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Vice President, Strategic Planning and Corporate Development</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Anthony J. Fiorelli, Jr.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Eliot M. Fried</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Richard F. Hamm, Jr.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Robert G. Stevens</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Director</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Bershad
has been our Chairman of the Board and Chief Executive Officer since 1988 and was our Chief Financial Officer from 1986 to 1989, and our President from 1986 to
August&nbsp;1999 and from March&nbsp;2002 to the present. Prior to that time, he was a Managing Director of Lehman Brothers&nbsp;Inc. and its predecessor firms, where he held a series of senior
management positions in merchant banking and mergers and acquisitions. Mr.&nbsp;Bershad is a director of EMCOR Group,&nbsp;Inc., an electrical and mechanical construction and facilities services
company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Almeida
joined us in November&nbsp;2001 as Vice President&#151;Finance, Chief Financial Officer, Secretary and Treasurer with nearly 20&nbsp;years of finance and
administrative experience with high-technology companies. Most recently, Mr.&nbsp;Almeida was Vice President&#151;Finance with ADC Telecommunications,&nbsp;Inc., a provider of
global network infrastructure products and services, in its Broadband, Access and Transport Group. Mr.&nbsp;Almeida spent eight years with ADC in a variety of executive positions managing finance,
human resources, information technology and customer service organizations through complex financial and business issues in a variety of ADC businesses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Conner
joined us in July&nbsp;2004 as Vice President, Strategic Planning and Corporate Development. Prior to joining us, Mr.&nbsp;Conner served for four years as Vice
President of Strategic Marketing and Business Development for Quantum Bridge Communications, formerly a privately held developer of Fiber-to-the-Home networking equipment. In this position, he
developed strategic marketing partnerships and headed the negotiations that lead to the sale of Quantum Bridge to Motorola. Prior to Quantum Bridge, Mr.&nbsp;Conner was Director of Business
Development and Strategy for ADC Telecommunications,&nbsp;Inc. where he was responsible for identifying and implementing several acquisitions. Before joining ADC, Mr.&nbsp;Conner spent several
years at Andersen Consulting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Fiorelli
has been a director of Axsys since 1986. Mr.&nbsp;Fiorelli has been a private investor since January&nbsp;1997. From December&nbsp;1985 until June&nbsp;1997,
he was President of Strategic Management Consulting Services,&nbsp;Inc., a management-consulting firm. Prior to that time, Mr.&nbsp;Fiorelli was President and Chief Executive Officer of General
Defense Corporation, a diversified engineering and manufacturing company. Mr.&nbsp;Fiorelli also serves as Chairman of the Board of the United States Merchant Marine Academy Alumni Foundation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Fried
has been a director of Axsys since 1994. For more than five years prior to his retirement in February&nbsp;2000, Mr.&nbsp;Fried was a Managing
Director&#151;Corporate Finance at Lehman
Brothers&nbsp;Inc. Mr.&nbsp;Fried is a director of Blount International,&nbsp;Inc., a manufacturer of industrial equipment products, and a director of Grant Prideco,&nbsp;Inc., an oil field
products company. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>63</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Hamm
has been a director of Axsys since 2000. Since November&nbsp;2004, Mr.&nbsp;Hamm has been the Senior Vice President, General Counsel and Secretary of Dendreon
Corporation, a biotechnology company. From April&nbsp;2002 to November&nbsp;2004, Mr.&nbsp;Hamm was the Vice President and Deputy General Counsel of Medtronic,&nbsp;Inc., a leading medical
technology company. Prior to Medtronic, Mr.&nbsp;Hamm was the Vice President&#151;Corporate Development and Planning at Carlson Companies,&nbsp;Inc., a travel, hospitality and marketing
company, for three years. For more than five years prior thereto, he was Senior Vice President&#151;Legal and Business Development and Vice President and General Counsel at Tropicana
Products,&nbsp;Inc., a leading producer of branded juice products. Mr.&nbsp;Hamm is a director of EMCOR Group,&nbsp;Inc., an electrical and mechanical construction and facilities services
company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Stevens
has been a director of Axsys since 2003. Since May&nbsp;2002, Mr.&nbsp;Stevens has been President of Growth Insight,&nbsp;Inc., a strategic planning practice,
which helps corporate and non-profit clients develop and improve customer-centric business models. Prior to that time, Mr.&nbsp;Stevens had been the Executive Vice President of
Bluefly,&nbsp;Inc., a publicly traded internet retailer of off-price fashion merchandise, for three years. From 1992 until 1999, Mr.&nbsp;Stevens served as Vice President and Partner
of Mercer Management Consulting,&nbsp;Inc., the management-consulting arm of Marsh&nbsp;&amp; McLennan,&nbsp;Inc. Mr.&nbsp;Stevens serves as Vice Chairman of the Board of Trustees of the Shambhala
Center of New York. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of the executive officers serve at the pleasure of the Board of Directors. Severance agreements have been entered into with all of the executive officers. For more information, see
the discussion under "&#151;Agreements with Directors and Officers." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors determines the compensation of non-employee Directors. Our non-employee directors receive an annual retainer fee of $18,000 plus meeting
fees of $1,000 for each Board meeting attended and $500 for each committee meeting attended. Directors who are our employees or are employees of any of our subsidiaries do not receive fees or other
compensation for their services as directors. All directors are reimbursed for travel and other expenses incurred in the performance of their duties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annually,
re-elected non-employee directors are granted an option to purchase the number of shares of our common stock, which on the date of grant have a fair
market value (as defined in the Stock Incentive Plan) equal to $30,000. On May&nbsp;11, 2004, each of Messrs.&nbsp;Fried, Fiorelli, Hamm and Stevens were granted options to purchase 2,507 shares
of common stock at an
exercise price of $11.973 per share with an expiration date of May&nbsp;11, 2014. These options vest 100% on the day immediately preceding our first regularly scheduled annual meeting of
stockholders occurring subsequent to the date of grant. The Stock Incentive Plan also provides that upon election to the Board, a new non-employee director will be granted an option to
purchase that number of shares of common stock, which on the date of grant have a Fair Market Value equal to $60,000. During 2004, there were no new directors added to the Board. In addition, Mr.
Fiorelli is covered under our executive health insurance plan, which provides for the reimbursement of deductible and coinsurance amounts and certain medical expenses. </FONT></P>

<P><FONT SIZE=2><B>Compensation Committee Interlocks and Insider Participation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, the Compensation Committee was composed of Messrs.&nbsp;Fiorelli, Fried and Hamm. There are no Compensation Committee interlocks between us and any
other entities involving our executive officers and directors who serve as executive officers of such entities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>64</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><B>Executive Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning compensation during the years ended December&nbsp;31, 2004, 2003 and 2002 for services in all capacities
awarded to, earned by or paid to our Chief Executive Officer, our two other current executive officers and a former executive officer of Axsys, which we collectively refer to as the "named executives"
in this prospectus: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Summary Compensation Table  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Long-term<BR>
Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Annual Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Options<BR>
(# of Shares)<SUP>(2)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Principal Position<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Salary ($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Bonus<BR>
($)<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other<BR>
Compensation<BR>
($)<SUP>(3)</SUP></B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2><B>Stephen W. Bershad</B></FONT><FONT SIZE=2><BR>
Chairman of the Board and Chief Executive Officer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR><BR></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>350,106<BR>
335,000<BR>
325,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR><BR></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>220,000<BR>
220,000<BR>
173,566</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>30,000<BR>
30,000<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR><BR></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>15,490<BR>
14,405<BR>
13,680</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><BR><FONT SIZE=2><B>David A. Almeida</B></FONT><FONT SIZE=2><BR>
Chief Financial Officer Vice President&#151;Finance, Secretary and Treasurer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
213,231<BR>
200,000<BR>
185,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
124,992<BR>
126,551<BR>
100,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
15,000<BR>
15,000<BR>
60,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21,917<BR>
24,995<BR>
29,045</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><BR><FONT SIZE=2><B>Scott B. Conner<SUP>(4)</SUP></B></FONT><FONT SIZE=2><BR>
Vice President&#151;Strategic Planning and Corporate Development</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
2004</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
85,384</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
41,241</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
45,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
30,694</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><BR><FONT SIZE=2><B>Kenneth F. Stern<SUP>(5)</SUP></B></FONT><FONT SIZE=2><BR>
Vice President&#151;Strategic Planning and Corporate Development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
187,525<BR>
185,000<BR>
177,208</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
53,614<BR>
87,794<BR>
66,566</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
7,500<BR>
7,500<BR>
15,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
34,402<BR>
23,679<BR>
21,573</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Reflects
payments under the Axsys Management Incentive Plan.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Reflects
awards under the Stock Incentive Plan.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Reflects:
(a)&nbsp;matching contributions under Axsys' 401(k) Plan, which in 2004 totaled $8,200 for Mr.&nbsp;Bershad, $8,200 for Mr.&nbsp;Almeida and $8,200 for
Mr.&nbsp;Stern; (b)&nbsp;payments under our executive health insurance plan, which in 2004 totaled $6,762 for Mr.&nbsp;Bershad, $13,189 for Mr.&nbsp;Almeida, $1,311 for Mr.&nbsp;Conner and
$25,894 for Mr.&nbsp;Stern; (c)&nbsp;payments of premiums for term life insurance maintained on behalf of the named executives, which in 2004 totaled $528 for Mr.&nbsp;Bershad, $528 for
Mr.&nbsp;Almeida, $220 for Mr.&nbsp;Conner and $308 for Mr.&nbsp;Stern; and (d)&nbsp;reimbursement for relocation costs of $29,163 for Mr.&nbsp;Conner. Our executive health insurance plan,
which covers only officers and certain key employees and Mr.&nbsp;Fiorelli, provides for the reimbursement of deductible and coinsurance amounts and certain medical expenses not covered under our
basic medical plans.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Conner
joined us in July&nbsp;2004. His annual base salary in 2004 was $185,000.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Stern
was terminated from Axsys in July&nbsp;2004. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>65</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain information regarding the options granted pursuant to the Stock Incentive Plan during the year ended December&nbsp;31, 2004 to the named
executives. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Stock Options Granted in Fiscal 2004  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="30%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Options<BR>
Granted</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of Total Options Granted to Employees During the Year Ended<BR>
December&nbsp;31, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise Price<BR>
($/Share)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Expiration<BR>
Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Grant Date<BR>
Present<BR>
Value<SUP>(3)</SUP></B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>Stephen W. Bershad</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10.99</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>03/04/09</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>112,408</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>David A. Almeida</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>15,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(2)</SUP></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.99</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>03/04/14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>59,769</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>Scott B. Conner</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>45,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(2)</SUP></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>21.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14.22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>07/19/14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>255,154</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>Kenneth F. Stern<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><SUP>(2)</SUP></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.99</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10/13/05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>29,887</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>These
options vest at the rate of 20% per year commencing on the first anniversary through the third anniversary and 40% on the fourth anniversary of the date of grant. Vesting of
these options will be accelerated in the event of certain changes in control of Axsys.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>These
options vest at the rate of 20% per year commencing on the first anniversary of the date of grant. Vesting of these options will be accelerated in the event of certain changes
in control of Axsys.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The
grant date present value was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: expected volatility of 43.3%;
risk-free interest rate of 4.24%; expected life of six&nbsp;years and no dividend yield. The Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective assumptions including the expected stock
price volatility. Because our stock-based awards to employees have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing model does not necessarily provide a reliable single measure of the fair value of awards pursuant to the Stock
Incentive Plan.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Stern
was terminated from Axsys in July&nbsp;2004. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>66</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ee6313_1_67"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain information regarding certain option exercises by the named executives in the year ended December&nbsp;31, 2004. The table also shows information
regarding unexercised stock option grants held by named executives as of December&nbsp;31, 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee6313_aggregate_option_exercises_in___agg03169"> </A>
<A NAME="toc_ee6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>Aggregate Option Exercises in Last Fiscal Year and<BR>  Fiscal Year-end Option Values    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="22%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year-End Option Values</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="22%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Number of Securities Underlying Unexercised Options at<BR>
Fiscal Year End&nbsp;(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Value of Unexercised In-the-Money Options at<BR>
Fiscal Year End&nbsp;($)<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="22%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired<BR>
on Exercise<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized on<BR>
Exercise<BR>
($)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="22%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2>Stephen W. Bershad</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>78,311</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>24,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>60,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>174,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>509,874</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2>David A. Almeida</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>40,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>87,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>477,734</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,011,219</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2>Scott B. Conner</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>45,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>148,050</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2>Kenneth F. Stern<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>300,827</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>69,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>144,597</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
only those options whose exercise prices are lower than $17.51 per share, the closing price for our common stock on the Nasdaq National Market on December&nbsp;31, 2004.
The value is based on the difference between the closing price on December&nbsp;31, 2004 and the exercise price of the option.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Stern
was terminated from Axsys in July&nbsp;2004. </FONT></DD></DL>


<P><FONT SIZE=2><B>Terminated Pension Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had a defined benefit pension plan, which was terminated on July&nbsp;31, 1989. We liquidated this plan on July&nbsp;29, 2004. As calculated by independent
actuaries, Mr.&nbsp;Bershad received a cash payout of $266,542. </FONT></P>

<P><FONT SIZE=2><B>Agreements with Directors and Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into indemnification agreements with our directors and executive officers in order to induce them to continue to serve as our directors and
officers, indemnifying them for any and all liabilities incurred by them arising out of their service as directors or officers, other than liabilities arising out of conduct which has been determined
in a final adjudication to constitute bad faith or a knowing violation of law or receipt by that person of an improper personal benefit. The rights to indemnification under the agreements are in
addition to any rights to indemnification contained in our Certificate of Incorporation or By-Laws, which provide for indemnification under certain circumstances. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into severance protection agreements with certain of our officers and key employees, including Stephen W. Bershad, David A. Almeida and Scott B. Conner, which provide for
certain benefits, among other things, if their employment is terminated within two years following a Change in Control (as defined in the agreements) of Axsys. The purpose of the severance protection
agreement is to foster the continued employment of officers and employees by allowing them to focus attention on their assigned responsibilities without distraction in the event of a possible change
in control of Axsys. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a Change in Control occurs and the executive's employment is terminated by us other than for cause, death or disability or by the executive for good reason within two years
thereafter, the executive will be entitled to receive a maximum lump sum cash payment equal to, in the case of Messrs.&nbsp;Almeida and Conner, 2.99 times the sum of (a)&nbsp;the highest annual
base salary paid to the executive during the twelve-month period immediately prior to the employment termination date and (b)&nbsp;the average of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>67</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ee6313_1_68"> </A>
<BR>

<P><FONT SIZE=2>annual
cash bonuses paid to the executive during the three calendar years prior to the year in which the employment termination date occurs and, at the executive's election, one year of continuation
of health care benefits or its cash equivalent. In the case of Mr.&nbsp;Bershad, he will be entitled to 2.99 times his "base amount" as defined in Section&nbsp;280G of the Internal Revenue Code of
1986, as amended, or the Code. To the extent that the payments and benefits provided under the severance protection agreements or any other of our plans or agreements would be subject to the excise
tax imposed under Section&nbsp;280G of the Code such payments and benefits shall be reduced (but not below zero) if and to the extent necessary so that no such payments or benefits provided to
Messrs.&nbsp;Bershad, Almeida and Conner shall be subject to such excise tax. The severance protection agreements of each of Messrs.&nbsp;Bershad, Almeida and Conner also provide that the
executive will be entitled to the foregoing severance benefits in the event he terminates his employment, with or without good reason, at any time during the one-month period commencing
six months following a Change in Control. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the severance protection agreements had an original term of up to two years from the date of its execution and automatically renews for successive one-year periods,
unless either party gives advance notice of non-renewal. Notwithstanding the foregoing, if there is a Change in Control, the agreements will not terminate prior to the expiration of
twenty-four months after the date of the Change in Control. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
their severance protection agreements, Mr.&nbsp;Almeida and Mr.&nbsp;Conner would receive up to six month's base compensation and certain other benefits from us in the event of
termination by us other than for cause. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kenneth
F. Stern, a former officer of ours, was terminated in July&nbsp;2004. Pursuant to his severance protection agreement, Mr.&nbsp;Stern received his bi-weekly base
salary and health benefits through the first anniversary of the termination date, which was July&nbsp;13, 2005. Mr.&nbsp;Stern's outstanding options were modified to accelerate his unvested
options and extend the time to exercise all options until ninety days after the end of his severance period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;2000, we entered into an employment agreement with Stephen W. Bershad. The agreement provided that during the initial period of the agreement, Mr.&nbsp;Bershad would
serve as our Chairman and CEO. The initial period of the agreement, which originally expired on October&nbsp;12, 2001, was extended until October&nbsp;12, 2002 in October&nbsp;2001,
October&nbsp;12, 2003 in October&nbsp;2002, October&nbsp;12, 2004 in 2003 and then subsequently extended to October&nbsp;12, 2005 in November&nbsp;2004. Upon expiration of this initial
period and for five years thereafter, the agreement provides that Mr.&nbsp;Bershad will serve as Chairman of the
Board. If Mr.&nbsp;Bershad is not elected to the Board, he is entitled to terminate his employment for good reason, the consequences of which are explained below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the agreement, Mr.&nbsp;Bershad will receive an annual salary of $350,000, subject to increase at the discretion of the Board, the responsibility for which was delegated by the
Board to the Compensation Committee, and will have the opportunity to earn an annual incentive bonus based on performance goals determined by the Board at the beginning of each fiscal year. He is also
eligible to receive awards under the Stock Incentive Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Mr.&nbsp;Bershad's employment is terminated by us other than for cause or by Mr.&nbsp;Bershad for good reason, Mr.&nbsp;Bershad will be entitled to the following compensation:
(1)&nbsp;within ten days of the employment termination date, all amounts of compensation for services rendered to us, including all accrued and unpaid base salary, accrued and unpaid bonus and
vacation pay as of the employment termination date, a pro rata portion of the highest annual bonus paid or payable to him in respect of any of the three full fiscal years of us immediately preceding
the employment termination date, all benefits accrued and unpaid under any benefit plans, programs or arrangements in which he has been a participant as of his termination date and any reimbursable
expenses incurred by him on our behalf during the period ending on the employment termination date; (2)&nbsp;within 30&nbsp;days following the employment termination date, a lump sum payment equal
to the greater of (x)&nbsp;two times the sum of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>68</FONT></P>

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<BR>

<P><FONT SIZE=2>(i)&nbsp;his
base salary plus (ii)&nbsp;the highest annual bonus paid or payable to him for any of our three full fiscal years immediately preceding his termination date and (y)&nbsp;the amount
of the base salary and bonus which would have been paid to him during the employment term had it not been terminated, assuming that the highest annual bonus paid or payable to him for any of our three
full fiscal years immediately preceding his termination would have been paid to him for each full fiscal year during the employment term; and (3)&nbsp;during the greater of (x)&nbsp;the
24-month period following the employment termination date and (y)&nbsp;the balance of the employment term, medical, dental, hospitalization, prescription drug and life insurance coverage
and benefits provided to him immediately prior to termination. In addition, all stock options held by him will become fully vested and will remain outstanding for their entire term and all
restrictions on all shares of restricted stock or other equity-based awards held by him will lapse and will become fully vested. To the extent that the payments and benefits provided under this
agreement or any other of our plans or agreements would be subject to the excise tax imposed under Section&nbsp;280G of the Code, such payments and benefits shall be reduced (but not below zero) if
and to the extent necessary so that no such payments or benefits provided to Mr.&nbsp;Bershad shall be subject to such excise tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the employment term is terminated by reason of Mr.&nbsp;Bershad's death or disability, by us for cause, by Mr.&nbsp;Bershad without good reason, by mutual agreement of the
parties, or by expiration of the employment term, our sole obligation under the employment agreement will be to pay Mr.&nbsp;Bershad or his estate, as the case may be, within 30&nbsp;days
following the employment termination date, all amounts of compensation for services rendered to us, including all accrued and unpaid base salary, accrued and unpaid bonus and vacation pay as of the
employment termination date, a pro rata portion of his annual bonus opportunity for the year of termination date, all benefits accrued and unpaid under any benefit plans, programs or arrangements in
which he has been a participant as of his termination date and any
reimbursable expenses incurred by him on our behalf during the period ending on the employment termination date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that at any time Mr.&nbsp;Bershad is entitled to receive payments and/or benefits under both his employment agreement and his severance protection agreement, he will
receive the payments and/or benefits only under the severance protection agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Bershad
is subject to a non-competition covenant for two years following termination. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>69</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=72,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=516962,FOLIO='69',FILE='DISK124:[05NYC3.05NYC6313]EE6313A.;17',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_eg6313_1_70"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="eg6313_principal_stockholders"> </A>
<A NAME="toc_eg6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>PRINCIPAL STOCKHOLDERS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table below sets forth, as of March&nbsp;7, 2005 unless otherwise indicated, certain information known to us regarding the beneficial ownership of
our common stock by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
person known by us to beneficially own more than 5% of our common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
of our directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
named executives; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>all
of our directors and executive officers as a group. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of our common stock outstanding on March&nbsp;7, 2005 was 7,066,287. That figure does not include shares reserved for issuance upon the exercise of options granted
under our Stock Incentive Plan. Percentage of ownership after the offering is based on 10,099,266 shares of common stock outstanding after completion of this offering. This table assumes no exercise
of the underwriters' over-allotment option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise noted, all information with respect to beneficial ownership has been furnished by each director or executive officer, or is based on filings with the SEC, as the case
may be. Unless otherwise indicated, the persons named below have sole voting and investment power with respect to the number of shares set forth opposite their names. Beneficial ownership of our
common stock has been determined for this purpose in accordance with the applicable rules and regulations promulgated under the Securities Exchange Act of 1934, which provide, in part, that a person
is deemed to be the beneficial owner of shares of stock if the person, directly or indirectly, has or shares the voting or
investment power of that stock, or has the right to acquire ownership of the stock within 60&nbsp;days. Shares that are subject to stock options that may be exercised within 60&nbsp;days of
March&nbsp;7, 2005 are reflected in the number of shares set forth below and in computing the percentage of our common stock beneficially owned by the person who owns those options. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares beneficially owned prior to this offering</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares to be beneficially owned after this offering</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares being offered</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Stephen W. Bershad<SUP>(1)(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,930,442</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>27.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,930,442</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><SUP>(2)</SUP></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>19.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Kern Capital Management, LLC<SUP>(3)</SUP><BR>
114 West 47th Street, Suite 1926<BR>
New York, NY 10036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>567,450</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>567,450</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Albert Fried &amp; Company, LLC<SUP>(4)</SUP><BR>
60 Broad Street, 39th Floor<BR>
New York, NY 10004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>540,976</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>540,976</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Babson Capital Management, LLC<SUP>(5)</SUP><BR>
One Memorial Drive<BR>
Cambridge, MA 02142</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>418,400</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>418,400</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Kenneth F. Stern<SUP>(6)(7)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>106,423</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>106,423</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>David A. Almeida<SUP>(2)(8)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>61,500</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>61,500</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Anthony J. Fiorelli, Jr.<SUP>(9)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>36,293</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>36,293</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Eliot M. Fried<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,965</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,965</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Richard F. Hamm, Jr.<SUP>(11)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,109</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,109</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>70</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=73,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=456745,FOLIO='70',FILE='DISK124:[05NYC3.05NYC6313]EG6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
<A NAME="page_eg6313_1_71"> </A>
<!-- end of table folio -->
<TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Robert G. Stevens<SUP>(12)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,386</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,386</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Scott B. Conner</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>All directors and executive officers as a group (7&nbsp;persons)<SUP>(13)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,045,994</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>28.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,045,994</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>19.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><BR>*</FONT></DT><DD><FONT SIZE=2>Less
 than 1%.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
33,000 shares of common stock underlying options that are exercisable as of March&nbsp;7, 2005 or within 60&nbsp;days after such date. Mr.&nbsp;Bershad
owns 1,003,180 shares of common stock directly, 8,116 shares through the Axsys Technologies,&nbsp;Inc. 401(k) Retirement Plan and 886,146 shares of common stock indirectly through SWB Holding
Corporation, of which he is the sole stockholder and chairman. Mr.&nbsp;Bershad's address is c/o Axsys, 175 Capital Boulevard, Suite 103, Rocky Hill, CT 06067.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Stephen
W. Bershad and David A. Almeida, who are our executive officers, are the sole trustees of the 401(k) Plan and may be deemed to beneficially own shares of common
stock held by the 401(k) Plan. Except to the extent of their individual interests therein, each of Messrs.&nbsp;Bershad and Almeida disclaims beneficial ownership of such 401(k) Plan shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>According
to a Schedule&nbsp;13G filed on February&nbsp;14, 2005 by Kern Capital Management, LLC, or Kern, and its managing members. Kern has sole voting and
dispositive power with respect to these shares in its capacity as an investment adviser. Kern's managing members disclaim beneficial ownership of these shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>According
to a Schedule&nbsp;13G filed by Albert Fried&nbsp;&amp; Company, LLC, or AFC, on February&nbsp;16, 2005. AFC has sole voting and dispositive power with
respect to 470,270 of these shares in its capacity as a broker-dealer. Albert Fried, Jr. is the managing member of AFC, and disclaims beneficial ownership over the shares beneficially owned by AFC.
Includes 70,706 shares with respect to which Albert Fried, Jr., in his individual capacity, has sole voting and dispositive power.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>According
to a Schedule&nbsp;13G filed on January&nbsp;20, 2005 by Babson Capital Management, LLC, or Babson, and its management members. Babson, in its capacity as
an investment adviser, has sole dispositive power with respect to all of these shares and has sole voting power with respect to 415,950 of these shares. Babson has no voting power with respect to the
other 2,450 shares beneficially owned by it.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Represents
69,000 shares of common stock underlying options, which are exercisable as of March&nbsp;7, 2005, or within 60&nbsp;days after such date and 37,423 shares
of common stock owned directly.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Stern
was terminated from Axsys in July&nbsp;2004.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Represents
61,500 shares of common stock underlying options, which are exercisable as of March&nbsp;7, 2005, or within 60&nbsp;days after such date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD><FONT SIZE=2>Includes
34,965 shares of common stock underlying options that are exercisable as of March&nbsp;7, 2005, or within 60&nbsp;days after such date and 1,328 shares of
common stock owned directly.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD><FONT SIZE=2>Includes
18,281 shares of common stock underlying options that are exercisable as of March&nbsp;7, 2005, or within 60&nbsp;days after such date and 16,684 shares of
common stock owned directly.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD><FONT SIZE=2>Represents
20,109 shares of common stock underlying options that are exercisable as of March&nbsp;7, 2005, or within 60&nbsp;days after such date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(12)</FONT></DT><DD><FONT SIZE=2>Represents
4,386 shares of common stock underlying options that are exercisable as of March&nbsp;7, 2005, or within 60&nbsp;days after such date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(13)</FONT></DT><DD><FONT SIZE=2>Does
not include shares owned by Mr.&nbsp;Stern who was terminated from Axsys in July&nbsp;2004. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>71</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=74,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=249524,FOLIO='71',FILE='DISK124:[05NYC3.05NYC6313]EG6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ei6313_1_72"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ei6313_description_of_capital_stock"> </A>
<A NAME="toc_ei6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF CAPITAL STOCK    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of this offering, there will be 10,099,266 shares of common stock issued and outstanding, based on the number of shares outstanding as of
July&nbsp;2, 2005, and no shares of preferred stock issued and outstanding. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of July&nbsp;2, 2005, our authorized capital stock consisted of 30,000,000 shares of common stock, $.01 par value per share, of which 7,099,266 shares were issued and outstanding,
and 4,000,000 shares of preferred stock, $.01 par value per share, of which no shares were issued and outstanding. </FONT></P>


<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary of the terms of our common stock is not meant to be a complete description of our common stock. It is qualified in its entirety by reference
to the DGCL and to the terms and provisions of our Restated Certificate of Incorporation and our By-Laws, copies of which we have filed as exhibits to the registration statement of which
this prospectus forms a part. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Certificate of Incorporation authorizes us to issue 30,000,000 shares of common stock and 4,000,000 shares of preferred stock. Our Certificate of Incorporation allows our board to
provide by resolution for the issuance of preferred stock in any series, and to fix the rights, preferences, privileges and restrictions of the preferred stock, including, among other things, the
dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and number of shares constituting any series or designation of any series. On July&nbsp;2, 2005, there
were 7,099,266 shares of common stock issued and outstanding, and there were no shares of preferred stock designated or issued. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of shares of common stock are entitled to one vote for each share held of record on matters to be voted on by the stockholders. Holders of shares of common stock are entitled to
receive dividends as determined by our board of directors. If we were to liquidate, dissolve or wind up our affairs, holders of our common stock would share proportionately in our assets that remain
after payment of all debts and obligations and after any liquidation payments to preferred stockholders, if any. Holders of common stock have no preemptive, subscription, redemption or conversion
rights. </FONT></P>

<P><FONT SIZE=2><B>Authorized But Unissued Shares  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The authorized but unissued shares of our common stock and preferred stock are available for future issuance without stockholder approval, except to the extent
required by Delaware law or the rules of the Nasdaq Stock Market. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to
obtain control of us by means of a proxy contest, tender offer, merger or otherwise. </FONT></P>

<P><FONT SIZE=2><B>Delaware Anti-Takeover Law  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the provisions of Section&nbsp;203 of the DGCL. In general, Section&nbsp;203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a period of three years after the time that the person became an interested stockholder, unless: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>before
the person became an "interested stockholder," the board of directors of the corporation approved the transaction in which the "interested stockholder" became an
"interested stockholder" or approved the business combination;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>upon
consummation of the transaction that resulted in the stockholder becoming an "interested stockholder," the "interested stockholder" owned at least 85% of the voting
stock of the </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>72</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ei6313_1_73"> </A>
<UL>
<UL>

<P><FONT SIZE=2>corporation
that was outstanding at the time the transaction commenced. For purposes of determining the number of shares outstanding, shares owned by directors who are also officers of the corporation
and shares owned by employee stock plans, in specified instances, are excluded; or </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>at
or after the time the person became an "interested stockholder," the business combination is approved by the board of directors of the corporation and authorized at an
annual or special meeting of the stockholders by the affirmative vote of at least 66<SUP>2</SUP>/<SMALL>3</SMALL>% of the outstanding voting stock which is not owned by the "interested stockholder." </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
"business combination" is defined generally to include mergers or consolidations between a Delaware corporation and an "interested stockholder," transactions with an "interested
stockholder" involving the assets or stock of the corporation or any majority-owned subsidiary, transactions which increase an "interested stockholder's" percentage ownership of stock of the
corporation or any majority-owned subsidiary, and receipt of various financial benefits from the corporation or any majority-owned subsidiary. In general, an "interested stockholder" is defined as any
person or entity that is the beneficial owner of at least 15% of a corporation's outstanding voting stock or is an affiliate or associate of the corporation and was the beneficial owner of 15% or more
of the outstanding voting stock of the corporation at any time within the past three years. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
provisions may have the effect of delaying or preventing a change of control of Axsys without action by the stockholders and, therefore, could adversely affect the price of our
common stock. </FONT></P>

<P><FONT SIZE=2><B>Unanimous Written Consent; Special Meetings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Certificate of Incorporation provides that any action required or permitted to be taken by the holders of our common stock at any meeting of our stockholders
may be taken without a meeting only by unanimous written consent signed by the holders of all the outstanding shares of our common stock. Our By-Laws further provide that special meetings
of stockholders may be called only by the chairman of the board or by the written consent of three-quarters of the entire board of directors. </FONT></P>

<P><FONT SIZE=2><B>Number, Election and Removal of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our By-Laws, there may be no less than two and no more than twelve directors, although preferred stockholders may elect additional directors
under specified circumstances. Our By-Laws also provide that no decrease in the number of directors may shorten the term of any incumbent director. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
vacancy in the board that is caused by death, resignation, removal, or otherwise, and any newly created directorship that results from an increase in the number of directors, may be
filled only by the affirmative vote of at least a majority of the directors then in office, even if the directors are less than a quorum, or by the sole remaining director. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
our By-Laws, any one or more directors may be removed from office only for cause and only by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
affirmative vote of three-quarters of the entire board of directors; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
affirmative vote of two-thirds of the votes that are represented by the issued and outstanding shares entitled to vote at a meeting called for this purpose. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
provisions of our By-Laws governing removal may have the effect of discouraging a third party from initiating a proxy contest, making a tender offer or otherwise
attempting to gain control of Axsys. In addition, these provisions may have the effect of discouraging an attempt to change the composition or policies of the board of directors, even though the
attempt might be beneficial to us or our </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>73</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ei6313_1_74"> </A>
<BR>

<P><FONT SIZE=2>stockholders.
These provisions of our By-Laws could thus increase the likelihood that incumbent directors will retain their positions. </FONT></P>


<P><FONT SIZE=2><B>Amendment of Our By-Laws  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to adopt, repeal, alter or amend the provisions set forth in the By-Laws, the By-Laws require: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
unanimous written consent of all directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
affirmative vote of a majority of the entire board of directors acting at a regular or special meeting. The notice of the meeting must include notice of the proposed
action to amend the By-Laws; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>by
the affirmative vote of a majority of votes represented by our issued and outstanding shares entitled to vote at a meeting called for this purpose. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><B>Advance Notice Provisions for Stockholder Nominations and Proposals  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our By-Laws provide that stockholders seeking to make nominations of candidates for election as directors or to bring business before an annual
meeting of stockholders must provide timely notice in writing. To be timely, we must receive notice no less than 60&nbsp;days nor more than 90&nbsp;days before the scheduled annual meeting. If we
give less than 70&nbsp;days' notice or prior public disclosure of the date of our scheduled annual meeting, then we must receive notice no later than the close of business on the 10th day after the
day that we mailed the notice or the day that we made the public disclosure of the scheduled annual meeting, whichever is earlier. Our By-Laws also specify certain requirements as to the
form and content of a stockholder's notice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an
annual meeting of stockholders. </FONT></P>

<P><FONT SIZE=2><B>Limitation on Liability and Indemnification Matters  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Certificate of Incorporation limits the liability of our directors to us and our stockholders to the fullest extent permitted by Delaware law. Specifically,
our directors will not be personally liable for money damages for breach of fiduciary duty as a director, except for liability: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>for
any breach of the director's duty of loyalty to us and our stockholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>for
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>under
Section&nbsp;174 of the DGCL, which concerns unlawful payments of dividends, stock purchases, or redemptions; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>for
any transaction from which the director derived an improper personal benefit. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Certificate of Incorporation also contains provisions indemnifying our directors and officers to the fullest extent permitted by Delaware law. The indemnification permitted under
Delaware law is not exclusive of any other rights to which the persons may be entitled. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
maintain directors' and officers' liability insurance to provide our directors and officers with insurance coverage for losses arising from claims based on breaches of duty,
negligence, error and other wrongful acts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also have entered into indemnification agreements with some of our directors and officers. These agreements contain provisions that may require us, among other things, to indemnify
these directors and officers against certain liabilities that may arise because of their status or service as </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>74</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ei6313_1_75"> </A>
<BR>

<P><FONT SIZE=2>directors
or officers, advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified and obtain directors' and officers' liability insurance. </FONT></P>


<P><FONT SIZE=2><B>Registrar and Transfer Agent  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mellon Investor Services is the transfer agent and registrar for our common stock. </FONT></P>

<P><FONT SIZE=2><B>Listing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is quoted on the Nasdaq National Market under the symbol "AXYS." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>75</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ek6313_1_76"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ek6313_underwriting"> </A>
<A NAME="toc_ek6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>UNDERWRITING    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to offer the shares through the underwriters. Subject to the terms and conditions described in an underwriting agreement between us and Bear,
Stearns&nbsp;&amp; Co.&nbsp;Inc. and Banc of America Securities LLC, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares of
common stock listed opposite their names below. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Underwriter<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
of Shares</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Bear, Stearns &amp; Co. Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,755,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Banc of America Securities LLC.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,170,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Kaufman Bros., L.P.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>75,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="74%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>3,000,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters have agreed to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting
agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to
make in respect of those liabilities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. </FONT></P>

<P><FONT SIZE=2><B>Commissions and Discounts  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters have advised us that they propose initially to offer the shares to the public at the public offering price on the cover page of this prospectus
and to dealers at that price less a concession not in excess of $0.65 per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $0.10 per share to other dealers.
After the public offering, the public offering price, concession and discount may be changed. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the
underwriters of their over-allotment option. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="50%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Without Option</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>With Option</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2>Public offering price</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>18.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>54,000,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>62,100,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2>Underwriting discount<BR>
(payable by us)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,240,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,726,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2>Proceeds, before expenses, to<BR>
Axsys Technologies, Inc.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16.92</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>50,760,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>58,374,000</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expenses of the offering, excluding the underwriting discount and commissions and related fees, are estimated at $980&nbsp;thousand and are payable by us. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>76</FONT></P>

<HR NOSHADE>
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<A NAME="page_ek6313_1_77"> </A>

<P><FONT SIZE=2><B>Over-Allotment Option  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have granted the underwriters an option exercisable for 30&nbsp;days from the date of this prospectus to purchase a total of up to 450,000 additional shares
at the public offering price less the underwriting discount. The underwriters may exercise this option solely to cover any over-allotments, if any, made in connection with this offering.
To the extent the underwriters exercise this option in whole or in part, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional
shares approximately proportionate to that underwriter's initial commitment amount reflected in the above table. </FONT></P>

<P><FONT SIZE=2><B>No Sales of Similar Securities  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and each of our officers and directors have agreed, with certain limited exceptions, not to sell or transfer any common stock for 90&nbsp;days after the date
of this prospectus without first obtaining the written consent of Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc. and Banc of America Securities LLC. Specifically, we and these other individuals have agreed,
subject to certain limited exceptions, not to directly or indirectly: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>offer,
pledge, sell or contract to sell any common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>sell
any option or contract to purchase any common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>purchase
any option or contract to sell any common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>grant
any option, right or warrant for the sale of any common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>lend
or otherwise dispose of or transfer any common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>request
or demand that we file&nbsp;a registration statement related to the common stock; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is
to be settled by delivery of shares or other securities, in cash or otherwise. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc.
and Banc of America Securities LLC may waive this lockup without public notice. This lockup provision does not limit our ability to grant options to purchase common stock under our Stock Incentive
Plan or issue shares of common stock under our 401(k) Plan. </FONT></P>

<P><FONT SIZE=2><B>Quotation on the Nasdaq National Market  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shares are quoted on the Nasdaq National Market under the symbol "AXYS." </FONT></P>


<P><FONT SIZE=2><B>Price Stabilization, Short Positions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until the distribution of the shares is completed, SEC rules may limit the underwriters from bidding for and purchasing our common stock. However, the
underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock during and after this offering. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the underwriters over-allot or otherwise create a short position in our common stock in connection with this offering
(</FONT><FONT SIZE=2><I>i.e.</I></FONT><FONT SIZE=2>, if they sell more shares than are listed on the cover of this prospectus), the underwriters may reduce that short position by purchasing shares
in the open market. The underwriters may also elect to reduce any short position by exercising all or part of the over-allotment option described above. In addition, the underwriters may
impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in this offering are reclaimed if shares of our common stock previously
distributed in this offering are </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>77</FONT></P>

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<P style='page-break-before:always'></p>
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<A NAME="page_ek6313_1_78"> </A>
<BR>

<P><FONT SIZE=2>repurchased
in connection with stabilization transactions or otherwise. These transactions to stabilize or maintain the market price may cause the price of our common stock to be higher than it might
be in the absence of such transactions. The imposition of a penalty bid may also affect the price of our common stock to the extent that it discourages resales. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price
of our common stock. In addition, neither we nor any of the underwriters makes any representation that they will engage in these transactions or that these transactions, once commenced, will not be
discontinued without notice. </FONT></P>

<P><FONT SIZE=2><B>Passive Market Making  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with this offering, the underwriters may engage in passive market making transactions in our common stock on the Nasdaq National Market in
accordance with Rule&nbsp;103 of Regulation&nbsp;M under the Exchange Act during a period before the commencement of offers or sales of common stock and extending through the completion of
distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive
market maker's bid, that bid must then be lowered when specified purchase limits are exceeded. </FONT></P>


<P><FONT SIZE=2><B>Other Relationships  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters have performed investment banking and advisory services for us from time to time, including in connection with certain acquisitions we have made,
for which they have received customary fees and expenses. The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business. In
addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their
customers, long or short positions in our debt or equity securities or loans, and may do so in the future. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
affiliate of Banc of America Securities LLC acted as the collateral agent, letter of credit issuer and lender under our new credit facility and has received, and will continue to
receive, customary fees for its services in such capacities. The net proceeds from this offering will be used to repay the amount outstanding under the term loan B and a portion of the amount
outstanding under the term loan&nbsp;A. Because an affiliate of Banc of America Securities LLC may receive more than 10% of the net proceeds from this offering, this offering is being conducted in
accordance with Rule&nbsp;2710(h)(1) of the Conduct Rules of the National Association of Securities Dealers,&nbsp;Inc., or NASD. The rule requires that if more than 10% of the net proceeds of a
public offering of equity securities are to be paid to members of the NASD that are participating in the offering, or affiliated or associated persons, the price of the equity securities distributed
to the public must be no higher than that recommended by a "qualified independent underwriter," as defined in Rule&nbsp;2720 of the Conduct Rules of the NASD. Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc.
will act as a qualified independent underwriter in connection with this offering. This independent underwriter, in its role as qualified independent underwriter, has performed due diligence
investigations and reviewed and participated in the preparation of this prospectus and the registration statement of which this prospectus forms a part. The price of the common stock sold to the
public will be no higher than that recommended by the independent underwriter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have agreed to indemnify Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc., in its role as qualified independent underwriter, against certain liabilities including liabilities under the
Securities Act. If we are unable to provide this indemnification, we will contribute to payments Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc. may be required to make in respect of those liabilities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>78</FONT></P>

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<P style='page-break-before:always'></p>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ek6313_legal_matters"> </A>
<A NAME="toc_ek6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>LEGAL MATTERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jones Day will pass upon the validity of the issuance of the shares being sold in this offering. Certain matters will be passed upon for the underwriters by
Latham&nbsp;&amp; Watkins LLP, New York, New York. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ek6313_experts"> </A>
<A NAME="toc_ek6313_3"> </A>
<BR></FONT><FONT SIZE=2><B>EXPERTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of Axsys Technologies,&nbsp;Inc. and subsidiaries at December&nbsp;31, 2004 and 2003, and for each of the three years in
the period ended December&nbsp;31, 2004, appearing in, and incorporated by reference from the Company's Annual Report on Form&nbsp;10-K into, this Prospectus and Registration Statement have been
audited by Ernst&nbsp;&amp; Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and incorporated herein by reference, and are
included, and incorporated herein by reference, in reliance upon such report given on the authority of such firm as experts in accounting and auditing. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial statements of Diversified Optical Products, Inc. as of December&nbsp;31, 2004 and 2003 and for each of the two years in the period ended December&nbsp;31, 2004,
included in and incorporated by reference into this Prospectus and Registration Statement, have been audited by Grant Thornton LLP, independent auditors, as stated in their report appearing herein.
Such financial statements have been included herein in reliance upon such reports given on the authority of such firm as experts in accounting and auditing in giving said reports. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial statements of Telic Optics,&nbsp;Inc. at December&nbsp;31, 2003 and 2002, and for each of the two years in the period ended December&nbsp;31, 2003, incorporated by
reference from the Company's Current Report on Form&nbsp;8-K/A filed with the SEC on May&nbsp;17, 2004 into this Prospectus and Registration Statement, have been audited by Ernst&nbsp;&amp; Young
LLP, independent registered public accounting firm, as set forth in their report thereon incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance
upon such report given on the authority of such firm as experts in accounting and auditing. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ek6313_where_you_can_find_more_information"> </A>
<A NAME="toc_ek6313_4"> </A>
<BR></FONT><FONT SIZE=2><B>WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file reports, proxy statements and other information with the Securities and Exchange Commission. These reports, proxy statements and other information can be
read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information
on the Public Reference Room. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file
electronically with the SEC, including Axsys Technologies,&nbsp;Inc. Our website address is http://www.axsys.com. The information on our website is not a part of this prospectus. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ek6313_incorporation_of_documents_by_reference"> </A>
<A NAME="toc_ek6313_5"> </A>
<BR></FONT><FONT SIZE=2><B>INCORPORATION OF DOCUMENTS BY REFERENCE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to "incorporate by reference" the documents that we file with the SEC. This means that we can disclose information to you by referring you to
those documents. Any information we incorporate in this manner is considered part of this prospectus except to the extent updated and superseded by information contained in this prospectus. Some
information we file with the SEC after the date of this prospectus and until this offering is completed will automatically update and supersede the information contained in this prospectus. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>79</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
incorporate by reference the following documents (Commission File No.&nbsp;000-16182) that we have filed with the SEC and any filings that we will make with the SEC in
the future under Section&nbsp;13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering is completed: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Annual
Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2004;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Quarterly
Report on Form&nbsp;10-Q for the quarter ended April&nbsp;2, 2005;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Quarterly
Report on Form&nbsp;10-Q for the quarter ended July&nbsp;2, 2005;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Current
Report on Form&nbsp;8-K/A filed with the SEC on May&nbsp;17, 2004;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Current
Report on Form&nbsp;8-K filed with the SEC on March&nbsp;25, 2005;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Current
Report on Form&nbsp;8-K filed with the SEC on May&nbsp;3, 2005;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Current
Report on Form&nbsp;8-K filed with the SEC on May&nbsp;26, 2005;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Current
Report on Form&nbsp;8-K/A filed with the SEC on July&nbsp;7, 2005; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
description of our common stock contained in Item 1 of our Registration Statement on Form&nbsp;8-A filed with the SEC on August&nbsp;8, 1991. This
description is superceded by the description of our common stock in this prospectus under the caption "Description of Capital Stock." </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will provide without charge, upon written or oral request, a copy of any or all of the documents that are incorporated by reference into this prospectus. Requests should be directed
to: Axsys Technologies,&nbsp;Inc., Attention: Corporate Secretary, 175&nbsp;Capital Boulevard, Suite&nbsp;103, Rocky Hill, Connecticut 06067, telephone number: (860)&nbsp;257-0200. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>80</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fa6313_index_to_financial_stat__fa602152"> </A>
<A NAME="toc_fa6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>INDEX TO FINANCIAL STATEMENTS<BR>  <BR>    AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Report of Independent Registered Public Accounting Firm</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Balance Sheets&#151;December&nbsp;31, 2004 and 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Statements of Operations&#151;For the years ended December&nbsp;31, 2004, 2003 and 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Statements of Cash Flows&#151;For the years ended December&nbsp;31, 2004, 2003 and 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-5</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)&#151;For the years ended December&nbsp;31, 2004, 2003 and 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Balance Sheets&#151;July&nbsp;2, 2005 (Unaudited) and December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-32</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Statements of Operations&#151;For the three and six months ended July&nbsp;2, 2005 and July&nbsp;3, 2004 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-33</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Statements of Cash Flows&#151;For the six months ended July&nbsp;2, 2005 and July&nbsp;3, 2004 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)&#151;For the six months ended July&nbsp;2, 2005 and July&nbsp;3, 2004 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-35</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Notes to Interim Consolidated Financial Statements&#151;(Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-36</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 ALIGN="CENTER"><BR><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS, INC.</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Report of Independent Auditors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-46</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Balance Sheets&#151;December&nbsp;31, 2004 and 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-47</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Operations&#151;For the years ended December&nbsp;31, 2004 and 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-48</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Cash Flows&#151;For the years ended December&nbsp;31, 2004 and 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-49</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Shareholders' Equity&#151;For the years ended December&nbsp;31, 2004 and 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-50</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Notes to the Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-51</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Balance Sheet&#151;March&nbsp;31, 2005 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-62</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Operations&#151;For the three months ended March&nbsp;31, 2005 and 2004 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-63</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Cash Flows&#151;For the three months ended March&nbsp;31, 2005 and 2004 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-64</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Shareholders' Equity&#151;For the three months ended March&nbsp;31, 2005 (Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-65</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2>Notes to the Financial Statements&#151;(Unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>F-66</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>F-1</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fc6313_1_2"> </A> </FONT> <FONT SIZE=2><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  </B></FONT></P>

<P><FONT SIZE=2>To the Shareholders of<BR>
Axsys Technologies,&nbsp;Inc.: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying consolidated balance sheets of Axsys Technologies,&nbsp;Inc., and subsidiaries as of December&nbsp;31, 2004 and 2003, and the related consolidated
statements of operations, shareholders' equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December&nbsp;31, 2004. These financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Axsys Technologies,&nbsp;Inc. and
subsidiaries at December&nbsp;31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December&nbsp;31, 2004, in
conformity with U.S. generally accepted accounting principles. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2><B>/s/ ERNST&nbsp;&amp; YOUNG LLP</B></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>Hartford,
Connecticut<BR>
February&nbsp;8, 2005 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-2</FONT></P>

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<A NAME="toc_fe6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Balance Sheets    <BR>    <BR>    (Dollars in thousands, except share and per share data)    <BR>    </B></FONT></P>

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<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><B><I>ASSETS</I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CURRENT ASSETS:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,983</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accounts receivable, net of allowance for doubtful accounts of $685 in 2004 and $653 in 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,715</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>29,698</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>24,786</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income taxes&#151;deferred and current</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,553</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,020</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,223</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%"><FONT SIZE=2>TOTAL CURRENT ASSETS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>55,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>50,589</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>PROPERTY, PLANT AND EQUIPMENT, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13,337</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,315</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>NET INTANGIBLE ASSET</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,127</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>GOODWILL</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13,013</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,600</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>OTHER ASSETS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,352</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,341</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%"><FONT SIZE=2>TOTAL ASSETS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>66,845</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><BR><FONT SIZE=2><B><I>LIABILITIES AND SHAREHOLDERS' EQUITY</I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CURRENT LIABILITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,459</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,240</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,513</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,170</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Deferred income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,195</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,546</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Current portion of long-term capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>368</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>423</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Current portion of long term debt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%"><FONT SIZE=2>TOTAL CURRENT LIABILITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>24,535</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17,379</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CAPITAL LEASES, less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>568</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>LONG TERM DEBT, less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>OTHER LONG-TERM LIABILITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,704</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>COMMITMENTS AND CONTINGENCIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>SHAREHOLDERS' EQUITY:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Common stock, $.0l par value: authorized 30,000,000 shares, issued 7,186,734 at December&nbsp;31, 2004 and 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Capital in excess of par</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>39,612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>39,375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accumulated other comprehensive loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(97</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(39</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,725</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Treasury stock, at cost: 130,216 shares at December&nbsp;31, 2004 and 199,030 shares at December&nbsp;31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,235</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%"><FONT SIZE=2>TOTAL SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>53,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>43,898</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%"><FONT SIZE=2>TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>66,845</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=86,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=444264,FOLIO='F-3',FILE='DISK124:[05NYC3.05NYC6313]FE6313A.;12',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fg6313_1_4"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg6313_axsys_technologies,_inc._conso__axs04518"> </A>
<A NAME="toc_fg6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Statements of Operations    <BR>    <BR>    (Dollars in thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>79,586</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cost of Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>72,874</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>62,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>59,454</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,656</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,073</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,684</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>15,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,262</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Research, development and engineering expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,059</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,049</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Restructuring and special charges (credits)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,854</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>OPERATING INCOME (LOSS)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,028</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(33</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(254</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(172</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(212</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>98</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>115</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>190</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Other (expense) income, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(38</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,151</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,234</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(45</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>(Benefit from) provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,969</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,014</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Discontinued operations:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Loss from discontinued operations, net of tax benefit of $267 in 2004 and $2,787 in 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(495</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(4,582</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>535</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>NET INCOME (LOSS)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,061</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>BASIC EARNINGS (LOSS) PER SHARE:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1.30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Discontinued operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.07</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.65</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Weighted-average basic common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,020,184</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,986,094</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,037,432</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>DILUTED EARNINGS (LOSS) PER SHARE:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Discontinued operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.07</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.65</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1.19</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Weighted-average diluted common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,289,437</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,074,342</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,037,432</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=87,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=495843,FOLIO='F-4',FILE='DISK124:[05NYC3.05NYC6313]FG6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:00' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fi6313_1_5"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fi6313_axsys_technologies,_inc._conso__axs03267"> </A>
<A NAME="toc_fi6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Statements of Cash Flows    <BR>    <BR>    (Dollars in thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(7,061</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Adjustments to reconcile net income (loss) to cash provided by operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,663</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Deferred income taxes (benefits)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,964</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Stock option compensation expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>70</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Non-cash restructuring and special charges (credits)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>888</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Loss on disposal of capital equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>751</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Impairment of assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>313</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(535</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4,464</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(129</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>594</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4,073</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,516</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Other current assets and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>787</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>868</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,116</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,112</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,343</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,282</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(592</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Deferred income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,649</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,431</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,507</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Long-term liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(448</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(504</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net cash provided by (used in) continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,778</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(232</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net cash (used in) provided by discontinued operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(140</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,261</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,990</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>NET CASH PROVIDED BY OPERATING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,638</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,751</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,758</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Capital expenditures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4,239</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,027</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,380</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Purchase of Telic Optics, Inc., net of cash acquired</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Net sale (purchase) of marketable securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(6,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Net proceeds from sale of discontinued operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>541</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>NET CASH USED IN INVESTING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(10,984</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(10,010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(839</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Proceeds from (repayment of) borrowings, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,860</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,255</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(898</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Proceeds from the exercise of options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Escheatment and settlement of preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(213</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,149</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,464</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(898</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>NET CHANGE IN CASH AND CASH EQUIVALENTS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>803</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4,723</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9,899</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT END OF YEAR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9,920</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=88,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=934406,FOLIO='F-5',FILE='DISK124:[05NYC3.05NYC6313]FI6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fk6313_1_6"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fk6313_axsys_technologies,_inc._conso__axs06095"> </A>
<A NAME="toc_fk6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)    <BR>    <BR>    (Dollars in thousands, except share and per share data)    <BR>
</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common<BR>
Stock<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital in<BR>
Excess of Par</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
Other<BR>
Comprehensive<BR>
Loss</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Retained<BR>
Earnings</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Treasury<BR>
Stock<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Comprehensive<BR>
Income (Loss)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Balance at December 31, 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>39,621</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>7,788</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(1,041</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>46,440</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><BR>
Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(7,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(7,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(7,061</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Total comprehensive loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(7,061</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Shares received&#151;sale of business</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>104</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>70</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Balance at December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>39,587</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>727</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(1,293</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>39,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><BR>
Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4,998</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Foreign exchange contract</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(39</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Total comprehensive income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>4,959</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Exercise of stock options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>53</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>55</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Escheatment of preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Preferred stock settlement</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(201</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(201</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Balance at December 31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>39,375</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>5,725</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(1,235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>43,898</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><BR>
Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
8,664</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Foreign exchange contract</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(84</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(84</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(84</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Gain on swap</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Total comprehensive income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>8,606</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Exercise of stock options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>38</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>322</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Escheatment of preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Stock option compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Balance at December 31, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>39,612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(97</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>14,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>53,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-6</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fm6313_axsys_technologies,_inc._notes__axs04754"> </A>
<A NAME="toc_fm6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    <BR>    <BR>    (Dollars in thousands, except per share data)    <BR>    <BR>    December&nbsp;31, 2004    <BR>
</B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business overview.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The accompanying consolidated financial statements include the accounts of Axsys Technologies,&nbsp;Inc.
and our wholly-owned subsidiaries (collectively "Axsys", "Company", "we", "our" or "us"). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Axsys
is a global leader in the design, manufacturing and distribution of precision components and assemblies for high technology markets. In addition, we distribute precision ball
bearings for use in a variety of industrial and commercial applications. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principles of consolidation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the results of Axsys and our wholly-owned
subsidiaries. The results of companies disposed of during the fiscal year are included in the consolidated financial statements up to the date of disposal. All significant inter-company balances and
transactions have been eliminated in consolidation. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue recognition.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenue is recognized in accordance with the Securities and Exchange Commission Staff Accounting
Bulletin ("SAB") No.&nbsp;104. SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1)&nbsp;persuasive evidence of an arrangement exists; (2)&nbsp;delivery
has occurred or services rendered; (3)&nbsp;the fee is fixed and determinable; and (4)&nbsp;collectibility is reasonably assured. Shipping and handling costs, such as freight to customers, are
classified in cost of sales. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
policy is to recognize revenues when product is either shipped to or received by the customer based on the terms of the specific sale. However, certain long-term
contracts are accounted for under the percentage of completion model. Revenues and estimated gross profit are recognized as work is performed based on the percentage that incurred costs to date bear
to estimated total costs. Cost estimates include direct and indirect costs such as labor, materials and overhead. These contracts require judgment relative to assessing risks, estimating future costs,
and making assumptions for schedule and technical issues. Contract changes are included when the costs can be reasonably estimated. We may receive progress payments that exceed costs incurred on these
long-term contracts. Such advances are recognized as billings in excess of costs and are included in accrued liabilities and other current liabilities on our Consolidated Balance Sheets. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provisions
for estimated losses on contracts are recognized when losses become evident. These estimates are subject to change and could result in adjustments to contracts in progress. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents include highly liquid investments with an original maturity of three
months or less at the date of purchase. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term investments.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Short-term investments include investments in federal agency notes and
commercial paper with maturities ranging from 3&nbsp;months to 12&nbsp;months at the date of purchase. All short-term investments are classified as
held-to-maturity and are recognized at amortized cost. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments,</I></FONT><FONT SIZE=2> We use derivative instruments, in the form of forward contracts and interest rate swap agreements, to manage
certain foreign currency and interest rate exposures. We view derivative instruments as risk management tools, and we do not use them for trading or speculative purposes. Derivatives used for hedging
purposes must be designated as an effective hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in fair value of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-7</FONT></P>

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<P style='page-break-before:always'></p>
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<A NAME="page_fm6313_1_8"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>derivative
contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
derivative instruments are recognized in the balance sheet at fair value. Derivatives used to hedge forecasted cash flows associated with foreign currency sales and interest rate
fluctuations are accounted for as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges are recognized in accumulated other comprehensive income (loss) and in earnings in a
manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently in earnings. At December&nbsp;31, 2004, we
had four forward exchange contracts outstanding with a total loss position of $123 included in our accrued liabilities. We also had one interest rate swap agreement with a fair value of $26 relating
to a $5,000 variable rate loan included in our other assets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below presents the fair value of those derivative instruments at December&nbsp;31: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Forward exchange contracts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(123</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Interest rate swap agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
carrying amounts of our other financial instruments, which include cash equivalents, short-term investments, accounts receivable and accounts payable approximate their
fair value due to the short-term nature of such instruments. In addition, the carrying value of long-term debt approximates fair value due to the variable interest rate it
bears. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable include only trade accounts receivables. Credit is extended to customers typically
on net 30-day terms. We do not require collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2004, Raytheon Corporation, an aerospace and defense systems supplier, accounted for 28.9% of our outstanding accounts receivable. As of December&nbsp;31,
2003, no individual customer represented more than 10% of our accounts receivable balance. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for doubtful accounts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We periodically review the aging of our accounts receivable over ninety days to identify
potentially uncollectible accounts and establish reserves based on experience and discussion with customers. Actual write-offs could differ from our allowance for doubtful accounts. If
circumstances change (</FONT><FONT SIZE=2><I>i.e.</I></FONT><FONT SIZE=2>, higher than expected defaults or an unexpected material adverse change in a customers ability to meet our financial
obligations), our estimates of recoverability of amounts due to us could be reduced by a material amount. Accounts receivable are written off only when all reasonable collection efforts are exhausted. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research, development and engineering.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Significant costs are incurred each year in connection with research and development
programs and administrative engineering costs ("R&amp;D"). Such costs are included in operating expenses as incurred. In situations where the customer reimburses the cost of the R&amp;D effort, the revenue
generated is recognized as sales and the expense is included in cost of sales. Research and development expenses, exclusive of engineering costs, were $1,571 in 2004, $756 in 2003 and $1,003 in 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-8</FONT></P>

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<A NAME="page_fm6313_1_9"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We value our inventory at the lower of the actual cost to purchase and/or manufacture the inventory or the current
estimated market value of the inventory with cost generally determined using the first in, first out method. A provision for excess or obsolete inventory is recorded based upon an analysis that
considers current inventory levels, historical usage patterns and future sales expectations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November 2004, the FASB issued SFAS No.&nbsp;151, "Inventory Costs, an amendment of ARB No.&nbsp;43, Chapter&nbsp;4," to clarify that abnormal amounts of idle facility expense,
freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that fixed production overheads should be allocated to inventory based on normal capacity of
production facilities. This statement is effective for Axsys' fiscal year 2006 and is not expected to have a material impact on our financial position or results of operations. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment are stated at cost, less accumulated depreciation, which
includes the depreciation of assets recognized under capital leases. Depreciation is provided primarily by the straight-line method using estimated lives for buildings and improvements of
20 to 25&nbsp;years and from 3 to 8&nbsp;years for machinery and equipment. Repair and maintenance costs are expensed as incurred. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill and other intangibles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We adopted SFAS No.&nbsp;142, "Goodwill and Other Intangible Assets," during 2002. In
accordance with SFAS No.&nbsp;142, goodwill is not amortized. In accordance with the adoption of SFAS No.&nbsp;142, the negative goodwill of $535 as of December&nbsp;31, 2001 was reversed as a
cumulative effect of a change in accounting principle in the first quarter of 2002. We annually review goodwill to assess recoverability from future operations using undiscounted cash flows. We have
completed our annual impairment testing and the goodwill of $13.0&nbsp;million was determined not to be impaired as of December&nbsp;31, 2004. Impairments are recognized in operating results when
a permanent diminution in value occurs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill
was $13,013 at December&nbsp;31, 2004 and $3,600 at December&nbsp;31, 2003. Goodwill increased in 2004 as a result of the purchase of Telic Optics,&nbsp;Inc. ("Telic").
There were no changes to goodwill in 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible
assets acquired as part of business combinations are amortized over their estimated useful lives unless their useful lives are determined to be indefinite. For material
business combinations, amounts recognized related to purchased intangibles are determined with the assistance of independent valuations. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments and contingencies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are self-insured for certain losses related to general liability, workers'
compensation and medical claims. Our liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. The estimated liability is established based on an analysis
of historical data and is reviewed by management on a quarterly basis to ensure that the liability is appropriate. While we believe that our estimates are reasonable based on the information currently
available, if actual trends, including the severity and frequency of claims, medical cost inflation or fluctuations in premiums, differ from our estimates, our results from operations could be
impacted. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-9</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income is recognized when we receive milestone payments from customers for either progress billings
or for material billings. Material billings primarily occur when customers advance us the cost of beryllium on long-lead time orders. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We provide warranties for certain of our products. Provisions for estimated expenses related to product warranties
are made at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes product warranty activity for 2004: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Balance at<BR>
December 31, 2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Provision, changes<BR>
and other</B></FONT><HR NOSHADE></TH>
<TH WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Payments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Balance at<BR>
December 31, 2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>633</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>396</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(279</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>750</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss contract reserves.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Generally, our customer contracts are completed within one year of receiving the order. However,
occasionally longer lead-time orders are received and we monitor these contracts periodically to determine if our actual costs are comparable to our cost estimates used at the time of
order acceptance. If we determine that our actual costs are significantly exceeding our original estimates, we will record a loss contract reserve. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environmental contingencies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are currently involved in several environmental remediation projects. We accrue for
environmental contingencies when (1)&nbsp;responsibility for cleanup is determined and (2)&nbsp;costs are probable and can be reasonably estimated. When costs are not probable and cannot be
reasonably estimated, no accrual is made. We have accrued our estimate of the probable costs for the resolution of these claims. These estimates have been developed in consultation with outside
environmental consultants handling these matters and are based upon an analysis of the anticipated remediation plans. We do not anticipate these projects will have a material adverse effect on our
consolidated financial position. It is possible, however, that future results of operations could be materially affected by changes in our assumptions. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We account for income taxes in accordance with SFAS&nbsp;109. As such, deferred income taxes are determined
based on the differences between the financial statement and tax basis of assets and liabilities at enacted income tax rates in effect in the year in which the differences are expected to reverse.
Valuation allowances are established, when necessary, to reduce deferred income tax assets to estimated amounts expected to be realized. Realizability of net deferred income tax assets are evaluated
on an ongoing basis. We consider future taxable income, our most recent operating results and various income tax planning strategies in assessing the need for a valuation allowance. In the
consideration of the realizability of net deferred income tax assets, recent losses must be given more weight than any projections of future profitability. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per share.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share have been computed by dividing net income or loss by the weighted-average number
of common shares outstanding. The dilutive effect of stock options on the weighted-average number of common shares outstanding was 269,253 shares for the year ended December&nbsp;31, 2004 and 88,248
shares as of December&nbsp;31, 2003. When there is a loss from continuing operations, the computation of the dilutive net loss per share is based on the weighted-average basic </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fm6313_1_11"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>shares
outstanding. Potentially dilutive common stock options aggregating 16,766 as of December&nbsp;31, 2002 have been excluded from the computation of diluted net loss per share because their
inclusion would have been anti-dilutive. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted
EPS for 2004 excludes 173,475 potential common shares related to our stock compensation plans because the option exercise price was greater than the average market price of our
common stock for the period. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have adopted the disclosure-only provisions of SFAS No.&nbsp;123, "Accounting for
Stock-based Compensation" and account for stock-based compensation under the provisions of Accounting Board Opinion No.&nbsp;25, "Accounting for Stock Issued to Employees" using the intrinsic value
method. The exercise price on stock options is either greater than or equal to the closing market price on the day of grant, and, accordingly, no compensation cost has been recognized. We do not grant
stock options with exercise prices below market value. Pro forma information regarding net income (loss) and net income (loss) per share is required by SFAS No.&nbsp;123 for awards as if we had
accounted for such awards under the fair value method. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table illustrates the effect on net income/(loss) and income/(loss) per share if we had applied the fair value recognition provisions of SFAS No. 123: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Reported net income (loss)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(7,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Stock option-related employee compensation expense</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(773</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(755</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(959</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Pro forma net income (loss)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,891</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,243</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(8,020</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Pro forma basic income (loss) per share</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1.14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=2>Weighted-average basic common shares outstanding</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,020,184</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6,986,094</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,037,432</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Pro forma diluted income (loss) per share</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1.14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=2>Weighted-average diluted common shares outstanding</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,289,437</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,074,342</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,037,432</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair value of each option granted in 2004, 2003 and 2002 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: expected
volatility of 43% of 2004, 68% in 2003 and 68% in 2002; risk-free interest rate of 4.24% in 2004, 4.27% in 2003 and 5.0% in 2002; expected lives of 6&nbsp;years; and no dividend yield.
Using this model, the weighted-average fair value of options granted was $7.05 during 2004, $5.45 during 2003 and $4.53 during 2002. For pro forma purposes, the estimated fair value of the our
Company's stock incentive awards to employees is amortized over the options' vesting period, which is generally five years. The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective assumptions including the
expected stock price volatility. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fm6313_1_12"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.&nbsp;123 (revised 2004)
("Statement&nbsp;123&nbsp;(R)"), "Share-based Payment", which revised SFAS No.&nbsp;123, "Accounting for Stock-based Compensation". This statement supercedes APB Opinion No.&nbsp;25,
"Accounting for Stock Issued to Employees". The revised statement addresses the accounting for share-based payment transactions with employees and other third parties, eliminates the ability to
account for share-based compensation transactions using APB&nbsp;25 and requires that the compensation costs relating to such transactions be recognized in the consolidated statement of operations.
The revised statement is effective as of the beginning of the first fiscal year beginning after June&nbsp;15, 2005. Axsys will adopt the statement as of January&nbsp;1, 2006 as required. The
impact of adoption of Statement&nbsp;123&nbsp;(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had Axsys adopted
Statement&nbsp;123&nbsp;(R) in prior periods, the annual impact of that standard would have approximated the impact of Statement&nbsp;123 as described in the disclosure of pro forma net income
(loss) and net income (loss) per share in the stock-based compensation accounting policy note included in Note&nbsp;1 to the consolidated financial statements. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Estimates and assumptions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
amounts in previously issued annual financial statements were reclassified to conform to the 2004 presentation. </FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;2&#151;Acquisitions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;8, 2004 (the "Closing Date"), we acquired all of the stock of Telic, a privately owned manufacturer of infrared optics and optical assemblies.
Telic's broad infrared optics capabilities increase our product offerings and complement our strong position in reflective optical solutions. In addition, Telic's products are typically used in
ground-and sea-based programs. This complements our historical focus on air- and space-based programs and expands our overall market and program penetration.
Finally, the complementary addition of Telic's technical capabilities to our core technical strengths is expected to increase our competitive advantage by broadening our technical offering to prime
contractors who are seeking to outsource the fulfillment of their optical requirements. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
initial purchase price of this acquisition, after a working capital adjustment of $15, was $14,423 with an additional earn out payment of up to $4,000 over the 36&nbsp;months
following the Closing Date based on the achievement of certain revenue goals. If revenue goals are achieved, the earn out could increase the total purchase price to $18,423. Included in the purchase
price was $438 of legal, audit and other acquisition-related expenses that were incurred in connection with the acquisition. We funded the purchase price and associated transaction costs through a
combination of existing cash balances and outside bank financing. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
acquisition has been accounted for according to the purchase method of accounting, and, accordingly, the consolidated statements of operations include the results of Telic since the
date of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fm6313_1_13"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;2&#151;Acquisitions (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>acquisition.
The assets acquired and the liabilities assumed were recognized at their estimated fair values within our Optical Systems Group. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2><B>Fair value:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Assets acquired</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,084</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Liabilities assumed</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(274</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Customer relationship intangible asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,413</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Purchase price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14,423</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Less: cash acquired</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(695</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Net cash paid</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill
acquired through the purchase of Telic is deductible for income tax purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unaudited
pro forma results of operations for the years ended December&nbsp;31, 2004 and 2003, as if Axsys had purchased Telic as of the beginning of each year, are presented below.
The pro forma results include estimates and assumptions, which we believe are reasonable. However, the pro forma results do not include any cost savings or other effects of the planned integration of
Telic, and are not necessarily indicative of the results which would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Originally<BR>
Reported<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Originally<BR>
Reported<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma<BR>
2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>105,289</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>94,998</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,999</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Earnings per common share:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.19</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.13</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=96,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=791265,FOLIO='F-13',FILE='DISK124:[05NYC3.05NYC6313]FM6313A.;14',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fo6313_1_14"> </A> </FONT> <FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004  </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;3&#151;Balance Sheet Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The details of certain balance sheet accounts are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,431</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,050</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>Work-in-process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>18,371</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14,662</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,888</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,991</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Gross inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34,690</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>28,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>Less reserve</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(4,992</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,917</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>29,698</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>24,786</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property, plant and equipment:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="63%"><FONT SIZE=2>Land</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>291</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>291</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="63%"><FONT SIZE=2>Buildings and improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,653</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="63%"><FONT SIZE=2>Machinery and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,437</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>22,373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property, plant and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>31,381</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>27,038</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="63%"><FONT SIZE=2>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(18,044</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(15,723</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property, plant and equipment, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,337</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,315</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Accrued expenses and other current liabilities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Compensation and related benefits</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,548</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,083</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Income taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>970</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,053</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Liabilities of discontinued operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>922</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,301</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Warranty</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>750</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>633</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Professional fees</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>392</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>574</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Stock redemption</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>291</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>426</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,640</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,100</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,513</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,170</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other long-term liabilities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,656</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,504</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Loss contract reserve</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,595</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,781</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Defined benefit pension and health insurance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>649</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>812</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Liabilities of discontinued operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>405</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>366</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Workers' compensation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>199</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>535</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total other long-term liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,704</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-14</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=97,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=232864,FOLIO='F-14',FILE='DISK124:[05NYC3.05NYC6313]FO6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fo6313_1_15"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;4&#151;Intangible Assets  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the acquisition of Telic, we recognized an intangible asset of $2,200 representing the value of customer relationships. Amortization of this intangible
asset is determined using the straight-line method of amortization over 22&nbsp;years. Amortization expense of $74 in 2004 was included in selling, general and administrative expenses.
There was no amortization expense in 2003 or 2002. Amortization expense for each of the next five years is expected to be $100. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;5&#151;Capital Lease Obligations  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Capital lease obligations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>518</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>991</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Less current portion</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(368</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(423</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>568</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2004 the cost of assets under capital leases was $1,521 with accumulated depreciation of $544 and at December&nbsp;31, 2003 was $1,703 with accumulated
depreciation of $401. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minimum
annual lease payments, including interest, on capital leases are $387 in 2005, and $153 in 2006. All capital lease obligations mature by the end of 2006. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;6&#151;Long-term Debt  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;8, 2004, in connection with the acquisition of Telic, we entered into an unsecured Credit Facility ("Credit Facility") with Bank of America
("Bank"). The Credit Facility is comprised of a $5,000 two-year Revolving Credit Facility ("Revolving Credit Facility") and a $5,000 five-year Term Loan facility ("Term Loan").
Repayments of amounts under the Credit Facility are guaranteed by all of our subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Credit Facility requires that we maintain certain minimum financial covenants, restricts our ability to incur secured indebtedness, and contains various customary provisions,
including affirmative
covenants, representations and warranties and events of default. As of December&nbsp;31, 2004, we were in compliance with the covenants and other terms thereof. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revolving Credit Facility:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The $5,000 Revolving Credit Facility is available through April&nbsp;8, 2006, subject to
optional prepayment in accordance with its terms. Up to $1,000 of the Revolving Credit Facility may be utilized to issue letters of credit. We may elect to have any borrowing under the Revolving
Credit Facility bear interest either at the Bank's prime rate or the 1-month LIBOR rate plus a margin of 100 to 150 basis points, depending on our consolidated funded
debt-to-consolidated EBITDA ratio, as defined. At December&nbsp;31, 2004, there were no borrowings outstanding under the $5,000 Revolving Credit Facility. However, as of
December&nbsp;31, 2004, $680 of the Revolving Credit Facility was utilized for outstanding letters of credit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms of the Revolving Credit Facility, we can borrow up to a maximum of $5,000. We are required to pay certain fees, including an unused commitment fee ranging from 20 to
40 basis points per annum on the average daily-unused portion of the Revolving Credit Facility. The unused </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-15</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=98,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=722282,FOLIO='F-15',FILE='DISK124:[05NYC3.05NYC6313]FO6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fo6313_1_16"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;6&#151;Long-term Debt (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>commitment
fee, which will vary depending on our consolidated funded debt-to-consolidated EBITDA ratio, as defined, is payable quarterly, in arrears. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Term Loan:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Term Loan is scheduled to mature on April&nbsp;8, 2009, subject to optional prepayment in accordance with
its terms, with annual principal payments totaling $1,000. The Term Loan bears interest at a rate per annum equal to the 1-month LIBOR rate plus a margin of 100 to 150 basis points,
depending on our consolidated funded debt-to-consolidated EBITDA ratio, as defined. The interest rate on the term loan was 3.06% as of December&nbsp;31, 2004. We paid a $40
commitment fee for the Term Loan. As of December&nbsp;31, 2004, the balance of the Term Loan was $4,333. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Rate Swap:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;8, 2004, we entered into an interest rate swap agreement with the Bank to hedge interest
rate fluctuations on the Term Loan. The interest rate swap has been designated as a cash flow hedge. Under the terms of the interest rate swap, we receive payments based on the 1-month
LIBOR rate and make payments based upon a fixed rate of 3.2%. The notional amount of the interest rate swap at inception was $5,000 and it expires on April&nbsp;8, 2009. The notional amount
decreases as principal payments are made on the term loan. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;7&#151;Restructuring and Special Charges  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year 2004:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we reversed a warranty reserve of $50 related to the product lines at the former Santa
Barbara, California facility, which were either sold or discontinued, as no longer required. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Fiscal Year 2002:  </I></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Relocation of OEM Product Lines:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During 2002, we closed our Santa Barbara, California facility and relocated various
commercial product lines to Rochester Hills, Michigan. The total cost of $1,053 associated with the relocation and facility closure included a charge of $436 for thirty terminated employees and a
charge of $123 for the disposal of excess furniture and fixtures. A charge of $136 was incurred as a result of the write-off of certain inventory related to the termination of certain
minor product lines. Other costs of $358 associated with the relocation included costs for the equipment relocation, employee training and recruitment and facility upgrades in Michigan, which were
expensed as incurred. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sale of Teletrac, Inc:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On April </FONT><FONT SIZE=2><I>5,</I></FONT><FONT SIZE=2> 2002, we sold all of the stock of the
Teletrac,&nbsp;Inc. ("Teletrac") subsidiary to Storage Test Solutions ("5TS") of Aurora, Colorado. In connection with the sale of Teletrac, we recognized a charge of $l,009 associated with asset
write-downs, severance payments and legal expenses. This charge is recognized in restructuring and other special charges. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reorganization:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2002, we announced the strategic realignment of our business. This plan resulted in a
restructuring charge of $178, net of tax of $108 for the termination of three salaried employees in the former Automation Group, which has been included in the loss from discontinued operations. In
addition, as part of the segment reorganization, we incurred a charge of $286 for the termination of the Chief Operating Officer, which is included in restructuring and other special charges. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-16</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=99,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=253233,FOLIO='F-16',FILE='DISK124:[05NYC3.05NYC6313]FO6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fo6313_1_17"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;7&#151;Restructuring and Special Charges (Continued) </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, we recognized the following amounts as restructuring and special charges in the Consolidated Statement of Operations related to the 2002 restructuring and special charge: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost of Sales</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Selling,<BR>
General and<BR>
Administrative<BR>
Expense</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Restructuring<BR>
Charge</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Relocation of product lines</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>136</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>358</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>559</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,053</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Sale of Teletrac</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,009</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Segment reorganization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>286</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>286</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>136</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>358</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,854</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,348</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through
December&nbsp;31, 2003, we had expended all cash costs in connection with the 2002 restructuring and special charges. The following table shows the balance sheet activity for
the restructuring accrual through December&nbsp;31, 2004 in conjunction with the 2002 restructuring activities: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="77%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Restructuring<BR>
Accrual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>2002 Charges</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>1,854</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>2002 Activity</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(1,734</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>2003 Activity</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(70</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>2004 Activity</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Balance at December 31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;8&#151;Environmental Contingencies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently involved in several environmental remediation projects. We accrue for environmental contingencies on an undiscounted basis when responsibility
for clean up is determined and costs, including legal fees, are probable and can be reasonably estimated. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to a remediation plan approved by the Ohio Environmental Protection Agency ("Ohio EPA") in 1993, we investigated soils and groundwater at a formerly owned site, and have
conducted certain remediation work at this site including soil removal. We have incurred costs of $118 in 2004 and
approximately $916 to date. We anticipate remediation costs for this site to continue through 2009, including estimated expenditures of $64 in 2005. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
1999, we sold the land and building of a previously discontinued division in St.&nbsp;Petersburg, Florida. We conducted investigations of soil and groundwater at the former
facility and received approval of the remediation action plan from the Florida Department of Environmental Protection. The remediation system was installed in 2003, and clean up of the site is still
in progress. In 2004, we spent $43 on the clean up of this facility and have incurred approximately $685 to date. We anticipate remediation costs for this site to continue through 2007, including
estimated expenditures of $56 in 2005. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-17</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fo6313_1_18"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;8&#151;Environmental Contingencies (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2001, we received a letter from the United States Environmental Protection Agency ("EPA") notifying us that we are considered a potentially responsible party for a site
located in Prospect, Connecticut, where our former subsidiary operated a screw machine shop from 1961 to 1978, and demanding that we reimburse the EPA for its costs incurred in connection with a
time-critical removal action taken by the EPA at the site in 2001. The former subsidiary was merged with Axsys in 1979. In April 2004, the EPA notified us that the total amount of such
costs is approximately $650, including indirect costs and interest. At a meeting with the EPA in April&nbsp;2004, we advised the EPA of our position that we are not responsible for these costs or
the contamination at the site. We have had subsequent communications with the EPA concerning our respective positions, and the EPA advised us that they were not prepared to proceed with settlement
discussions until they had conducted a further investigation of the activities of our former subsidiary at the site. In July 2004, the EPA served us with a 104 (e)&nbsp;letter requesting detailed
information concerning the activities of our former subsidiary at the site. We responded to the 104(e) letter on January&nbsp;17, 2005. The EPA has designated no other potentially responsible
parties. During 2004, we recognized a charge of $32, net of tax of $18 in discontinued operations, for additional legal expenses related to this site. During 2004, we paid $121 in legal fees and we
have incurred approximately $328 to date in legal fees. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004, we recognized a charge of $42, net of tax of $23 related to our share of the settlement of an environmental claim concerning a previously discontinued operation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;2004, we have an accrual of $711 for future costs related to these sites. These estimates have been developed in consultation with outside environmental and legal
consultants handling these matters and are based upon an analysis of the anticipated remediation plans. We do not anticipate these matters will have a material adverse effect on our consolidated
financial position. It is possible, however, that future results of operations could be materially affected by changes in our assumptions. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;9&#151;Litigation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we were named as a co-defendant in the case Parker, et al v. Brush Wellman,&nbsp;Inc. et al., a punitive class action lawsuit brought
by a group of named plaintiffs who are employees, former employees, or family members of employees and former employees, of Lockheed Martin Corporation ("Lockheed"). The plaintiffs claim that they
have suffered personal injuries or are at an increased risk of developing personal injuries as a result of exposure to beryllium-containing materials used at Lockheed's facility. The plaintiffs
purport to represent a class of persons whom they claim are similarly situated. The defendants include Lockheed and various other companies, including Axsys, who are alleged to have supplied
beryllium-containing materials used at the facility. The case is currently pending in the United States District Court for the Northern District of Georgia. We have filed a motion to dismiss based on
a lack of personal jurisdiction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
the case is in its preliminary stages and no meaningful, substantive discovery has been performed, it is premature for us, along with our attorneys, to attempt to evaluate likely
outcomes of the case. During 2004, we spent $56 in legal costs and as of December&nbsp;31, 2004 we had $24 accrued for future legal expenses. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-18</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fq6313_1_19"> </A> </FONT> <FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004  </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;9&#151;Litigation (Continued)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004, we settled an action, which was filed in the Court of Chancery in the State of Delaware on May&nbsp;30, 1997, against Axsys and three of the directors on behalf of a
purported class of persons who purchased our preferred stock. The plaintiff challenged our decision to redeem all of our outstanding shares of the preferred stock. The plaintiff claimed that the
defendants (1)&nbsp;breached fiduciary duties in setting the redemption price too low and unfairly seeking to advantage holders of common stock and (2)&nbsp;breached contractual duties as set
forth in the Certificate of Designation governing the preferred stock, as well as an implied covenant of good faith and fair dealing. We paid $201 to settle this claim and reflected the charge as a
reduction to paid-in-capital in 2003. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;10&#151;Shareholders' Equity  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Repurchase:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During 2004, our Board of Directors authorized the repurchase, from time to time, on the open market or
otherwise, of up to 200,000 shares of the Axsys common stock at prevailing market prices or at negotiated prices. We plan to use the repurchased shares for general corporate purposes, including the
satisfaction of commitments under our employee benefit plans and the exercise of stock option grants. As of December&nbsp;31, 2004, we repurchased 12 shares under this authorization. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Split:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors declared on June&nbsp;1, 2004, a 3:2 stock split to be effected as a stock dividend
payable on June&nbsp;30, 2004 to stockholders of record on June&nbsp;15, 2004. Stockholders received a
dividend of one additional share of Axsys $0.01 par value common stock for every two shares owned on the record date. Fractional shares were not issued; rather cash payments were made to shareholders
in lieu of fractional shares on June&nbsp;30, 2004. The cash paid for fractional shares was de minimus. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
conjunction with the stock split, we issued an additional 2,395,578 shares resulting in a total of 7,186,734 issued shares of Axsys $0.01 par value stock on June&nbsp;30, 2004. We
reclassified an amount equal to the par value of the number of shares issued to common stock from retained earnings. All share information, including the basic and diluted weighted-average number of
shares and net income per share information, for all reporting periods have been restated retroactively to reflect the effects of the stock split. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paid in Capital:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we recognized $242 of compensation expense related to the modification of certain existing
stock options pursuant to the terms of a severance arrangement. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury Stock:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We use treasury stock shares for general corporate purposes, including the satisfaction of commitments under
the employee benefit plans and the exercise of stock options. During 2004, we received 11,902 shares of Axsys $0.01 par value common stock as payment in lieu of cash for the exercise of incentive
stock options. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, we sold our wholly owned subsidiary Automation Engineering,&nbsp;Inc. ("AEI") to an investor group who individually owned shares of Axsys common stock. As a group, the
investors owned 9.2% of Axsys common stock prior to the sale of AEI, with individual ownership ranging from 1.8% to 4.6%. The sales price included both cash and a return of 77,784 shares of Axsys
stock. The common </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-19</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fq6313_1_20"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;10&#151;Shareholders' Equity (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>stock
was valued at $4.58 per share, which represented the average of the mean of the bid and ask price of the common stock at the close of trading on the Nasdaq Stock Market for the trading days
immediately preceding the closing date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes
in treasury stock were as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="69%" ALIGN="LEFT"><FONT SIZE=1><B>Number of shares<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at December 31, 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>145,314</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,041</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Shares received from sale of business</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>77,784</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Contribution to the 401(k) plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(14,616</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(104</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>208,482</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,293</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Exercise of stock options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(900</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Contribution to the 401(k) plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(8,552</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(53</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at December 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>199,030</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Exercise of stock options, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(64,108</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(322</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Contribution to the 401(k) plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(4,718</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Repurchase of stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at December 31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>130,216</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><I>Common Stock:  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares of common stock authorized and issued were 7,186,734 shares at the end of 2004, 2003 and 2002. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;11&#151;Supplemental Cash Flow Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Supplemental cash flow information from continuing operations for the years ended December&nbsp;31, 2004, 2003 and 2002 is summarized as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Cash received/(paid) during the year for:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>Interest paid</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(177</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(108</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(149</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>Interest received</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>99</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>118</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>181</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>Income tax payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,558</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(429</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(383</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>Income tax refunds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>566</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,522</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,478</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Non-cash investing activities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>Equipment acquired under capital leases</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>905</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>Stock proceeds from sale of AEI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-20</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=103,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=272721,FOLIO='F-20',FILE='DISK124:[05NYC3.05NYC6313]FQ6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fq6313_1_21"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;12&#151;Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The income tax (benefit) provision from continuing operations consists of: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Current income taxes:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>U.S. Federal</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,097</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,595</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>State and local</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>376</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,473</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,295</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred income taxes:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>U.S. Federal</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,216</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(195</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,910</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="55%"><FONT SIZE=2>State and local</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(265</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>195</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>354</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,481</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,264</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total income tax (benefit) provision:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
current and deferred federal and state income taxes reflect the creation of a valuation allowance in 2002 and the utilization of the valuation allowance in 2003 and 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
difference between the provision for income taxes and the amount computed by applying the statutory federal income tax rate to Income (Loss) from Continuing Operations Before Income
Taxes and Cumulative Effect of Change in Accounting Principle is as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Federal statutory rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Computed expected income tax provision (benefit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Increase (decrease) in income taxes resulting from:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Net change in valuation allowance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,395</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,631</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>State and local taxes, net of federal tax benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>355</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>348</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>91</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Tax benefit of credits and net operating losses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Net alternative minimum tax activity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>245</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Tax basis adjustment&#151;sale of subsidiary</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Adjustment to tax accrual</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(318</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Actual tax (benefit) provision:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2004, we had credit carryforwards of approximately $403, which expire at various times between 2018 and 2022. In accordance with the SFAS No.&nbsp;109, we
recognized a valuation allowance during 2002 in the amount of $4,631 to offset a portion of the recognized deferred income tax asset. During 2003 and 2004, the valuation allowance was reduced by
$1,395 and $3,236, respectively as deferred income tax assets were realized and since, as of December&nbsp;31, 2004, it is more likely than not that the net deferred income tax assets will be
realized in the future. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-21</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=104,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=581275,FOLIO='F-21',FILE='DISK124:[05NYC3.05NYC6313]FQ6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fq6313_1_22"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;12&#151;Income Taxes (Continued) </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes reflect the net federal and state tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
components of deferred income taxes are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred income tax assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,361</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,193</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Tax credit carry-forward</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>403</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Net operating loss carry-forward</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>310</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Loss contract reserve</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>720</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Exit costs of discontinued operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>318</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>316</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Sensor systems accruals</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>134</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>170</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Note receivable&#151;STS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Allowance for doubtful accounts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>254</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>255</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Pension accruals</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>296</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>383</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Warranty reserves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>193</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>161</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Other, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>124</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Total deferred income tax asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,803</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,140</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Net deferred income tax asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,803</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Long-term deferred income tax liabilities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Property, plant and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,464</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,504</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Intangibles</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(192</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Net long-term deferred income tax liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,656</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,504</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;13&#151;Pension Arrangements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004, we had one pension plan for which benefits and participation have been frozen. Pension benefits under this plan are generally
based upon years of service and compensation. The plan is an unfunded plan with an annual payout of approximately $105 until such time as the sole participant becomes ineligible. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-22</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=105,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=479690,FOLIO='F-22',FILE='DISK124:[05NYC3.05NYC6313]FQ6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fs6313_1_23"> </A> </FONT> <FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004  </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;13&#151;Pension Arrangements (Continued)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004, we terminated and liquidated a fully-funded pension plan. The net distribution from this plan was in excess of $900. The following table summarizes the components of net
periodic pension cost for the defined benefit plans: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="75%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended<BR>
December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Interest cost on projected benefit obligation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>92</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>86</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Expected return on plan assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(44</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Recognized net actuarial loss</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Effect of special events</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(48</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Total pension expense</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>84</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>101</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assumptions
used in accounting for the defined benefit plans as of the plans' measurement dates were: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="78%"><FONT SIZE=2>Weighted-average assumption used to determine benefit obligation at:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="78%"><FONT SIZE=2>Weighted-average discount rate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.75</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="78%"><FONT SIZE=2>Weighted-average assumptions used to determine net periodic benefit costs for years ending:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="78%"><FONT SIZE=2>Discount rate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.75</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="78%"><FONT SIZE=2>Expected long-term return on plan assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-23</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=106,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=432278,FOLIO='F-23',FILE='DISK124:[05NYC3.05NYC6313]FS6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fs6313_1_24"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;13&#151;Pension Arrangements (Continued) </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the change in benefit obligation, change in plan assets and the funded status recognized in the Consolidated Balance Sheets for our defined benefit pension
plans: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Change in benefit obligation:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Benefit obligation at beginning of year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,385</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,186</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Interest cost</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>92</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Actuarial loss</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>211</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Benefits/settlements paid</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,012</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(104</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Benefit obligation at end of year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>450</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,385</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Change in plan assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Fair value of plan assets at beginning of year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>906</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>837</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Actual return</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Employer contribution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>104</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>145</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Benefits/settlements paid</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,012</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(104</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Fair value of plan assets at end of year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>906</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Funded status</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>440</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>479</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Unrecognized net actuarial loss</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Accrued benefit costs at December 31</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>440</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>452</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrecognized
net gains and losses are amortized over the average future service lives of participants. Asset management objectives include maintaining an adequate level of
diversification and providing adequate liquidity to meet immediate and future benefit payment requirements. Plan assets for the fully funded plan were invested in a managed portfolio consisting
primarily of equity securities, real estate and bonds. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
asset allocation of pension benefit plans at December&nbsp;31 was: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=1><B>Asset Category<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Money market account</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>194</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Debt securities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>178</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Real estate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>176</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Government securities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>170</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>188</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>906</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also sponsor a 401(k) plan under which eligible employees may elect to contribute a percentage of their earnings. We match employee contributions to this plan in amounts ranging from
3% to </FONT><FONT SIZE=2><I>5%</I></FONT><FONT SIZE=2> of the employees' gross earnings. Our matching contributions, were $918 in 2004, $719 in 2003, and $720 in 2002 of which a portion was provided
in Axsys stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-24</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=107,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=768921,FOLIO='F-24',FILE='DISK124:[05NYC3.05NYC6313]FS6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fs6313_1_25"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;14&#151;Stock Options  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1991, our shareholders approved our Long-term Stock Incentive Plan (the "Plan"). Shareholders approved amendments to and restatement of the Plan in
May&nbsp;2000 and May&nbsp;2001, which, among other things, increased the number of shares of common stock authorized for issuance under the Plan by 300,000 each year. As of December&nbsp;31,
2004, the total number of shares of common stock authorized for issuance under the Plan was 1,200,000 shares, of which 212,760 shares of common stock remain available for grant under the Plan. The
Compensation Committee of the Board of Directors (the "Committee") administers the Plan. The Committee selects participants from among those executives and other employees of Axsys and the
subsidiaries who materially contribute to the success of our Company and determines the amounts, times, forms, terms and conditions of grants. Grants may be in the form of options to purchase shares
of common stock, stock appreciation rights, restricted stock and performance units (collectively, "Stock Incentives"). Generally, each grant vests 20&nbsp;percent per year for five years, is
exercisable upon vesting and expires in ten years. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004, we modified the stock option grants of a former officer, which resulted in compensation expense of $242. A summary of all outstanding stock options is presented in the table
below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Stock<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Outstanding at December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>775,103</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>9.93</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>194,497</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>5.67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Forfeited/cancelled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(277,013</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>(10.34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(900</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>(4.46</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Outstanding at December 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>691,687</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>8.54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>210,278</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>11.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Forfeited/cancelled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(14,850</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>(10.47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(76,009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>(7.17</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Outstanding at December 31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>811,106</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>9.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Exercisable at December 31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>302,619</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>11.29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-25</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=108,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=753420,FOLIO='F-25',FILE='DISK124:[05NYC3.05NYC6313]FS6313A.;16',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fs6313_1_26"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;14&#151;Stock Options (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information about stock options outstanding at December&nbsp;31, 2004: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1><B>Range of<BR>
Exercise Prices<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
average<BR>
Remaining<BR>
Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$2.72 to $5.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>220,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4.66</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>51,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4.62</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$5.44 to $8.15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>197,035</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6.89</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>82,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7.18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$8.16 to $10.87</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>144,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9.94</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>33,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9.86</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$10.88 to $13.58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>90,646</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11.94</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>37,944</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12.43</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$13.59 to $16.30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>56,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14.29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14.75</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$16.31 to $19.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>90,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17.72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>88,275</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17.74</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$19.03 to $24.45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>24.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>24.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>$2.72 to $24.45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>811,106</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>302,619</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11.29</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;15&#151;Commitments and Contingencies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future minimum payments under non-cancelable operating leases (exclusive of property expenses and net of sublease rental income), as of
December&nbsp;31, 2004, are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,548</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,282</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,186</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,102</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>2009 and thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,230</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,348</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rent
expense under such leases, net of sublease rental income, amounted to $1,598 in 2004, $1,400 in 2003 and $1,517 in 2002. We anticipate receiving an aggregate of $6 in future
sublease rental income. As of December&nbsp;31, 2004, we were contingently liable for $680 under outstanding letters of credit. We have issued letters of credit for certain business transactions
including insurance programs and building lease security deposits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the normal course of business, we are liable for contract completion and product performance. In the opinion of management, such obligations will not significantly affect our
financial position or annual results of operations. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;16&#151;Discontinued Operations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, we recognized a charge of $74, net of tax of $41, related to legal and consulting expenses related to environmental clean up sites. (See
Note&nbsp;8 of the Consolidated Financial Statements.) In 2004, we also recognized an additional loss reserve in relation to the 2002 sale of the Automation Group. The charge of $421, net of tax
$226, represents rental expenses for two facilities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-26</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fs6313_1_27"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;16&#151;Discontinued Operations (Continued) </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, we sold the Automation Group, which consisted of two manufacturing facilities, one in Pittsburgh, Pennsylvania and the other in Wilmington, Massachusetts. In conjunction
with the sale of the Automation Group, we recognized, in 2002, a loss from discontinued operations of $1,709, net of taxes of $1,029. This loss included a charge of $729 for the impairment of assets
and $980 of closing related expenses. The operating loss from discontinued operations for 2002 was $2,692, net of taxes of $1,638. Revenues from the Automation Group were $1,177 in 2002. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
loss from discontinued operations, net of tax, recognized in the Consolidated Statements of Operations includes the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Automation Group&#151;operating loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,692</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Automation Group&#151;loss on sale</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,709</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Environmental charges for previously divested business</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(74</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Reversal of unutilized reserves from a previously disposed of business</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Loss from discontinued operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(495</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4,582</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><B>Note&nbsp;17&#151;Segment Data  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Company's continued growth led us to modify our segments in 2004. All of our engineering and manufacturing facilities are selling products and solutions into
both the aerospace and defense and the commercial markets. In addition, we are developing more sophisticated solutions that draw from the diverse technical capabilities of all of our facilities. As a
result of these operational changes, we combined our former Aerospace and Defense Group and our former Commercial Products Group into a single reporting segment, Optical Systems Group. This new
segment structure incorporates all the facilities, engineers and staff contributing to our optics strategy and more accurately reflects the way we manage our business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Optical Systems Group designs, manufactures and sells highly precise assemblies and components which are typically embedded in optical platforms for both government and commercial
applications. Products can be grouped into four primary areas; precision metal optical products, infrared optical products, motion control products, and precision machined lightweight structures.
However, customer requirements sometimes demand an optical solution that combines products from two or three of these areas into a sophisticated optical system. The Optical Systems Group has design
and manufacturing facilities and each facility is identified as a reporting unit as follows: Motion Control Products in San Diego, California, Precision Machined Products in Cullman, Alabama, Imaging
Systems in Rochester Hills, Michigan and IR Systems in North Billerica, Massachusetts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Distributed Products Group distributes precision ball bearings, spherical plain bearings and bushings, acquired from various domestic and international sources, to original equipment
manufacturers and maintenance repair organizations. The bearings and bushings are used in a variety of industrial automation and commercial markets. Additionally, the Distributed Products Group
designs, manufacturers and sells mechanical-bearing subassemblies for a variety of customers. The Distributed Products group is comprised of the reporting unit AST Bearings Division located in
Montville, New Jersey, with a satellite distribution center in Irvine, California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segment
information for all prior periods has been restated to reflect the new operating segments. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-27</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fu6313_1_28"> </A> </FONT> <FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004  </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;17&#151;Segment Data (Continued)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following tables present financial data for each segment: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="75%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Net sales from continuing operations:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>78,189</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>63,246</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>59,438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,341</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21,863</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>20,148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Total sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>79,586</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Income (loss) from continuing operations before income taxes and cumulative change in accounting principles:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,063</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,063</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,900</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,211</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Non-allocated expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(4,478</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,729</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(6,308</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Income (loss) from continuing operations before income taxes and cumulative change in accounting principle</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,151</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,234</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Capital expenditures of continuing operations:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,062</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,908</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,227</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>149</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>103</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>124</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Corporate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Total capital expenditures</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,239</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,027</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,380</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Depreciation and amortization of continuing operations:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,251</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,422</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>154</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>219</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>223</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Corporate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>269</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>279</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>290</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Total depreciation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,674</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,920</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,663</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of intangibles</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>73</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Total depreciation and amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,747</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,920</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,663</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-28</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=111,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=867863,FOLIO='F-28',FILE='DISK124:[05NYC3.05NYC6313]FU6313A.;12',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_fu6313_1_29"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;17&#151;Segment Data (Continued) </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Identifiable assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>61,552</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>37,566</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,787</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,366</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Non-allocated assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,476</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16,913</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="63%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>66,845</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Goodwill:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical System Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,573</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,160</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,440</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,440</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="63%"><FONT SIZE=2>Total goodwill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,013</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,600</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in non-allocated expenses are general corporate expense, interest expense, and other income and expense. Identifiable assets by segment consist of those assets that
are used in the segments' operations. Non-allocated assets are comprised primarily of short-term investments, cash and cash equivalents, corporate assets and net deferred
income tax assets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents the non-allocated identifiable assets: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Non-allocated assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,197</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Income taxes&#151;deferred and current</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,553</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,203</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Long-term deferred income tax asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,264</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Short-term investments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,983</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Other corporate assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>673</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,266</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,476</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16,913</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below presents sales from continuing operations to specific geographic regions. Substantially all of our assets are located within the United States. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December 31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>91,069</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>73,051</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>65,179</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,672</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,991</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,951</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other foreign</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,789</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,067</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,456</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2>Total sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,530</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>85,109</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>79,586</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-29</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fu6313_1_30"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;17&#151;Segment Data (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
activity with one customer, Raytheon, represented 25% in 2004 and 21% in 2003 of our net sales within the Optical Systems Group. During 2002, we did not have a concentration of
sales with any one customer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
our Optical Systems Group, we had aggregate sales, both military and non-military, directly to the U.S. government, including its agencies and departments, of $2,367
in 2004, $3,397 in 2003 and $4,570 in 2002. In addition, sales of $47,574 in 2004, $36,633 in 2003 and $32,356 in 2002 were derived from subcontracts with U.S. government contractors. The majority of
these contracts are subject to termination at the convenience of the U.S. government, and certain contracts are also subject to renegotiation. Currently, we are not aware of any proposed termination
or renegotiation of such contracts that would have a material adverse effect on our business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
raw materials and components that we purchase are generally available from multiple suppliers. However, beryllium, a material we use extensively within our Optical Systems Group, is
only available from Brush Wellman,&nbsp;Inc. ("Brush Wellman"), the sole U.S. supplier. Historically, we have had an excellent relationship with Brush Wellman and have not encountered problems in
obtaining our supply
requirements. However, the partial or complete loss of Brush Wellman as a supplier of beryllium, or production shortfalls or interruptions that otherwise impair the supply of beryllium, would have a
material adverse effect on our business, financial condition and results of operations. If such conditions were to occur, it is uncertain whether alternative sources could be developed. We paid Brush
Wellman $9,660 in 2004, $5,855 in 2003 and $12,462 in 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, within our Distributed Products Group, we purchase a substantial amount of ball bearings that we distribute from two foreign suppliers. While we believe that we could obtain
alternate sources of supply, any interruption in the flow of products from these suppliers, or significant increases in the cost of these products, could have an adverse effect on our business,
financial condition and results of operations. We paid these two suppliers $6,406 in 2004, $5,438 in 2003 and $3,114 in 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-30</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fu6313_1_31"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except per share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;18&#151;Selected Quarterly Financial Data  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selected quarterly financial data for the years ended December&nbsp;31, 2004 and 2003 is summarized as follows (in thousands, except per share data): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Quarters Ended (Unaudited)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December<BR>
2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2><B><I>Statement of Operations Data:</I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23,406</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25,729</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26,356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>28,039</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,781</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,821</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,949</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,105</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Income from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,644</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,149</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Diluted net income per share from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.49</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Diluted net income per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Diluted weighted-average common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,117</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,224</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,241</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,408</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Quarters Ended (Unaudited)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December<BR>
2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2><B><I>Statement of Operations Data:</I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20,373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21,693</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21,203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21,840</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,447</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,714</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,926</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Income from continuing operations before cumulative effect of change in accounting principle</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>874</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,436</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,225</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,463</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>874</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,436</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,225</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,463</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Diluted net income per share from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.17</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Diluted net income per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.17</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="49%"><FONT SIZE=2>Diluted weighted-average common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,040</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,103</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,156</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-31</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=114,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=806991,FOLIO='F-31',FILE='DISK124:[05NYC3.05NYC6313]FU6313A.;12',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fw6313_1_32"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fw6313_axsys_technologies,_inc._conso__axs04034"> </A>
<A NAME="toc_fw6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Balance Sheets    <BR>    <BR>    (Dollars in thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005<BR>
(Unaudited)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>CURRENT ASSETS:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,531</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Accounts receivable&#151;net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,910</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>15,715</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Inventories&#151;net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>37,612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>29,698</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,553</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,215</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,020</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>TOTAL CURRENT ASSETS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>63,518</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>55,986</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>PROPERTY, PLANT AND EQUIPMENT&#151;net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>15,108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>13,337</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>AMORTIZABLE INTANGIBLE ASSET&#151;net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,048</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,127</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>GOODWILL</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>57,549</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>13,013</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>OTHER ASSETS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,405</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,352</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>TOTAL ASSETS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148,628</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 ALIGN="CENTER" VALIGN="TOP"><BR><FONT SIZE=2><B>LIABILITIES AND SHAREHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2><BR>
CURRENT LIABILITIES:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,818</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,459</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>15,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9,513</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Deferred income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,195</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Current portion of long-term capital lease obligations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>368</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Current portion of long-term debt</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>TOTAL CURRENT LIABILITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>37,614</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>24,535</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>CAPITAL LEASES, less current portion</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>LONG-TERM DEBT, less current portion</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>50,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,333</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>OTHER LONG-TERM LIABILITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4,704</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2>SHAREHOLDERS' EQUITY:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Common stock, authorized 30,000,000 shares, issued 7,186,734 shares at July&nbsp;2, 2005 and December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Capital in excess of par</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>39,954</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>39,612</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Accumulated other comprehensive loss</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(224</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(97</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,548</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14,389</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Treasury stock, at cost, 87,468 shares at July&nbsp;2, 2005 and 130,216 at December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(634</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(883</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>TOTAL SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>56,716</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>53,093</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148,628</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-32</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=115,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=807713,FOLIO='F-32',FILE='DISK124:[05NYC3.05NYC6313]FW6313A.;14',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fy6313_1_33"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fy6313_axsys_technologies,_inc._conso__axs04846"> </A>
<A NAME="toc_fy6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Statements of Operations    <BR>    <BR>    (Dollars in thousands, except share and per share data&#151;Unaudited)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>For the Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>For the Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>33,384</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,729</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>62,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>49,135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,050</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,908</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>43,242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,533</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,821</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,790</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5,946</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,868</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,046</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Research, development and engineering expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,044</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,788</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,303</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Write-off of restructuring accrual</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Operating income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,344</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,956</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,083</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(76</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(773</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(108</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>76</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Other income (expense) net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(22</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Income from continuing operations before income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,723</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,195</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,295</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,987</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>220</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,986</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>399</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Income from continuing operations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Loss from discontinued operations, net of tax</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,552</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
BASIC EARNINGS (LOSS) PER SHARE:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Continuing operations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.24</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Discontinued operations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Weighted average basic common shares outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,094,794</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,999,806</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,079,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,994,018</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
DILUTED EARNINGS (LOSS) PER SHARE:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Continuing operations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.44</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Discontinued operations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.21</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Weighted average dilutive common shares outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,476,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,280,829</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,459,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,223,409</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-33</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=116,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=200969,FOLIO='F-33',FILE='DISK124:[05NYC3.05NYC6313]FY6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ga6313_1_34"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ga6313_axsys_technologies,_inc._conso__axs03595"> </A>
<A NAME="toc_ga6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Statements of Cash Flows    <BR>    <BR>    (Dollars in thousands&#151;Unaudited)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Adjustments to reconcile net income to cash provided by operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,549</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,391</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>227</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>632</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Stock contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Loss on disposal of capital assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Write-off of restructuring accrual</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,153</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,759</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(868</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>124</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,094</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(621</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,456</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,195</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Long-term liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(470</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other&#151;net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(70</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>NET CASH PROVIDED BY OPERATING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,489</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,548</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Capital expenditures, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,899</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Acquisitions, net of cash acquired</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(56,369</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,105</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from sale of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>NET CASH USED IN INVESTING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(57,665</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(8,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Repayment of borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4,851</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(282</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from long-term debt, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>55,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,833</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from the exercise of options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Distribution from preferred stock settlement fund</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>NET CASH PROVIDED BY FINANCING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>50,707</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,708</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>NET DECREASE IN CASH</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,469</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,765</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT END OF PERIOD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,531</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,432</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Supplemental cash flow information</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Cash (paid for) received from:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Interest paid</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(91</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(61</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Interest received</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>86</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Income tax payments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,018</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(799</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-34</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=117,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=942765,FOLIO='F-34',FILE='DISK124:[05NYC3.05NYC6313]GA6313A.;7',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gc6313_1_35"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gc6313_axsys_technologies,_inc._conso__axs06726"> </A>
<A NAME="toc_gc6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)    <BR>    <BR>    For the Six Months Ended July&nbsp;2, 2005 and July&nbsp;3, 2004    <BR>
<BR>    (Dollars in thousands&#151;Unaudited)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common<BR>
Stock<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital in<BR>
Excess of<BR>
Par</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
Other<BR>
Comprehensive<BR>
Gain/ (Loss)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Retained<BR>
Earnings</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Treasury<BR>
Stock<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Comprehensive<BR>
Income</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Balance at December 31, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>39,612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(97</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>14,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>53,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1><BR>
Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,159</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Foreign exchange contract</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>121</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Loss on interest rate swap</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(248</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Total comprehensive income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>3,032</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Distribution from preferred stock settlement fund</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Exercise of stock options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>246</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>21</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Balance at July 2, 2005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>39,954</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(224</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>17,548</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(634</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>56,716</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1><BR>
Balance at December 31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
39,375</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
5,725</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(1,235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
43,898</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1><BR>
Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Foreign exchange contract</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>22</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Gain on interest rate swap</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Total comprehensive income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>3,616</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Exercise of stock options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>111</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>158</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Contribution to 401(k) plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Escheatment of preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Balance at July 3, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>39,365</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>(11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>9,313</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(1,108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>47,631</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes to consolidated financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-35</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ge6313_1_36"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ge6313_axsys_technologies,_inc._notes__axs05359"> </A>
<A NAME="toc_ge6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.    <BR>    <BR>    Notes to Interim Consolidated Financial Statements    <BR>    <BR>    (Dollars in thousands, except share and per share data&#151;Unaudited)    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Basis of Presentation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Axsys Technologies,&nbsp;Inc. ("Axsys" or "we") prepared the unaudited Consolidated Financial Statements as of and for the three months and six months ended
July&nbsp;2, 2005 and July&nbsp;3, 2004. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods
have been made, and the interim accounting policies followed are in conformity with generally accepted accounting principles and are consistent with those applied for annual periods as described in
Axsys' Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2004, previously filed with the Securities and Exchange Commission (the "Annual Report"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted as permitted by
the SEC. It is suggested that these consolidated financial statements be read in conjunction with the financial statements included in Axsys' Annual Report. The results of operations for the six
months ended July&nbsp;2, 2005 and July&nbsp;3, 2004 are not necessarily indicative of the operating results for the full year. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic
earnings per share have been computed by dividing net income by the weighted average number of common shares outstanding. The dilutive effect of stock options on the weighted
average number of common shares was 381,613 shares for the quarter and 379,333 shares for the six months ended July&nbsp;2, 2005 compared to 281,023 shares for the quarter and 229,391 shares for the
six months ended July&nbsp;3, 2004. Diluted earnings per share excludes 128,250 potential shares of common stock for the three months ended July&nbsp;2, 2005 and 91,277 potential shares of common
stock for the six months ended July&nbsp;2, 2005 related to our stock compensation plans because the option exercise price was greater than the average market price of our common stock for the
period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table illustrates the effect on net income and income per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards
("SFAS") No.&nbsp;123: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Reported net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,552</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Add: Stock-based compensation expense included in reported net income, net of related tax effect</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Deduct: Stock-based employee compensation expense determined under fair value method, net of related tax effect</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(127</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(186</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(253</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(372</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Pro forma net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,425</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,789</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,906</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,216</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Pro forma basic earnings per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.46</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2>Weighted average basic common shares<BR>
outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,094,794</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,999,806</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,079,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,994,018</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Pro forma diluted earnings per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
0.19</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
0.25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
0.39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
0.45</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2>Weighted average diluted common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,476,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,280,829</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,459,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,223,409</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-36</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=119,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=817670,FOLIO='F-36',FILE='DISK124:[05NYC3.05NYC6313]GE6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_ge6313_1_37"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;2&#151;Acquisitions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;2, 2005, Axsys acquired 100% of the stock of Diversified Optical Products,&nbsp;Inc. ("DiOP") for approximately $55,244 in cash plus $1,642 of
legal, accounting and other acquisition-related costs. DiOP was a privately held manufacturer of high-end thermal surveillance camera systems and lenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to obtaining an established and skilled workforce, we expect that this acquisition will leverage our existing technologies and provide a new base of customers. DiOP's
successes as a developer of long-range infrared surveillance camera systems for both homeland security and military markets complements are our existing infrared lens capabilities. These
cameras are used for applications such as surveillance and reconnaissance, border patrol, perimeter security, and law enforcement. DiOP's technology and market position directly addresses our primary
strategic goals of increasing the technical sophistication of our solution and leveraging our technical strengths to serve growth markets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to camera systems, DiOP has strong capabilities and an impressive reputation in the design and development of infrared lenses for high-end military applications.
These technical capabilities are quite similar to our existing infrared design and manufacturing skills. By combining these operations we will be able to better satisfy the growing demand for thermal
imaging lenses, and simultaneously recognize operational efficiencies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
acquisition has been accounted for by the purchase method of accounting, and accordingly, the consolidated statements of income include the results of DiOP during the second quarter
of 2005 from the date of acquisition. The assets acquired and the liabilities assumed were recorded at estimated fair values as determined by Axsys management and a valuation firm based on information
currently available and on current assumptions as to future operations. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Fair value:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Cash</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,009</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Inventory, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,581</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,292</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Liabilities assumed</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Amortizable intangible assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>44,536</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Purchase price</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>56,886</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Cash acquired</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,009</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Debt repayment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Payment of officer loan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(142</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Accrued acquisition costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(675</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Net cash paid during the second quarter of 2005</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>56,369</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill
acquired through the purchase of DiOP is deductible for income tax purposes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-37</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=120,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=726829,FOLIO='F-37',FILE='DISK124:[05NYC3.05NYC6313]GE6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gg6313_1_38"> </A> </FONT> <FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited)  </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;2&#151;Acquisitions (Continued)  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
results of DiOP's operations from the date of acquisition are included in our Optical Systems Group. Unaudited proforma results of operations for the three months and six months
ended July&nbsp;2, 2005 and July&nbsp;3, 2004, as if Axsys and DiOP had been combined as January&nbsp;1, 2004 are presented below. The pro forma results include estimates and assumptions, which
our management believes are reasonable. However, the pro forma results do not include any cost savings or other effects of the planned integration of DiOP, and are not necessarily indicative of the
results which would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR>
July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR>
July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Filed</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Filed</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro Forma</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net sales:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>33,384</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,911</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,729</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>31,030</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Income from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,761</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,115</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,552</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,611</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,115</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Earnings per common share:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.23</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.30</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.21</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.29</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Weighted average common shares outstanding:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,094,794</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,094,794</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,999,806</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,999,806</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,476,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,476,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,280,829</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,280,829</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended<BR>
July&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended<BR>
July&nbsp;3, 2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER"><BR><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B><BR>
As Filed</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B><BR>
Pro Forma</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B><BR>
As Filed</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B><BR>
Pro Forma</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net sales:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>62,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>69,449</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>58,436</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Income from continuing operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,254</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,522</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,588</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,254</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Earnings per common share:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.47</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0.45</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Weighted average common shares outstanding:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,079,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,079,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,994,018</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,994,314</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,459,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,459,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,223,409</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,223,705</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-38</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=121,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=997947,FOLIO='F-38',FILE='DISK124:[05NYC3.05NYC6313]GG6313A.;13',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_gg6313_1_39"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;3&#151;Inventories&#151;net  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories, determined by lower of cost (first-in, first-out or average) or market, consist of: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2,<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="60%"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,719</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>6,431</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="60%"><FONT SIZE=2>Work-in-process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>20,182</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>18,371</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="60%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,572</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>9,888</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Gross inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>42,473</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>34,690</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="60%"><FONT SIZE=2>Less reserve</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(4,861</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(4,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>37,612</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>29,698</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;4&#151;Derivative Financial Instruments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use derivative instruments in the form of forward exchange contracts and interest rate swap agreements to manage certain foreign currency and interest rate
exposures. We view derivative instruments as risk management tools, and we do not use them for trading or speculative purposes. Derivatives used for hedging purposes must be designated as an effective
hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in the fair value of the
underlying hedged item at inception of the hedge and over the life of the hedge contract. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
derivative instruments are recorded in the balance sheet at fair value. Derivatives used to hedge forecasted cash flows associated with foreign currency sales and interest rate
fluctuations are accounted for as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges are recognized in accumulated other comprehensive income (loss) and in earnings in a
manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently in earnings. At July&nbsp;2, 2005, we had one
forward exchange contract outstanding with a total loss position of $2 and an interest rate swap agreement with a total loss position of $222, both are included in our accrued liabilities. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below presents the fair value of those derivative instruments: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>April 2,<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Forward exchange contracts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(123</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Interest rate swap agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(222</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;5&#151;Segment Data  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Axsys classifies its businesses under two major groups, the Optical Systems Group and the Distributed Products Group. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Optical Systems Group designs, manufactures and sells highly precise assemblies and components that are typically embedded in optical platforms for both government and commercial
applications. Products can be grouped into four primary areas: precision metal optical products; </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-39</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=122,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=467433,FOLIO='F-39',FILE='DISK124:[05NYC3.05NYC6313]GG6313A.;13',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_gg6313_1_40"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;5&#151;Segment Data (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>infrared
optical products; motion control products; and precision machined lightweight structures. However, customer requirements sometimes demand an optical solution that combines products from two
or three of these areas into a sophisticated optical system. The Optical Systems Group plans to continue focusing on growth markets that require highly precise optical and related motion control
solutions. These markets include homeland security initiatives, unmanned vehicle applications, the national missile defense market, new weapons platforms, and performance commercial markets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Distributed Products Group distributes precision ball bearings, spherical plain bearings and bushings, acquired from various domestic and international sources, to original equipment
manufacturers and maintenance repair organizations. The bearings and bushings are used in a variety of industrial automation and commercial markets. Additionally, the Distributed Products Group
designs, manufacturers and sells mechanical-bearing subassemblies for a variety of customers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following tables present the operating results for each of Axsys' segments: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended:</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended:</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net sales:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>27,160</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>19,282</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>49,429</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>36,495</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,224</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,447</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,603</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,640</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=2>Total sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>33,384</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>25,729</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>62,032</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>49,135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Income before income taxes:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,160</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,679</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,413</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,932</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>439</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>706</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>898</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Non-allocated expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,876</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,190</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,016</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,243</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=2>Total income before income taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,723</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,195</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,295</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,987</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents the details of the non-allocated expenses: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended:</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended:</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 2, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July 3, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Non-allocated expenses:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Corporate expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,255</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,108</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,355</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,147</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(706</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(76</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(773</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>76</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Miscellaneous other (expense) income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="33%"><FONT SIZE=2>Total non-allocated expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,876</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,190</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,016</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,243</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-40</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=123,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=532644,FOLIO='F-40',FILE='DISK124:[05NYC3.05NYC6313]GG6313A.;13',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gi6313_1_41"> </A> </FONT> <FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited)  </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;5&#151;Segment Data (Continued)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents the identifiable assets for each of Axsys' segments: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2,<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Identifiable assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>127,004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>61,552</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,072</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>12,787</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Non-allocated assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,552</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>11,476</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="56%"><FONT SIZE=2>Total identifiable sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148,628</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>85,815</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2,<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Goodwill:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Optical Systems Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>56,109</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>11,573</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Distributed Products Group</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,440</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1,440</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Total goodwill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>57,549</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>13,013</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents the non-allocated identifiable assets: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>July&nbsp;2,<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Non-allocated assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,531</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred income taxes, current</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>3,553</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred income taxes, long-term</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>985</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>1,250</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Due from stockholders of DiOP</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>516</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Prepaid insurance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>426</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>565</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Finance fees&#151;DiOP acquisition</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>461</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Miscellaneous other corporate assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>383</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>108</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><FONT SIZE=2>Total non-allocated assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,552</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>11,476</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;6&#151;Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated effective tax rate was 37.5% for the three months and six months ended July&nbsp;2, 2005 compared to 10.0% in the comparable periods of 2004.
During 2005, we recorded a tax expense of 34% for federal taxes and 3.5% for state taxes as compared to 6.0% for federal taxes and 4.0% for state taxes during 2004. The 2004 federal tax expense was
reduced as a result of the reversal of the valuation allowance that had been established in 2002 in accordance with the SFAS No.&nbsp;109. A valuation allowance was no longer required as it is more
likely than not that the net deferred income tax assets will be realized in the future. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-41</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=124,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=110385,FOLIO='F-41',FILE='DISK124:[05NYC3.05NYC6313]GI6313A.;15',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_gi6313_1_42"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;7&#151;Warranty Accruals  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide warranties for certain of our products. Provisions for estimated expenses related to product warranties are made at the time products are sold. These
estimates are established using historical information on the nature, frequency, and average cost of warranty claims. The following table summarizes product warranty activity for the second quarter of
2005: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="54%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Balance at<BR>
December&nbsp;31, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Provision,<BR>
changes and other</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Payments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Balance at<BR>
April&nbsp;2, 2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>750</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="30%" ALIGN="RIGHT"><FONT SIZE=2>270</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(238</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>782</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;8&#151;Environmental Contingencies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2001, we received a letter from the United States Environmental Protection Agency ("EPA") notifying us that we are considered a potentially
responsible party for a site located in Prospect, Connecticut, where our former subsidiary operated a screw machine shop from 1961 to 1978, and demanding that we reimburse the EPA for its costs
incurred in connection with a time-critical removal action taken by the EPA at the site in 2001. In April&nbsp;2004, the EPA notified us that the total amount of such costs is
approximately $650, including indirect costs and interest. We advised the EPA of our position that we are not responsible for these costs or the contamination at the site. In January&nbsp;2005, we
responded to a 104(e) letter from the EPA requesting additional information. We have settled the case in principle with the EPA for $175 plus accrued interest from the date the final agreement is
signed until payment is made. We are actively pursuing partial reimbursement from our insurance carriers. However, we have not recorded a receivable from our insurance carriers due to the uncertainty
of the reimbursement. For the six months ended July&nbsp;2, 2005, we spent $70 in legal fees related to the Prospect site, and we have incurred a total of approximately $398 through July&nbsp;2,
2005 in legal fees. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the second quarter of 2005, we recognized a charge of $150, net of tax of $90 in discontinued operations related to our share of the settlement of the Prospect, Connecticut
environmental claim. In connection with the pending settlement with the EPA, we will have no further responsibility to the EPA as it relates to this site </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;9&#151;Long-Term Debt  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the acquisition of DiOP, we entered into a new Credit Facility ("Credit Facility") with an affiliate of Bank of America ("Bank"), on
May&nbsp;2, 2005. The Credit Facility is comprised of a $15,000 three-year Revolving Credit Facility ("Revolving Credit Facility"), a $20,000 five-year Term Loan Facility
("Term Loan A") and a $35,000 two-year Term Loan Facility ("Term Loan B"). Repayments of amounts borrowed under the Credit Facility are secured by a lien on all of our assets and the
assets of our subsidiaries, including a pledge of the stock of all of our subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Credit Facility requires, among other things, that we maintain certain financial performance covenants, restricts our ability to incur additional indebtedness, and contains various
customary provisions, including affirmative and negative covenants, representations and warranties and events of default. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-42</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=125,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=623386,FOLIO='F-42',FILE='DISK124:[05NYC3.05NYC6313]GI6313A.;15',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_gi6313_1_43"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;9&#151;Long-Term Debt (Continued) </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revolving Credit Facility:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The $15,000 Revolving Credit Facility is available through May&nbsp;2008, subject to optional
prepayment in accordance with its terms. Up to $2,000 of the Revolving Credit Facility may be utilized to issue letters of credit. We may elect to have any borrowing under the Revolving Credit
Facility bear interest either at the Bank's prime rate or the LIBOR rate plus a margin of 100 to 275 basis points, depending on our consolidated funded debt-to-consolidated
EBITDA ratio, as defined. We have the option of selecting the 1-month, 2-month, 3-month or 6-month LIBOR rate. On July&nbsp;2, 2005, there were no
borrowings outstanding under the Revolving Credit Facility. In addition, as of July&nbsp;2, 2005, $657 of the Revolving Credit Facility was utilized for outstanding letters of credit. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Term Loan A:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Term Loan A is scheduled to mature in May&nbsp;2010, subject to optional and mandatory prepayment in
accordance with its terms, with quarterly principal payments of $1,000, which begin in August&nbsp;2005. The Term Loan A bears interest at a rate per annum equal to the 3-month LIBOR
rate plus a margin of 100 to 275 basis points, depending on our consolidated funded
debt-to-consolidated EBITDA ratio, as defined. As of July&nbsp;2, 2005, the balance of the Term Loan A was $20,000 and the interest rate was 5.96%. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Term Loan B:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Term Loan B is scheduled to mature in May&nbsp;2007, subject to optional and mandatory prepayment in
accordance with its terms. Principal payments, which begin in February&nbsp;2006, will be made in five quarterly installments of $500 each and a final installment of $32,500 on May&nbsp;2, 2007.
The Term Loan B bears interest at a rate per annum equal to the LIBOR rate plus a margin of 100 to 275 basis points, depending on our consolidated funded debt-to-consolidated
EBITDA ratio, as defined. We have the option of selecting the 1-month, 2-month or 3-month LIBOR rate. As of July&nbsp;2, 2005, the balance of the Term Loan B was
$35,000 and the interest rate was 5.96%. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Rate Swap:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;2, 2005, we entered into an interest rate swap contract with the Bank to hedge interest
rate fluctuations on the Term Loan A. The interest rate swap has been designated as a cash flow hedge. Under the terms of the interest rate swap, we receive payments based on the 3-month
LIBOR rate and make payments based upon a fixed rate of 4.46%. The notional amount of the interest rate swap at inception was $20,000 and it expires in May&nbsp;2010. The notional amount decreases
as principal payments are made on the term loan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
debt payments as of July&nbsp;2, 2005, are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="83%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Six months ended December&nbsp;31, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>37,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2010 and thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;10&#151;Intangible Assets  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the acquisitions of Telic Optics,&nbsp;Inc. on April&nbsp;8, 2004 and Diversified Optical Products,&nbsp;Inc. on May&nbsp;2, 2005, Axsys
recorded an intangible asset of $2,200 and $9,150, respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-43</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=126,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=595576,FOLIO='F-43',FILE='DISK124:[05NYC3.05NYC6313]GI6313A.;15',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_gi6313_1_44"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;10&#151;Intangible Assets (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
components of intangible assets related to both acquisitions as of July&nbsp;2, 2005 are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross Carrying<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
Amortization</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net Carrying<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average Life</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Customer relationships</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(177</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,823</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>19 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Camera technology</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,546</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>8 years</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Backlog</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>1 year</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Service contract</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>198</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>5 years</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Developed software for internal testing use</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>9 years</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Amortizable intangibles</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>11,350</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(302</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,048</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>16 years</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
expense for the six months ended July&nbsp;2, 2005 was $227, which was included in selling, general and administrative expenses. Estimated amortization expense for each of
the five succeeding years is as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="84%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2>Six months ended December&nbsp;31, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>812</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2>Year ended December&nbsp;31, 2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>950</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2>Year ended December&nbsp;31, 2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>810</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2>Year ended December&nbsp;31, 2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>803</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2>Year ended December&nbsp;31, 2009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>797</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2>Year ended December&nbsp;31, 2010</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>765</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;11&#151;Shareholders' Equity  </B></FONT></P>

<P><FONT SIZE=2><I>Stock Repurchase  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2004, the Axsys' Board of Directors authorized the repurchase, from time to time, on the open market or otherwise, of up to 200,000 shares of Axsys common
stock at prevailing market prices or at negotiated prices. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
plan to use the repurchased shares for general corporate purposes, including the satisfaction of commitments under our employee benefit plans and the exercise of stock option grants.
We repurchased 20 shares under this authorization during the six months ended July&nbsp;2, 2005. We did not repurchase any shares during the six months ended July&nbsp;3, 2004. Through
July&nbsp;2, 2005, Axsys has repurchased 32 shares in total under this repurchase program. </FONT></P>

<P><FONT SIZE=2><I>Paid in Capital  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of 2005, the settlement fund related to preferred stock litigation was closed and we received $75 related to unpaid claims. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-44</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=127,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=62816,FOLIO='F-44',FILE='DISK124:[05NYC3.05NYC6313]GI6313A.;15',USER='CNAPOLE',CD='22-SEP-2005;09:01' -->
<A NAME="page_gi6313_1_45"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AXSYS TECHNOLOGIES,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Notes to Interim Consolidated Financial Statements (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Dollars in thousands, except share and per share data&#151;Unaudited) </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;11&#151;Shareholders' Equity (Continued) </B></FONT></P>


<P><FONT SIZE=2><I>Treasury Stock  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use treasury stock shares for general corporate purposes, including the satisfaction of commitments under employee benefit plans and stock options. Changes in
treasury stock were as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="69%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>130,216</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Exercise of stock options, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(41,054</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Contribution to the 401(k) plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,714</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Repurchase of common stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at July&nbsp;2, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>87,468</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>634</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2><BR>
Balance at December&nbsp;31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
199,030</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Exercise of stock options, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(33,057</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(111</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Contribution to the 401(k) plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,658</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Balance at July&nbsp;3, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>163,315</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>F-45</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gj6313_1_46"> </A> </FONT> <FONT SIZE=2><B>REPORT OF INDEPENDENT AUDITORS  </B></FONT></P>

<P><FONT SIZE=2>To the Shareholders of<BR>
Diversified Optical Products,&nbsp;Inc.: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheets of Diversified Optical Products,&nbsp;Inc. (the "Company") as of December&nbsp;31, 2004 and 2003 and the related statements of
operations, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these
financial statements based on our audits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States of America as established by the Auditing Standards Board of the American Institute
of Certified Public Accountants. 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 consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Diversified Optical Products,&nbsp;Inc. at
December&nbsp;31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>/s/ Grant Thornton LLP</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>Boston,
Massachusetts<BR>
June&nbsp;22, 2005 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-46</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gk6313_1_47"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gk6313_diversified_optical_products,___div03384"> </A>
<A NAME="toc_gk6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Balance Sheets    <BR>    <BR>    (Amounts in thousands, except share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
CURRENT ASSETS:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,068</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accounts receivable, net of allowance for doubtful accounts of $0 in 2004 and $35 in 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,865</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,414</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,380</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income taxes&#151;current</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income taxes&#151;deferred</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>206</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>162</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>TOTAL CURRENT ASSETS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,090</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,079</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
PROPERTY AND EQUIPMENT, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,196</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,923</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
LONG-TERM ASSETS:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Shareholder loan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>130</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>130</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Income taxes&#151;deferred</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Other long term assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>TOTAL LONG-TERM ASSETS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>211</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>149</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>TOTAL ASSETS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12,497</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,151</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><BR><FONT SIZE=2><B>LIABILITIES AND SHAREHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
CURRENT LIABILITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Line of credit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Current portion of long-term note payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>498</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>281</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,141</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>968</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>519</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Customer advances</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>262</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>41</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>223</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>TOTAL CURRENT LIABILITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,231</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,809</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Note payable, less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,924</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
473</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
COMMITMENTS (Note 12)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Common stock, no par value:<BR>
authorized 200 shares, issued and outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,082</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,609</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>TOTAL SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,342</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,869</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12,497</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,151</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-47</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gm6313_1_48"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gm6313_diversified_optical_products,___div04408"> </A>
<A NAME="toc_gm6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Statements of Operations    <BR>    <BR>    (Amounts in thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,090</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13,899</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,165</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Gross margin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,925</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2><BR>
Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,524</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,674</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Research and development costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,826</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,597</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Gain on sale of assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(145</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(342</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>OPERATING INCOME (LOSS)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,888</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,004</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2><BR>
Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(163</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(119</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Other (expense) income, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2><BR>
Income (loss) from operations before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(1,098</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Provision for (benefit from) income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>229</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(97</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>NET INCOME (LOSS)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,473</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2><BR>
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
12,365</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(5,005</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Weighted average basic and diluted common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-48</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=131,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=517972,FOLIO='F-48',FILE='DISK124:[05NYC3.05NYC6313]GM6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_go6313_1_49"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="go6313_diversified_optical_products,___div03157"> </A>
<A NAME="toc_go6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Statements of Cash Flows    <BR>    <BR>    (Amounts in thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,473</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>817</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(68</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(157</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Gain on disposal of capital equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(145</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(342</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Inventory write downs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>109</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,749</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Provision for doubtful accounts</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Change in warranty reserves</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>240</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,416</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>577</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>228</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,421</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Other current and long-term assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(25</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>173</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,344</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>349</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(206</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Customer advances</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>221</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(117</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>223</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,435</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Capital expenditures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(519</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(123</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Proceeds from sale of capital equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>259</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>684</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>561</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Proceeds from new borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,700</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Repayment of borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(301</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>Distribution to stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="72%"><FONT SIZE=2>NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>299</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>NET CHANGE IN CASH AND CASH EQUIVALENTS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>741</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,575</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,068</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,643</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT END OF YEAR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,068</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-49</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=132,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=574310,FOLIO='F-49',FILE='DISK124:[05NYC3.05NYC6313]GO6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_go6313_1_50"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="go6313_diversified_optical_products,___div04223"> </A>
<A NAME="toc_go6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Statements of Shareholders' Equity    <BR>    <BR>    (Amount in thousands, except share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Retained<BR>
Earnings</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Balance at December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9,270</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2><BR>
Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(1,001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(1,001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Shareholder distributions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(2,400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Balance at December 31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,609</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,869</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2><BR>
Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,473</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,473</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Shareholder distributions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Balance at December 31, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,082</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,342</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-50</FONT></P>

<HR NOSHADE>
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NAME="page_gq6313_1_51"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gq6313_diversified_optical_products,___div04482"> </A>
<A NAME="toc_gq6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    NOTES TO THE FINANCIAL STATEMENTS    <BR>    <BR>    (Amounts in thousands, except share data)    <BR>    <BR>    December&nbsp;31, 2004    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business overview.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Diversified Optical Products,&nbsp;Inc. ("DiOP", "Company", "we", "our" or "us") was incorporated in
December&nbsp;1976 as a New York corporation. The Company is primarily engaged in the manufacture and sale of infrared optical products and their components and is based in Salem, New Hampshire. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue recognition.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenue is recognized in accordance with the Securities and Exchange Commission Staff Accounting
Bulletin ("SAB") No.&nbsp;104. SAB No.&nbsp;104 requires that four basic criteria must be met before revenue can be recognized: (1)&nbsp;persuasive evidence of an arrangement exists;
(2)&nbsp;delivery has occurred or services rendered; (3)&nbsp;the fee is fixed and determinable; and (4)&nbsp;collectibility is reasonably assured. Shipping and handling costs, such as freight
to customers, are classified in cost of sales. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
generally recognize revenues when product is either shipped to or received by the customer based on the terms of the specific sale. During 2004, one sale totaling approximately $1,700
was recorded before delivery occurred because title transferred to the customer and the customer accepted product in our facility. Service revenue is deferred and recognized over the contract period,
as is the case for extended warranty contracts. Provisions for estimated losses on contracts are recognized when losses become evident. These estimates are subject to change and could result in
adjustments to contracts in progress. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents consist of highly liquid investments with original maturities of three
months or less. At December&nbsp;31, 2004, cash and cash equivalents includes $752 of certificates of deposit maturing within sixty days. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable includes only trade accounts receivables. Credit is extended to customers typically
on net 30-day terms and collateral is not required. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for doubtful accounts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We periodically review the aging of our accounts receivable to identify potentially
uncollectible accounts and establish reserves based on experience and discussion with
customers. Actual write-offs could differ from our allowance for doubtful accounts. Accounts receivable are written off only when all reasonable collection efforts are exhausted. We have
determined that no reserve was necessary as of December&nbsp;31, 2004. As of December&nbsp;31, 2003, $35 was required for doubtful accounts. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost, computed on a first-in, first-out basis, or
market and generally include materials, labor, and manufacturing overhead. Inventory write downs are established when conditions exist that suggest that inventories at cost may be in excess of market
value due to anticipated demand or are obsolete based upon the Company's assumptions about future demand for its products and market conditions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.&nbsp;151, "Inventory Costs, an amendment of
ARB No.&nbsp;43, Chapter 4," to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and
that fixed production overheads should be allocated to inventory based on normal capacity of production facilities. This statement is </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-51</FONT></P>

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<A NAME="page_gq6313_1_52"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>effective
for DiOP's fiscal year 2006 and is not expected to have a material impact on our financial position or results of operations. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment are carried at cost. We provide for depreciation of our fixed assets,
principally equipment, using straight-line and accelerated methods over estimated useful lives of three to seven years. Expenditures for normal maintenance and repairs are charged to
expense as incurred. Significant additions, renewals or betterments that extend the useful lives of the assets are capitalized. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in Property and Equipment are cameras manufactured by DiOP for internal use as loaners or demonstration cameras. We had capitalized costs for these units of $1,320 as of
December&nbsp;31, 2004 and $701 as of December&nbsp;31, 2003. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer advances.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For significant orders, we generally require, as part of our terms and conditions, an advance deposit with
order acceptance. These deposit amounts are recorded as a liability under "customer advances" until reduced by revenue recognized against the specific contract. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue primarily consists of unearned revenue where the customer has been invoiced but the
transaction has not yet met the generally accepted accounting principles for revenue recognition. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Advertising costs are expensed as they are incurred. Advertising expense was $61 for the year ended
December&nbsp;31, 2004 and $120 for the year ended December&nbsp;31, 2003. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Expenditures for research and development activities are expensed as incurred. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our products are sold with warranty provisions that require us to remedy deficiencies in quality or performance of
our products over a specified period of time, generally twelve months, at no cost to our customers. Warranty reserves are established at the time that revenue is recognized based on our estimates of
the costs that will be incurred to fulfill those warranty requirements. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes product warranty activity for 2004 and 2003: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Reserve at January 1, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>120</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Provision, changes and other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>270</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(270</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Balance at December 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>120</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2><BR>
Provision, changes and other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
530</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(290</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Balance at December 31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>F-52</FONT></P>

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<A NAME="page_gq6313_1_53"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies (Continued) </B></FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;DiOP is taxed under the provisions of Subchapter S of the Internal Revenue Code, whereby the
individual shareholders recognize the Company's taxable income or loss for federal and certain state tax purposes. Therefore, no federal tax provision is made for DiOP's earnings. The state of New
Hampshire does not recognize S-corporation status. Consequently, we are subject to New Hampshire state income tax. Distributions may be made periodically to the shareholders for, among
other things, the shareholders' income taxes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
account for our state income taxes under the provisions of SFAS No.&nbsp;109, "Accounting for Income Taxes". Under the asset and liability method of SFAS No.&nbsp;109, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and net operating loss and tax credit carryforwards, if any. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be
realized. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss contract reserves.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Generally, our customer contracts are completed within one year of receiving the order. However,
occasionally longer lead-time orders are received and we monitor these contracts periodically to determine whether our actual costs are comparable to our cost estimates used at the time of
order acceptance. If we determine that our actual costs are significantly exceeding our original estimates, we will record a loss contract reserve. As of December&nbsp;31, 2004 and 2003, we did not
have any contracts in a loss position. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Estimates and assumptions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting
principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in preparing these financial statements include those
used in evaluating loss contracts, recording warranty accruals, inventory reserves and the collectibility of amounts due from customers. It is at least reasonably possible that the significant
estimates used will change within the next year. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;2&#151;Concentration of Credit Risk  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments that potentially subject DiOP to concentration of credit risk consist primarily of cash, trade receivables and accounts payable. As of
December&nbsp;31, 2004, balances of cash and cash equivalents at a financial banking institution exceeded the federally insured limit of $100 by $1,732. As of December&nbsp;31, 2003, balances of
cash and cash equivalents at a financial banking institution exceeded the federally insured limit by $1,075. Significant portions of our trade receivables are due from defense contractors. We control
credit risk through credit approvals, credit limits and monitoring procedures. As of December&nbsp;31, 2004, three customers accounted for 49% of outstanding accounts receivable. As of
December&nbsp;31, 2003, two customers accounted for 46% of outstanding accounts receivable. We purchase a certain key component from two suppliers. While this key component may be purchased from
other </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-53</FONT></P>

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<A NAME="page_gq6313_1_54"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;2&#151;Concentration of Credit Risk (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>suppliers,
the loss of either of these two suppliers would cause a short-term disruption in our business. Payments to these two suppliers totaled $2,279 during 2004 and $3,519 during 2003. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;3&#151;Loan Receivable&#151;Shareholder  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, DiOP loaned an unsecured advance of $130 to a shareholder of the Company. The note began accruing interest on January&nbsp;1, 2004 at a rate of 4%.
The balance outstanding on the note was $130 as of December&nbsp;31, 2004 and December&nbsp;31, 2003. Accrued interest was $10 as of December&nbsp;31, 2004. There was no accrued interest as of
December&nbsp;31, 2003. This loan was paid in full, including accrued interest, on May&nbsp;2, 2005, in conjunction with the sale of DiOP. (See Note&nbsp;13). </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;4&#151;Long-term Debt and Note Payable&#151;Line of Credit  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2004 Financing Activities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;28, 2004, DiOP refinanced a revolving line of credit and long-term debt
with a bank. The refinancing includes a $2,500 revolving line of credit, payable on demand with monthly payments of interest only at the Prime Rate minus 0.5%. There was no outstanding balance on the
revolving line of credit at December&nbsp;31, 2004 and during 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
refinancing also included a five-year $2,700 term note to a bank, dated May&nbsp;28, 2004, payable in blended monthly payments of principal and interest calculated
based on a five-year amortization schedule. Note interest amounts outstanding accrue at an annual fixed rate of 5.5% and are charged on a per diem basis. The note is secured by
substantially all the assets of DiOP. The outstanding balance of this note was $2,422 at December&nbsp;31, 2004. The note was due May&nbsp;28, 2009 but was paid in full on May&nbsp;2, 2005 in
conjunction with the sale of DiOP. (See Note&nbsp;13). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
financial facilities are subject to various affirmative, negative and financial covenants, including Minimum Debt Service Coverage, Tangible Net Worth minimums and Maximum Debt to
Capital Base requirements. As of December&nbsp;31, 2004, we were in compliance with these covenants. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2003 Financing Activities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;8, 2003, DiOP consolidated a revolving credit note and equipment line of credit
providing for maximum borrowings of $4,000. We terminated this agreement and entered into another agreement on December&nbsp;22, 2003. The agreement also provided for a revolving credit note and an
equipment line of credit note. The maximum amount available under the revolving credit note was $3,500 and under the equipment line of credit was $500. The notes were secured by substantially all of
the assets of DiOP and were fully guaranteed by KFN Reality,&nbsp;Inc., a related party and landlord of DiOP. The lines of credit bore variable interest at the bank's prime rate (4.0% at
December&nbsp;31, 2003), less one-half percent, adjusted daily. The revolving line of credit was subject to review and, at the sole option of the Bank, was renewable on May&nbsp;31,
2004. The outstanding balance on the revolving credit note at December&nbsp;31, 2003 was $3,000. There was no outstanding balance on the equipment line of credit at December&nbsp;31, 2003. The
notes were refinanced on May&nbsp;28, 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-54</FONT></P>

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<A NAME="page_gq6313_1_55"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;4&#151;Long-term Debt and Note Payable&#151;Line of Credit (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2003, DiOP's long-term debt consisted of the following: </FONT></P>

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<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="88%"><FONT SIZE=2>Note payable to a bank, dated September 21, 2001, payable in monthly principal payments of $14 plus variable interest at LIBOR plus 1.8% (2.92% at December&nbsp;31, 2003).</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>139</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="88%"><FONT SIZE=2>Note payable to a bank, dated November 21, 2002, payable in monthly principal payments plus interest at LIBOR plus 1.8% (2.92% at December&nbsp;31, 2003), commencing January&nbsp;17, 2003. Monthly principal payments
increased annually; payments in 2004 were $12 per months. This note was secured by substantially all of the assets of the Company.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>615</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="88%"><FONT SIZE=2>Total notes payable at December 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>754</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
line of credit arrangement and the note payables were subject to various affirmative, negative and financial covenants, including Tangible Net Worth and Earnings
before Interest, Depreciation and Taxes minimums. At December&nbsp;31, 2003, we were not in compliance with certain financial covenants and we did not receive waivers from the bank. The notes and
credit line were refinanced in May&nbsp;2004. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt consisted of the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="72%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="72%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%"><FONT SIZE=2>Term note payable, bank</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,422</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>754</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%"><FONT SIZE=2>Less: current maturities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(498</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(281</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="72%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%"><FONT SIZE=2>Long-term debt, less current maturities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,924</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>473</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="72%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the loan had not been paid off, annual principal payments would have been as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>498</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>526</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>556</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>587</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>255</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,422</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="85%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had interest rate swap agreements that were entered into to minimize exposure to fluctuations in interest rates under our commercial loan agreements. The swap
agreements included a notional principal amount at December&nbsp;31, 2003 of $474 that was due to terminate in December&nbsp;2007. Under these agreements, we paid interest upon fixed rates of
5.95% and 5.00%, while receiving interest based upon variable one-month LIBOR plus 1.8% (2.92% on December&nbsp;31, 2003). The interest rate differentials, paid or received under these
agreements, were recognized as incurred and were included in interest expense. At December&nbsp;31, 2003, the difference between the carrying value and the fair value </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-55</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=138,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=964464,FOLIO='F-55',FILE='DISK124:[05NYC3.05NYC6313]GQ6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gq6313_1_56"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December&nbsp;31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;4&#151;Long-term Debt and Note Payable&#151;Line of Credit (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>of
these obligations was not significant to the accompanying financial statements and not recorded. These interest rate swap agreements were cancelled in 2004. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;5&#151;Shareholders' Equity  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were 200 shares of common stock authorized and issued as of December&nbsp;31, 2004 and 2003. The Shareholders and the Company have entered into a
Shareholder's Agreement ("Agreement"), which among other things places restrictions on the transfer of outstanding stock. Under the terms of the Agreement, DiOP has the right to purchase the
Shareholder's shares upon notice of either a Shareholder's intention to transfer the shares, a Shareholder's disability or an involuntary transfer. Additionally, DiOP has an obligation to purchase a
Shareholder's shares upon death of a Shareholder. In the event of death, disability or involuntary transfer, the purchase price is set based upon the greater of an agreed upon fixed minimum value
calculation or the results of an agreed to valuation computation. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-56</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=139,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=97757,FOLIO='F-56',FILE='DISK124:[05NYC3.05NYC6313]GQ6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gs6313_1_57"> </A> </FONT> <FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December 31, 2004  </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;6&#151;Balance Sheet Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The details of certain balance sheet accounts are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of December&nbsp;31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Inventories:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,488</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,141</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Work-in-process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,136</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>995</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>568</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,244</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,192</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,380</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property and equipment:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Machinery and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,319</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,933</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Demonstration and loaner units</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,320</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>701</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Furniture and fixtures</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>315</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>266</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Computer software</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>247</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>217</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>158</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>139</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total property and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,359</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,256</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,163</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net property and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,196</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,923</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Depreciation expense</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>983</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>817</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Accrued expenses and other liabilities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Compensation and related benefits</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>445</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Reserve for warranty costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>360</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>120</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Income taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>237</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Professional fees</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>128</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,107</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>519</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-57</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=140,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=617787,FOLIO='F-57',FILE='DISK124:[05NYC3.05NYC6313]GS6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gs6313_1_58"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December 31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;7&#151;Supplemental Cash Flow Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Supplemental cash flow information from continuing operations for the years ended December&nbsp;31, 2004 and 2003 is summarized as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Cash paid during the year for:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>Interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>163</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>119</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>Income taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>231</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
Non-cash investing and financing activities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>Reclassification of inventory to fixed assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>851</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,042</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004, DiOP relieved certain liabilities during the year totaling $43 in exchange for fixed assets with a net book value of $3 and cash of $40. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;8&#151;Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 1997, DiOP, by the consent of its shareholders, elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, we do not pay corporate federal income taxes on our taxable income; instead, the shareholders are liable for individual income taxes on their proportionate share of the DiOP's
taxable income. However, the state of New Hampshire does not recognize subchapter S status and therefore we are subject to New Hampshire corporate taxes. The significant components of the provision
for income tax expense for the year ended December&nbsp;31, 2004 and 2003 are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Current state taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>297</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Deferred state tax benefits</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(68</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>Total tax expense (benefit)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>229</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(97</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes reflect the net state tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-58</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=141,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=181992,FOLIO='F-58',FILE='DISK124:[05NYC3.05NYC6313]GS6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gs6313_1_59"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December 31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;8&#151;Income Taxes (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
components of deferred income taxes are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Deferred income tax assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Current:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>161</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>143</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Warranty reserves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>31</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%"><FONT SIZE=2>Total current</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>206</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>162</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Long-Term:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Property, plant and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Total deferred tax asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>242</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
difference between the provision for taxes and the amount computed by applying the New Hampshire state income tax rate to net income are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>New Hampshire state income tax rate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8.5</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Computed expected tax provision (benefit)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>230</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(93</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Permanent and other differences</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Actual tax provision (benefit)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>229</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(97</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;9&#151;Sales Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2004, three customers accounted for 40% of the sales for the year, the largest of which accounted for 18%. For the year
ended December&nbsp;31, 2003, two customers accounted for 43% of sales for the year, the largest of which accounted for 22%. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents sales by geographic region. All assets are located within the United States. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>20,712</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,828</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>309</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>409</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other foreign</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>971</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>853</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Total sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>21,992</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>15,090</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-59</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=142,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=433028,FOLIO='F-59',FILE='DISK124:[05NYC3.05NYC6313]GS6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gs6313_1_60"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December 31, 2004 </B></FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;9&#151;Sales Information (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had aggregate sales, both military and non-military, directly to the U.S. government, including its agencies and departments, of $3,164 in 2004 and $184 in 2003. In
addition, sales of $15,183 in 2004 and $10,932 in 2003 were derived from subcontracts with U.S. government contractors. The majority of these contracts are subject to termination at the convenience of
the U.S. government, and certain contracts are also subject to renegotiation. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;10&#151;Related Party Transactions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain shareholders of the Company also control the entity, KFN Realty,&nbsp;Inc., from which the Company leases its primary office and manufacturing
facilities in Salem, New Hampshire. The current lease expires in December&nbsp;2006. The aggregate annual rent paid, including real estate taxes, to the related party amounted to $162 for the year
ended December&nbsp;31, 2004 and for the year ended December&nbsp;31, 2003. (See Note&nbsp;12). </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;11&#151;Profit Sharing Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DiOP maintains a 401(k) defined contribution retirement plan that covers all employees who meet certain minimum age and service requirements. Employees may elect
to have a portion of their compensation contributed to the plan on a tax-deferred basis. Matching contributions are made at the discretion of DiOP as a percentage of employee
contributions. Our matching contributions were $76 in 2004 and $72 in 2003. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;12&#151;Commitments and Contingencies  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating leases.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company leases its office and manufacturing facilities in Salem, New Hampshire under a commercial lease
agreement with two separate entities, KFN Realty,&nbsp;Inc., a related party, and an unrelated party. The related-party lease was renewed on November&nbsp;5, 2004, providing a
twenty-four month lease term ending December&nbsp;31, 2006, and options to extend to a maximum of thirty-six additional months. The lease agreement with the unrelated party
is a two-year lease, expiring on December&nbsp;31, 2006. The Company is also responsible for the payment of real estate taxes associated with the leased property. DiOP incurred $210 of
annual rent expense including $12 of real estate taxes during 2004 and during 2003. The Company also leases certain office equipment under operating leases expiring through January&nbsp;2006. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
minimum operating lease commitments as of December&nbsp;31, 2004 are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>Year ending December 31,</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>232</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>Total future minimum lease payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>468</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="88%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment Banking Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;27, 2004, the Company entered into an agreement with an investment banking
firm to become its exclusive advisor to provide financial advisory and investment banking services in connection with any transactions involving a sale of all or a substantial </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-60</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=143,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=245409,FOLIO='F-60',FILE='DISK124:[05NYC3.05NYC6313]GS6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gs6313_1_61"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> December 31, 2004 </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;12&#151;Commitments and Contingencies (Continued) </B></FONT></P>

<BR>

<P><FONT SIZE=2>part
of the Company's business. The agreement requires the Company to pay monthly retainer fees for six months and would require the Company to pay a transaction fee if a Transaction (as defined in
the agreement) is consummated. On May&nbsp;2, 2005, Axsys Technologies,&nbsp;Inc. acquired all of the outstanding capital stock of DiOP. (See Note&nbsp;13). </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are involved in two employment-related lawsuits. We believe that the chance of an unfavorable outcome is
possible for both events but not probable. We believe that the estimated loss if unfavorable outcomes were levied would range from $35 to $75; however, no accrual has been recorded. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;13&#151;Subsequent Events  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;2, 2005, Axsys Technologies,&nbsp;Inc., a vertically integrated supplier of precision optical solutions for high technology applications, serving
the aerospace, defense and high performance commercial markets, purchased all of the outstanding capital stock of DiOP for $60,000, plus or minus working capital adjustments, of which $5,000 will be
held in escrow until at least May&nbsp;2006. In conjunction with the sale, all outstanding bank financing was paid in full. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-61</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=144,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=174129,FOLIO='F-61',FILE='DISK124:[05NYC3.05NYC6313]GS6313A.;11',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gu6313_1_62"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gu6313_diversified_optical_products,___div03662"> </A>
<A NAME="toc_gu6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Balance Sheet&#151;Unaudited    <BR>    <BR>    (Amounts in thousands, except share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March&nbsp;31,<BR>
2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
CURRENT ASSETS:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,345</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,450</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,114</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Income taxes&#151;deferred</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>254</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>81</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>TOTAL CURRENT ASSETS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,244</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>PROPERTY AND EQUIPMENT, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,088</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
LONG TERM ASSETS:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Shareholder loan</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>140</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Income taxes&#151;deferred</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>38</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Other long term assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>TOTAL LONG TERM ASSETS:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>223</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>TOTAL ASSETS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,555</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><BR><FONT SIZE=2><B>LIABILITIES AND SHAREHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
CURRENT LIABILITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Current portion of long-term note payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>505</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,002</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>822</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Deferred income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>231</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Customer advances</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>TOTAL CURRENT LIABILITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,639</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Note payable, less current portion</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,792</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
COMMITMENTS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Common stock, no par value:<BR>
authorized 200 shares, issued and outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,864</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>TOTAL SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,124</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,555</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to unaudited financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-62</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=145,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=7533,FOLIO='F-62',FILE='DISK124:[05NYC3.05NYC6313]GU6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gu6313_1_63"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gu6313_diversified_optical_products,___div04736"> </A>
<A NAME="toc_gu6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Statements of Operations&#151;Unaudited    <BR>    <BR>    (Amounts in thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR>
March&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,890</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,803</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,433</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Gross margin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,087</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,567</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2><BR>
Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
965</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
723</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Research and development costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>479</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>415</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Gain on sale of assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(21</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>OPERATING INCOME</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>878</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>450</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2><BR>
Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(37</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Other income, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Income from operations before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>856</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>416</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>74</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>NET INCOME</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>782</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>379</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>BASIC AND DILUTED EARNINGS PER SHARE</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,910</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,895</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Weighted average basic and diluted common shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to unaudited financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-63</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=146,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=806034,FOLIO='F-63',FILE='DISK124:[05NYC3.05NYC6313]GU6313A.;8',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gw6313_1_64"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gw6313_diversified_optical_products,___div03485"> </A>
<A NAME="toc_gw6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Statements of Cash Flows&#151;Unaudited    <BR>    <BR>    (Amounts in thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR>
March&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>782</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>379</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Adjustments to reconcile net income to cash provided by (used in) operating activities:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>207</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Gain on disposal of capital equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(21</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Inventory write downs</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>414</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(61</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Change in allowance for doubtful accounts</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(35</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Change in warranty reserves</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(585</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(617</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(653</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Other current and long-term assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(73</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>861</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>725</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accrued expenses and other liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(293</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(23</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Customer advances</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>183</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>273</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(442</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2><BR>
CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Capital expenditures, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(42</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Cash received from sale of fixed assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%" VALIGN="TOP"><FONT SIZE=2>NET CASH PROVIDED BY INVESTING ACTIVITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>388</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Repayment of borrowings</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(125</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(77</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Distribution to stockholders</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="70%" VALIGN="TOP"><FONT SIZE=2>NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(125</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(577</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>NET CHANGE IN CASH AND CASH EQUIVALENTS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>536</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,016</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,068</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>CASH AND CASH EQUIVALENTS AT END OF PERIOD</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Supplemental cash flow information:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Cash paid (received) from</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Interest paid</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Interest received</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Income tax payments</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2><BR>
Non-cash investing and financing activities:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Reclassification of inventory to fixed assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>281</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>136</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to unaudited financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-64</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=147,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=769055,FOLIO='F-64',FILE='DISK124:[05NYC3.05NYC6313]GW6313A.;10',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gw6313_1_65"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gw6313_diversified_optical_products,___div04551"> </A>
<A NAME="toc_gw6313_2"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    Statements of Shareholders' Equity&#151;Unaudited    <BR>    <BR>    (Amount in thousands, except share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="90%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Retained<BR>
Earnings</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Balance at December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,082</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>7,342</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>782</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>782</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Balance at March&nbsp;31, 2005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,864</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>8,124</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to unaudited financial statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-65</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_gy6313_1_66"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="gy6313_diversified_optical_products,___div04610"> </A>
<A NAME="toc_gy6313_1"> </A>
<BR></FONT><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC.    <BR>    <BR>    NOTES TO THE UNAUDITED FINANCIAL STATEMENTS    <BR>    <BR>    (Amounts in thousands, except share data)    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;1&#151;Summary of Significant Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diversified Optical Products,&nbsp;Inc. ("DiOP", "Company", "we", "our" or "us") was incorporated in December&nbsp;1976 as a New York corporation. The Company
is primarily engaged in the manufacture and sale of infrared optical products and their components and is based in Salem, New Hampshire. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods have been made, and the interim
accounting policies followed are in conformity with generally accepted accounting principles and are consistent with those applied for annual periods. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted accounting principles have been omitted as permitted by the Securities and Exchange Commission. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates used in preparing these financial statements include those used in evaluating loss contracts, recording warranty accruals, inventory reserves and the
collectibility of amounts due from customers. It is at least reasonably possible that the significant estimates used will change within the next year. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;2&#151;Inventories  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories, determined by lower of cost (first-in, first-out) or market, consist of: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="62%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March&nbsp;31,<BR>
2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Inventories:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="75%"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>3,050</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="75%"><FONT SIZE=2>Work-in-process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,640</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="75%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>424</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>5,114</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Note&nbsp;3&#151;Loan Receivable&#151;Shareholder  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, DiOP loaned an unsecured advance of $130 to a shareholder of the Company. The note began accruing interest on January&nbsp;1, 2004 at a rate of 4%.
The balance outstanding on the note was $130 as of March&nbsp;31, 2005 and December&nbsp;31, 2004. Accrued interest was $10 as of March&nbsp;31, 2005 and December&nbsp;31, 2004. This loan was
paid in full, including accrued interest, on May&nbsp;2, 2005, in conjunction with the sale of DiOP. (See Note&nbsp;10). </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;4&#151;Long-term Debt and Note Payable&#151;Line of Credit  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current Financing Activities</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;28, 2004, DiOP refinanced a revolving line of credit and long-term
debt with a bank. The refinancing includes a $2,500 revolving line of credit, payable on demand with monthly payments of interest only at the Prime Rate minus 0.5%. There was no </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-66</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=149,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=196482,FOLIO='F-66',FILE='DISK124:[05NYC3.05NYC6313]GY6313A.;15',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gy6313_1_67"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;4&#151;Long-term Debt and Note Payable&#151;Line of Credit (Continued) </B></FONT></P>

<P><FONT SIZE=2>outstanding
balance on the revolving line of credit at March&nbsp;31, 2005 and during the first three months of 2005. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
refinancing also included a five-year $2,700 term note to a bank, dated May&nbsp;28, 2004, payable in blended monthly payments of principal and interest calculated
based on a five-year amortization schedule. Note interest amounts outstanding shall accrue at an
annual fixed rate of 5.5% and are charged on a per diem basis. The note is secured by substantially all the assets of DiOP and contains certain financial and restrictive covenants, with which we were
in compliance at March&nbsp;31, 2005. The outstanding balance of this note was $2,297 at March&nbsp;31, 2005. The note was due May&nbsp;28, 2009 but was paid in full on May&nbsp;2, 2005 in
conjunction with the sale of DiOP. (See Note&nbsp;10) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
financial facilities are subject to various affirmative, negative and financial covenants, including Minimum Debt Service Coverage, Tangible Net Worth minimums and Maximum Debt to
Capital Base requirements. As of March&nbsp;31, 2005, we were in compliance with these covenants. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior Financing Activities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During the first three months of 2004, we had available to us a revolving credit note and an
equipment line of credit note. The maximum amount available under the revolving credit note was $3,500 and under the equipment line of credit was $500. The notes were secured by substantially all of
the assets of DiOP and were fully guaranteed by KFN Reality,&nbsp;Inc., a related party and landlord of DiOP. The lines of credit bore variable interest at the bank's prime rate (3.5% at
March&nbsp;31, 2004), less one-half percent, adjusted daily. The revolving line of credit was subject to review and, at the sole option of the bank, was renewable on May&nbsp;31, 2004.
The outstanding balance on the revolving credit note at March&nbsp;31, 2004 was $3,000. There was no outstanding balance on the equipment line of credit at March&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
March&nbsp;31, 2004, DiOP's long-term debt consisted of the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Note payable to a bank, dated September 21, 2001, payable in monthly principal payments of $14 plus variable interest at LIBOR plus 1.8% (5.95% at March&nbsp;31, 2004). The note is secured by substantially
all of the assets of the Company.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>580</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2><BR>
Note payable to a bank, dated November&nbsp;21, 2002, payable in monthly principal payments plus interest at LIBOR plus 1.8% (5.95% at March&nbsp;31, 2004), commencing January&nbsp;17, 2003. Monthly principal payments increased annually; payments in
2004 were $12 per months. This note was secured by substantially all of the assets of the Company.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
97</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="90%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Total notes payable at March&nbsp;31, 2004</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>677</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="90%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
line of credit arrangement and the note payables were subject to various affirmative, negative and financial covenants, including Tangible Net Worth and Earnings before Interest,
Depreciation and Taxes
minimums. At March&nbsp;31, 2004, we were not in compliance with certain financial covenants and we did not receive waivers from the bank. The notes and credit line were refinanced in
May&nbsp;2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-67</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>

<!-- ZEQ.=2,SEQ=150,EFW="2163159",CP="AXSYS TECHNOLOGIES, INC.",DN="1",CHK=795865,FOLIO='F-67',FILE='DISK124:[05NYC3.05NYC6313]GY6313A.;15',USER='CNAPOLE',CD='22-SEP-2005;09:02' -->
<A NAME="page_gy6313_1_68"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;4&#151;Long-term Debt and Note Payable&#151;Line of Credit (Continued) </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term
debt consisted of the following: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="58%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March&nbsp;31, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Term note payable, bank</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Less: current maturities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(505</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Long-term debt, less current maturities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,792</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had interest rate swap agreements that were entered into to minimize exposure to fluctuations in interest rates under our commercial loan agreements. The swap agreements included a
notional principal amount at March&nbsp;31, 2004 of $677 that was due to terminate in December&nbsp;2007. Under these agreements, we paid interest upon fixed rates of 5.95% and 5.00%, while
receiving interest based upon variable one-month LIBOR plus 1.8% (2.9% on March&nbsp;31, 2004). The interest rate differentials, paid or received under these agreements, were recognized
as incurred and were included in interest expense. At March&nbsp;31, 2004, the difference between the carrying value and the fair value of these obligations was not significant to the accompanying
financial statements and not recorded. These interest rate swap agreements were cancelled in May&nbsp;2004. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;5&#151;Warranty  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are sold with warranty provisions that require us to remedy deficiencies in quality or performance of our products over a specified period of time,
generally twelve months, at no cost to our customers. Warranty reserves are established at the time that revenue is recognized based on our estimates of the costs that will be incurred to fulfill
those warranty requirements. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes product warranty activity for the first three months of 2005: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="60%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Balance at December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Provision, changes and other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(130</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Balance at March&nbsp;31, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>368</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>Note&nbsp;6&#151;Shareholders' Equity  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were 200 shares of common stock authorized and issued as of March&nbsp;31, 2005. The Shareholders and the Company have entered into a Shareholder's
Agreement ("Agreement"), which among other things places restrictions on the transfer of outstanding stock. Under the terms of the Agreement, DiOP has the right to purchase the Shareholder's shares
upon notice of either a Shareholder's intention to transfer the shares, a Shareholder's disability or an involuntary transfer. Additionally, DiOP has an obligation to purchase a Shareholder's shares
upon death of a Shareholder. In the event of death, disability or involuntary transfer, the purchase price is set based upon the greater of an agreed upon fixed minimum value calculation or the
results of an agreed to valuation computation. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-68</FONT></P>

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<A NAME="page_gy6313_1_69"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>DIVERSIFIED OPTICAL PRODUCTS,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Amounts in thousands, except share data) </B></FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;7&#151;Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DiOP is taxed under the provisions of Subchapter S of the Internal Revenue Code, whereby the individual shareholders recognize the Company's taxable income or
loss for federal and certain state tax purposes. Therefore, no federal tax provision is made for DiOP's earnings. The state of New Hampshire does not recognize S-corporation status.
Consequently, we are subject to New Hampshire state income tax. Distributions may be made periodically to the shareholders for, among other things, the stockholders' income taxes. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;8&#151;Related Party Transactions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain shareholders of the Company also control the entity, KFN Realty,&nbsp;Inc., from which the Company leases its primary office and manufacturing
facilities in Salem, New Hampshire. The current lease expires in December&nbsp;2006. The aggregate annual rent paid, including real estate taxes, to the related party amounted to $45 for the three
months ended March&nbsp;31, 2005 and $38 for the three months ended March&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2><B>Note&nbsp;9&#151;Commitments and Contingencies  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment Banking Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;27, 2004, we entered into an agreement with an investment banking firm to
become its exclusive advisor to provide financial advisory and investment banking services in connection with any transactions involving a sale of all or a substantial part of the business. The
agreement requires us to pay monthly retainer fees for six months and would require us to pay a transaction fee if a Transaction (as defined in the agreement) is consummated. On May&nbsp;2, 2005,
Axsys Technologies,&nbsp;Inc. acquired all of the stock of DiOP. (See Note&nbsp;10). </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;DiOP is involved in two wrongful termination lawsuits. We believe that the chance of an unfavorable outcome is
possible for both events but not probable. We believe that the estimated loss if unfavorable outcomes were levied would range from $35 to $75; however, no accrual has been recorded. </FONT></P>


<P><FONT SIZE=2><B>Note&nbsp;10&#151;Subsequent Events  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;2, 2005, Axsys Technologies,&nbsp;Inc., a vertically integrated supplier of precision optical solutions for high technology applications, serving
the aerospace, defense and high performance commercial markets, purchased all of the outstanding capital stock of DiOP for $60,000, plus or minus working capital adjustments, of which $5,000 will be
held in escrow until at least May&nbsp;2006. In conjunction with the sale, all outstanding bank financing was paid in full. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-69</FONT></P>

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<IMG SRC="g164651.jpg" ALT="LOGO" WIDTH="684" HEIGHT="886">
  </B></FONT></P>

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<P><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><I>No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely
on any
unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.</I></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%" ALIGN="CENTER"><FONT SIZE=3><B>TABLE OF CONTENTS</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=3>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="92%" ALIGN="CENTER"><FONT SIZE=2><BR>
&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><BR><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>About This Prospectus</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>i</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Prospectus Summary</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Risk Factors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Forward-Looking Statements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Dividend Policy</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Price Range of Common Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Capitalization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Unaudited Pro Forma Financial Information</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Selected Consolidated Financial Data</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Business</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>49</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Management</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Principal Stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>70</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Capital Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Underwriting</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>76</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Legal Matters</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Experts</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Incorporation of Documents by Reference</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Index to Financial Statements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>F-1</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=4><B>3,000,000 shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>
<IMG SRC="g266840.jpg" ALT="LOGO" WIDTH="213" HEIGHT="88">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Stock  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="37%"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="23%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2><B>PROSPECTUS</B></FONT><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="37%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=4><B>September&nbsp;21, 2005  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>Bear, Stearns&nbsp;&amp; Co.&nbsp;Inc.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B> Banc of America<BR>
Securities LLC  </B></FONT></P>

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<BR>
<P><br><A NAME="05NYC6313_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bi6313_1">ABOUT THIS PROSPECTUS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ca6313_1">PROSPECTUS SUMMARY</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca6313_2">Company Overview</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca6313_3">Strengths</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca6313_4">Strategies</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca6313_5">Recent Developments</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca6313_6">Information About Axsys Technologies, Inc.</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_cc6313_1">The Offering</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_cc6313_2">Risk Factors</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_cc6313_3">Summary Consolidated Financial Data</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de6313_1">RISK FACTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de6313_2">Risks Related to our Business</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg6313_1">Risks Relating to This Offering</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di6313_1">FORWARD-LOOKING STATEMENTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di6313_2">USE OF PROCEEDS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di6313_3">DIVIDEND POLICY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dk6313_1">PRICE RANGE OF COMMON STOCK</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dm6313_1">CAPITALIZATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_do6313_1">Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Year Ended December 31, 2004 (In thousands, except share and per share data)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_do6313_2">Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Six Months Ended July 2, 2005 (In thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dq6313_1">Unaudited Pro Forma Condensed Consolidated Balance Sheet As of July 2, 2005 (In thousands)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq6313_2">Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (In thousands, except share and per share data)</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ds6313_1">SELECTED CONSOLIDATED FINANCIAL DATA</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_du6313_1">MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ea6313_1">BUSINESS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ee6313_1">MANAGEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ee6313_2">Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_eg6313_1">PRINCIPAL STOCKHOLDERS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ei6313_1">DESCRIPTION OF CAPITAL STOCK</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ek6313_1">UNDERWRITING</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ek6313_2">LEGAL MATTERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ek6313_3">EXPERTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ek6313_4">WHERE YOU CAN FIND MORE INFORMATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ek6313_5">INCORPORATION OF DOCUMENTS BY REFERENCE</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fa6313_1">INDEX TO FINANCIAL STATEMENTS AXSYS TECHNOLOGIES, INC.</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fe6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Balance Sheets (Dollars in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fg6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Statements of Operations (Dollars in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fi6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Statements of Cash Flows (Dollars in thousands)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fk6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) (Dollars in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fm6313_1">AXSYS TECHNOLOGIES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) December 31, 2004</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fw6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Balance Sheets (Dollars in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fy6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Statements of Operations (Dollars in thousands, except share and per share data&#151;Unaudited)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ga6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Statements of Cash Flows (Dollars in thousands&#151;Unaudited)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gc6313_1">AXSYS TECHNOLOGIES, INC. Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) For the Six Months Ended July 2, 2005 and July 3, 2004 (Dollars in thousands&#151;Unaudited)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ge6313_1">AXSYS TECHNOLOGIES, INC. Notes to Interim Consolidated Financial Statements (Dollars in thousands, except share and per share data&#151;Unaudited)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gk6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. Balance Sheets (Amounts in thousands, except share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gm6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. Statements of Operations (Amounts in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_go6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. Statements of Cash Flows (Amounts in thousands)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_go6313_2">DIVERSIFIED OPTICAL PRODUCTS, INC. Statements of Shareholders' Equity (Amount in thousands, except share data)</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gq6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. NOTES TO THE FINANCIAL STATEMENTS (Amounts in thousands, except share data) December 31, 2004</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gu6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. Balance Sheet&#151;Unaudited (Amounts in thousands, except share data)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_gu6313_2">DIVERSIFIED OPTICAL PRODUCTS, INC. Statements of Operations&#151;Unaudited (Amounts in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gw6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. Statements of Cash Flows&#151;Unaudited (Amounts in thousands)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_gw6313_2">DIVERSIFIED OPTICAL PRODUCTS, INC. Statements of Shareholders' Equity&#151;Unaudited (Amount in thousands, except share data)</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_gy6313_1">DIVERSIFIED OPTICAL PRODUCTS, INC. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Amounts in thousands, except share data)</A></FONT><BR>
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`
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</SUBMISSION>
