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Delaware (State or other jurisdiction of incorporation or organization)		3674 (Primary Standard Industrial Classification Code Number) 50 Old Webster Road Oxford, Massachusetts 01540 (508) 373-1100		04-3444218 (I.R.S. employer identification number)

Robert W. Ericson, Esq. David A. Sakowitz, Esq. Winston & Strawn LLP 200 Park Avenue New York, New York 10166- 4193 (212) 294-6700				Robert G. Day, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304- 1050 (650) 493-9300 Adam M. Dinow, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 1301 Avenue of the Americas New York, New York 10019 (212) 999-5800

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

		Per Share		Total
Public offering price		$		$
Underwriting discount		$		$
Proceeds, before expenses, to IPG Photonics		$		$
Proceeds, before expenses, to selling stockholders		$		$

Merrill Lynch & Co.	Lehman Brothers

	Jefferies & Company

	Thomas Weisel Partners LLC

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		Page
Prospectus Summary			1
Risk Factors			7
Special Note Regarding Forward-Looking Statements			22
Use of Proceeds			23
Dividend Policy			24
Capitalization			25
Dilution			26
Selected Consolidated Financial Data			28
Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Business			49
Management			67
Principal and Selling Stockholders			80
Certain Relationships and Related Party Transactions			82
Description of Capital Stock			89
Shares Eligible for Future Sale			93
Certain Material U.S. Federal Income Tax Consequences to Non-U.S. Holders			96
Underwriting			99
Legal Matters			105
Experts			105
Where You Can Find Additional Information			105
Index to Financial Statements			F-1
Ex-10.32 Confidential Settlement Agreement, dated as of June 25, 2003
Ex-10.37 Pledge Agreement, dated September 30, 2003
Ex-10.38 Pledge Agreement, dated December 3, 2003
Ex-10.39 Pledge Agreement, dated April 13, 2001, as amended
Ex-10.40 Pledge Agreement, dated March 5, 2001, as amended
Ex-10.41 Pledge Agreement, dated January 22, 2001, as amended
Ex-10.42 Promissory Note, dated January 22, 2001
Ex-10.43 Stockholders Agreement, dated as of August 30, 2000, as amended
Ex-10.44 Series D Preferred Stockholders Agreement, dated as of August 13, 2003
Ex-21.1 List of Subsidiaries
Ex-23.1 Consent of Deloitte & Touche LLP

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	Our future growth depends upon our ability to penetrate new applications for fiber lasers and increase our market share in existing applications.

	•	demonstrate the effectiveness of fiber lasers in new applications;
	•	increase our direct and indirect sales efforts;
	•	extend our product line to address new applications for our products;
	•	continue to reduce our manufacturing costs and enhance our competitive position; and
	•	effectively service and support our installed product base.

	If fiber lasers do not achieve broader market acceptance or if market penetration occurs more slowly than we expect, prospects for our growth and profitability may be negatively impacted.

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	We may not be able to effectively manage our growth and we may need to incur significant costs to address the operational requirements related to our growth, either of which could harm our business and operating results.

	Our vertically integrated business results in high levels of fixed costs that may adversely impact our gross profits and our operating results in the event of a reduction in demand for our products.

	We are subject to lawsuits alleging that we are infringing third-party intellectual property rights. Intellectual property claims could result in costly litigation and harm our business.

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	•	stop selling our products or using the technology that contains the allegedly infringing intellectual property;
	•	pay actual monetary damages, royalties, lost profits or increased damages and the plaintiff’s attorneys’ fees;
	•	attempt to obtain a license to use the relevant intellectual property, which may not be available on reasonable terms or at all; and
	•	attempt to redesign the products that allegedly infringed upon intellectual property of others, which may be costly or impractical.

	Our inability to protect our intellectual property and proprietary technologies could result in the unauthorized use of our technologies by third parties, hurt our competitive position and adversely affect our operating results.

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	We depend upon internal production and on outside single or limited-source suppliers for many of our key components and raw materials. Any interruption in the supply of these key components and raw materials could adversely affect our results of operations.

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	We rely on the significant experience and specialized expertise of our senior management and scientific staff and if we are unable to retain these key employees and attract other highly skilled personnel necessary to grow our business successfully, our business and results of operations could suffer.

	Failure to effectively build and expand our direct field service and support organization could have an adverse effect on our business.

	The laser and amplifier industries may experience declining average selling prices, which could cause our gross margins to decline and harm our operating results.

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	A few customers account for a significant portion of our sales, and if we lose any of these customers or they significantly curtail their purchases of our products, our results of operations could be adversely affected.

	We have experienced, and expect to experience in the future, fluctuations in our quarterly operating results. These fluctuations may increase the volatility of our stock price.

	•	the increase, decrease, cancellation or rescheduling of significant customer orders;
	•	the timing of revenue recognition based on the installation or acceptance of certain products shipped to our customers;
	•	the timing of customer qualification of our products and commencement of volume sales of systems that include our products;
	•	the rate at which our present and future customers and end users adopt our technologies;
	•	the gain or loss of a key customer;
	•	product or customer mix;
	•	competitive pricing pressures;
	•	the relative proportions of our U.S. and international sales;
	•	our ability to design, manufacture and introduce new products on a cost-effective and timely basis;
	•	the incurrence of expenses to develop and improve application and support capabilities, the benefits of which may not be realized until future periods, if at all;
	•	different capital expenditure and budget cycles for our customers, which affect the timing of their spending;
	•	foreign currency fluctuations; and
	•	our ability to control expenses.

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	Our manufacturing capacity may not be at the appropriate size for future levels of demand.

	Future downturns in the economy, particularly in the materials processing and communications markets, could have a material adverse effect on our sales and profitability.

	We depend on our OEM customers and system integrators and their ability to incorporate our products into their systems.

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	Because we lack long-term purchase commitments from our customers, our sales can be difficult to predict, which could adversely affect our operating results.

	The markets for our products are highly competitive and increased competition could increase our costs, reduce our sales or cause us to lose market share.

	Our inability to manage risks associated with our international customers and operations could adversely affect our business.

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	•	longer accounts receivable collection periods;
	•	changes in the values of foreign currencies;
	•	changes in a specific country’s or region’s economic conditions, such as recession;
	•	compliance with a wide variety of domestic and foreign laws and regulations and unexpected changes in those laws and regulatory requirements, including uncertainties regarding taxes, tariffs, quotas, export controls, export licenses and other trade barriers;
	•	certification requirements;
	•	environmental regulations;
	•	less effective protection of intellectual property rights in some countries;
	•	potentially adverse tax consequences;
	•	different capital expenditure and budget cycles for our customers, which affect the timing of their spending;
	•	political, legal and economic instability, foreign conflicts, and the impact of regional and global infectious illnesses in the countries in which we and our customers, suppliers, manufacturers and subcontractors are located;
	•	preference for locally produced products;
	•	difficulties and costs of staffing and managing international operations across different geographic areas and cultures;
	•	seasonal reductions in business activities; and
	•	fluctuations in freight rates and transportation disruptions.

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	Foreign currency transaction risk may negatively affect our net sales, cost of sales and operating margins and could result in exchange losses.

	Our products could contain defects, which may reduce sales of those products, harm market acceptance of our fiber laser products or result in claims against us.

	We may pursue acquisitions and investments in new businesses, products or technologies. These may involve risks which could disrupt our business and may harm our financial condition.

	We are subject to various environmental laws and regulations that could impose substantial costs upon us and may adversely affect our business, operating results and financial condition.

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	We are subject to export control regulations that could restrict our ability to increase our international sales and may adversely affect our business.

	The market price of our common stock may be volatile, which could result in substantial losses for investors purchasing shares in this offering.

	•	general market conditions;
	•	U.S. and international economic factors;
	•	actual or anticipated fluctuations in our quarterly operating results;
	•	changes in or failure to meet publicly disclosed expectations as to our future financial performance;

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	•	changes in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts;
	•	changes in market valuations or earnings of similar companies;
	•	announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;
	•	developments or disputes concerning intellectual property or proprietary rights, including increases or decreases in litigation expenses associated with intellectual property lawsuits we may initiate, or in which we may be named as defendants;
	•	failure to complete significant sales;
	•	any future sales of our common stock or other securities; and
	•	additions or departures of key personnel.

	We could be the subject of securities class action litigation due to future stock price volatility, which could divert management’s attention and adversely affect our operating results.

	Dr. Valentin P. Gapontsev, our chairman, chief executive officer and principal stockholder, will control more than      % of our voting power after the completion of this offering, and will have a significant influence on the outcome of director elections and other matters requiring stockholder approval, including a change in corporate control.

	•	election of our directors;
	•	amendment of our certificate of incorporation or by-laws; and
	•	approval of mergers, consolidations or the sale of all or substantially all of our assets.

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	Dr. Valentin P. Gapontsev, our chairman, chief executive officer and principal stockholder, owns a material portion of one of our operating subsidiaries, which creates the possibility of a conflict of interest.

	Anti-takeover provisions in our charter documents and Delaware law could prevent or delay a change in control of our company, even if a change in control would be beneficial to our stockholders.

	•	authorizing the issuance of “blank check” preferred stock;
	•	establishing a classified board;
	•	providing that directors may only be removed for cause;
	•	prohibiting stockholder action by written consent;
	•	limiting the persons who may call a special meeting of stockholders;
	•	establishing advance notice requirements for nominations for election to the board of directors and for proposing matters to be submitted to a stockholder vote; and
	•	supermajority stockholder approval to change these provisions.

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	Substantial sales of our common stock could cause our stock price to decline.

	We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.

	We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

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	Investors in this offering will experience immediate and substantial dilution.

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	•	approximately $22.1 million to repurchase the warrants to purchase shares of our common stock that are owned by holders of the series B preferred stock;
	•	approximately $4.7 million to repay Euro-denominated construction loans due from 2006 to 2010 that bear annual interest at 5.25%;
	•	approximately $5.7 million to repay a U.S. construction loan due January 2007 that bears annual interest at 7.9%;
	•	approximately $5.5 million to repay other Euro-denominated term debt with various maturities ranging from 2006 to 2019 with fixed and variable interest rates ranging from 4.2% to 6.5%;
	•	approximately $4.9 million to repay Euro-denominated line-of-credit facilities that bear annual interest at rates ranging from 7.5% to 8.0%;
	•	approximately $1.5 million to repay a U.S. demand line-of-credit facility that bears interest at a variable rate of LIBOR plus 4% (8.37% at June 30, 2006); and
	•	the balance of the net proceeds for general corporate purposes.

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	•	on an actual basis;
	•	on a pro forma basis to give effect to the conversion of all outstanding shares of preferred stock upon the closing of this offering into                 shares of common stock and the issuance of subordinated notes totaling $20.0 million to the holders of our series B preferred stock; and
	•	on a pro forma as adjusted basis to give effect to the transactions described above as well as our sale of                      shares of our common stock in this offering and the application of the estimated net proceeds therefrom as described in “Use of Proceeds.”

			As of June 30, 2006
											Pro Forma As
			Actual				Pro Forma				Adjusted
							(unaudited)
			(in thousands, except share and per share data)
Short-term debt:
	Revolving line-of-credit facilities			11,011				11,011
Subordinated notes				—				20,000
Other long-term debt (including current maturities)				24,268				24,268
Total debt				35,279				55,279
Series B warrants				16,863				16,863				—
Convertible redeemable preferred stock, par value $0.0001 per share:
	Series B preferred stock, 3,800,000 shares designated, issued and outstanding, actual; no shares designated, issued or outstanding, pro forma and pro forma as adjusted			92,285				—				—
	Series D preferred stock, 5,400,000 shares designated, 2,684,211 shares issued and outstanding, actual; no shares designated, issued or outstanding, pro forma and pro forma as adjusted			5,100				—				—
Stockholders’ (deficit) equity:
	Preferred stock, par value $0.0001 per share, 15,000,000 shares authorized, actual; Series A preferred stock, 500,000 shares designated, 488,000 shares issued and outstanding, actual; 5,000,000 shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted			4,880				—				—
	Common stock, par value $0.0001 per share, 70,000,000 shares authorized, 40,883,700 shares issued and outstanding, actual; 175,000,000 shares authorized, pro forma and pro forma as adjusted;      shares issued and outstanding, pro forma;      shares issued and outstanding, pro forma as adjusted			4				4
	Additional paid-in capital			94,912				177,177
	Notes receivable from stockholders			(463	)			(463	)
	Accumulated deficit			(143,507	)			(143,507	)
	Accumulated other comprehensive income			5,629				5,629
Total stockholders’ (deficit) equity			$	(38,545	)		$	38,840			$
Total capitalization			$	110,982			$	110,982			$

	•	we repaid a $4.6 million credit line through an exchange with our chief executive officer;
	•	we repaid a $5.1 million subordinated note; and
	•	two of our directors repaid $681,000 owed to us.

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Assumed initial public offering price per share							$
	Pro forma net tangible book value as of June 30, 2006		$	(	)
	Increase per share attributable to new investors
Adjusted pro forma net tangible book value per share after this offering
Dilution in pro forma net tangible book value per share to new investors							$

			Shares Purchased								Total Consideration								Average
																			Price Per
			Number				Percent				Amount				Percent				Share
Existing stockholders									%		$						%		$
New investors
	Total							100.0	%		$					100.0	%

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			Shares Purchased								Total Consideration
																			Average
																			Price Per
			Number				Percent				Amount				Percent				Share
Existing stockholders									%		$						%		$
New investors
	Total							100.0	%		$					100.0	%

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				Year Ended December 31,																				Six Months Ended June 30,
				2001				2002				2003				2004				2005				2005				2006
																								(unaudited)
				(in thousands, except per share data)
Consolidated Statement of Operations Data:(1)
Net sales				$	26,490			$	22,180			$	33,740			$	60,707			$	96,385			$	41,630			$	64,927
Cost of sales					26,223				23,277				38,583				42,274				62,481				28,437				39,119
Gross profit (loss)					267				(1,097	)			(4,843	)			18,433				33,904				13,193				25,808
Operating expenses:
	Sales and marketing				21,240				19,910				2,110				2,363				3,236				1,538				2,343
	Research and development				8,407				8,383				10,063				4,831				5,788				2,873				2,622
	General and administrative				18,875				13,354				9,998				8,179				10,598				4,352				5,813
	Aborted offering costs				2,156				—				—				—				—				—				—
	In-process research and development				900				—				—				—				—				—				—
	Provision for contract settlement				—				9,474				—				—				—				—				—
	Amortization and impairment of intangible assets				11,986				—				—				—				—				—				—
		Total operating expenses			63,564				51,121				22,171				15,373				19,622				8,763				10,778
Operating (loss) income					(63,297	)			(52,218	)			(27,014	)			3,060				14,282				4,430				15,030
Interest income (expense), net					1,857				(1,089	)			(1,505	)			(2,150	)			(1,840	)			(969	)			(709	)
Fair value adjustment to series B warrants(2)					6,862				2,518				(3,664	)			(615	)			(745	)			(314	)			(2,219	)
Other income, net					975				2,414				1,647				196				236				141				12
(Loss) income before benefit from (provision for) income taxes and minority interests in consolidated subsidiaries					(53,603	)			(48,375	)			(30,536	)			491				11,933				3,288				12,114
Benefit from (provision for) income taxes					3,985				(1,175	)			2,205				1,601				(4,080	)			(1,219	)			(5,598	)
Minority interests in consolidated subsidiaries					(4	)			165				121				(80	)			(426	)			81				(398	)
Net (loss) income				$	(49,622	)		$	(49,385	)		$	(28,210	)		$	2,012			$	7,427			$	2,150			$	6,118
Net (loss) income per share:
	Basic			$	(1.45	)		$	(1.42	)		$	(0.93	)		$	(0.01	)		$	0.11			$	0.02			$	0.11
	Diluted			$	(1.45	)		$	(1.42	)		$	(0.93	)		$	(0.01	)		$	0.11			$	0.02			$	0.10
Weighted average shares outstanding:
	Basic				35,959				36,476				38,302				38,547				39,348				39,008				40,385
	Diluted				35,959				36,476				38,302				38,547				45,252				44,912				49,584
Supplementary pro forma net income per share(3)																				$								$

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		As of December 31,
																						As of June 30,
		2001				2002				2003				2004				2005				2006
																						(unaudited)
		(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents		$	8,851			$	1,379			$	536			$	2,548			$	8,361			$	11,282
Working capital			44,711				35,669				16,303				20,934				23,550				22,721
Total assets			128,230				117,166				105,481				110,545				115,481				131,996
Long-term debt, including current portion and a provision for contract settlement			21,668				38,143				34,268				31,454				26,081				24,268
Series B warrants			12,138				9,620				13,284				13,899				14,644				16,863
Convertible redeemable preferred stock			81,842				84,194				91,646				93,997				96,348				97,385
Preferred stock			18,660				5,000				5,000				4,880				4,880				4,880
Stockholders’ equity (deficit)			12,090				(19,516	)			(51,947	)			(49,038	)			(46,504	)			(38,545	)

(1)	Due primarily to certain stock-based compensation awarded primarily in 2000 and 2001, we have recorded significant stock-based compensation during the years ended December 31, 2001, 2002 and 2003. Those awards became fully vested during the year ended December 31, 2004. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Stock-Based Compensation.”
(2)	The change in value of the series B warrants is a non-cash charge related to recording the increase or decrease in the fair value of the warrants. The change in fair value for this derivative instrument is directly related to the probability that the warrants will be exercised prior to their expiration in April 2008. We intend to use a portion of the net proceeds from this offering to repurchase the series B warrants. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors and Trends That Affect our Operations and Financial Results — Effect of Preferred Stock On Net Income and Net Income Per Share.”
(3)	The supplemental pro forma disclosures are intended to demonstrate the effects on net income per share of the completion of this offering and the related impacts of the conversion of our preferred stock and the repurchase of the series B warrants with a portion of the net proceeds of this offering. The number of shares used in the calculation of supplementary pro forma net income per common share includes (a) the basic weighted average common stock outstanding, (b)                      shares of common stock, which will be issued upon completion of this offering upon the conversion of our preferred stock, and (c)                shares related to the additional dilutive impact of existing options assuming that the fair value of the common stock increases to the midpoint of the range set forth on the cover page of this prospectus. Supplementary pro forma net income used in the calculation of supplementary pro forma net income per share reflects the elimination of the increase in value of the series B warrants, which will be repurchased upon the completion of this offering, totaling $745,000 for the year ended December 31, 2005 and $2.2 million for the six months ended June 30, 2006. In addition, all accretion of preferred stock has been eliminated in the determination of net income attributable to common stockholders. See “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Fair Value Adjustment of Warrants” and “Certain Relationships and Related Party Transactions.”

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	•	factors that affect the prices we can charge, including the features and performance of our products, their output power, the nature of the end user and application, and competitive pressures;
	•	factors that affect the cost of our net sales, including the cost of raw materials and components, manufacturing costs and shipping costs;
	•	production volumes of specific product lines; and
	•	in the case of our OEM customers, the type of market that they serve and the competitive pricing pressures faced by our OEM customers.

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																						Six Months Ended
		Year Ended December 31,																				June 30,
		2001				2002				2003				2004				2005				2005				2006
																						(unaudited)
		(in thousands)
Cost of sales		$	2,574			$	789			$	577			$	218			$	4			$	—			$	37
Sales and marketing			19,148				17,260				18				6				1				—				11
Research and development			1,608				314				1,062				669				1				—				3
General and administrative			9,403				3,326				546				10				1				—				75
Total		$	32,733			$	21,689			$	2,203			$	903			$	7			$	—			$	126

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	•	independent valuation reports that we received;
	•	the agreed-upon consideration paid in arms-length transactions in the form of convertible preferred stock and common stock;
	•	the superior rights and preferences of securities senior to our common stock at the time of each grant;
	•	historical and anticipated fluctuations in our net sales and results of operations, which reflect our dependence on certain key customers, the cyclical nature of certain of our end markets and market acceptance of our products; and
	•	the risk of owning our common stock and its non-liquid nature.

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			Year Ended December 31,																								Six Months Ended June 30,
			2003								2004								2005								2005								2006
			(in thousands, except percentages)
Net sales			$	33,740				100.0	%		$	60,707				100.0	%		$	96,385				100.0	%		$	41,630				100.0	%		$	64,927				100.0	%
Cost of sales				38,583				114.4				42,274				69.6				62,481				64.8				28,437				68.3				39,119				60.3
Gross (loss) profit				(4,843	)			(14.4	)			18,433				30.4				33,904				35.2				13,193				31.7				25,808				39.7
Operating expenses:
	Sales and marketing			2,110				6.3				2,363				3.9				3,236				3.4				1,538				3.7				2,343				3.6
	Research and development			10,063				29.8				4,831				8.0				5,788				6.0				2,873				6.9				2,622				4.0
	General and administrative			9,998				29.6				8,179				13.5				10,598				11.0				4,352				10.5				5,813				9.0
	Total operating expenses			22,171				65.7				15,373				25.4				19,622				20.4				8,763				21.1				10,778				16.6
Operating (loss) income				(27,014	)			(80.1	)			3,060				5.0				14,282				14.8				4,430				10.6				15,030				23.1
Interest expense, net				(1,505	)			(4.5	)			(2,150	)			(3.5	)			(1,840	)			(1.9	)			(969	)			(2.3	)			(709	)			(1.1	)
Fair value adjustment to series B warrants				(3,664	)			(10.9	)			(615	)			(1.0	)			(745	)			(0.8	)			(314	)			(0.8	)			(2,219	)			(3.4	)
Other income, net				1,647				4.9				196				0.3				236				0.2				141				0.3				12				0.0
(Loss) income before benefit from (provision for) income taxes and minority interests in consolidated subsidiaries				(30,536	)			(90.6	)			491				0.8				11,933				12.3				3,288				7.8				12,114				18.6
Benefit from (provision for) income taxes				2,205				6.5				1,601				2.6				(4,080	)			(4.2	)			(1,219	)			(2.9	)			(5,598	)			(8.6	)
Minority interests in consolidated subsidiaries				121				0.4				(80	)			(0.1	)			(426	)			(0.4	)			81				0.2				(398	)			(0.6	)
Net (loss) income			$	(28,210	)			(83.7	)%		$	2,012				3.3	%		$	7,427				7.7	%		$	2,150				5.1	%		$	6,118				9.4	%

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				Three Months Ended
				Mar. 31,				June 30,				Sep. 30,				Dec. 31,				Mar. 31,				June 30,
				2005				2005				2005				2005				2006				2006
				(in thousands)
Net sales				$	18,788			$	22,843			$	20,607			$	34,147			$	32,743			$	32,184
Cost of sales					12,937				15,501				13,325				20,718				20,278				18,841
Gross profit					5,851				7,342				7,282				13,429				12,465				13,343
Operating expenses:
	Sales and marketing				650				887				817				882				1,080				1,263
	Research and development				1,370				1,504				1,303				1,611				1,235				1,387
	General and administrative				1,793				2,559				2,337				3,909				2,659				3,154
		Total operating expenses			3,813				4,950				4,457				6,402				4,974				5,804
Operating income					2,038				2,392				2,825				7,027				7,491				7,539
Interest expense, net					(514	)			(454	)			(442	)			(430	)			(355	)			(354	)
Fair value adjustment to series B warrants					(155	)			(159	)			(163	)			(268	)			(1,862	)			(357	)
Other income, net					(2	)			143				55				40				8				4
Income before provision for income taxes and minority interests in consolidated subsidiaries					1,367				1,922				2,275				6,369				5,282				6,832
Provision for income taxes					(468	)			(751	)			(818	)			(2,043	)			(2,833	)			(2,765	)
Minority interests in consolidated subsidiaries					77				5				(107	)			(401	)			(288	)			(110	)
Net income				$	976			$	1,176			$	1,350			$	3,925			$	2,161			$	3,957

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				Three Months Ended
				Mar. 31,				June 30,				Sep. 30,				Dec. 31,				Mar. 31,				June 30,
				2005				2005				2005				2005				2006				2006
Net sales					100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
Cost of sales					68.9				67.9				64.7				60.7				61.9				58.5
Gross profit					31.1				32.1				35.3				39.3				38.1				41.5
Operating expenses:
	Sales and marketing				3.5				3.9				4.0				2.6				3.3				3.9
	Research and development				7.3				6.6				6.3				4.7				3.8				4.3
	General and administrative				9.5				11.2				11.3				11.4				8.1				9.8
		Total operating expenses			20.3				21.7				21.6				18.7				15.2				18.0
Operating income					10.8				10.4				13.7				20.6				22.9				23.5
Interest expense, net					(2.7	)			(2.0	)			(2.1	)			(1.3	)			(1.1	)			(1.1	)
Fair value adjustment to series B warrants					(0.8	)			(0.7	)			(0.8	)			(0.8	)			(5.7	)			(1.1	)
Other income, net					(0.0	)			0.6				0.3				0.1				0.0				0.0
Income before provision for income taxes and minority interests in consolidated subsidiaries					7.3				8.3				11.1				18.6				16.1				21.3
Provision for income taxes					(2.5	)			(3.3	)			(4.0	)			(6.0	)			(8.7	)			(8.6	)
Minority interests in consolidated subsidiaries					0.4				0.0				(0.5	)			(1.2	)			(0.9	)			(0.3	)
Net income					5.2	%			5.0	%			6.6	%			11.4	%			6.5	%			12.4	%

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Description		Available Principal		Interest Rate		Maturity		Security
Euro Overdraft Facility		Euro 4.4 million ($5.5 million)		7.5%-8.0%, depending upon principal outstanding		Euro 2.0 million ($2.5 million) available through September 2006 Euro 2.4 million ($3.0 million) available through March 2010		Common pool of assets of German subsidiary
U.S. Demand Line(1)		80% of eligible receivables, up to $7,000,000		LIBOR plus 4.0%		June 2008		All assets held by our U.S. parent company (IPG Photonics Corporation)
Japanese Overdraft Facility		100% of eligible receivables, up to JPY700,000,000 ($6.0 million)		1.88%		September 2006		Pool of assets of Japanese subsidiary

(1)

This loan has a minimum debt service coverage covenant, which requires that we maintain a ratio of not less than 1.20:1.00 of (i) earnings before interest, taxes, depreciation and amortization, plus stock-based compensation and fair value adjustments to the series B warrants, less unfunded capital expenditures and cash taxes paid, divided by (ii)(a) current maturities of long-term debt and capital leases, plus (b) interest expense, measured as of each fiscal quarter. After the completion of this offering, we also will be required to maintain a ratio of not less than 2.50:1.00 of current assets to current liabilities and a ratio of not less than 2.01:1.00 of total liabilities to tangible net worth, measured each fiscal quarter.

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Description

Principal

Interest Rate

Maturity

Security

U.S. Construction Loan(1)

$5.8  million

7.9%

January 2007

Property and plant in United States

Euro Construction Loans

$7.1  million

5.25%

September 2006 to December 2010

Property and plant in Germany

Other Euro-fixed term debt

$6.3  million

4.2-6.5%

December 2006 to December 2019

Property, plant and equipment, receivables and other assets in Germany

(1)	The construction loan has a minimum debt service coverage covenant, which requires that we maintain a ratio of not less than 1.20:1.00 of (i) net profit plus depreciation and amortization divided by (ii)(a) current maturities of long-term debt and capital leases, plus (b) interest expense, measured each fiscal year.

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		Payments Due in
						Less Than												More Than
		Total				1 Year				1-3 Years				3-5 Years				5 Years
Operating lease obligations		$	3,386			$	1,094			$	1,679			$	613			$	—
Long-term debt obligations (including interest)			28,573				11,845				12,900				1,346				2,482
Total		$	31,959			$	12,939			$	14,579			$	1,959			$	2,482

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	•	Materials Processing. Our fiber lasers are used in a diverse range of materials processing applications: marking, engraving and printing; welding, cutting, drilling, soldering and hardening; and high precision machining. Examples of such processes using our low and mid-power fiber lasers include razorblade, stent and pacemaker manufacturing, integrated circuit marking and trimming; semiconductor memory repair and trimming; and computer disk manufacturing and texturing. Examples of such processes using our high-power fiber lasers include cutting and welding metal blanks, sheets, frames and transmissions in the automotive industry; welding aluminum and titanium air frames in the aerospace industry; hardening, cutting and welding in heavy industries such as nuclear power, pipelines, ships and rail cars; and drilling and cutting concrete and rock.
	•	Communications. Our fiber amplifiers are used in the deployment of interactive and advanced “triple-play” broadband services that include video, high-speed internet and telephony services, as well as in wireline transport networks. We also sell integrated transport systems for ultra-long-haul optical dense wavelength multiplexing networks.
	•	Medical. Our lasers are used for applications as components in medical laser systems, driven by aesthetic applications such as skin resurfacing and rejuvenation. Other soft-tissue applications include dentistry, urology, surgery and vision correction.
	•	Advanced Applications. Our fiber lasers and amplifiers are utilized by commercial firms and by academic, government and other institutions worldwide for commercial products and for research in advanced technologies and products. Our products are used in the aerospace, research, scientific and test and measurement markets.

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	Traditional Laser Technologies

	Introduction of Fiber Lasers

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	Advantages of Fiber Lasers over Traditional Lasers

	•	Superior Performance. Fiber lasers provide high beam quality over the entire power range. In most traditional laser solutions, the beam quality is sensitive to output power, while in fiber lasers, the output beam is virtually non-divergent over a wide power range, meaning the beam can be highly focused to achieve high levels of precision, increased power densities and greater distances over which processing can be completed. The superior beam quality and greater intensity of a fiber laser’s beam allow tasks to be accomplished rapidly and with lower-power units than comparable traditional lasers.
	•	Lower Total Cost of Ownership. Fiber lasers offer strong value to customers because of their lower total operating costs due to their lower maintenance costs, high reliability and energy efficiency. The initial purchase price for fiber lasers is generally below that of YAG lasers and comparable to that of CO2 lasers. Fiber lasers convert electrical energy to optical energy 2 to 3 times more efficiently than diode-pumped YAG lasers, 3 times more efficiently than CO2 lasers and 15 to 30 times more efficiently than lamp-pumped YAG lasers. Because fiber lasers are much more energy-efficient and place lower levels of thermal stress on their internal components, they have substantially lower cooling requirements compared to conventional lasers and lower or no maintenance costs. For example, single-emitter diodes used in fiber lasers have estimated lives of over 200,000 hours. In contrast, diode bars used in YAG lasers are typically replaced every 10,000 to 20,000 hours and lamps are typically replaced every 1,000 hours, involving substantial costs and lost production time. CO2 lasers also utilize components that require frequent replacement, such as resonator mirrors, fluids and filters.
	•	Ease of Use. Many features of fiber lasers make them easy to operate, maintain and integrate into laser-based systems, providing a turnkey solution. Unlike traditional solutions that require frequent adjustments, fiber lasers have a monolithic solid-state design that does not require fine mechanical alignment or adjustment of mirrors or other components. An additional benefit is that fiber lasers deliver their energy through an integrated flexible optical fiber that can be up to 100 meters long.
	•	Compact Size and Portability. Fiber lasers are typically smaller and lighter in weight than traditional lasers, saving valuable floor space. While conventional lasers are delicate due to the precise alignment of mirrors, fiber lasers are more durable and able to perform in variable working environments. These qualities permit fiber laser systems to be transported easily. The portability and versatility of fiber lasers also allow them to be used in new laser applications, such as nuclear facility pipe welding and welding on ships.
	•	Choice of Wavelengths and Precise Control of Beam. The design of fiber lasers generally provides a broad range of wavelength choices, allowing users to select the precise wavelength

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		that best matches their application and materials. Conventional lasers generally have limited wavelength options. In addition, the greater stability of the output and improved control of output beam parameters in fiber lasers, such as beam shape, allow users to more effectively use lasers in their applications.

	Adoption of Fiber Lasers and Amplifiers

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	Lasers

	Amplifiers

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	Materials Processing

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	Communications

	Medical

	Advanced Applications

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	Specialty Optical Fibers

	Semiconductor Diode Laser Processing and Packaging Technologies

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	Specialty Components and Combining Techniques

	Side Pumping of Fibers and Fiber Block Technologies

	High-Stress Testing

•   BAE Systems •   Daihen Corporation •   EO TECHNICS •   Esko-Graphics •   German Institute for Materials Processing		•   The Gillette Company •   Harmonic Inc. •   HM Laser Machinery Co., Ltd. •   Mitsubishi Heavy Industries, Ltd. •   Nippon Steel Corporation		•   Reliant Technologies Inc. •   Sahajanand Laser Technology •   SUNX Limited •   Telesis Technologies •   TEM Incorporated

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			Year Ended December 31,																								Six Months
																											Ended June 30,
			2003								2004								2005								2006
																											(unaudited)
Materials Processing			$	23,685				70.2	%		$	41,990				69.2	%		$	60,399				62.7	%		$	47,168				72.6	%
Communications			$	5,250				15.6	%		$	9,697				16.0	%		$	15,751				16.3	%		$	8,281				12.8	%
Medical			$	181				0.5	%		$	1,544				2.5	%		$	7,422				7.7	%		$	4,949				7.6	%
Advanced Applications			$	4,624				13.7	%		$	7,476				12.3	%		$	12,813				13.3	%		$	4,529				7.0	%
	Total		$	33,740				100.0	%		$	60,707				100.0	%		$	96,385				100.0	%		$	64,927				100.0	%

			Year Ended December 31,																								Six Months
																											Ended June 30,
			2003								2004								2005								2006
																											(unaudited)
North and South America			$	10,365				30.7	%		$	20,911				34.4	%		$	38,512				40.0	%		$	23,044				35.5	%
Europe			$	12,963				38.4	%		$	19,339				31.9	%		$	23,882				24.8	%		$	18,585				28.6	%
Asia and Australia			$	10,412				30.9	%		$	20,232				33.3	%		$	33,569				34.8	%		$	23,298				35.9	%
Rest of World			$	—				0.0	%		$	225				0.4	%		$	422				0.4	%		$	—				0.0	%
	Total		$	33,740				100.0	%		$	60,707				100.0	%		$	96,385				100.0	%		$	64,927				100.0	%

	•	maintaining a technological lead over competitors;
	•	reducing component and final product costs as volumes increase;

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	•	ensuring access to critical components, enabling us to better meet customer demands;
	•	controlling performance, quality and consistency; and
	•	enabling rapid development and deployment of new products and technologies.

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	•	product performance and reliability;
	•	quality and service support;
	•	price and value to the customer;
	•	ability to manufacture and deliver products on a timely basis;
	•	ability to achieve qualification for and integration into OEM systems;
	•	ability to meet customer specifications; and
	•	ability to respond quickly to market demand and technological developments.

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Owned or

Lease

Approximate

Location

Leased

Expiration

Size (sq. ft.)

Primary Activity

Oxford, Massachusetts

Owned

—

123,000

Diodes, components, complete device manufacturing, administration

Burbach, Germany

Owned

—

137,000

Optical fiber, components, final assembly, complete device manufacturing, administration

Fryazino, Russia

Leased

April 2007

55,000

Components, complete device manufacturing, administration

Legnano, Italy

Leased

March  2012

12,000

Complete device manufacturing, administration

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Name		Age				Position(s)
Valentin P. Gapontsev, Ph.D.			67			Chief Executive Officer and Chairman of the Board
Eugene Shcherbakov, Ph.D.			59			Managing Director of IPG Laser and Director
Timothy P.V. Mammen			37			Chief Financial Officer and Vice President
Angelo P. Lopresti			42			General Counsel, Secretary and Vice President
Denis Gapontsev, Ph.D.			34			Vice President-Research & Development
George H. BuAbbud, Ph.D.			51			Vice President-Telecommunications Products
Alexander Ovtchinnikov, Ph.D.			45			Vice President-Components
Igor Samartsev			43			Acting General Manager of NTO IRE-Polus and Director
Robert A. Blair(1)(2)			60			Director
Michael C. Child(1)(3)			51			Director
John H. Dalton			64			Director
Henry E. Gauthier(1)(3)			66			Director
William S. Hurley(2)(3)			62			Director
William F. Krupke, Ph.D.(2)			69			Director

(1)	Member of the compensation committee.
(2)	Member of the nominating and corporate governance committee.
(3)	Member of the audit committee.

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	•	appoints, approves the compensation of, and assesses the independence of our independent registered public accounting firm;
	•	reviews the audit committee charter periodically and recommends any necessary amendments to such charter to our board of directors;
	•	oversees the work of our independent auditor, which includes the receipt and consideration of certain reports from the independent registered public accounting firm;
	•	resolves disagreements between management and our independent registered public accounting firm;
	•	pre-approves auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
	•	reviews and discusses with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;
	•	coordinates the oversight of our internal and external controls over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
	•	establishes, reviews and updates our code of business conduct and ethics;
	•	reviews and approves all related-party transactions;
	•	establishes procedures for the receipt of accounting-related complaints and concerns;

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	•	meets independently with our independent registered public accounting firm and management; and
	•	will prepare the audit committee report required by SEC rules to be included in our proxy statements.

	•	annually reviews base salary and incentive compensation for our chief executive officer and other executive officers;
	•	approves corporate goals and objectives relevant to compensation of our chief executive officer and other executive officers;
	•	evaluates the performance of our chief executive officer in light of our corporate goals and objectives and determines the compensation of our chief executive officer;
	•	reviews and makes recommendations to the board of directors with respect to the compensation of our other executive officers; and
	•	periodically reviews our incentive-based compensation plans and stock-based plans and makes recommendations to the board of directors with respect to such plans.

	•	develops and recommends to the board of directors criteria for board membership;
	•	recommends to the board of directors changes that the committee believes to be desirable with regard to the appropriate size, functions and needs of the board of directors;
	•	identifies and evaluates director candidates, including nominees recommended by our stockholders;
	•	identifies individuals qualified to fill vacancies on any committee of the board of directors;
	•	reviews procedures for stockholders to submit recommendations for director candidates;
	•	recommends to the board of directors the persons to be nominated for election as directors and to each of the board’s committees;
	•	reviews the performance of the committee and evaluates its charter periodically; and
	•	develops and recommends to the board of directors a set of corporate governance guidelines.

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	•	We granted options to purchase 30,000 shares of common stock to each of Messrs. Blair, Child and Dalton and Dr. Krupke on June 12, 2005, at an exercise price of $1.00 per share;
	•	We granted options to purchase 30,000 shares of common stock to each of Messrs. Gauthier and Hurley on April 18, 2006, at an exercise price of $3.58 per share; and
	•	We granted options to purchase 10,000 shares of common stock to each of Messrs. Blair, Child and Dalton and Dr. Krupke on June 21, 2006, at an exercise price of $4.30 per share.

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															Long-Term
															Compensation
			Annual Compensation												Awards
											Other Annual				Securities				All Other
Name and Principal											Compensation				Underlying				Compensation
Position			Salary($)				Bonus ($)(1)				($)(2)				Options(#)				($)(3)
Valentin P. Gapontsev			$	383,284			$	604,243				—				—			$	2,945
	Chief Executive Officer and
	Chairman of the Board(4)(5)
Eugene Shcherbakov				256,515				138,935				—				—				—
	Managing Director and
	Director(4)(5)
Angelo P. Lopresti				254,248				147,567				—				20,000				8,913	(6)
	Vice President, General
	Counsel and Secretary
Timothy P.V. Mammen				200,000				142,500				—				20,000				8,550	(7)
	Vice President and
	Chief Financial Officer
Denis Gapontsev				227,479				94,250				—				—				470
	Vice President,
	Research and Development(5)

(1)	The bonuses paid in 2005 include an annual performance bonus for the achievement of certain performance objectives which were met during 2005. Bonuses paid in 2005 also include a one-time, non-recurring loyalty bonus intended to reward officers for their long-term contributions to us in the following amounts: Dr. V. Gapontsev, $368,823; Dr. Shcherbakov, $72,236; Mr. Lopresti, $68,750; Mr. Mammen, $82,500; and Dr. D. Gapontsev, $29,750.
(2)	We have concluded that the aggregate amount of perquisites and other personal benefits paid to each of the named executive officers for fiscal year 2005 did not exceed the lesser of 10% of such named executive officer’s total annual salary and bonus for 2005 or $50,000; such amounts are not included in the table.
(3)	All Other Compensation consists of our matching contributions to retirement accounts under our 401(k) plan and our payment of premiums on group term life insurance on behalf of our employees. The group term life insurance does not have a cash surrender value and premiums paid are not refunded upon termination.
(4)	A portion of the amounts paid to Dr. Shcherbakov and Dr. V. Gapontsev were denominated in Euros. These amounts are translated into U.S. dollars at the exchange rate as of December 30, 2005.
(5)	A portion of the amounts paid to Dr. Shcherbakov, Dr. V. Gapontsev and Dr. D. Gapontsev were denominated in Rubles. These amounts are translated into U.S. dollars at the exchange rate as of December 30, 2005.
(6)	Reflects our contribution of $8,430 to Mr. Lopresti’s retirement account under our 401(k) plan and payment of $483 of premiums on Mr. Lopresti’s group term life insurance.
(7)	Reflects our contribution of $8,294 to Mr. Mammen’s retirement account under our 401(k) plan and payment of $256 of premiums on Mr. Mammen’s group term life insurance.

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																		Value at Assumed
																		Annual Rates of
		Securities				% of Total												Stock Price
		Underlying				Options												Appreciation for
		Options				Granted to				Exercise								Option Term (1)
		Granted				Employees in				Price Per
Name		(#)				Fiscal Year				Share				Expiration Date				5%				10%
Valentin P. Gapontsev			—				—				—				—				—				—
Eugene Shcherbakov			—				—				—				—				—				—
Angelo P. Lopresti			20,000				1.60			$	1.25				September 22, 2015
Timothy P.V. Mammen			20,000				1.60			$	1.25				September 22, 2015
Denis Gapontsev			—				—				—				—				—				—

(1)	Potential realizable values are net of exercise price, but before any taxes associated with exercise. The assumed rates of stock price appreciation are provided in accordance with SEC rules based upon an assumed initial public offering price of $           per share, and do not represent our estimate of our future stock price.

										Number of Securities								Value at Assumed Annual
										Underlying Unexercised								Rates of Stock Price
										Options at Fiscal								Appreciation for
		Shares								Year-End (#)								Option Term (1)
		Acquired on				Value
Name		Exercise (#)				Realized ($)				Exercisable				Unexercisable				Exercisable				Unexercisable
Valentin P. Gapontsev			—				—				355,876				—
Eugene Shcherbakov			55,215								34,776				—
Angelo P. Lopresti			75,000								283,708				36,666
Timothy P.V. Mammen			50,000								271,259				36,666
Denis Gapontsev			—				—				70,019				16,666

(1)	There was no public trading market for our common stock as of December 31, 2005. Accordingly, the value of unexercised in-the-money options is based on an assumed initial public offering price of $           per share, minus the per share exercise price, multiplied by the number of shares underlying the option.

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	2000 Incentive Compensation Plan, 2006 Incentive Compensation Plan and Non-Employee Directors Stock Plan

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	•	accelerate the time for exercise or payout of all outstanding awards;
	•	cancel the award after notice to the holder of an outstanding award as long as the holder receives a payment equal to the difference between the fair market value of the award on the date of the change of control and the exercise price per share, if any, of such award; or
	•	provide that all outstanding awards will be assumed by the entity that acquires control or substituted for similar awards by such entity.

	•	any person becomes a beneficial owner of our securities representing at least 50% of the combined voting power of our then-outstanding securities;
	•	persons who, at the beginning of any period of two consecutive years, were members of the board of directors cease to constitute a majority of the board of directors unless the election or nomination for election by the stockholders of each new director during that two-year period is approved by at least two-thirds of the incumbent directors then still in office;
	•	the occurrence of a merger, sale of all or substantially all of our assets, cash tender or exchange offer, contested election or other business combination under circumstances in which our stockholders immediately prior to such merger or other such transaction do not, after such transaction, own shares representing at least a majority of our voting power or the surviving or resulting corporation, as the case may be; or
	•	our stockholders approve a complete liquidation.

	401(k) Plan

	Senior Executive Short-Term Incentive Plan

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	•	any person becomes a beneficial owner of our securities representing at least 50% of the combined voting power of our then-outstanding securities; or
	•	our stockholders approve a reorganization, merger or consolidation, or a sale or other disposition of all or substantially all of the assets of our company.

	Employment Agreements

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	•	any breach of the director’s duty of loyalty to us or our stockholders;
	•	any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
	•	any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or
	•	any transaction from which the director or officer derived an improper personal benefit.

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	•	each person or group of affiliated persons known by us to own beneficially more than 5% of our common stock;
	•	each of our named executive officers;
	•	each of our directors;
	•	all of our executive officers and directors as a group; and
	•	each selling stockholder.

										Pro Forma
		Beneficial Ownership								Beneficial Ownership												Beneficial Ownership
		Prior to Offering								Prior to Offering								Shares				After Offering
																		Being
Name of Beneficial Owner		Number				Percentage				Number				Percentage				Offered				Number				Percentage
Valentin P. Gapontsev(1)			30,398,876				62.4	%
IP Fibre Devices (UK) Ltd.(1)			11,150,000				22.9	%											0
TA Associates Funds(2)			2,352,941				4.8	%											0
JDS Uniphase Corporation(3)			2,684,211				5.5	%											0
Denis Gapontsev(4)			2,578,352				5.3	%											0
Robert A. Blair			547,500				1.1	%
John H. Dalton(5)			496,933				1.0	%
Igor Samartsev(6)			503,445				1.0	%											0
Eugene Shcherbakov(7)			489,991				1.0	%											0
Timothy P.V. Mammen(8)			422,592				*												0
Angelo P. Lopresti(9)			422,042				*												0
William F. Krupke(10)			157,500				*												0
Michael C. Child(11)			2,460,441				5.0	%											0
George H. BuAbbud(12)			305,000				*												0
Alexander Ovtchinnikov(13)			141,667				*												0
Henry E. Gauthier			0				—												0
William S. Hurley			0				—												0
All executive officers and directors as a group (14 persons)(14)			38,924,339				77.8	%

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	*	Less than 1.0%.
	(1)	Includes shares beneficially owned by IPFD, of which Dr. Valentin Gapontsev is the managing director. Dr. Valentin Gapontsev has voting and investment power with respect to the shares held of record by IPFD and is the father of Dr. Denis Gapontsev. Dr. Valentin Gapontsev has a 53% economic interest in IPFD.
	(2)	Amounts shown reflect the aggregate number of shares of common stock held by TA IX L.P., TA/Atlantic and Pacific IV L.P., TA/Advent VIII L.P., TA Executives Fund LLC, and TA Investors LLC (collectively, the “TA Associates Funds”), assuming the conversion of 2,000,000 shares of our series B preferred stock. Investment and voting control of the TA Associates Funds is held by TA Associates, Inc. No stockholder, director or officer of TA Associates, Inc. has voting or investment power with respect to our shares of common stock held by the TA Associates Funds. Voting and investment power with respect to such shares is vested in a four-person investment committee consisting of the following employees of TA Associates: Messrs. Michael C. Child, Jonathan M. Goldstein, C. Kevin Landry and Kenneth T. Schiciano. Mr. Child is a Managing Director of TA Associates, Inc., the manager of the general partner of TA IX L.P. and TA/Advent VIII L.P.; the manager of TA Investors LLC and TA Executives Fund LLC; and the general partner of the general partner of TA/Atlantic and Pacific IV L.P. Mr. Child has been a member of our board of directors since November 2000. See note 11 below. The address of TA Associates, Inc. is John Hancock Tower, 56th Floor, 200 Clarendon Street, Boston, Massachusetts 02116.
	(3)	Amounts shown reflect the aggregate number of shares of common stock held by JDS Uniphase Corporation, assuming the conversion of 2,684,211 shares of our series D preferred stock. The address of JDS Uniphase Corporation is 1768 Automation Parkway, San Jose, California 95131. We have been informed that David Vellequette, the Chief Financial Officer of JDS Uniphase Corporation, has voting and investment power with respect to the shares held by JDS Uniphase.

(4)	Includes 78,352 shares of common stock issuable upon exercise of options. Does not include shares held by IPFD. Dr. Denis Gapontsev has a 15% economic interest in IPFD but does not possess voting or investment power with respect to such interest.
(5)	Includes 7,500 shares of common stock issuable upon exercise of options.
(6)	Includes 3,445 shares of common stock issuable upon exercise of options. Does not include shares held by IPFD. Mr. Samartsev has an 8% economic interest in IPFD but does not possess voting or investment power with respect to such interest.
(7)	Does not include shares held by IPFD. Dr. Shcherbakov has an 8% economic interest in IPFD but does not possess voting or investment power. Includes 100,000 shares of common stock issuable upon exercise of options.
(8)	Includes 284,592 shares of common stock issuable upon exercise of options.
(9)	Includes 272,042 shares of common stock issuable upon exercise of options.

(10)	Includes 7,500 shares of common stock issuable upon exercise of options.
(11)	Includes 107,500 shares of common stock issuable upon exercise of options and 2,212,389 shares held by TA Associates, Inc. Mr. Child is a managing director of TA Associates, Inc. and may be considered to have beneficial ownership of TA Associates, Inc.’s interest in us. Mr. Child disclaims beneficial ownership of all such shares. Mr. Child has been a member of our board of directors since September 2000. See note 2 above.
(12)	Includes 275,000 shares of common stock issuable upon exercise of options.
(13)	Includes 5,000 shares of common stock issuable upon exercise of options.
(14)	Includes 1,140,931 shares of common stock issuable upon exercise of options.

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	•	we intend to adopt a board policy that the audit committee of our board of directors will review and approve any distributions and dividends to stockholders of NTO IRE-Polus;
	•	Dr. Valentin P. Gapontsev and Mr. Samartsev intend to grant a proxy to us to vote their shares with respect to NTO IRE-Polus, giving us the ability to vote 82.6% of its total shares and allowing us to have sufficient votes to elect the general manager of NTO IRE-Polus and approve other changes that require the approval of 662/3% of NTO IRE-Polus’s stockholders; and
	•	Dr. Valentin P. Gapontsev and Mr. Samartsev intend to grant a right of first refusal to us on any sale of their shares of NTO IRE-Polus to existing stockholders of NTO IRE-Polus at a price equal to the lesser of the per-share fair value or book value of NTO IRE-Polus as of June 30, 2006. The charter documents of NTO IRE-Polus and applicable Russian law also provide that existing stockholders, including us, have a right of first refusal up to their respective pro rata interests with respect to transfers of shares of NTO IRE-Polus to third parties.

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		$								$
IPG Common Stock Price Per Share		All Holders				TA Associates				All Holders				TA Associates
Common stock(1)		$				$				$				$
Subordinated notes			20,000				10,526				20,000				10,526
Total		$				$				$				$

(1)	Represents                     and                      shares, respectively, for all series B preferred stockholders and TA Associates at $          per share and                     and                      shares, respectively, for all series B preferred stockholders and TA Associates at $          per share.

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	•	before the stockholder became an interested stockholder, the board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
	•	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 corporation outstanding at the time the transaction commenced, excluding, for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers and some employee stock plans; or
	•	at or after the time the stockholder became an interested stockholder, the business combination was 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 two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

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Number of
Shares Eligible
for Future Sale		Date
		Immediately after the date of this prospectus
		After 90 days from the date of this prospectus
		After 180 days from the date of this prospectus

	•	one percent of the then-outstanding shares of common stock (approximately            shares immediately after this offering); or
	•	the average weekly trading volume on the Nasdaq Global Market during the four calendar weeks before the date on which the seller files a notice of the proposed sale with the SEC.

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	•	a citizen or resident of the United States;
	•	a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
	•	an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
	•	a trust (i) which is subject to primary supervision by a court situated within the United States and as to which one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

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	•	the gain is effectively connected with a trade or business of the Non-U.S.  Holder in the United States and, where a tax treaty applies, is attributable to a United States permanent establishment or fixed base of the Non-U.S. Holder;
	•	the Non-U.S. Holder is an individual who is present in the United States for 183 or more days during the taxable year of disposition and meets certain other requirements; or
	•	we are or have been a “U.S. real property holding corporation” within the meaning of Section 897(c)(2) of the Code, also referred to as a USRPHC, for United States federal income tax purposes at any time within the five-year period preceding the disposition (or, if shorter, the Non-U.S. Holder’s holding period for the common stock).

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		Number of
Underwriter		Shares
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Lehman Brothers Inc.
Needham & Company, LLC
Jefferies & Company, Inc.
Thomas Weisel Partners LLC
Total

Per Share

Without Option

With Option

Public offering price

$

$

$

Underwriting discount

$

$

$

Proceeds, before expenses, to IPG Photonics

$

$

$

Proceeds, before expenses, to the selling stockholders

$

$

$

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	•	offer, pledge, sell or contract to sell any common stock;
	•	sell any option or contract to purchase any common stock;
	•	purchase any option or contract to sell any common stock;
	•	grant any option, right or warrant for the sale of any common stock;
	•	lend or otherwise dispose of or transfer any common stock;
	•	enter into any swap or other agreement that transfers, in whole or in part, the economic consequences 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; or
	•	publicly announce any of the foregoing.

	•	during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or
	•	prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

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	•	the valuation multiples of publicly traded companies that the underwriters believe to be comparable to us;
	•	our financial information;
	•	the history of, and the prospects for, our company and the industry in which we compete;
	•	an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;
	•	the present state of our development; and
	•	the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

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	•	it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to us; and
	•	it has complied with, and will comply with, all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

	•	to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
	•	to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year, (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or
	•	in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive.

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Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2004 and 2005 and June 30, 2006 (unaudited)		F-3
Consolidated Statements of Operations for the Years Ended December 31, 2003, 2004, and 2005 and for the Six Months Ended June 30, 2005 (unaudited) and 2006 (unaudited)		F-4
Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders’ Deficit for the Years Ended December 31, 2003, 2004, and 2005 and for the Six Months Ended June 30, 2006 (unaudited)		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004, and 2005 and for the Six Months Ended June 30, 2005 (unaudited) and 2006 (unaudited)		F-6
Notes to Consolidated Financial Statements		F-7

F-1

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					December 31,
																	Pro Forma
					2004				2005				June 30, 2006				June 30, 2006
													(unaudited)				(unaudited)
					(in thousands, except share and per share data)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents				$	2,548			$	8,361			$	11,282
	Accounts receivable, net of allowance of $172, $198, and $189 as of December 31, 2004 and 2005 and June 30, 2006, respectively					10,806				15,434				18,131
	Inventories — net					29,577				28,588				34,759
	Prepaid expenses and other current assets					2,072				2,482				4,141
	Deferred income taxes					1,648				3,005				168
			Total current assets			46,651				57,870				68,481
RESTRICTED CASH						6,607				36				38
DEFERRED INCOME TAXES						4,761
PROPERTY, PLANT, AND EQUIPMENT — Net						45,982				50,995				57,545
EMPLOYEE AND STOCKHOLDER LOANS						6,265				6,339				5,303
OTHER ASSETS						279				241				629
TOTAL					$	110,545			$	115,481			$	131,996
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
CURRENT LIABILITIES:
	Revolving line-of-credit facilities				$	8,259			$	8,746			$	11,011
	Current portion of long-term debt					5,995				10,438				15,301
	Accounts payable					3,240				5,164				6,231
	Accrued expenses and other liabilities					7,174				9,907				11,248
	Income taxes payable					1,049				65				1,969
			Total current liabilities			25,717				34,320				45,760
DEFERRED INCOME TAXES										82				223
LONG-TERM DEBT						25,459				15,643				8,967			$	28,967
SERIES B WARRANTS						13,899				14,644				16,863
COMMITMENTS AND CONTINGENCIES (Notes 6, 10 and 13)
MINORITY INTERESTS						511				948				1,343
CONVERTIBLE REDEEMABLE PREFERRED STOCK, $0.0001 par value:
	Series B — designated, issued, and outstanding, 3,800,000 shares; liquidation and redemption value, $95,000					88,897				91,248				92,285				—
	Series D — designated, 5,400,000 shares; issued and outstanding, 2,684,211 shares; liquidation and redemption values, $5,100					5,100				5,100				5,100				—
STOCKHOLDERS’ (DEFICIT) EQUITY:
	Preferred stock, $0.0001 par value — authorized, 15,000,000 shares; Series A — designated, 500,000 shares; issued and outstanding, 488,000 shares; liquidation value, $4,880					4,880				4,880				4,880				—
	Common stock, $0.0001 par value — authorized, 70,000,000 shares; issued and outstanding, 38,987,494, 39,988,948 and 40,883,700 shares at
		December 31, 2004 and 2005 and June 30, 2006, respectively				4				4				4				4
	Additional paid-in capital					96,261				95,029				94,912				177,177
	Notes receivable from stockholders					(463	)			(463	)			(463	)			(463	)
	Deferred compensation									(111	)
	Accumulated deficit					(157,052	)			(149,625	)			(143,507	)			(143,507	)
	Accumulated other comprehensive income					7,332				3,782				5,629				5,629
			Total stockholders’ (deficit) equity			(49,038	)			(46,504	)			(38,545	)			38,840
TOTAL					$	110,545			$	115,481			$	131,996

F-3

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				Years Ended December 31,												Six Months Ended June 30,
				2003				2004				2005				2005				2006
																(unaudited)				(unaudited)
				(in thousands except per share data)
NET SALES				$	33,740			$	60,707			$	96,385			$	41,630			$	64,927
COST OF SALES					38,583				42,274				62,481				28,437				39,119
GROSS (LOSS) PROFIT					(4,843	)			18,433				33,904				13,193				25,808
OPERATING EXPENSES:
	Sales and marketing				2,110				2,363				3,236				1,538				2,343
	Research and development				10,063				4,831				5,788				2,873				2,622
	General and administrative				9,998				8,179				10,598				4,352				5,813
		Total operating expenses			22,171				15,373				19,622				8,763				10,778
OPERATING (LOSS) INCOME					(27,014	)			3,060				14,282				4,430				15,030
OTHER (EXPENSE) INCOME — Net:
	Interest expense — net				(1,505	)			(2,150	)			(1,840	)			(969	)			(709	)
	Fair value adjustment to Series B Warrants				(3,664	)			(615	)			(745	)			(314	)			(2,219	)
	Other income — net				1,647				196				236				141				12
		Total other expense			(3,522	)			(2,569	)			(2,349	)			(1,142	)			(2,916	)
(LOSS) INCOME BEFORE BENEFIT FROM (PROVISION FOR) INCOME TAXES AND MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES					(30,536	)			491				11,933				3,288				12,114
BENEFIT FROM (PROVISION FOR) INCOME TAXES					2,205				1,601				(4,080	)			(1,219	)			(5,598	)
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES					121				(80	)			(426	)			81				(398	)
NET (LOSS) INCOME				$	(28,210	)		$	2,012			$	7,427			$	2,150			$	6,118
NET (LOSS) INCOME PER SHARE:
	Basic			$	(0.93	)		$	(0.01	)		$	0.11			$	0.02			$	0.11
	Diluted			$	(0.93	)		$	(0.01	)		$	0.11			$	0.02			$	0.10
WEIGHTED AVERAGE SHARES OUTSTANDING:
	Basic				38,302				38,547				39,348				39,008				40,385
	Diluted				38,302				38,547				45,252				44,912				49,584

F-4

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																						Convertible
					Convertible Redeemable Preferred Stock																	Preferred Stock
					Series B								Series D									Series A								Common Stock												Note												Accumulated								Other
																																						Additional				Receivable												Other								Comprehensive
																																		Par				Paid-In				From				Deferred				Accumulated				Comprehensive								Income
					Shares				Amount				Shares				Amount					Shares				Amount				Shares				Value				Capital				Stockholders				Compensation				Deficit				Income				Total				(Loss)
																														(In thousands, except share and per-share data)
BALANCE — January 1, 2003						3,800,000			$	84,194				—			$	—					500,000			$	5,000				37,940,668			$	4			$	100,076			$	(463	)		$	(2,613	)		$	(130,854	)		$	747			$	(28,103	)
	Comprehensive income:
		Net loss																																																	(28,210	)							(28,210	)		$	(28,210	)
		Translation adjustment																																																					4,508				4,508				4,508
			Total comprehensive loss																																																											$	(23,702	)
	Issuance of Series D Preferred Stock													2,684,211				5,100
	Beneficial conversion charge									(4,991	)																(251	)											5,242																				4,991
	Accretion of Series B Preferred Stock									7,343																	251												(7,594	)																			(7,343	)
	Sale of common stock																														500,000								5																				5
	Stock-based compensation awarded																																						496								(496	)
	Amortization of stock-based compensation																																														2,203												2,203
	Proceeds from exercise of stock options																														2,375								2																				2
BALANCE — December 31, 2003						3,800,000				86,546				2,684,211				5,100					500,000				5,000				38,443,043				4				98,227				(463	)			(906	)			(159,064	)			5,255				(51,947	)
	Comprehensive income:
		Net income																																																	2,012								2,012			$	2,012
		Translation adjustment																																																					2,077				2,077				2,077
			Total comprehensive income																																																											$	4,089
	Accretion of Series B Preferred Stock									2,351																													(2,351	)																			(2,351	)
	Common stock issued to acquire subsidiary																														99,000																												—
	Stock-based awards forfeited																																						(3	)							3												—
	Amortization of stock-based compensation																																														903												903
	Exercise of stock options																						(12,000	)			(120	)			445,451								388																				268
BALANCE — December 31, 2004						3,800,000				88,897				2,684,211				5,100					488,000				4,880				38,987,494				4				96,261				(463	)			—				(157,052	)			7,332				(49,038	)
	Comprehensive income:
		Net income																																																	7,427								7,427			$	7,427
		Translation adjustment																																																					(3,550	)			(3,550	)			(3,550	)
			Total comprehensive income																																																											$	3,877
	Accretion of Series B Preferred Stock									2,351																													(2,351	)																			(2,351	)
	Stock-based awards																																						118								(118	)											—
	Amortization of stock-based compensation																																														7												7
	Exercise of stock options																														1,001,454								1,001																				1,001
BALANCE — December 31, 2005						3,800,000				91,248				2,684,211				5,100					488,000				4,880				39,988,948				4				95,029				(463	)			(111	)			(149,625	)			3,782				(46,504	)
	Comprehensive income:
		Net income (unaudited)																																																	6,118								6,118			$	6,118
		Translation adjustment (unaudited)																																																					1,847				1,847				1,847
			Total comprehensive income (unaudited)																																																											$	7,965
	Adoption of FAS 123(R) (unaudited)																																						(111	)							111												—
	Accretion of Series B Preferred Stock (unaudited)									1,037																													(1,037	)																			(1,037	)
	Stock-based awards (unaudited)																																						126																				126
	Amortization of stock-based compensation (unaudited)
	Exercise of stock options (unaudited)																														894,752								905																				905
BALANCE — June 30, 2006 (unaudited)						3,800,000			$	92,285				2,684,211			$	5,100					488,000			$	4,880				40,883,700			$	4			$	94,912			$	(463	)		$	—			$	(143,507	)		$	5,629			$	(38,545	)

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																			Six Months Ended
							2003				2004				2005				2005				2006
																			(unaudited)				(unaudited)
							(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net (loss) income						$	(28,210	)		$	2,012			$	7,427			$	2,150			$	6,118
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
			Depreciation and amortization					7,759				7,154				7,583				3,567				3,754
			Deferred income taxes					(2,536	)			(462	)			2,732				1,084				3,063
			Stock-based compensation					2,203				903				7				—				126
			Interest accretion of convertible note					86				235				247				121				127
			(Gain) loss on sale of investment and fixed assets					(484	)			(14	)			(238	)			56				69
			Inventory provisions					8,321								2,370				923				—
			Fair value adjustment to Series B Warrants					3,664				615				745				314				2,219
			Minority interests in consolidated subsidiaries					(121	)			80				426				(81	)			398
			Changes in assets and liabilities that provided (used) cash:
				Accounts receivable				(2,101	)			(2,791	)			(5,599	)			(3,064	)			(2,281	)
				Due from affiliates — net				(1,174	)			(40	)			236				162				21
				Inventories				10,970				1,176				(4,011	)			(1,174	)			(6,091	)
				Prepaid expenses and other current assets				(324	)			(55	)			(312	)			(539	)			(1,212	)
				Accounts payable				(1,209	)			(1,460	)			(1,030	)			(2,005	)			871
				Accrued expenses and other liabilities				1,955				207				4,088				(27	)			983
				Income and other taxes payable				53				(1,312	)			(1,086	)			61				2,143
					Net cash provided by (used in) operating activities			(1,148	)			6,248				13,585				1,548				10,308
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property, plant, and equipment							(2,588	)			(4,037	)			(15,989	)			(6,451	)			(9,054	)
	Proceeds from sale of property, plant, and equipment											80				782				132				20
	Proceeds on sale of investment							502				—				—				—				—
	Employee and shareholder loans repaid							1,719				—				—				—				1,071
	Restricted cash released to support construction loan							313				87				6,566				6,566				—
					Net cash used in investing activities			(54	)			(3,870	)			(8,641	)			247				(7,963	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from line-of-credit facilities							5,204				3,456				9,561				1,710				8,517
	Payments on line-of-credit facilities							(2,493	)			(2,638	)			(9,384	)			(772	)			(6,325	)
	Principal payments on long-term borrowings							(2,351	)			(1,654	)			(2,263	)			(449	)			(2,688	)
	Proceeds from long-term borrowings							—				—				2,209				2,239
	Issuance of common stock and exercise of employee stock options							7				268				1,001				79				905
	Minority interest capital contribution											142				11				11				—
					Net cash provided by (used in) financing activities			367				(426	)			1,135				2,818				409
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS								(8	)			60				(266	)			(147	)			167
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS								(843	)			2,012				5,813				4,466				2,921
CASH AND CASH EQUIVALENTS — Beginning of period								1,379				536				2,548				2,548				8,361
CASH AND CASH EQUIVALENTS — End of period							$	536			$	2,548			$	8,361			$	7,014			$	11,282
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for interest						$	1,565			$	1,780			$	2,046			$	999			$	716
	Income taxes paid						$	—			$	59			$	1,989			$	—			$	781
	Non-cash transactions:
		Stock-for-stock swap on options					$	—			$	120			$	—			$	—			$	—
		Issuance of Series D Preferred Stock in satisfaction of accrued contract settlement					$	5,100
		Issuance of convertible note in satisfaction of accrued contract settlement					$	4,374

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1.	NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Category		Economic Useful Life
Buildings			30 years
Machinery and equipment			3-5 years
Office furniture and fixtures			3-5 years
Other assets			3-5 years

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Balance at January 1, 2003		$	278
Provision for bad debts			172
Uncollectible accounts written off			(153	)
Foreign currency translation			25
Balance at December 31, 2003			322
Provision for bad debts			35
Uncollectible accounts written off			(185	)
Balance at December 31, 2004			172
Provision for bad debts			43
Uncollectible accounts written off			(24	)
Foreign currency translation			7
Balance at December 31, 2005		$	198

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														Six Months
														Ended
														June 30,
		2003				2004				2005				2005				2006
Cost of sales		$	577			$	218			$	4			$	—			$	37
Sales and marketing			18				6				1				—				11
Research and development			1,062				669				1				—				3
General and administrative			546				10				1				—				75
Total		$	2,203			$	903			$	7			$	—			$	126

		2003				2004				2005
Reported net income		$	(28,210	)		$	2,012			$	7,427
Add stock-based employee compensation expense included in net income — net of taxes			2,203				903				7
Deduct stock-based employee compensation expense determined using the fair value for all awards — net of taxes			(2,241	)			(915	)			(22	)
Pro forma net income		$	(28,248	)		$	2,000			$	7,412

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2.	STOCK-BASED COMPENSATION (UNAUDITED)

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											Weighted-
											Average
							Weighted-				Remaining
							Average				Contractual
			Number of				Exercise				Term
			Options				Price				(In Years)
Outstanding — January 1, 2006				5,879,578			$	1.06				7.52
	Granted			1,696,425				3.60
	Exercised			894,752				1.01
	Cancelled
	Forfeited			25,291				1.72
Outstanding — June 30, 2006				6,655,960				1.71				7.76
Exercisable — June 30, 2006				3,248,762			$	1.03				6.19

3.	INVENTORIES

		December 31,
										June 30,
		2004				2005				2006
										(unaudited)
Components and raw materials		$	15,473			$	9,985			$	14,637
Work-in-process			5,900				10,010				8,872
Finished goods			8,204				8,593				11,250
Total		$	29,577			$	28,588			$	34,759

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		December 31,
										June 30,
		2004				2005				2006
										(unaudited)
Land		$	4,284			$	5,817			$	6,281
Buildings			27,212				35,397				38,010
Machinery and equipment			42,023				43,783				48,797
Office equipment and fixtures			4,875				5,625				6,664
Construction-in-progress			4,182				1,084				3,350
Total property, plant, and equipment			82,576				91,706				103,102
Accumulated depreciation			(36,594	)			(40,711	)			(45,557	)
Total property, plant, and equipment — net		$	45,982			$	50,995			$	57,545

		December 31,
										June 30,
		2004				2005				2006
										(unaudited)
Accrued compensation		$	2,562			$	4,248			$	3,666
Customer deposits and deferred revenue			2,166				2,078				3,899
Accrued warranty			593				1,065				1,149
Other			1,853				2,516				2,534
		$	7,174			$	9,907			$	11,248

6.	FINANCING ARRANGEMENTS

				December 31,
												June 30,
				2004				2005				2006
												(unaudited)
Revolving Line-of-Credit Facilities:
	Euro Overdraft Facility			$	3,259			$	3,060			$	4,870
	U.S. Demand Line of Credit				400				1,000				1,500
	IPFD Credit Facility (related party)				4,600				4,686				4,641
		Total		$	8,259			$	8,746			$	11,011

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				December 31,
												June 30,
				2004				2005				2006
												(unaudited)
Term Debt:
	U.S. Construction Loan			$	6,347			$	5,983			$	5,790
	Note Payable to Supplier				3,350
	Convertible Supplier Note				4,695				4,942				5,069
	Euro Construction Loan				10,232				7,588				6,274
	NTO Note Payable to IPFD (related party)				651				595
	Other term debt				6,179				6,973				7,135
		Total term debt			31,454				26,081				24,268
Less current portion					(5,995	)			(10,438	)			(15,301	)
Long-term debt				$	25,459			$	15,643			$	8,967

2006			$	10,438
2007				8,306
2008				1,994
2009				1,866
2010				1,134
2011 and thereafter				2,343
	Total		$	26,081

	Revolving Line-of-Credit Facilities:

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7.	CONVERTIBLE REDEEMABLE PREFERRED STOCK, PREFERRED STOCK AND WARRANTS

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8.	RELATED-PARTY TRANSACTIONS

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9.	NET INCOME (LOSS) PER SHARE

															Six Months Ended
			Year Ended December 31,												June 30,
			2003				2004				2005				2005				2006
															(unaudited)
Weighted-average common shares outstanding used to compute basic net income per share				38,302				38,547				39,348				39,008				40,385
Add dilutive common equivalents:
	Stock options			—				—				—				—				3,295
	Series A preferred stock — if converted			—				—				536				536				536
	Series B preferred stock — if converted			—				—				—				—				—
	Series D preferred stock — if converted			—				—				2,684				2,684				2,684
	Convertible supplier note payable — if converted			—				—				2,684				2,684				2,684
Shares used to compute diluted net income per share				38,302				38,547				45,252				44,912				49,584

														Six Months
		Year Ended December 31,												Ended June 30,
		2003				2004				2005				2005				2006
														(unaudited)
Stock options			4,324				5,730				5,880				5,606				964
Series A preferred stock — if converted			549				549				—				—				—
Series B preferred stock — if converted			4,336				4,336				4,336				4,336				4,377
Series D preferred stock — if converted			2,684				2,684				—				—				—
Convertible supplier note payable — if converted			2,684				2,684				—				—				—

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															Six Months Ended
			Year Ended December 31,												June 30,
			2003				2004				2005				2005				2006
															(unaudited)
Calculation of basic net income per share — two-class method:
	Net income (loss)		$	(28,210	)		$	2,012			$	7,427			$	2,150			$	6,118
	Accretion of series B preferred stock			(2,352	)			(2,351	)			(2,351	)			(1,176	)			(1,037	)
	Beneficial conversion feature			(5,242	)			—				—				—				—
	Subtotal		$	(35,804	)		$	(339	)		$	5,076			$	974			$	5,081
	Percent of net income (loss) allocable to common stockholders			100	%			100	%			84	%			84	%			84	%
	Net income (loss) allocable to common stockholders			(35,804	)			(339	)			4,258				816				4,277
	Weighted average common shares outstanding			38,302				38,547				39,348				39,008				40,385
	Basic net income (loss) per share — two-class method		$	(0.93	)		$	(0.01	)		$	0.11			$	0.02			$	0.11
Calculation of diluted net income per share:
	Net income (loss) allocable to common stockholders		$	(35,804	)		$	(339	)		$	4,258			$	816			$	4,277
	Interest expense on convertible supplier note payable			—				—				247				121				127
	Net income allocable to anti-dilutive convertible preferred			—				—				349				67				341
	Net income (loss)			(35,804	)			(339	)			4,854				1,004				4,745
	Weighted average diluted shares outstanding			38,302				38,547				45,252				44,912				49,584
	Diluted net income (loss) per share		$	(0.93	)		$	(0.01	)		$	0.11			$	0.02			$	0.10

														Six Months Ended
		Year Ended December 31,												June 30,
		2003				2004				2005				2005				2006
														(unaudited)
Weighted average common shares outstanding			38,302				38,547				39,348				39,008				40,385
Weighted average dilutive convertible preferred stock			—								3,220				3,220				3,220
Weighted average anti-dilutive convertible preferred stock outstanding			5,589				7,569				4,336				4,336				4,377
Weighted average common shares and preferred shares outstanding			43,891				46,116				46,904				46,564				47,982
Percent of net income (loss) allocable to common stockholders			87	%			84	%			84	%			84	%			84	%
Percent of net income (loss) allocable to dilutive convertible preferred stockholders			0	%			0	%			7	%			7	%			7	%

10.	COMMITMENTS AND CONTINGENCIES

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Years Ending December 31			Facilities				Equipment				Total
2006			$	406			$	688			$	1,094
2007				373				414				787
2008				370				132				502
2009				367				23				390
2010				321				17				338
2011				275								275
	Total		$	2,112			$	1,274			$	3,386

11.	LEGAL PROCEEDINGS

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12.	EMPLOYEE BENEFIT PLANS

			Number of				Weighted-Average
			Options				Exercise Price
Outstanding — January 1, 2003				3,311,996			$	1.03
	Granted			2,148,976				1.00
	Exercised			(2,375	)			1.07
	Forfeited			(1,134,925	)			1.01
Outstanding — December 31, 2003				4,323,672				1.02
	Granted			2,036,949				1.00
	Exercised			(445,451	)			0.87
	Forfeited			(184,755	)			1.00
Outstanding — December 31, 2004				5,730,415				1.02
	Granted			1,252,000				1.19
	Exercised			(1,001,454	)			1.00
	Forfeited			(101,383	)			1.00
Outstanding — December 31, 2005				5,879,578			$	1.06

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						Weighted-Average
						Remaining				Number Exercisable at December 31,
Exercise		Number				Contractual Life
Price		Outstanding				(Years)				2005				2004				2003
$1.00			4,876,148				7.11				3,594,278				4,018,628				48,526
1.25			947,000				9.74												2,359,849
2.57			5,830				5.28				5,830				5,830				4,373
3.00			25,700				5.85				25,700				19,800				13,750
3.50			24,900				4.60				24,900				24,900				23,675
			5,879,578								3,650,708				4,069,158				2,450,173

13.	INCOME TAXES

		2003				2004				2005
U.S.		$	(21,040	)		$	(1,637	)		$	1,211
Foreign			(9,496	)			2,128				10,722
Total		$	(30,536	)		$	491			$	11,933

				2003				2004				2005
Current:
	U.S.			$	—			$	1,569			$	—
	Foreign				(331	)			(430	)			(1,348	)
		Total current			(331	)			1,139				(1,348	)
Deferred:
	Federal				5,280				(189	)			(682	)
	State				337				(97	)			(56	)
	Foreign				2,536				586				(2,992	)
	Change in valuation allowance				(5,617	)			162				998
		Total deferred			2,536				462				(2,732	)
Benefit from (provision for) income taxes				$	2,205			$	1,601			$	(4,080	)

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		2003				2004				2005
Tax at statutory rate		$	10,517			$	(167	)		$	(4,057	)
Non-U.S. rate differential — net			(1,010	)			492				(658	)
State income taxes — net			337				97				(18	)
Resolution of prior year tax contingencies and reserves			—				1,569				—
Fair value adjustment to series B warrants			(1,246	)			(209	)			(253	)
Stock compensation expense			(749	)			(307	)			—
Change in valuation allowance			(5,617	)			162				998
Other — net			(27	)			(36	)			(92	)
		$	2,205			$	1,601			$	(4,080	)

		2004				2005
Property, plant, and equipment		$	(918	)		$	(790	)
Inventory provisions			6,779				4,961
Allowances and accrued liabilities			2,832				3,433
Other tax credits			1,055				1,056
Net operating loss carryforwards			17,050				13,654
Valuation allowance			(20,389	)			(19,391	)
Net deferred tax assets		$	6,409			$	2,923

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14.	GEOGRAPHIC AND PRODUCT INFORMATION

				2003				2004				2005
United States and other North America				$	10,349			$	20,911			$	38,512
South America					16				—				—
Europe:
	Germany				7,583				11,898				13,137
	Other including Eastern Europe/ CIS				5,380				7,441				10,745
Asia and Australia:
	Japan				10,412				16,022				25,354
	Other				—				4,210				8,215
Rest of the World					—				225				422
		Total		$	33,740			$	60,707			$	96,385

			2003				2004				2005
Materials processing			$	23,685			$	41,990			$	60,399
Communications				5,250				9,697				15,751
Medical				181				1,544				7,422
Advanced applications				4,624				7,476				12,813
	Total		$	33,740			$	60,707			$	96,385

		2004				2005
United States		$	23,391			$	27,071
Germany			21,024				22,107
Russia			1,344				1,438
Other			223				379
		$	45,982			$	50,995

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Merrill Lynch & Co.	Lehman Brothers

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ITEM 13.	Other Expenses of Issuance and Distribution.

			Amount to be Paid
SEC registration fee			$	13,910
National Association of Securities Dealers Inc. fee				13,500
Nasdaq Global Market listing fee				5,000
Printing and mailing				150,000
Legal fees and expenses
Accounting fees and expenses
Directors and officers insurance				700,000
Miscellaneous
	Total		$

ITEM 14.	Indemnification of Directors and Officers.

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ITEM 15.	Recent Sales of Unregistered Securities.

	(1) On December 15, 2004, we sold 99,000 shares of our common stock to Sujay Shetty, an individual, in exchange for 277,000 shares of IPG Photonics (India) Private Limited;
	(2) On August 13, 2003, in connection with the settlement of a litigation between us and JDS Uniphase Corporation (JDSU), we issued to JDSU 2,684,211 shares of our series D preferred stock having an aggregate liquidation value of $5,100,000, which shares are convertible into up to 2,684,211 shares of our common stock, and we issued to JDSU a subordinated convertible note in the principal amount of $5,100,000, which note was convertible into 2,684,211 shares of our series D preferred stock and was repaid in August 2006;
	(3) On April 4, 2003, we sold 500,000 shares of our common stock to TEM Incorporated for $1,000,000; and
	(4) Since January 1, 2003, we have granted options to purchase 7,243,725 shares of our common stock at exercise prices ranging from $1.00 to $4.30 per share to employees, consultants and directors under our 2000 Incentive Compensation Plan, our 2006 Incentive Compensation Plan and our Non-Employee Directors Stock Plan. Since January 1, 2003, we have issued 2,482,959 shares of our common stock pursuant to the exercise of stock options for aggregate consideration of $2.4 million.

ITEM 16.	Exhibits.

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ITEM 17.	Undertakings.

	(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
	(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
	(3) For the purpose of determining liability under the Securities Act to any purchaser if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
	(4) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

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	(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
	(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
	(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
	(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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	IPG Photonics Corporation

		By:		/s/ Valentin P. Gapontsev             Valentin P. Gapontsev      Chief Executive Officer and        Chairman of the Board

Signature				Title
/s/ Valentin P. Gapontsev   Valentin P. Gapontsev				Chief Executive Officer, Chairman of the Board and Director (Principal Executive Officer)		October 17, 2006
/s/ Timothy P.V. Mammen   Timothy P.V. Mammen				Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)		October 17, 2006
*   Robert A. Blair				Director		October 17, 2006
*   Michael C. Child				Director		October 17, 2006
*   John H. Dalton				Director		October 17, 2006
*   Henry E. Gauthier				Director		October 17, 2006
*   William S. Hurley				Director		October 17, 2006
*   William F. Krupke				Director		October 17, 2006

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Signature				Title
*   Eugene Shcherbakov				Director		October 17, 2006
*   Igor Samartsev				Director		October 17, 2006
*By:		/s/ Valentin P. Gapontsev        Valentin P. Gapontsev        as Attorney-in-fact

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Number				Description
	1	.1*		Form of Underwriting Agreement
	3	.1**		Amended and Restated Certificate of Incorporation of the Registrant
	3	.2**		Form of Second Amended and Restated Certificate of Incorporation of the Registrant, to be effective at the completion of this offering
	3	.3**		By-laws of the Registrant
	3	.4**		Form of Amended and Restated By-laws of the Registrant, to be effective at the completion of this offering
	4	.1*		Specimen Stock Certificate
	4	.2**		Registration Rights Agreement by and among the Registrant and the Investors named therein, dated as of August 30, 2000, as amended
	4	.3**		Registration Rights Agreement by and among the Registrant and JDS Uniphase Corporation, dated as of August 13, 2003, as amended
	5	.1*		Opinion of Winston & Strawn LLP
	10	.1**		2000 Incentive Compensation Plan
	10	.2**		2006 Incentive Compensation Plan
	10	.3**		Non-Employee Directors Compensation Plan
	10	.4**		Non-Employee Directors Stock Plan
	10	.5**		Senior Executive Short-Term Incentive Plan
	10	.6**		Form of Subordinated Note of the Registrant to be issued to holders of series B preferred stock
	10	.7**		Form of Warrant to Purchase Common Stock of the Registrant issued to holders of series B preferred stock, as amended
	10	.8**		Employment Agreement by and between the Registrant and Valentin P. Gapontsev, dated as of March 1, 2006
	10	.9**		Service Agreement by and between the Registrant and Eugene Shcherbakov, dated as of March 1, 2006
	10	.10**		Employment Agreement by and between the Registrant and Tim Mammen, dated as of March 1, 2006
	10	.11**		Employment Agreement by and between the Registrant and Angelo P. Lopresti, dated as of March 1, 2006
	10	.12**		Employment Agreement by and between the Registrant and Denis Gapontsev, dated as of March 1, 2006
	10	.13**		Form of Indemnification Agreement between the Registrant and each of its Directors and Executive Officers
	10	.14**		Form of Stock Option Agreement under the 2000 Incentive Compensation Plan
	10	.15**		Form of Stock Option Agreement under the 2006 Incentive Compensation Plan
	10	.16**		Form of Stock Option Agreement under the 2006 Non-Employee Directors Stock Plan
	10	.17**		Form of Confidentiality, Non-Competition and Confirmatory Assignment Agreement
	10	.18**		Construction Loan Agreement, dated as of April 28, 2000, between the Registrant and Family Bank, FSB, as amended
	10	.19**		Loan and Security Agreement, dated as of November 15, 2004, between the Registrant and BankNorth, N.A. as Lender, as amended
	10	.21**		Assignment, Research and Development Agreement between the Registrant, IPG Laser GmbH, IPG Fibertech S.R.L. and NTO IRE-Polus, dated as of August 30, 2000
	10	.22**		Investment Agreement between NTO IRE-Polus and IPG Laser GmbH, dated as of March 1, 2001
	10	.23**		Loan and Security Agreement between the Registrant and IP Fibre Devices (UK) Ltd., dated as of August 23, 2002
	10	.24**		Non-Recourse Promissory Note by Valentin P. Gapontsev, dated April 1, 2003
	10	.25**		Amended and Restated Non-Recourse Promissory Note by John H. Dalton, dated April 13, 2001

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Number				Description
	10	.26**		Stock Purchase Agreement of John H. Dalton, dated December 14, 2004
	10	.27**		Guaranty of Valentin P. Gapontsev, dated as of August 9, 2006
	10	.28**		Stock Purchase Agreement between the Registrant and the Investors named therein, dated as of August 30, 2000
	10	.29**		Loan Agreement between IP Fibre Devices (UK) Ltd. and NTO IRE-Polus, dated January 3, 2002, as amended
	10	.30**		Exchange Agreement between the Registrant and Valentin P. Gapontsev, dated as of July 31, 2006
	10	.31**		Subscription Agreement between the Registrant and JDS Uniphase Corporation, dated August 13, 2003
	10	.32†		Confidential Settlement Agreement between the Registrant and JDS Uniphase Corporation, dated as of June 25, 2003
	10	.33**		Convertible Promissory Note between the Registrant and JDS Uniphase Corporation, dated August 13, 2003
	10	.34**		Secured Promissory Note between the Registrant and JDS Uniphase Corporation, dated August 13, 2003
	10	.35**		Non-Recourse Promissory Note by Robert A. Blair, dated September 30, 2003
	10	.36**		Non-Recourse Promissory Note by Robert A. Blair, dated December 3, 2003
	10	.37		Pledge Agreement between the Registrant and Robert A. Blair, dated September 30, 2003
	10	.38		Pledge Agreement between the Registrant and Robert A. Blair, dated December 3, 2003
	10	.39		Pledge Agreement between the Registrant and John H. Dalton, dated April 13, 2001, as amended
	10	.40		Pledge Agreement between the Registrant and Dr. Valentin P. Gapontsev, dated March 5, 2001, as amended
	10	.41		Pledge Agreement between the Registrant and Vincent Au-Yeung, dated January 22, 2001
	10	.42		Promissory Note by Vincent Au-Yeung, dated January 22, 2001
	10	.43		Stockholders Agreement by and among the Registrant, the Founders named therein and the Investors named therein, dated as of August 30, 2000, as amended
	10	.44		Series D Preferred Stockholders Agreement by and among the Registrant and JDS Uniphase Corporation, dated as of August 13, 2003
	21	.1		List of Subsidiaries
	23	.1		Consent of Deloitte & Touche LLP
	23	.2*		Consent of Winston & Strawn LLP (included in Exhibit 5.1)
	24	.1**		Power of Attorney

*	To be filed by amendment.

**	Previously filed.
†	Portions of this exhibit are the subject of a confidential treatment request and have been omitted. These portions have been submitted separately to the Securities and Exchange Commission.