U.S. SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                            --------------------

                                 FORM 10-KSB

[x]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                 For the fiscal year ended December 31, 1999


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.  For the transition period from _________ to
      _________

                             Commission File No.
                                   1-13628

                         INTELLIGENT CONTROLS, INC.
               (Name of small business issuer in its charter)

                Maine                                01-0354107
   (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)                Identification No.)

                74 Industrial Park Road, Saco, Maine    04072
             (Address of principal executive offices) (Zip code)

      Issuer's telephone number:  (207) 283-0156

      Securities registered under Section 12(b) of the Exchange Act:

      Title of each class         Name of each exchange on which registered
      -------------------         -----------------------------------------

      common stock,               American Stock Exchange (Emerging Company
      no par value                Marketplace)

Securities registered under Section 12(g) of the Exchange Act:  None

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes   X   No
     ---     ---

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year: $12,904,697

The aggregate market value of common stock held by non-affiliates as of
March 5, 2000 was $3,699,844.

There were 5,061,123 shares of common stock of the issuer outstanding as of
March 5, 2000.

                     DOCUMENTS INCORPORATED BY REFERENCE

Part III:  Proxy Statement for the Annual Meeting of Shareholders to be
held in June 2000.

Transitional Small Business Disclosure Format:  Yes       No   X
                                                     ---      ---

                                   PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

Intelligent Controls, Inc. ("INCON" or the "Company") is a Maine
corporation founded in 1978.  INCON designs, manufactures, and sells
electronic measurement systems and software to the petroleum and power
utility industries and for general level measurement, monitoring and
predictive maintenance applications. The Company's products, including
related applications and communication software, enable the users to detect
leaks, measure liquid levels, and to perform general and predictive
maintenance monitoring and protection of equipment, for position indication
and as an early indicator of wear and potential failure. The table below
summarizes sales for these product lines over the past three years.

                          NET SALES BY PRODUCT LINE
                           (Dollars In Thousands)

<TABLE>
<CAPTION>
                                      1999                 1998                 1997
                                ----------------     ----------------     ----------------

<S>                             <C>         <C>      <C>         <C>      <C>         <C>
Petroleum (ATG):
  OEMs                          $   337       3%     $   451       3%     $   655       5%
  End Users                      10,867      84%      14,409      89%      10,803      83%
                                -------              -------              ------
    Total ATG:                   11,204               14,860               11,458

Utility and Other
  Power Utility                   1,534      12%       1,237       7%       1,398      11%
  General Instrument                167       1%         101       1%         149       1%
                                -------              -------              ------
    Total Utility and Other       1,701                1,338                1,547

       TOTAL NET SALES          $12,905     100%     $16,198     100%     $13,005     100%
                                =======              =======              ======
</TABLE>


Petroleum Equipment Products

INCON manufactures electronic instruments and software for use at retail
gasoline stations and gasoline/convenience stores.  The products are also
utilized in other locations where petroleum fuels or chemicals are stored
in underground storage tanks ("USTs") and above ground storage tanks
("ASTs"), including large private fleets, government agencies,
municipalities, and fuel distribution companies. The products include
automatic tank gauges (some with remote communications features), dedicated
leak detectors, liquid level sensors, line leak detectors, user interface
software, and various accessories, all of which can be used to meet UST
monitoring regulations promulgated by the U.S. Environmental Protection
Agency (the "EPA"). They also provide important information for the tank
owner to manage inventories on a real-time basis.  The manufacturing
process for these and other INCON products consists of basic mechanical and
electronic assembly as well as the integration of software into the overall
system.

INCON's automatic tank gauge ("ATG") systems consist of wall-mounted
electronic consoles, tank-mounted liquid level sensors, leak sensors, user
interface software, and associated accessories. The systems provide very
accurate measurement of inventory (gasoline or other liquid) in a UST or
AST. INCON tank gauges also perform leak tests to determine whether product
is escaping from the tank. ATG systems can also monitor a wide variety of
sensors which may be located between the walls of double walled tanks, in
sumps, under dispensers, or in other locations where leaking product might
collect.

The Company's electronic Line Leak Detector ("LLD") monitors the
pressurized pipe between the submersible pump (located in the tank) and the
dispenser (gas pump). The product meets pipeline-monitoring requirements
imposed by EPA regulations and is an updated technology that can replace
mechanical line leak detectors. The LLD can interface with an ATG or
operate as a stand-alone device. Since its original 1995 introduction, the
LLD product has been enhanced and the Company was granted Patent No.
5,918,268 dated June 29, 1999 for its invention.  INCON also offers
dedicated leak detection ("DLD") consoles that are similar to the ATG
console. Instead of measuring inventory levels, these products only monitor
leak detection, thereby offering certain customers an inexpensive
alternative for achieving regulatory compliance. In addition to the ATG
consoles, line leak detectors and liquid level sensors, INCON offers a wide
variety of accessories, software, and leak detection sensors.  These
provide the ability to customize a system for specific customer
applications, allow the system to sense leaks and inventory levels in many
different locations, and simplify installation. The Company assembles some
of these products, while others are fabricated by outside contractors to
INCON specifications.

The Company's liquid level sensors are based on magnetostrictive position
measurement technology that is widely proven in the industry.  The
manufacturing its own probes has given INCON control of product quality
and significantly reduced the overall cost of this component to the Company.
In most cases, each UST or AST requires a liquid level sensor. INCON's ATG
consoles will support from one to eight liquid level sensors.  The average
North American retail gasoline station or gasoline/convenience store has
three USTs, while sites overseas may have five to eight USTs.

In 1998 the Company introduced a new ATG product line, the 1001 and 2001
models, marketed under the Company's Tank Sentinel registered trademark.
They were designed as the new generation product to replace INCON's model
1000 and 2000 series. These units have optional internal fax modem
communications capability and were designed to be easy to use and upgrade,
providing greater flexibility for the operator.  The Company believes they
provide more overall capability than any other tank gauge in their price
range as well as upgraded display, printer, and keyboard functions.  This
contrasts to some competitive models that cannot be upgraded, or require
very expensive additional modules to accommodate needed features. The 1001
model can accommodate four liquid level sensor inputs and the 2001 model
accommodates eight. The 1001 and 2001 models are designed to be cost-
effective to manufacture and incorporate a large number of common
components.

In keeping with the trend toward digital technology, INCON manufactures,
under private label, a Digital Liquid Level Sensor ("DLP"). This device
integrates microcomputer functions of the automatic tank gauge console into
the tank-mounted liquid level sensor.  The microprocessor in the DLP
interprets the signal from the level and temperature sensing system and
transmits the processed data to a remote computer or other collection
device. Data from many sensors can be transmitted over a common cable in a
manner similar to a computer on a network. The product allows the ATG
information to be read directly by personal computers, cash registers,
point of sale equipment, or fuel management systems, both remotely and at
the site.

The Company has been actively developing a software product capability that
can be offered alone, or in combination with INCON hardware products.  This
capability will allow digital or traditional probe users to efficiently
integrate an overall system using equipment and software modules, which can
interface with their established or developing business information
systems. This software, called System Sentinel Version 1, was released
starting in February 1999 followed by System Sentinel Version 2 released in
November 1999. As part of the November release the Company also introduced
a Dispenser Interface Module ("DIM") which in conjunction with System
Sentinel Software allows a multiple site operator to automatically
reconcile sales to inventory in the tanks. Such a capability is important
for business management and also automates a reporting requirement of the
EPA regulations.

In late 1999 the Company introduced a power conditioning product line,
Power Sentinel. This device is manufactured for the Company by an outside
supplier and provides surge protection and noise reduction for the
electrical circuits.  The Company believes that as more sophisticated
electronics are installed in petroleum retailing sites, such TVSS
(transient voltage surge suppression) devices will be installed more
frequently and, in some cases, be necessary for equipment manufacturers to
honor warranties.

The demand for ATGs, DLDs and LLDs domestically had been strong in 1997 and
1998, bolstered by EPA and state regulations that require owners of USTs to
monitor tanks and related lines for leaks.  In addition to more
sophisticated and automated techniques (such as automatic tank gauging),
the EPA regulations permit the use of inventory reconciliation and manual
(dip stick) testing as a means of compliance. Although less expensive,
these methods do not provide for accurate inventory measurement and control
and are also subject to personnel variables affecting manual stick readings
and data recording.  INCON's management believes that UST owners will
continue to automate both inventory and leak detection systems to insure
accuracy and reduce dependence on trained personnel.  Moreover, leak
detection requirements will probably become more stringent due in part to
heightened concerns about MTBE contamination of groundwater.  After
December 22, 1998, inventory reconciliation and manual testing is
permissible only (i) during the first ten years after a tank is newly
installed or upgraded in accordance with EPA performance standards or (ii)
in the case of small tanks having less than 550 gallons of capacity.

All tanks had to meet EPA performance standards in 1998 and management
believes this favorably affected the market for ATGs, DLDs, and LLDs during
early 1999 as a certain amount of carryover activity took place.  New
gasoline and convenience store expansion has continued, due to growth in
the economy, and upgrading of acquired sites by larger, more aggressive
convenience store marketers. Site construction has also been favorably
affected by non-traditional retailers like supermarkets and wholesale clubs
entering the retail petroleum market. However, countering this during much
of 1999 is the slowdown in activity by the major oil companies as a result
of mergers and the resulting uncertainty as to which sites may be divested
as a condition of government approval.

Internationally, many countries follow the lead of the United States, in
terms of both environmental regulations and measurement technologies.  The
demand for ATGs, DLDs, and LLDs is expected to continue to grow in other
parts of the world and INCON will continue to aggressively seek such
business.

Power Utility and General Instrument Products

INCON's Power Utility and Predictive Maintenance Instrument lines consist
of electronic instruments for measurement and control in the power utility
and general industrial markets. Typical customers include large publicly
owned electric power utilities, municipal utilities, and manufacturing
customers.

Historically, regulation has insulated utilities in the United States and
other developed countries from competitive market forces, creating
monopolies that permitted utilities to remain profitable despite their use
of inefficient or outdated technology. In the deregulated environment being
adopted across the United States over the next five years, consumers will
have greater freedom to choose electricity suppliers, just as they now can
choose among many long distance telephone service providers.  This will
place significant pressure on utility company management to reduce costs
and increase system efficiency. The Company believes this overall business
backdrop will provide a positive environment for products that help
utilities operate more efficiently and perform predictive maintenance in
advance of system failures.

INCON's power utility product line includes two instruments, the Model 1250
and the Optimizer, offering automated control and data collection for
electrical substations. Two other power utility products, the Model 1255
and Model 1810, are offered for use in automating hydroelectric generating
plants. The Model 1250 Tap Position Monitor is used on large high-voltage
transformers. These transformers are typically equipped with "tap changers"
that regulate the voltage on the power transmission and distribution grid.
The voltage is adjusted by switching to any one of approximately 32
"voltage taps." The Model 1250 allows utilities to use their system control
and data acquisition system (SCADA) to monitor from a central station which
tap has been selected.  Utilities can then establish interactive control
over tap changing through the system and can adjust and regulate the
voltage being produced by the transformer. This product is also sold
directly to transformer manufacturers and is mounted on many new units
sold. During 1999 the Company received several orders in excess of 100
units each that were part of utility upgrade and infra-structure
improvement programs.

The Optimizer is a microprocessor-based monitoring device used to predict
life and schedule preventive maintenance for high-voltage circuit breakers
used by electric utilities. It measures the energy dissipated by the
contacts in large circuit breakers as they operate. The Optimizer product
can help power utilities reduce the cost of breaker maintenance and avoid
service interruptions.  The product was originally released in 1996 and a
second- generation version, the Optimizer+ was introduced in September
1998. This product continues to be evaluated by utilities, and there were a
number of program orders placed during 1999 to add Optimizer+ devices to
various critical circuit breakers.

Software/Systems Products

Consistent with an overall business trend, the petroleum market sector is
rapidly bringing electronic data interchange and the power of the computer
and networking to bear on its business activities. Remote communication,
via modem or RF, is becoming an important capability as multiple-site
enterprises seek to gather information and control their activities in a
standardized and centralized way.  Petroleum product marketers, gasoline
retailers, gas/convenience store operators, and fuel wholesalers desire
automated information and the ability to monitor and plan their activities
centrally with less dependence on local management and employees.  Modem
communications as well as local/host computer systems allow some companies
to manage inventories of liquid products, automatically order new product,
and comply with environmental monitoring and reporting requirements.  In
order to meet competitive business pressures as well as regulatory
requirements to monitor leaks, users are pushing this market sector towards
greater demand for multi-site systems.

INCON is actively providing software and systems capability to complement
its measurement and leak detection instruments. In 1997 the Company was
successful in working with a major convenience store chain to supply a
customized software and communication system which linked environmental and
business monitoring and reporting across multiple sites.  As a result of
this successful experience and to take advantage of the market trends,
INCON began the development of a standardized software package in late 1997
that can be installed across a broad customer base. Beta site testing of a
new Windows based client/server remote monitoring software package, System
Sentinel 1.0 began in September 1998 with full-scale introduction occurring
in February 1999.  A newer version, System Sentinel 2.0, was introduced in
November 1999. Management believes that interconnectivity will be
increasingly important, as the owners of existing instrumentation expend
considerable effort to link their sites electronically and standardize
monitoring and reporting.

Competition

The petroleum equipment market is very competitive, both for
instrumentation and software/system products. The Company's products
compete with similar offerings from other manufacturers in the industry. In
addition to INCON, there are at least three other significant suppliers of
automatic tank gauge systems, one of which (a division of a large public
company) is believed to have approximately a 50% market share. These
suppliers are generally larger and have potentially greater resources than
the Company. In addition there are over ten other minor suppliers of ATGs,
as well as additional companies that sell software (point-of sale and back-
office) and other environmental and inventory monitoring services.  Several
suppliers offer customers the option of contracting out some or all of
their measurement and compliance management activities. In such a case a
monthly service fee is charged and the products can be installed and leased
to the site owner.  Based on observations to date, INCON's management
believes that this concept is slowly being adopted, and may be beneficial
to certain types of UST and ATG owners and operators.  Although the Company
has not provided this outsource service directly, one of its largest
customers is active in this area and the Company has and will continue to
benefit from this trend through increased hardware, communications, and
software sales.

INCON has a solid competitive position in the power utility market sector
for its particular product niche. The Company is the only supplier of
programmable tap position monitoring systems in the United States, and
competes only with older technologies. The competing products tend to be
lower in price, but are more difficult to install, are not programmable,
and have more parts that are subject to wear and replacement. There are
many types of transformers and tap changers in service in the United States
today that operate with the Model 1250, and the 1250's programmability
gives it a major advantage over non-programmable products.

INCON owns exclusive rights to the U.S. patent on certain Optimizer
technology. Interest in the concept of circuit breaker monitoring has
resulted in several competing models being offered by other companies.
These competitive products, however, tend to be more expensive.

During 1999, GE Power Systems acquired two small companies that are
competitors to INCON in the circuit breaker monitoring product area. GE has
resources that are considerably greater than the Company. Management
believes that this action confirms its belief that the market is getting
stronger and electric utilities will place increased emphasis on sub-
station automation and reliability in the future.

Customers

INCON's customer base remains highly diversified, with no one customer
accounting for more than 10% of the Company's business in 1999.  In the
petroleum equipment area the Company's customers are principally petroleum
equipment distributors who purchase products from INCON and are responsible
for installation and after-sales service.  These distributors range from
very large, regionally active organizations, to small organizations that
focus on a narrow customer group or geography.  The distributors usually
handle other complementary products sold to the same end-use customer base.
Examples of such products are gasoline dispensers, point-of-sale ("POS")
systems, vapor recovery systems, lighting, and canopies. Often the
Company's products are specified by end-users that choose to standardize
their equipment for all their locations. The distributors and end-use
customers are serviced by INCON's factory-based national selling and
technical service organization as well as by regionally based
manufacturer's representatives. In addition, the Company supplies petroleum
equipment products to a few OEM (original equipment manufacturer) customers
and has a number of large direct national accounts.

In the power utility and predictive maintenance instruments product line,
INCON's customers are equipment OEMs and various electric utilities or
large private system operators. These customers are serviced by the
Company's factory-based national selling organization as well as by
regionally based manufacturer's representatives.

International sales are normally made to distributors, which are then
responsible for importing the product to their respective countries, as
well as sales, installation, and after-sales service.

Intellectual Property

INCON markets its petroleum equipment products under the registered
trademark "Tank Sentinel." INCON was granted Patent No. 5,918,268 dated
June 29, 1999 covering its LLD (line leak detector) product. The Company
has copyrights on certain software products; other key software is
highly technical and difficult to copy.

The Company has numerous trade secrets with regard to methods of detecting
leaks in tanks and pipelines. Among these are INCON's volumetric tank leak
test algorithm, its continuous automatic leak detection algorithm, and its
method of detecting leaks in pressurized piping. INCON's process for
producing the magnetostrictive wire, required by the liquid level sensor, is
a Company trade secret.

General

As of March 5, 2000 the Company employed 75 people, including 13 in sales,
marketing and technical service, 11 in research and product development, 10
in administration, and 41 in manufacturing operations.

In most of its products, INCON tries to utilize off-the-shelf electronic
components that are readily available from more than one distributor. There
are, however, some products that are designed around a particular
manufacturer, such as in the use of microprocessor chips and compact
printers.  If one of these manufacturers were suddenly to cease production
of a key component, the Company might need to find an alternate source or
redesign the product. Stainless steel and brass are major components in two
of the Company's products. Both of these commodities can fluctuate in price
due to supply and demand, thereby affecting the Company's future costs.

INCON continuously invests in the development of new products and software
as well as adapting existing products to new applications. During 1997,
1998 and 1999 the expenditures relating to the development of new products
and the improvement of existing products were approximately $791,000,
$997,000 and $1,188,000 respectively.  These research and product
development expenditures represent 6% to 9% of sales.

Government Regulation/Other Certifications

The automatic tank gauge product line, used in gasoline stations and
convenience/gasoline stores, requires listing by Underwriters Laboratory
(UL) in the United States and by the Canadian Standards Association (CSA)
in Canada.  All major portions of the Tank Sentinel ATG product line,
including line leak detectors, are presently listed by UL and CSA.

The Tank Sentinel ATG products perform leak detection in accordance with
EPA regulation 40 CFR Part 280, Subpart D. To confirm compliance with the
federal and state regulations for tank tightness tests, the ATG system must
be tested by an independent laboratory in accordance with EPA/530/UST-
90/006 and certified to meet the EPA performance requirements. The INCON
TS-1000 system, TS-1001 system, TS-2000 system, TS-2001 system, and TS-LLD
have been tested by Ken Wilcox Associates, Inc., Blue Springs, Missouri and
are certified.

The Tank Sentinel ATG products also meet the much more stringent standards
for testing tank tightness.  To prove compliance with the federal and state
regulations for tank tightness test, the ATG system must be tested by an
independent laboratory in accordance with EPA/530/UST-90/006 and certified
to meet the performance requirements. The INCON TS-1000/1001 and TS-
2000/2001 systems have been tested and certified by Ken Wilcox Associates,
Inc.. In Canada the TS-1000/1001 system, TS-2000/2001 system, and TS-LLD
are certified by Underwriters Laboratory of Canada in accordance with
ULC/ORD-C58.12-1992, "Leak Detection Devices (Volumetric Type) For
Underground Flammable Liquid Storage Tanks." This standard is very similar
to EPA/530/UST-90/006.

With regard to INCON's own operations, the Company's cost of compliance
with federal, state, and local environmental laws do not materially affect
the Company's financial condition.


ITEM 2.  DESCRIPTION OF PROPERTY.

The Company leases two modern 13,000 square foot facilities in an
industrial park in Saco, Maine.  One building serves as INCON's executive
offices; the other it's manufacturing facility.  The executive office
building is leased from a corporation owned in part by two principal INCON
shareholders, Alan and Paul Lukas.  The other building is leased from an
unrelated third party.  The leases on these buildings expire in October
2000 and the executive office building includes an option to purchase at
the then fair market value, subject to certain minimum purchase prices.
The Company is currently negotiating new three-year leases on both
facilities.  The Company believes it will renew these leases without any
material adverse effect on operations.

The Company maintains no other direct or indirect investments in real
estate and has no current intentions to do so.


ITEM 3.  LEGAL PROCEEDINGS.

On April 21, 1999 the Company received notice of the filing of an action
entitled Omega Environmental, Inc. v. INCON International, Inc. in United
States Bankruptcy Court for the Western District of Washington.  The action
was brought by Omega Environmental, Inc. for avoidance and recovery of
approximately $60,000 of payments that Omega had made to the Company for
INCON products, as alleged preferential transfers. The Company is
contesting the claim.

Q&E LLC (a convenience store/retail petroleum operator) has filed suit
against the Company and PEMCO Service Company, Inc. for damages allegedly
arising in connection with a petroleum spill.  The damages claimed are
$1,000,000.  The Company's insurance carrier has assumed the defense of the
claim.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to the shareholders of the Company during the
fourth quarter of 1999.

                                   PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

On February 15, 1995 the Company's common stock was accepted for listing
and began trading on the Emerging Company Marketplace of the American Stock
Exchange.  The trading symbol for INCON common stock is ITC.

The high-low prices for the Company's stock for the last four quarters were
as follows:

<TABLE>
<CAPTION>
                                            High         Low
                                            ----         ---

      <S>                                  <C>         <C>
      Quarter Ended March 27, 1999          $3 1/8      $2 1/4

      Quarter Ended June 26, 1999          $3 5/16      $2 3/8

      Quarter Ended September 25, 1999          $3     $2 5/16

      Quarter Ended December 31, 1999       $2 3/4     $2 5/16
</TABLE>


As of March 5, 1999 the Company had 374 shareholders of record.

It has been INCON's policy to reinvest all earnings in the business, and
the Company has never paid dividends on its common stock.  Also, under
credit agreements with its bank, the Company may not declare or pay
dividends to shareholders without the prior consent of the bank.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Results of Operations
---------------------

1999 Compared to 1998

Net sales totaled $12.9 million in fiscal 1999, down $3.3 million or 20%,
from sales of $16.2 million in 1998.  The decrease in revenue was primarily
caused by a slowdown in sales of the Company's Fuel Management Systems
(FMS) product sales.

During 1999, Fuel Management System sales decreased overall by 25% to $11.2
million from $14.9 million in 1998.  The decrease was in the wake of a
strong EPA compliance deadline driven market during 1998 that resulted in
strong shipments for 1998 as well as the first quarter of 1999.  Throughout
1999 the market softened as the urgency of EPA compliance calmed and most
site operators completed their compliance upgrade programs.  Also
contributing to the soft FMS market demand was the slowdown in activity by
the major oil companies as a result of impending mergers and the
uncertainty as to which sites might have to be divested as a condition of
government approval for the mergers.

The Power Utility and Predictive Maintenance instrument product sales
improved by 27% in 1999 to $1.7 million, an increase over sales of $1.3
million in 1998.  Stronger sales were the result of increased marketing and
sales efforts and a strengthening market caused by the progress toward
power deregulation.

Gross margins increased from 49% in 1998 to 52% in 1999. The improvement in
gross margins was primarily attributable to gains in manufacturing
efficiency, raw material purchase price reductions and a favorable product
mix. Throughout 1999 the Company reduced its manufacturing expenditures
to better align with declining sales levels.  This action allowed the Company,
in the declining market of late 1999, to preserve most of the improved gross
margin levels of late 1998 and early 1999. Gross margins for the first half of
1998 were adversely affected by a $592,000 shipment to Chinese Petroleum, at
reduced margin of approximately 35%; even without the effect of the Chinese
Petroleum shipment, gross margins showed improvement.

Operating expenses declined by $1.1 million to $5.7 million in 1999, down
from $6.8 million in 1998. $747,000 of this reduction was from one-time
charges resulting from settling two lawsuits in 1998 and approximately
$200,000 was the legal expenses associated with these lawsuits.  Operating
expenses in 1998 also included one-time expenses of approximately $60,000
associated with completing and investment transaction with a venture
capital firm.  During 1999 the Company continued to invest in sales and
marketing activities at levels similar to 1998, and increased its product
development spending by approximately $200,000, or 20% over 1998.

The company's overall operating profitability was impacted by lower than
expected sales volume and operating expenses that were similar to the
overall amount spent in 1998. Operating income for 1999 was $1.06 million,
a decline of 13.5% from 1998.  1999 operating income increased as a percent
of sales to 8.2%, or $1,057,000, from 7.6%, or $1,223,000 in 1998.  The
increase was due to elimination of one-time charges from 1998 as described
above and improved gross margins.

Net income for 1999 was $798,000 versus $671,000 in 1998, and included
$256,000 of interest income (net) in 1999 versus $15,000 in 1998.

1998 Compared to 1997

Net sales totaled $16.2 million in fiscal 1998, an increase of $3.2 million
or 24.5% from 1997.  The increase was primarily due to strong sales of the
Company's petroleum equipment product line fueled by new construction and
compliance deadlines for leak detection mandated by the EPA.

Petroleum equipment sales increased 30% during 1998 to $14.9 million from
$11.5 in 1997.  Sales through the petroleum distributors (the Company's
primary sales channel) increased by 44% over 1997.  The increase in sales
was primarily due to a strong EPA compliance driven market, strong new
construction, success with the new ATG 1001/2001 products, as well as
general market share gains.  The Company completed shipping a $1.8 million
order to Taiwan in 1998, of which $1.2 million was shipped in 1997.

The Utility and Predictive Maintenance product line sales fell in 1998 by
$209,000, a 13% decline from 1997.  The decline in sales was primarily
attributable to design changes in Optimizer circuit breaker monitor. During
the first half of 1998, all Optimizer shipments were deferred pending
completion of the upgrade.  Optimizer units recalled from the field were
modified to incorporate several improvements, or for a small charge, to
replace them with the new model.  This latest model (Optimizer+) was
released for sale in September 1998.

Gross margins improved markedly to 49% in 1998, as compared to 42% for the
year 1997.  Purchased material cost reductions, manufacturing volume
efficiencies, reduced warranty scrap, and a favorable product/features mix
were the major components of this performance improvement.  Another notable
factor was the timing of shipments of a large low margin order to Taiwan.
In 1997 the Company shipped two-thirds of the Chinese Petroleum order, with
the final one-third shipping in March 1998.  Gross margins improved as the
year progressed and averaged 52% for the second half.

Operating expenses increased as a percentage of sales from 35.1% in 1997 to
41.8% in 1998.  Included in this $2.2 million increase were substantial
one-time charges incurred in 1998 completing an investment transaction with
an outside venture capital firm, legal and settlement costs in two
significant lawsuits, and recruiting costs along with the ongoing expenses
associated with building a stronger sales/marketing and senior management
team.  The Company also increased its investment in product development to
almost $1 million in 1998 as compared to $790,000 in 1997.  Interest
expense declined due to strong operating cash flow and cash proceeds from
an investment by an outside venture capital firm.  The Company recognized
$148,809 in interest income for the last 8 months of 1998.

1998 operating profits increased to $1,223,000, or 7.6% of sales, from
$868,000, or 6.7%, in 1997.  Even though the Company incurred substantial
one-time operating expenses and a higher ongoing operating cost, the
combined effect of increased sales, improved gross margins, reduction of
interest expense, and the addition of interest income resulted in $355,000
of profit improvement.


Liquidity and Capital Resources
-------------------------------

The Company utilized its $3.5 million working capital line of credit to
fund operations and growth through the first four months of 1998.  On May
1, 1998 the Company completed an investment by Roger E. Brooks and two
venture capital funds, Ampersand Specialty Materials and Chemicals III
Limited Partnership and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership (collectively, "Ampersand").  Ampersand
and Roger E. Brooks invested $5.6 million to purchase common stock from
INCON.  The proceeds from these funds were utilized to pay off the working
capital line of credit ($1 million), complete a Company tender offer to its
own shareholders ($1.6 million) and pay legal settlement costs ($500,000).
The remainder of the investment was used for working capital, and is
available to fund future acquisitions by the Company.  As of December 26,
1998, the Company had $3.5 million available to be borrowed on its working
capital line of credit, as well as a cash balance of $4,202,084.

The Company did not utilize its $3.5 million working capital line of credit
in 1999.  All operations were funded with the Company's internally
generated cash.  All cash remains available as working capital or to be
used to fund future acquisitions.  Although the Company has completed no
acquisitions to date, it continues to explore growth opportunities through
acquisition.  As of December 31, 1999 the Company had $3.5 million
available to be borrowed on its working capital line of credit, as well as
a cash balance of $4,980,805.

Total 1999 year-end inventories were valued at $1,055,000, down from
$1,321,000, partially due to continued improvement in materials management
and purchasing, and also due to a general slowdown in sales levels.
Accounts receivable declined to $1,488,000 at 1999 year-end, down from
$3,253,000 at year end 1998 due to slower sales in the second half of 1999
than the second half of 1998.

The Company has a $1 million equipment revolver, of which $827,000 was
available to be borrowed as of December 31, 1999.  The Company has not
drawn on this revolver in either 1998 or 1999.

On September 18, 1998 the Company's Board of Directors authorized a stock
buyback program. Through December 31, 1999, the Company had repurchased
$590,771 of its common stock at an average price of $2.76 per share.  The
shares purchased under this program will be held for issuance under the
employee stock option plan and other compensation plans, or for other
proper corporate purposes.

The Company feels that current funds and existing lines of credit are
adequate to fund existing operations for the foreseeable future.


Year 2000 Issues
----------------

Year 2000 (Y2K) issues arise from the inability of some computer-based
systems to properly recognize and process dates after December 31, 1999.
The total cost of the Company's Y2K compliance effort through December 31,
1999 was approximately $80,000.  The Company spent about $50,000 upgrading
all major IT systems including accounting, manufacturing, and sales
processing software and hardware.  Although helpful to the Y2K compliance
effort, these upgrades were made in the normal course of business to
replace outmoded systems.  The remaining $30,000 was specifically
attributable to Y2K compliance, primarily the costs of current employees'
time to do the appropriate planning, testing, and investigation of the many
areas of the business potentially affected by this issue.  The costs have
not been material to the operating results of the Company.  All expenses
were expensed as incurred, except those capitalized as normal costs of
doing business.  The Company does not expect to incur any significant costs
to address Y2K issues beyond what has already been incurred.


Effect of New Accounting Pronouncements
---------------------------------------

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133 - Accounting for Derivative
Instruments and Hedging Activities, which requires entities to report all
derivatives at fair value as assets or liabilities in their statements of
financial position.  This statement is effective for financial statements
issued for fiscal periods beginning after June 15, 1999.  The Company does
not currently have any derivative instruments or hedging activities to
report under this standard.


Forward-Looking Statements
--------------------------

The "Management's Discussion and Analysis," "Description of Business" and
"Description of the Property "sections of this report contain forward-
looking statements, as defined in Section 21E of the Securities Exchange
Act of 1934.  Examples of such statements in this report include those
relating to estimates of future market demand and trends regarding
Petroleum and PowerUtility/Predictive Maintenance products, expected future
efforts with regard to foreign markets for Company products, expected lease
renewals and associated costs, future adequacy of the Company's capital
resources, and expected costs of Y2K compliance efforts.  The Company
cautions investors that numerous factors could cause actual results and
business conditions to differ materially from those reflected in such
forward-looking statements including, but not limited to, the following:
unanticipated shifts in market demand for ATG and LLD products or
PowerUtility/Predictive Maintenance products, owing to competition,
regulatory changes, or changes in the overall economy; competitive
pressures on sales margins for INCON products; unanticipated warranty costs
from existing products or newly introduced products; unexpected costs
associated with Y2K issues; and risks attendant to expansion of the
Company's business through increased investment in product development,
increased marketing and sales efforts, and future acquisitions.


ITEM 7.  FINANCIAL STATEMENTS.

Audited financial statements of the Company appear after the signature page
below, and are incorporated herein by reference.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There were no changes in or disagreements with accountants on accounting
and financial disclosures in 1999.


                                  PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Certain information with respect to the executive officers of the Company
is set forth below.  All other information required by this Item is
incorporated herein by reference to the Company's definitive proxy
statement for the Annual Meeting of Shareholders, to be held in June 2000.

Under the bylaws of the Company, all officers hold office until the next
Annual Meeting of Directors and until their successors are chosen and have
qualified, or until their earlier resignation or removal from office.

There are no family relationships among any executive officers or
directors.

The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Name                  Age     Positions with Company
----                  ---     ----------------------

<S>                   <C>     <C>
Roger E. Brooks       55      Chief Executive Officer and Director

Alan Lukas            49      Vice President Product Development, Director,
                              and Chairman of the Board

Andrew B. Clement     30      Controller and Assistant Treasurer

Enrique Sales         36      Vice President Sales & Marketing

Dean Richards         51      Vice President Manufacturing
</TABLE>


Roger E. Brooks served as a consultant to INCON from February 5, 1998 until
he became President/CEO and a Director on May 1, 1998.  Previously he was
President/CEO and a Director of Dynisco, Inc. (1984-1996), a Director,
Executive Vice President/Chief Operating Officer and VP Marketing & Sales
for Thermo Electric Co. Inc. (1977-1984), and Marketing Manager for General
Cable Corporation (1970-1977).  Currently he is a Director of Moldflow
Corporation.

Alan Lukas founded INCON in 1978.  Previously he had held positions as
Project Engineer at GenRad (1972-1973), Applications Engineer at Analog
Devices, Inc. (1973), Product Marketing Manager at Teledyne Philbrick
(1974), Engineering Manager at Process Development Corp., Division of
Honeycomb Systems (1975-1978) and President/CEO and Chairman of INCON
(1978-1998).  He currently is a member of the Advisory Board of the School
of Engineering Science at the University of Southern Maine.  He has been a
director of INCON since 1978.

Andrew B. Clement has been with INCON since November of 1997, in the
position of Controller.  Previously he held positions as Controller at EDM,
Inc. (1997), Accountant at Portland Pipe Line Corp. (1996) and Cost
Accountant at Aero Tech Manufacturing, Inc. (1992-1995)

Enrique (Rick) Sales joined INCON in December 1998 as the Company's Vice
President of Sales & Marketing. Previously, he was Director of Sales &
Marketing for LMI, Inc. (1998), Vice President of Sales & Marketing for Lan
Technologies, Inc. (1992-1998), Sales Manager, Latin America and Product
Manager for BASF Corporation (1987-1989), and Sales Representative for
International Paper, Co. (1985-1987).  He is a Trustee of the Renssalaer
Alumni Association.

Dean Richards joined INCON in May 1999 as Vice President of Manufacturing.
Previously he held positions as Director of Manufacturing, Measurement &
Control Division of Analogic Corporation (1996-1999), Vice President of
Operations,a/d/s/ Inc. (1993-1996), Director of Manufacturing Industrial
Technology Group, Analogic Corporation (1986-1993), Director of
Manufacturing, Vicor Corporation (1983-1986), Operations Manager, Data
Precision Corporation (1981-1983), and Operations Manager of Intronics, Inc
(1971-1981).


ITEM 10.  EXECUTIVE COMPENSATION.

The information required by this Item is incorporated herein by reference
to the Company's definitive proxy statement for the 2000 Annual Meeting of
Shareholders.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is incorporated herein by reference
to the Company's definitive proxy statement for the 2000 Annual Meeting of
Shareholders.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is incorporated herein by reference
to the Company's definitive proxy statement for the 2000 Annual Meeting of
Shareholders.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

An index of the exhibits filed with this report appears after the financial
statements below, and is incorporated herein by reference.

During the fourth quarter of 1999 the Company filed no reports on Form 8-K.


                                 SIGNATURES

In accordance with Section 13 of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       INTELLIGENT CONTROLS, INC.

                                       By:  /s Roger E. Brooks
                                           --------------------------------
                                           Roger E. Brooks, President and
                                           Chief Executive Officer
                                           Date:  March 30, 2000

                                       By:  /s Andrew B. Clement
                                           --------------------------------
                                           Andrew B. Clement, Controller
                                           (principal financial officer and
                                           principal accounting officer)
                                           Date:  March 30, 2000

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Company and in the capacities and on
the dates indicated.


 /s  Roger E. Brooks                   Date:  March 30, 2000
-----------------------------------
Roger E. Brooks, President, Chief
Executive Officer and Director


 /s  Andrew B. Clement                 Date:  March 30, 2000
-----------------------------------
Andrew B. Clement, Controller


 /s  George E. Hissong                 Date:  March 30, 2000
-----------------------------------
George E. Hissong, Director


 /s  Alan Lukas                        Date:  March 30, 2000
-----------------------------------
Alan Lukas, Director


 /s  Paul  F. Walsh                    Date:  March 30, 2000
-----------------------------------
Paul F. Walsh, Director


 /s  Charles D. Yie                    Date:  March 30, 2000
-----------------------------------
Charles Yie, Director


                      REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors and Stockholders of
INTELLIGENT CONTROLS, INC.

In our opinion, the accompanying balance sheets and the related statements
of income, stockholders' equity, and cash flows present fairly, in all
material respects, the financial position of Intelligent Controls, Inc. at
December 31, 1999 and December 26, 1998, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.  These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits.  We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for the opinion expressed above.


/s  PricewaterhouseCoopers  LLP
-------------------------------

Portland, Maine
February 17, 2000


                         INTELLIGENT CONTROLS, INC.
                               BALANCE SHEETS

                   December 31, 1999 and December 26, 1998

<TABLE>
<CAPTION>
                                   ASSETS
                                   ------
                               (Note 4 and 5)

                                                                  1999            1998
                                                               -----------     -----------

<S>                                                            <C>             <C>
Current assets:
  Cash and cash equivalents                                    $ 4,980,805     $ 4,202,084
  Accounts receivable, net of allowances of $105,000
   in 1999 and $170,000 in 1998                                  1,488,414       3,253,477
  Inventories (Note 2)                                           1,054,625       1,320,913
  Prepaid expenses and other                                        89,976         127,425
  Income tax receivable                                            105,292
  Deferred income taxes (Note 6)                                   209,799         343,520
                                                               -----------     -----------

      Total current assets                                       7,928,911       9,247,419

  Property and equipment, net (Note 3)                             753,604         889,748
  Other assets                                                      36,033          31,611
                                                               -----------     -----------
      Total assets                                             $ 8,718,548     $10,168,778
                                                               ===========     ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY
                    ------------------------------------

Current liabilities:
  Income taxes payable                                                         $   299,269
  Accounts payable                                             $   461,560       1,007,400
  Accrued expenses                                                 585,424       1,144,682
  Current portion of long-term debt (Note 5)                       160,872         194,000
                                                               -----------     -----------

      Total current liabilities                                  1,207,856       2,645,351

Long-term debt, net of current portion (Note 5)                     12,535         140,279

Deferred income taxes (Note 6)                                      49,709          76,740

Commitments (Note 9)

Stockholders' equity:
  Common stock, no par value; 8,000,000 shares authorized;
   5,061,123 shares issued in 1999 and 5,060,760 in 1998         7,585,534       7,585,080
  Retained earnings                                              1,937,274       1,139,196
  Receivable from stockholder (Note 8)                          (1,463,704)     (1,376,728)
  Treasury stock, 321,724 shares in 1999
   and 115,951 shares in 1998                                     (610,656)        (41,140)
                                                               -----------     -----------

      Total stockholders' equity                                 7,448,448       7,306,408
                                                               -----------     -----------
Total liabilities and stockholders' equity                     $ 8,718,548     $10,168,778
                                                               ===========     ===========
</TABLE>


   The accompanying notes are an integral part of the financial statements


                         INTELLIGENT CONTROLS, INC.
                            STATEMENTS OF INCOME

         For the Years Ended December 31, 1999 and December 26, 1998

<TABLE>
<CAPTION>
                                                        1999            1998
                                                     -----------     -----------

<S>                                                  <C>             <C>
Net sales                                            $12,904,697     $16,198,385

Cost of sales                                          6,148,090       8,198,641
                                                     -----------     -----------

Gross profit                                           6,756,607       7,999,744

Operating expenses:
  Selling, general and administrative                  4,511,725       5,032,227
  Research and development                             1,187,506         996,933
  Legal settlement charges                                               747,660
                                                     -----------     -----------

                                                       5,699,231       6,776,820
                                                     -----------     -----------

Operating income                                       1,057,376       1,222,924

Other income (expense):
  Interest income                                        330,498          82,517
  Other expense                                          (74,796)        (67,291)
                                                     -----------     -----------

                                                         255,702          15,226
                                                     -----------     -----------

Income before income tax expense                       1,313,078       1,238,150

Income tax expense (Note 6)                              515,000         567,000
                                                     -----------     -----------

Net income                                           $   798,078     $   671,150
                                                     ===========     ===========

      Net income per share basic and diluted         $       .16     $       .15
                                                     ===========     ===========

      Weighted average common shares outstanding       4,860,065       4,391,305
                                                     ===========     ===========

      Weighted average common
       and common equivalent shares outstanding        4,898,014       4,455,635
                                                     ===========     ===========
</TABLE>

   The accompanying notes are an integral part of the financial statements


                         INTELLIGENT CONTROLS, INC.
                     STATEMENTS OF STOCKHOLDERS' EQUITY

         For the Years Ended December 31, 1999 and December 26, 1998


<TABLE>
<CAPTION>
                                         Common Stock                                                                  Total
                                   -------------------------      Retained       Receivable from     Treasury      Stockholders'
                                    Shares         Amount         Earnings         Stockholder         Stock          Equity
                                    ------         ------         --------       ---------------     --------      -------------

<S>                                <C>           <C>             <C>               <C>               <C>            <C>
Balances at December 27, 1997      3,274,306     $ 2,293,841     $   468,046                 -               -      $ 2,761,887


Exercise of stock options            125,141          44,012               -                 -               -           44,012

Issuance of common stock           2,136,313       6,850,494               -                 -               -        6,850,494

Retirement of common stock          (475,000)     (1,603,267)              -                 -               -       (1,603,267)

Acquisition of treasury shares      (116,121)              -               -                 -       $ (41,483)         (41,483)

Issuance of treasury shares              170               -               -                 -             343              343

Receivable from stockholder                -               -               -       $(1,376,728)              -       (1,376,728)

Net Income                                 -               -         671,150                 -               -          671,150
                                   --------------------------------------------------------------------------------------------

Balances at December 26, 1998      4,944,809       7,585,080       1,139,196        (1,376,728)        (41,140)       7,306,408


Exercise of stock options              4,802             454               -                 -           3,299            3,753

Acquisition of treasury shares      (210,212)              -               -                 -        (572,815)        (572,815)

Receivable from stockholder                -               -               -           (86,976)              -          (86,976)

Net Income                                 -               -         798,078                 -               -          798,078
                                   --------------------------------------------------------------------------------------------

Balances at December 31, 1999      4,739,399     $ 7,585,534     $ 1,937,274       $(1,463,704)      $(610,656)     $ 7,448,448
                                   ============================================================================================
</TABLE>


   The accompanying notes are an integral part of the financial statements


                         INTELLIGENT CONTROLS, INC.
                          STATEMENTS OF CASH FLOWS

         For the Years Ended December 31, 1999 and December 26, 1998


<TABLE>
<CAPTION>
                                                             1999            1998
                                                          -----------     ------------

<S>                                                       <C>             <C>
Cash flows from operating activities:
  Net income                                              $   798,078     $   671,150
  Adjustments to reconcile net income to net cash
   provided (used) by operating activities:
    Depreciation and amortization                             315,893         267,605
    Interest on receivable to stockholder                     (86,976)
    Loss on disposal of property and equipment                    398          13,426
    Deferred income taxes                                     106,690        (141,611)
    Changes in assets and liabilities:
      Accounts receivable                                   1,765,063      (1,053,415)
      Inventories                                             266,288         533,415
      Prepaid expenses and other current assets                37,449         130,279
      Income tax receivable                                  (105,292)        119,099
      Income tax payable                                     (299,269)        299,269
      Accounts payable and accrued expenses                (1,105,098)        862,276
      Other                                                    (4,422)         (4,435)
                                                          -----------     -----------

  Net cash provided by operating activities                 1,688,802       1,697,058
                                                          -----------     -----------

Cash flows from investing activities:
  Capital expenditures                                       (186,147)       (314,198)
  Proceeds from sale of property and equipment                  6,000
                                                          -----------     -----------

  Net cash used by investing activities                      (180,147)       (314,198)
                                                          -----------     -----------

Cash flows from financing activities:
  Increase in non-interest bearing overdraft                                  (67,259)
  Repayment of note payable - bank                                           (754,366)
  Repayment of long-term debt                                (160,872)       (232,822)
  Issuance of common stock, net                                   454       5,517,778
  Retirement of common stock                                               (1,603,267)
  Acquisition of treasury stock                              (569,516)        (41,140)
                                                          -----------     -----------

  Net cash (used by) provided by financing activities        (729,934)      2,818,924
                                                          -----------     -----------

Net decrease in cash                                          778,721       4,201,784

Cash and cash equivalents at beginning of year              4,202,084             300
                                                          -----------     -----------

Cash and cash equivalents at end of year                  $ 4,980,805     $ 4,202,084
                                                          ===========     ===========

Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest                                              $    20,884     $    66,292
    Income taxes                                          $   814,223     $   320,000

Supplemental disclosure of noncash financing activity:
  During 1998 common stock amounting to $1,376,728 was
   issued for a receivable from stockholder
</TABLE>


   The accompanying notes are an integral part of the financial statements


                         INTELLIGENT CONTROLS, INC.
                        NOTES TO FINANCIAL STATEMENTS

                   December 31, 1999 and December 26, 1998


1.    Summary of significant accounting policies:


      Organization and Operations
      ---------------------------

      The Company is engaged primarily in designing and manufacturing
      microprocessor-based control devices and systems for industrial,
      commercial and power utility applications.

      During 1999 the Company changed its reporting year end from the last
      Saturday in December, as used in previous years, to a calendar year
      end.

      Use of Estimates
      ----------------

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates
      and assumptions that affect reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at
      the date of the financial statements and the reported amount of
      revenues and expenses during the reported period.  Actual results
      could differ from those estimates.

      Cash and Cash Equivalents
      -------------------------

      The Company considers all highly liquid debt instruments purchased
      with a maturity of three months or less to be cash equivalents.

      Revenue Recognition
      -------------------

      Substantially all revenue is related to the sale of product and is
      recorded at the time of shipment to the customer.  The product is
      distributed through distributors and directly to customers. The
      Company provides its customers the right of return for its product
      under certain circumstances and records a reserve for products
      estimated to be returned.  The reserves estimated for product returns
      at December 31, 1999 and December 26, 1998 were approximately $30,000
      and $75,000, respectively, and are included in accrued expenses in
      the accompanying balance sheets at December 31, 1999 and December 26,
      1998.

      Inventories
      -----------

      Inventories are stated at the lower of cost (average cost) or market
      (net realizable value) on a first in first out basis.

      Property and Equipment
      ----------------------

      Property and equipment are stated at cost.  Depreciation is
      calculated using straight-line and accelerated methods over estimated
      useful lives of the equipment (three to ten years) and the lease
      terms for the leasehold improvements for book and tax purposes.

      Expenditures for maintenance, repairs and minor replacements are
      charged to operations while expenditures for major replacements and
      betterments are added to property and equipment accounts.  When fixed
      assets are sold, retired or otherwise disposed of, the asset cost and
      accumulated depreciation are removed from the accounts and any
      resulting gain or loss is reflected in income.

      Net Income Per Share
      --------------------

      The net income per common share has been computed in accordance with
      Statement of Financial Accounting Standards (SFAS) No. 128 - Earnings
      Per Share.  The Statement requires dual presentation of basic and
      diluted earnings per share of common stock on the statements of
      income.  Basic earnings per share of common stock have been
      determined by dividing net earnings by the weighted average number of
      shares of common stock outstanding during the year.  Diluted earnings
      per share reflect the potential dilution that would occur if existing
      stock options were exercised.  Following is a reconciliation of the
      dual presentations of earnings per share for the fiscal years
      presented.

<TABLE>
<CAPTION>
                                           Net            Common         Earnings
                                         Income           Shares           Per
                                       (Numerator)     (Denominator)      Share
                                       -----------     -------------     --------

      <S>                               <C>              <C>               <C>
      December 31, 1999
      -----------------

        Basic earnings per share        $798,078         4,860,065         $.16
        Dilutive potential shares              -            37,949         ====
                                        --------         ---------
        Diluted earnings per share      $798,078         4,898,014         $.16
                                        ========         ======================

      December 26, 1998
      -----------------

        Basic earnings per share        $671,150         4,391,305         $.15
        Dilutive potential shares              -            64,330         ====
                                        --------         ---------
        Diluted earnings per share      $671,150         4,455,635         $.15
                                        ========         ======================
</TABLE>


      Fair Value of Financial Instruments
      -----------------------------------

      At December 31, 1999, the carrying amounts of the Company's financial
      instruments included in current assets and current liabilities
      approximate fair value of the short maturity of those instruments.
      The carrying amounts of the Company's long-term debt also
      approximates their value as of December 31, 1999 based upon the
      borrowing rates currently available to the Company for loans with
      similar terms and maturities.

      Impairment Accounting
      ---------------------

      The Company adopted Financial Accounting Standard No. 121, Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to
      be Disposed of, (SFAS No. 121) in 1996. The Company reviews the
      recoverability of its long-lived assets, including goodwill and other
      intangible assets, when events or changes in circumstances occur that
      indicate that the carrying value of the assets may not be
      recoverable. The measurement of possible impairment is based on the
      Company's ability to recover the asset from expected future pre-tax
      cash flows (undiscounted and without interest charges) of the related
      operations. The measurement of impairment requires management to make
      estimates of expected future cash flows related to long-lived assets.
      It is at least reasonably possible that future events or
      circumstances could cause these estimates to change.

      New Accounting Pronouncements
      -----------------------------

      In June 1998, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards (SFAS) No. 133 -
      Accounting for Derivative Instruments and Hedging Activities, which
      requires entities to report all derivatives at fair value as assets
      or liabilities in their statements of financial position.  This
      statement is effective for financial statements issued for fiscal
      periods beginning after June 15, 1999.  The Company does not
      currently have any derivative instruments or hedging activities to
      report under this standard.


2.    Inventories:

      Inventories consisted of the following at December 31, 1999 and
      December 26, 1998:

<TABLE>
<CAPTION>
                                     1999           1998
                                  ----------     ----------

      <S>                         <C>            <C>
      Raw materials and parts     $  549,801     $  960,552
      Work-in-progress               155,853        167,512
      Finished goods                 348,971        187,849
      Supplies and other                   -          5,000
                                  ----------     ----------
                                  $1,054,625     $1,320,913
                                  ==========     ==========
</TABLE>


3.    Property and equipment:

      Property and equipment consisted of the following at December 31,
      1999 and December 26, 1998:

<TABLE>
<CAPTION>
                                                            1999           1998
                                                         ----------     ----------

      <S>                                                <C>            <C>
      Equipment                                          $1,269,015     $1,217,932
      Furniture and fixtures                                191,637        102,874
      Computer software                                     187,144        169,176
      Leasehold improvements                                154,344        109,512
      Construction in progress                               16,361        105,813
                                                         ----------     ----------

                                                          1,818,501      1,705,307

      Less accumulated depreciation and amortization      1,064,897        815,559
                                                         ----------     ----------

                                                         $  753,604     $  889,748
                                                         ==========     ==========
</TABLE>


4.    Line of Credit Agreement:

      The Company maintains a $3,500,000 working capital line of credit.
      Such borrowings are collateralized by all assets of the Company and
      are subject to certain restrictions, including those related to new
      borrowings, maximum debt to equity ratio, and minimum pretax income
      levels.  Interest is variable at the bank's base rate plus .25% (8.5%
      at December 31, 1999 and 7.75% at December 26, 1998).  At December
      31, 1999 and December 26, 1998, the line was not being utilized and
      all $3.5 million was available to be borrowed.


5.    Long-term debt:

      Long-term debt consisted of the following at December 31, 1999 and
      December 26, 1998:

<TABLE>
<CAPTION>
                                                                                 1999          1998
                                                                               ---------     ---------

      <S>                                                                      <C>           <C>
      Borrowing under a $1,000,000 revolving credit agreement with a bank,
       interest at a variable rate (8.5% at December 31, 1999 and 7.75%
       at December 26, 1998), with principal and interest payable
       monthly through January 2001                                            $ 173,407     $ 334,279
                                                                               ---------     ---------

      Total Debt                                                                 173,407       334,279

      Less current portion                                                      (160,872)     (194,000)
                                                                               ---------     ---------

      Long-term portion                                                        $  12,535     $ 140,279
                                                                               =========     =========
</TABLE>

The revolving credit agreement is collateralized in the same manner and
subject to the same conditions as the line of credit agreement described in
Note 4.


6.    Income taxes:

      Income tax expense (benefit) consists of the following as of December
      31, 1999 and December 26, 1998:

<TABLE>
<CAPTION>
                                         1999          1998
                                       --------     ---------

        <S>                            <C>          <C>
        Current:

          Federal                      $320,000     $ 544,000
          State                          88,000       165,000
                                       --------     ---------

                                        408,000       709,000
                                       --------     ---------

        Deferred:

          Federal                        83,000      (110,000)
          State                          24,000       (32,000)
                                       --------     ---------

                                        107,000      (142,000)
                                       --------     ---------

          Total income tax expense     $515,000     $ 567,000
                                       ========     =========
</TABLE>

      The actual income tax benefit differs from the expected tax computed
      by applying the U.S. federal corporate tax rate of 34% to income
      before income tax as follows:

<TABLE>
<CAPTION>
                                                     1999     1998
                                                     ----     ----

      <S>                                            <C>      <C>
      Computed expected income tax expense           34%      34%
      State income taxes, net of federal benefit      6%       6%
      Legal Settlement                                         5%
      Other                                          (1%)      1%
                                                     --       --

            Total income tax expense rate            39%      46%
                                                     ==       ==
</TABLE>


      The tax effects of temporary differences that give rise to
      significant portions of the deferred tax assets and liabilities
      consist of the following at December 31, 1999 and December 26, 1998:

<TABLE>
<CAPTION>
                                               1999         1998
                                             --------     --------

      <S>                                    <C>          <C>
      Deferred tax assets:
        Inventory                            $ 74,773     $109,212
        Reserves                              107,002      207,660
        Compensation                           28,024       26,648
                                             --------     --------

            Total Deferred tax asset         $209,799     $343,520
                                             ========     ========

      Deferred tax liabilities:
        Depreciation                           49,709       76,740
                                             --------     --------

            Total Deferred Tax Liability     $ 49,709     $ 76,740
                                             ========     ========
</TABLE>


7.    Common stock:

      The Company has granted stock options to employees, directors and
      outside consultants and advisors under a 1984 Incentive Stock Option
      Plan, a 1993 Directors Stock Option Plan, an Advisory Board Stock
      Option Plan, and a 1998 Employee Stock Option Plan. Options granted
      under the 1984 Incentive Stock Option Plan vest at a rate of 20% per
      year, options granted under the 1998 Employee Stock Option Plan vest
      at a rate of 25% per year, and options granted under the other two
      plans vest immediately. Options granted under the 1984 Incentive
      Stock Option Plan, the Advisory Board Stock Option Plan, and the 1998
      Employee Stock Option Plan expire after 10 years, while options
      granted under the 1993 Directors Stock Option Plan expire after 5
      years.  As of December 31, 1999, 230,000 shares were available to be
      granted under these plans in the future. A summary of changes of
      common stock options during 1999 and 1998 is:

<TABLE>
<CAPTION>
                                                  Number of     Weighted Average
                                                   Shares        Exercise Price
                                                  ---------     ----------------

      <S>                                         <C>                <C>
      Outstanding at December 27, 1997             551,708           $1.74

      Issued during 1998                           181,000           $2.28

      Lapsed during 1998                          (223,072)          $1.36

      Exercised during 1998                       (125,668)          $1.30
                                                  --------

      Outstanding at December 26, 1998             383,968           $2.36

      Issued during 1999                            73,500           $2.65

      Lapsed during 1999                           (44,800)          $2.49

      Exercised during 1999                          7,200           $0.94

      Outstanding at December 31, 1999             405,468           $2.28
                                                  ========

      Shares exercisable at December 31, 1999      195,148
                                                  ========

      Shares exercisable at December 26, 1998      157,454
                                                  ========
</TABLE>


      The weighted average fair value of options granted in 1999 and 1998
      was $1.46 and $1.28, respectively and the range of exercise prices at
      December 31, 1999 is $0.50 to $4.52.  The weighted average remaining
      contractual life of these options is approximately 7.2 years.

      On January 1, 1996, the Company adopted Statement of Financial
      Accounting Standards No. 123, Accounting for Stock Based Compensation
      (SFAS No. 123). This statement requires a fair value based method of
      accounting for employee stock options and results in expense
      recognition for the Company's employee stock plans. It also permits a
      Company to continue to measure compensation expense for such plans
      using value based method as prescribed by Accounting Principles Board
      Opinion 25, "Accounting for Stock Issued to Employees" (APB No. 25).
      The Company has elected to follow APB No. 25 in accounting for its
      employee stock plans, and accordingly, no compensation cost has been
      recognized. Had compensation cost for the Company's stock plans been
      determined based on the fair value requirements under SFAS No. 123,
      the Company's net income and earnings per share would have been to
      the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                             1999                      1998
                                     ---------------------     ---------------------
                                        As          Pro           As          Pro
                                     Reported      Forma       Reported      Forma
                                     --------      -----       --------      -----

      <S>                            <C>          <C>          <C>          <C>
      Net income                     $798,078     $634,550     $671,150     $596,630

      Basic net income per share     $   0.16     $   0.13     $   0.15     $   0.14
</TABLE>


      The fair value of stock options in the pro forma accounts for 1999
      and 1998 is not necessarily indicative of the future effects on net
      income and earnings per share. The fair value of each stock option
      grant has been estimated on the date of the grant using the Black-
      Scholes option-pricing model with the following weighted-average
      assumptions used for grants in 1998: no dividend yield; expected
      volatility of 50%; risk-free interest rates of 6%; and expected life
      of 6 years.  The following assumptions were used for grants in 1999:
      no dividend yield; expected volatility of 62%; risk free interest
      rate ranging from 5.17% to 6.48%; and expected life of 4 years.


8.    Receivable from shareholder:

      In May 1998, the Company sold 486,923 shares of common stock at a
      price of $3.25 per share to its chief executive officer (CEO). The
      shares were paid for with a 5.69% promissory note for $1,332,500 and
      cash in the amount of $250,000. Principal and interest under the note
      become payable in five years except that the payment obligation may
      be accelerated if the CEO's employment with the Company is terminated
      for any reason. In such event, the note becomes due within either 90
      days or one year, depending upon the reason for termination. The note
      is collateralized by the purchased shares and the CEO's personal
      guaranty, limited to $200,000. The Company has the right to purchase
      some of the shares from the CEO at the initial purchase price of
      $3.25 per share. The repurchase right extends to 410,000 shares and
      lapses as to 25,625 shares for every three months of continued
      employment. The repurchase right lapses on May 1, 2002 if the CEO is
      still employed. The repurchase rights also lapse in certain other
      instances, including change in control of the Company as defined.
      Compensation expense is adjusted for increases or decreases in the
      market value of the common stock in excess of $3.25 per share for
      those shares relating to the unpaid nonrecourse portion of the
      promissory note.  There was no adjustment to expense in 1999 and
      1998.


9.    Commitments:

      The Company leases two facilities, including one from a related
      party, and various computer and office equipment under non-cancelable
      operating leases.  The Company has an option to purchase one of the
      facilities prior to October 2000.  Minimum lease payments over the
      fixed terms of these leases are $110,623, $7,447, $2,960 in years
      2000, 2001, 2002, respectively.  Rent expense was approximately
      $123,000 and $118,000 in 1999 and 1998, respectively, including
      approximately $60,000 and $65,000 to a related party.

      The Company manufactures a certain product line under an exclusive
      license agreement that requires the Company to make royalty payments
      on such product sales through 2007.  Royalty expense related to this
      agreement was approximately $4,000 and $6,000 in 1999 and 1998,
      respectively.


10.   Employee benefit plan:

      The Company has adopted a 401(k) plan, which covers all eligible
      employees and includes a matching contribution by the Company.  In
      1995, the Company's Board of Directors voted to increase the
      Company's match from 40% of the first 5% of the employee's
      contribution, to 50% of an employee's contribution up to 5% of the
      employee's salary.  Expenses associated with the plan were
      approximately $ 49,000 and $41,000 and in 1999 and 1998,
      respectively.


11.   Litigation:

      On April 21, 1999 the Company received notice of the filing of an
      action entitled Omega Environmental, Inc. v. INCON International,
      Inc. in United States Bankruptcy Court for the Western District of
      Washington.  The action was brought by Omega Environmental, Inc. for
      avoidance and recovery of approximately $60,000 of payments that
      Omega had made to the Company for INCON products, as alleged
      preferential transfers. The Company is contesting the claim.

      Q&E LLC (a convenience store/retail petroleum operator) has filed
      suit against the Company and PEMCO Service Company, Inc. for damages
      allegedly arising in connection with a petroleum spill.  The damages
      claimed are $1,000,000.  The Company's insurance carrier has assumed
      the defense of the claim.


                              Index to Exhibits
                              -----------------

<TABLE>
<CAPTION>
Exhibit No.     Description
-----------     -----------

<S>             <C>
3(i)            Conformed copy of Articles of Incorporation, as amended to
                date, incorporated by reference to Exhibit 3(i) to the
                Company's Form 10-K for the fiscal year ended December 26,
                1998.

3(ii)           Bylaws of the Company, as amended to date, incorporated by
                reference to Exhibit 3(ii) to the Company's Form 10-K for the
                fiscal year ended December 26, 1998.

4               See Exhibits 3(i) and 3(ii)

10.1            Investment Agreement, dated March 26, 1998, among the
                Company, Ampersand Specialty Materials and Chemicals III
                Limited Partnership, Ampersand Specialty Materials and
                Chemicals III Companion Fund Limited Partnership, and Roger
                E. Brooks; incorporated by reference to Exhibit 99.c(1) to
                the Company's Schedule 13E-4 Issuer Tender Offer Statement
                filed March 30, 1998

10.1A           Amendment No. 1 to Investment Agreement, dated as of May 1,
                1998, among the Company, Ampersand Specialty Materials and
                Chemicals III Limited Partnership, Ampersand Specialty
                Materials and Chemicals III Companion Fund Limited
                Partnership, and Roger E. Brooks; incorporated by reference
                to Exhibit 10.1A to the Company's Form 10-QSB for the
                quarter ended March 28, 1998

10.2            Stockholders Agreement, dated as of May 1, 1998, among the
                Company, Ampersand Specialty Materials and Chemicals III
                Limited Partnership, Ampersand Specialty Materials and
                Chemicals III Companion Fund Limited Partnership, Roger E.
                Brooks, Alan Lukas, Paul E. Lukas, and certain related
                parties; incorporated by reference to Exhibit 99.c(2) to
                the Company's Schedule 13E-4 Issuer Tender Offer Statement
                filed March 30, 1998

Note:  Compensatory plans and management contracts are filed as Exhibits
10.3 through 10.10 below.

10.3            Employment Agreement between the Company and Roger E.
                Brooks; incorporated by reference to Exhibit 10.3 to the
                Company's Form 10-QSB for the fiscal quarter ended March
                28, 1998

10.3A           Employee Stock Restriction Agreement between the Company
                and Roger E. Brooks and related promissory note, pledge
                agreement and form of 83(b) election; incorporated by
                reference to Exhibit 10.3A to the Company's Form 10-QSB for
                the fiscal quarter ended March 28, 1998

10.4            Employment Agreement dated as of May 1, 1998 with Alan
                Lukas; incorporated by reference to Exhibit 10.2 to the
                Company's Form 10-QSB for the fiscal quarter ended June 27,
                1998

10.5            1998 Employee Stock Option Plan; incorporated by reference
                to Exhibit 10.4 to the Company's Form 10-QSB for the
                quarter ended March 28, 1998

10.6            1984 Incentive Stock Option Plan; incorporated by reference
                to Exhibit 6.5 of the Company's Form 1-A, filed June 19,
                1993, as amended, SEC File No. 24B-3429 ("Company's Form 1-
                A")

10.6A           Amendment No. 1 to 1984 Incentive Stock Option Plan;
                incorporated by reference to Exhibit 10.5A of the Company's
                Form 10-SB, filed February 2, 1995

10.6B           Amendment No. 2 to 1984 Incentive Stock Option Plan;
                incorporated by reference to Exhibit 10.6B of the Company's
                Form 10-KSB for the fiscal year ended December 31, 1996

10.7            1993 Director Stock Option Plan, as amended

10.8            1994 Employee Stock Purchase Plan, amended and restated as
                of January 1, 1996; incorporated by reference to Exhibit
                10.9 of the Company's Form 10-KSB for the fiscal year ended
                December 31, 1996

10.9            Advisory Board Stock Option Plan; incorporated by reference
                to Exhibit 6.6 of the Company's Form 1-A

10.10           Form of Confidentiality and Nondisclosure Agreement;
                incorporated by reference to Exhibit 6.11 of the Company's
                Form 1-A

10.11           Settlement Agreement and Mutual Release, dated May 13,
                1998, with John Knight; incorporated herein by reference to
                Exhibit 99.1 to the Company's Form 8-K, filed May 27, 1998

10.12           Settlement Agreement, dated August 25, 1998, between the
                Company and Hasstech, Inc.; incorporated herein by
                reference to Exhibit 10.12 to the Company's Form 10-KSB for
                the fiscal year ended December 26, 1998

10.13           Lease Agreement with Apollo Development Corp., dated as of
                April 11, 1991; incorporated by reference to Exhibit 6.4 of
                the Company's Form 1-A

10.13A          Lease Extension Agreement, dated March 9, 2000 with Apollo
                Development Corp.

10.14           Lease Agreement with BJB Associates, dated June 21, 1994;
                incorporated by reference to Exhibit 10.4 of the Company's
                Form 10-KSB for the fiscal year ended December 31, 1994

10.14A          Addendum to Lease, executed March 20, 2000 with BJB
                Associates.

21              Subsidiaries of the Company

23              Consent of Accountants

27              Financial Data Schedule

</TABLE>