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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File No. 0-17541

Presstek, Inc.

55 Executive Drive, Hudson, New Hampshire 03051-4903

Registrant’s telephone number, including area code:

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

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

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 28, 2003 was approximately $189,000,000.

      As of February 27, 2004, there were 34,252,425 shares of the registrant’s common stock outstanding.

Documents Incorporated by Reference:

      Parts of the definitive Proxy Statement (which is expected to be filed within 120 days after the Company’s fiscal year end) for the registrant’s Annual Meeting of Stockholders to be held on June 8, 2004 are incorporated by reference into Part II and Part III of this Form 10-K.

Table of Contents

PART I

General

      Presstek, Inc. (“Presstek®”, the “Company”, “we” or “us”), is a developer, manufacturer, and marketer of digital laser imaging and chemistry-free plate technologies for the printing and graphic arts industries. Presstek’s products and applications incorporate its patented Direct Imaging (“DI®”) technologies and consumables for direct-to-press and computer-to-plate (“CTP”) applications. Presstek’s DI technology enables “direct to press” or on-press imaging, whereby the printing plates are imaged on the press directly from digital files, bypassing numerous prepress procedures and chemical processes in preparing jobs for presswork. Our imaging technology also enables computer-to-plate or off-press imaging whereby operators of conventional printing presses image plates directly from digital files to a CTP device. The printer then uses these imaged plates on a traditional printing press, but without the chemical processes required for conventional plates.

      Our patented DI thermal laser diode product family enables customers to produce high quality, full-color lithographic printed materials more quickly and cost effectively than conventional methods. Presstek’s patented DI, CTP and plate products eliminate photographic darkrooms, film, and toxic chemical processing, which results in reduced printing cycle time and lowers the effective cost of production for commercial printers. Presstek solutions make it easier for printers to meet increasing customer demand for shorter print runs, faster turnaround times and improved cost competitiveness, with an environmentally friendly process that avoids the chemicals associated with plate development.

      Our DI technologies are marketed to leading press manufacturers to be incorporated into their direct imaging presses, and are also used in our Dimension® series of CTP systems. Our patented ProFire® laser imaging system, and our recently introduced ProFire Excel imaging system, represent the next generation technology which can be adapted to many DI presses and CTP devices. Presstek’s Dimension CTP systems incorporate the ProFire® system and use our chemistry free printing plates, Applause® and Anthem®.

      Presstek’s CTP workflow and automated DI printing technology not only complement digital publishing technology, they also help printers meet the short-run, quick turnaround color demands of the printing marketplace. By significantly increasing the efficiency with which jobs are prepared for print, Presstek’s technology makes shorter printing runs more feasible at lower costs. Our technology utilizes the offset lithographic method of applying ink to paper that is universally accepted by printers and consumers to produce the versatile, high-quality characteristics they require.

      Lasertel, Inc. (“Lasertel”), a subsidiary of Presstek, is primarily engaged in the manufacture and development of high-powered laser diodes. Lasertel’s products include semiconductor lasers and active components for the graphics and defense industries. Lasertel offers high-powered laser diodes in both standard and customized configurations, including chip on sub-mount, un-mounted bars, and fiber-coupled devices, to support various applications.

Business Overview

      Beginning in the late 1980’s, we developed a direct imaging system that allows digitally formatted file data to be used to image a printing plate directly on the printing press. Presstek’s technology and products use thermal energy generated by lasers to reproduce digital files directly onto printing plates, without the daylight sensitive, photomechanical and chemical processes associated with other imaging methods. Our direct imaging technology is currently being used in a variety of both on-press and off-press applications. This capability has provided a number of new applications for direct imaging systems and patented thermal-based digital media and consumable printing plates.

      In 2000 we established Lasertel for the purpose of securing a supply of laser diodes for Presstek, which are critical components of our imaging technology. Lasertel is located in Tucson, Arizona, and is primarily engaged in the manufacture and development of high-powered laser diodes. In addition to focusing its efforts on supplying laser diodes to Presstek, Lasertel has also developed laser products for the defense industry, and continues to

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      Presstek operates in two reportable segments, the Digital Imaging Products segment and the Lasertel segment. The Digital Imaging Products segment is primarily engaged in the development, manufacture and sale of our patented digital imaging systems and printing plate technologies for direct-to-press, or on-press applications, and CTP, or off-press applications. The Lasertel segment is primarily engaged in the manufacture and development of high-powered laser diodes for Presstek and other customers.

      Information about our business segments, major customers and geographic areas are included in Note 11 to the Company’s financial statements appearing elsewhere herein.

      Presstek was incorporated in Delaware in 1987. Presstek’s headquarters are located at 55 Executive Drive, Hudson, New Hampshire, 03051. Our general telephone number is 603-595-7000, and our web site can be found at www.presstek.com.

Presstek’s DI Technology

      Presstek’s DI products use thermal energy generated by lasers to image thermal printing plates. This thermal imaging process utilizes the heat from lasers to remove the top surface of the plate, creating an ink receptive surface, or a water receptive surface in the case of a positive writing plate. Because it is daylight-safe, thermal imaging eliminates the need for safelights and darkrooms, which are required in systems that employ visible light lasers and photosensitive plates. Because DI relies on a physical reaction of the laser and plate materials, rather than a chemical reaction, our thermal technology also eliminates post-imaging chemical processing. Freedom from the constraints of other imaging methods allows the application of our technology within the limited confines of a printing press, and accommodates the highly automated features of today’s DI presses. It is the interaction of the essential components of lasers, plate materials, and press design, working in concert, which results in the improved efficiencies and performance of our proprietary products.

      A DI digital imaging system is composed of a series of solid state semiconductor laser diodes held in a fixed array that can range in size, depending on the application, from as few as 8 diodes to as many as 64 diodes. Each diode is under computer control and can be turned off and on at very high speeds, usually measured in microseconds. When the diode is turned on, it creates a miniature, precise, beam of high-power, infrared laser light. The beam is focused on a specific area on the surface of the thermal printing plate causing this area of the plate to instantaneously heat up, creating an image by ablation. This ablation effect creates an ink-receptive surface, or a water receptive surface in the case of positive writing plates. This laser-based imaging concept is used on both direct-to-press and CTP systems. While many companies have experience using lasers in CTP applications, Presstek’s multiple laser diode arrays have been working more reliably and at lower operating costs in the harsh environments of on-press imaging.

      The ProFire integrated imaging system, introduced in May 2000, integrates lasers, laser drivers, digital electronics, and motion control into one modular package design that can be adapted to many CTP devices or direct imaging presses. The ProFire system has three major components: the FirePower™ laser diode system, made up of unique four-beam laser diodes and laser drivers, the integrated motion system that controls the placement of the laser diodes, and the FireStation™ digital controller and data server. This modular system allows us to expand the number of diodes mounted on a fixed array, increasing image size, speed, and overall imaging performance. FirePower lasers are incorporated in Presstek’s ProFire imaging modules, which combine lasers, electronics and motion control in a compact package for efficient manufacturing and ease of incorporation into DI press designs and CTP systems. The current generation of semiconductor lasers has quadrupled the output of preceding lasers for faster imaging times and improved accuracy. Our Lasertel subsidiary provides Presstek with a steady supply of lasers and the scientific expertise to advance its technology.

      The ProFire Excel laser imaging system, our next generation thermal imaging platform, is designed to bring improved productivity, higher quality and reduced cost to DI and thermal CTP applications. The foundation of ProFire Excel is a single Image Data Board replacing the nine separate boards utilized in the current version of

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      We continue to develop and commercialize our DI digital imaging systems for on-press applications. There can be no assurance, however, that we will be able to successfully commercialize additional products that incorporate this technology.

The Dimension CTP Product Line

      The Dimension platesetter is a CTP imaging device that can image our Anthem, PEARLdry® Plus and Applause thermal plates in an A3 (2-page), A2 (4-page) or A1 (8-page) format size. The Dimension utilizes Presstek’s ProFire direct imaging technology, and can produce completely imaged printing plates, ready to be mounted on a printing press, within 3 to 5 minutes depending on the plate size. This simplified workflow results not only in higher levels of automation and repeatability, but also in lower cost per finished plate and smaller overall work space requirements for platemaking operation. For the broad base of installed conventional printing presses, the Dimension series of CTP systems is designed to allow printers to realize many of the benefits of DI before investing in a new digital press.

      In September 2003 we introduced a new OEM computer-to-plate imaging system, the Vector 52 thermal platesetter. The Vector 52 is a two-page imaging device incorporating Presstek’s ProFire direct imaging technology, designed for short-run, small format printing. With a direct path from digital files to completed metal plates, Vector’s thermal imaging technology maximizes efficiency by eliminating the steps, chemicals and materials associated with film-based imaging.

      We continue to develop and commercialize our CTP systems. There can be no assurance, however, that we will be able to successfully commercialize these or other products, or enter into any additional arrangements that will result in the broader distribution of our Dimension product line.

DI and CTP Printing Plates

      Our DI and CTP printing plates are available in waterless form, such as PEARLdry Plus for DI presses, or Applause, Anthem and Freedom, our wet offset thermal plates for CTP imaging. These plates are based on our patented thermal imaging technology, where the plates respond to heat and not to light. Our plates are imaged by the thermal reaction of a special layer that is heated by the laser light source. The plate materials have a wide infrared spectral sensitivity range (800 to 1200 nanometers) and can be used with a variety of semiconductor diode laser imaging systems with sufficient power to remove the surface layers. These plates also utilize unique chemical-free processing methods.

      The current PEARLdry Plus plate is a second-generation product based on our patented PEARLdry technology. The plate uses a specially formulated silicone material that is coated over the metalized infrared absorbing layer. Environmentally friendly, thin-film deposition processes produce the ultra-thin film coatings that facilitate ablative imaging without excessive residue and are the foundation of PEARLdry Plus plates for waterless printing. The silicone layer is ink resistant, and when the imaging laser causes the ablation process to occur, the resulting hole created by the laser in the metal layer becomes ink receptive. Our PEARLdry Plus spooled plates are used in a number of highly automated DI presses. The Dimension CTP platesetter and other computer-to-plate systems also are able to image the PEARLdry Plus plate.

      The Anthem plate is the first in what we believe will be a family of plates for wet offset lithography. Anthem plates for CTP feature Presstek’s patented polymer-ceramic technology and combine ablative imaging and chemical-free cleaning with run lengths of up to 100,000 impressions. The Anthem plate runs with a wide range of fountain chemistry and inks and can be imaged on other thermal CTP systems. The product durability is built in as part of the manufacturing process, providing consistent performance and wide latitude. Anthem’s market includes a broad base of installed conventional wet offset presses, currently the largest segment of the printing

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      The Applause plate is a new process-free plate product. This plate is designed for use on both on-press and off-press applications, with run lengths up to 100,000 impressions. We believe Applause is unique in that it is a truly no-process plate. Unlike other digital plate products, Applause requires no intermediate steps between imaging and printing. Other benefits of Applause include excellent ink/water latitude, high resolution, and compatibility with the existing press chemistries. Applause is expected to be certified for third-party, non-proprietary thermal platesetters upon completion of ongoing qualification testing.

      The Freedom plate is the latest chemistry-free plate product, introduced in September 2003. The unique surface structure of the plate results in fast make-ready, greater ink/water latitude and excellent durability. In addition, Freedom plates accommodate a wide range of industry standard inks and fountain solutions. Like Presstek’s Anthem plate, Freedom requires only a simple wash with water before printing. Unlike other Presstek plate products, however, the Freedom plate is designed as a non-ablative, short-run plate that requires less power to image. Freedom plates deliver the performance characteristics and stability of conventional aluminum plates.

      Presstek continues to develop thermal consumable plate products that can be imaged by both its own DI systems as well as high-energy laser-based CTP and other computer-to-plate systems offered by leading manufacturers. There can be no assurance, however, that we will be able to successfully commercialize products that incorporate this technology.

Semiconductor Laser Diode Products

      Our high-powered semiconductor laser diode products are designed to achieve greater imaging speed and resolution, without adding to the size and cost of the diode array. The graphic arts industry requires lasers with a high degree of power, uniformity, and reliability at a low unit cost. Presstek believes its FirePower semiconductor laser diode not only changes the standards in the graphic arts markets, but is a new innovation to the semiconductor laser industry as well. Each FirePower diode quadruples laser power by sending the output of four optical fibers through a single lens assembly. Writing speed and accuracy are increased without additional space and costs. These four-channel lasers, manufactured at our Lasertel subsidiary, also incorporate a number of packaging innovations that reduce the size of the device and facilitate incorporation into the ProFire imaging module.

      Lasertel also manufactures and develops laser products for the defense and industrial sectors. These semiconductor devices can be integrated into equipment for range finding, illumination, and solid-state laser weapons for defense applications.

      Lasertel continues to develop prototypes for qualification in the defense and industrial industries. There can be no assurance, however, that any of these prototypes, if and when marketed, will be commercially successful or produce significant revenue for Presstek or Lasertel.

Manufacturing

      We operate manufacturing sites in Hudson, New Hampshire and Tucson, Arizona.

      Presstek’s DI and CTP systems are manufactured at our 165,000-square-foot facility located in Hudson, New Hampshire. We use a number of outside vendors who supply components and sub-assemblies which are integrated into completed systems — either direct imaging systems used in DI presses such as the Ryobi 3404DI, and the Heidelberg Quickmaster DI, or CTP imaging systems, such as the Dimension. These systems use semiconductor laser diode devices built to our specifications and currently supplied by Lasertel. We believe there are other sources available to manufacture the laser diodes to specification, if required in the future.

      Our PEARLdry Plus and Applause plate products are also manufactured at our New Hampshire facility using equipment that includes a thin film vacuum deposition coater, plate converting and finishing equipment, and an atmospheric coater. Our Anthem and Freedom thermal plates are currently manufactured by a third party

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      Lasertel operates a 75,000-square-foot facility located in Tucson, Arizona. The facility includes 10,000 square feet of clean room space, and complete process equipment for semiconductor laser manufacturing. Lasertel’s manufacturing process begins with molecular beam epitaxy reactors to grow semiconductor laser wafers, and extends through the final polishing techniques for the optical fiber.

      Our press products are manufactured under an agreement with a press manufacturer located in Japan. We believe there are other sources available to manufacture these products; however, if the supply of these presses were to be delayed, or if import restrictions were imposed, our ability to ship products in a timely manner could be adversely affected, which could have a material adverse effect on our business, results of operations and financial condition.

Marketing, Distribution and Customer Support

      Our sales strategy is designed to distribute Presstek DI and CTP products and the related consumables to customers through direct distribution channels via independent distributors, and by way of indirect distribution channels using strategic partnerships with original equipment manufacturers (“OEM”).

      For our direct distribution strategy, we have established a worldwide distribution network through which we market and sell CTP equipment and PEARLdry Plus, Applause and Anthem thermal plate products. The network currently includes over 30 independent graphic arts dealers in 18 countries, including two national distributors, the Pitman Company and xpedx Graphic Systems, and several regional dealers in the United States. To supplement our direct distribution partners we also market and sell DI consumable products through our Presstek.com web site.

      We also have OEM agreements or reseller relationships with Ryobi Limited (“Ryobi”), Koenig & Bauer, AG (“KBA”) and Kodak Polychrome Graphics (“KPG”) with respect to the Ryobi 3404DI, the 46 Karat, the KPG DirectPress 5034 DI, and related consumables, respectively. These agreements permit the OEM resellers and their dealers to sell DI-based equipment and consumable products under their own labels. We also have an OEM agreement with A.B. Dick and its dealers to market and sell the Vector 52 platesetter and the Freedom plate under its own label. In March 2003, we agreed with Xerox Corporation (“Xerox”) to terminate our distribution agreement with respect to its DocuColor DI presses and related consumables. We continue to provide consumables and make service available through our distribution channel for the current installed base of Xerox DocuColor DI presses.

      By using this direct and indirect approach to distribution, we have attempted to maximize the number of systems using Presstek technology, which require Presstek consumables. Additionally, we have developed an integrated service strategy, using our own resources and those of third-party service providers, dedicated to servicing the products delivered through our distribution network.

      Market acceptance for any products incorporating our various technologies and proprietary know-how will require substantial marketing efforts and the expenditure of significant sums, either by us, and/or our strategic and OEM partners. There can be no assurance that any existing or new products will achieve market acceptance or become commercially viable.

Business Strategy and Strategic Relationships

      Presstek’s business strategy is based in part on strategic alliances and relationships with leading companies in the printing and graphic arts industry. This strategy includes licensing intellectual property; specialized product development based on our proprietary technologies; the manufacturing of imaging systems for inclusion in other manufacturers’ products; the sale, distribution and marketing of our own consumables; and the manufacturing of our patented thermal plate materials for use in Presstek’s and other manufacturers’ imaging hardware and printing presses.

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      Presstek and Ryobi, an international supplier of printing presses of Japan, developed an A3 format size four-color sheet-fed press, which is marketed by Ryobi as the 3404DI. Incorporating Presstek’s dual plate cylinder concept, this press also features our internal automated plate cylinder design, our ProFire technology, and our PEARLdry spooled plates. The small format of this press is designed to appeal to quick printers, in-plant printers, and copy centers looking to expand their services with offset color printing.

      Presstek and KBA, an international supplier of printing presses of Germany, have an agreement under which KBA markets and sells the 46 Karat press, an A3 format size four-color sheet-fed DI press, in certain geographic markets. The 46 Karat delivers fully automated plate advancing, imaging, ink presetting, and printing, using PEARLdry Plus spooled plates. KBA also manufactures and markets a digital offset press, the 74 Karat, which uses Presstek’s direct imaging and PEARLdry plates, and related intellectual property under license. PEARLdry Plus plates for the 46 Karat are marketed directly by KBA and through Presstek’s European distributor network.

      We also developed a long-term relationship with Heidelberger Druckmaschinen AG (“Heidelberg”), one of the world’s largest manufacturers of printing presses and printing equipment, based in Germany. This relationship was formalized with the signing of a Master Agreement, Supply Agreement, and a Technology License (the “Heidelberg Agreements”) in January 1991, which covered the integration of the DI technology into various presses manufactured by Heidelberg. Under the Heidelberg Agreements, Heidelberg is required to pay royalties to Presstek based on the net sales prices of various specified types of Heidelberg presses on which our DI technology is used. The manufacture of components, at specified rates, for these presses and the commercialization of such presses are also covered by the Heidelberg Agreements. Heidelberg also has been provided with certain rights for use of the DI technology for the Quickmaster DI format size press. The Heidelberg Agreements expire in December 2011, subject to certain early termination and extension provisions.

      In July 2003, we entered into OEM consumables supply agreements with Heidelberg and Heidelberg USA that provide us with certain preferred supplier rights, which vary based on territory, time period and sales volume. Under the terms of the OEM agreements, which include minimum volume commitments from Heidelberg and Heidelberg USA, we will manufacture and supply Heidelberg branded consumable plate products for the Heidelberg Quickmaster DI press. Shipments to Heidelberg of the branded consumable product began in August 2003.

      While our alliance with Heidelberg has been an important one, there are substantial risks associated with this relationship. Unlike our distribution relationships with companies such as Ryobi, we have no distribution rights to the Quickmaster DI, and must rely on Heidelberg to sell this press. We currently have no orders from Heidelberg for direct imaging kits used in the Quickmaster DI. Heidelberg has indicated, as a result of the global economic slowdown, that it has an inventory of direct imaging kits on hand to support its production requirements for six months. We believe that orders for direct imaging kits could resume sometime late in fiscal 2004, however, there can be no assurance that any orders will be received. Sales to Heidelberg and its distributors represented approximately 21%, 36%, and 42% of revenue for fiscal 2003, 2002 and 2001 respectively. As a result of our expanded strategic partnerships and distribution channels, our sales to Heidelberg comprise a less significant share of total sales for fiscal 2003. The loss of Heidelberg as a customer, however, would have a material adverse effect on our business, results of operations and financial condition.

      We also have an agreement with Kodak-Polychrome Graphics (“KPG”), a leading supplier of digital, conventional and business solutions for the graphic arts industry, granting KPG certain rights to market, sell and service a direct digital imaging press and related consumables in the United States and Canada. The KPG DirectPress 5034 DI solution is a two-page, four-color Ryobi platform DI press which is enabled by Presstek’s ProFire imaging and thermal plate technology. This new highly automated DI solution is manufactured to KPG specifications and is designed to provide high quality offset printing.

      We entered into an agreement in September 2003 with A.B. Dick Company (“A.B. Dick”), a leading worldwide supplier of equipment and supplies for document creation to the graphic arts and printing industry, to provide a new OEM computer-to-plate system to A.B. Dick. The new system includes the new two-page Vector platesetter, which is manufactured by Presstek and incorporates Presstek’s digital imaging technology, and the

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      Presstek and Xerox entered into a supply and distribution agreement in 2000 to supply a series of three Presstek enabled DI presses and related consumables. The Xerox agreement covered four and five color versions of a B3 format sheet-fed press, and an A3 format size four-color sheet-fed press marketed by Xerox as the DocuColor DI presses. In March 2003, Presstek and Xerox terminated their supply and distribution agreement for these presses. Presstek continues to provide consumables and make service available for the current installed base of Xerox DocuColor DI presses. The revenue generated from the sale of these presses was not material in fiscal 2002 or fiscal 2003, and as a result, the termination of this agreement is not expected to have a material adverse effect on our business, results of operations and financial condition.

      We are pursuing other business relationships that we believe may result in broader use of our digital imaging and printing plate technologies, in existing as well as new applications. There can be no assurance, however, that any Presstek product, or any products incorporating our technology, will be able to compete successfully in these markets.

Competition

      Presstek believes that its imaging, thermal plate and other intellectual property, including its patented technologies, its thermal plate manufacturing facilities, and its strategic alliances and worldwide distribution network provide it with a competitive advantage. However, a number of other companies address markets in which Presstek products are used and have products that are competitive to our patented direct imaging thermal plate technologies and related capabilities.

      In the area of direct imaging and the short-run, on-demand market, potentially competitive companies use electrophotographic technology, sometimes referred to as xerography, as the basis of their product lines. These companies include, among others, Canon Inc., Hewlett Packard Company, Heidelberg, Kodak, and Xerox. These electrophotographic imaging systems use either wet or dry toners to create one to four color images on paper and typically offer resolutions of between 400 and 1200 dots per inch.

      Most of the major companies in the graphic arts industry have developed or are developing off-press CTP imaging systems. Potential competitors in this area include, among others, Agfa-Gevaert N.V., Creo Inc., DaiNippon Screen Mfg., Ltd., Fuji, Heidelberg, combinations of these companies, and other smaller or lesser-known companies. To date, these devices, for the most part, utilize printing plates that require a post imaging photochemical developing step and/or other post processing steps such as heat treatment. In our opinion, our Dimension CTP off-press plate imaging system provides a further technological advantage over these competing systems because the printing plates it utilizes eliminate the need for post chemical processing. We believe however, that some of the graphic arts companies mentioned above are working on or have developed other plate concepts that would eliminate the need for post image chemical processing.

      We anticipate competition from printing plate companies that manufacture, or have the potential to manufacture digital thermal plates. Such companies include, among others, Agfa-Gevaert N.V., KPG, and Fuji Photo Film Co., Ltd. Heidelberg is marketing a competitive plate product as an alternative to Presstek’s PEARLdry for the Quickmaster DI. The introduction of a competitive plate could reduce the revenue generated by Presstek under its agreements with Heidelberg, including the OEM consumables supply agreements entered into in July 2003. It could also lead to downward pricing pressure on our full line of spooled consumable products, which could have a material adverse effect on our business, results of operations and financial condition.

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

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

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

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

Patents, Trademarks and Proprietary Rights

      As of January 3, 2004, Presstek and its subsidiaries have in force 120 U.S. patents, (including 4 design patents), 185 foreign patents (including 20 design patents), and had received notices of allowance for 20 additional patents (consisting of 3 U.S. and 17 foreign patents). These patents, which expire from 2008 through 2023, are all believed to be material to our business. We have applied for and are pursuing applications for 9 additional U.S. patents and 57 foreign patents. We have registered, or applied to register, certain trademarks in the US and other countries, including Presstek, DI, Dimension, ProFire, Anthem, Applause, and PEARLdry. We anticipate that we will apply for additional patents, trademarks, and copyrights, as deemed appropriate. There can be no assurance as to the issuance of any such patents or trademarks or the breadth or degree of protection that our patents, trademarks or copyrights may afford us.

      There is rapid technological development in the electronic image reproduction industries, resulting in extensive patent filings and a rapid rate of issuance of new patents. Although we believe that our technology has been independently developed, and that the products we market and propose to market will not infringe on the patents, or violate other proprietary rights of others, it is possible that such infringement of existing or future patents, or violation of proprietary rights may occur. In such event we may be required to modify our design or obtain a third party license. No assurance can be given that we will be able to do so in a timely manner, upon acceptable terms and conditions, or at all. The failure to do any of the foregoing could have a material adverse effect on our business. Furthermore, there can be no assurance that we will have the financial or other resources necessary to successfully defend a patent infringement or proprietary rights violation action. Moreover, we may be unable, for financial or other reasons, to enforce our rights under any of our patents. We have agreements with several of our strategic partners which require us to indemnify the strategic partner from claims made by third parties against Presstek’s intellectual property, and to defend the validity of the patents or otherwise ensure the technology’s availability to the strategic partner. An indemnification claim under any such agreement could have a material adverse effect on our business, results of operations and financial condition.

      In September 2003, Presstek filed an action against Fuji Photo Film Corporation, Ltd., in the District Court of Mannheim, Germany for patent infringement. In this action, Presstek alleges that Fuji has manufactured and distributed a product that violates a Presstek European Patent. Presstek seeks an order from the court that Fuji refrain from offering the infringing product for sale, from using the infringing material or introducing it for the named purposes, or from possessing such infringing material.

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

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Research and Development

      Research and product development expenses, related to our continued development of products incorporating DI technologies, including our semiconductor laser diodes, were $7.1 million, $9.3 million and $11.7 million in fiscal 2003, 2002 and 2001 respectively. These research and development expenditures are primarily related to the Digital Imaging Products segment.

Backlog

      As of February 27, 2004, Presstek and Lasertel had a backlog of products and royalties under contract aggregating approximately $12.6 million compared to a backlog of approximately $11.3 million as of March 21, 2003. Substantially all backlog of products as of February 27, 2004 is expected to ship in 2004.

Employees

      As of February 27, 2004, Presstek and its Lasertel subsidiary had 230 employees. Of these 230 employees, 25 are engaged primarily in engineering, research and development; 56 are engaged in sales, marketing and customer support; 115 are engaged primarily in manufacturing, manufacturing engineering and quality control; and 34 are engaged primarily in corporate management, administration and finance. None of our employees is represented by a labor union. We consider the relationship with our employees to be good.

Investor Information

      Financial and other information about Presstek is available on our website (www.presstek.com). We make available, free of charge on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Glossary

      Set forth below is a glossary of certain terms used in this report:

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      Presstek’s operations are conducted primarily in two locations.

      Our building located at 55 Executive Drive in Hudson, New Hampshire is a 165,000-square-foot facility, which we own. This building contains the corporate headquarters for both our operating segments, as well as manufacturing operations, research and development activities, marketing and demonstration facilities, and various administrative and customer support activities for the Digital Imaging Products segment.

      We also own a 75,000-square-foot facility in Tucson, Arizona, which is leased by Lasertel. This building contains the manufacturing operations, research and development activities, as well as the various administrative activities of the Lasertel segment.

      These properties are secured by a five-year credit facility totaling $50.0 million. These properties were built for an aggregate cost of approximately $25.6 million.

      We currently utilize approximately 70% of the capacity of our facilities. We believe that our existing facilities are well maintained, in good operating condition, and are adequate for our current and expected future operations.

      In September 2003, Presstek filed an action against Fuji Photo Film Corporation, Ltd., in the District Court of Mannheim, Germany for patent infringement. In this action, Presstek alleges that Fuji has manufactured and distributed a product that violates Presstek European Patent 0 644 047 registered under number DE 694 17 129 with the German Patent and Trademark Office. Presstek seeks an order from the court that Fuji refrain from offering the infringing product for sale, from using the infringing material or introducing it for the named purposes, or from possessing such infringing material.

      In August 2003, the Company was served with a purported securities class action lawsuit filed on June 2, 2003 in the United States District Court for the Districts of New Hampshire against the Company and two of its former officers, captioned “James B. Zouras v. Robert W. Hallman, et. al. ” (Civ. Action No. 3-240 M). On December 15, 2003, an amended class action complaint (the “Complaint”), which superseded the original complaint, was filed with the court. The Complaint is captioned “In re Presstek, Inc. Securities Litigation” (Civ. Action No. 3-240 M) and names as defendants the Company and two of its former officers. The Complaint, which seeks unspecified damages, allegedly was filed on behalf of all purchasers of the Company’s common stock during the period December 10, 1999 to August 7, 2001 and generally alleges, among other things, that during such period, the defendants made misstatements and omissions to the investing public relating to an arbitration proceeding commenced in 1999 and concluded in 2001 with one of the Company’s customers, and also relating to production issues and projected sales of certain of the Company’s products. Presstek, along with the other named defendants, has filed a motion to dismiss the litigation in its entirety, which is currently pending with the court. Although the Company believes this matter lacks merit and intends to vigorously defend against it, the litigation process is inherently uncertain and there can be no guarantee as to the ultimate outcome of this matter.

      In December 1999, PPG, Inc. brought suit against Delta V Technologies, Inc. (“Delta V”), a subsidiary of the Company, and Presstek. The suit alleged that Delta V sold to PPG certain vacuum coating equipment that did not meet certain product specifications. PPG sought damages in excess of $7.0 million. PPG sought to hold Presstek liable for the alleged breach of contract by its subsidiary, Delta V, on a theory of indirect liability. Presstek and Delta V answered PPG’s complaint. Delta V asserted a counterclaim against PPG for PPG’s failure to make the final installment payment in excess of $400,000 for Delta V’s work. In November 2002, the U.S.

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      Not Applicable

PART II

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

      On February 27, 2004 there were 2,898 holders of record of our common stock. The closing price of our common stock was $10.16 per share on February 27, 2004.

Dividend Policy

      To date, we have not paid any cash dividends on our common stock. The payment of cash dividends in the future is within the discretion of our Board of Directors, and will depend upon our earnings, capital requirements, financial condition and other relevant factors. The Board of Directors does not intend to declare any cash dividends in the foreseeable future, but instead intends to retain all earnings, if any, for use in our business operations.

Securities Authorized for Issuance Under Equity Compensation Plans

      We also have securities authorized for issuance under equity compensation plans. Information concerning securities authorized for issuance under our equity compensation plans will be set forth under the caption “Equity Compensation Plan Information” in our definitive proxy that we expect to file with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended January 3, 2004, and such information is incorporated herein by reference.

      The following selected financial data of the Company has been derived from the financial statements of the Company, appearing elsewhere herein (except for the statements of operations data for the fiscal years ended December 30, 2000 and January 1, 2000 and the balance sheet data at December 29, 2001, December 30, 2000 and January 1, 2000, which are not included in such financial statements).

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SELECTED FINANCIAL DATA

Statements of Operations