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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

            [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
                                       OR
            [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
          THE TRANSITION PERIOD FROM _______________ TO _______________

                           COMMISSION FILE NO. 0-22166

                              AETRIUM INCORPORATED
             (Exact name of registrant as specified in its charter)

                 MINNESOTA                                  41-1439182
      (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                    Identification No.)

                                2350 HELEN STREET
                         NORTH ST. PAUL, MINNESOTA 55109
               (Address of principal executive offices) (Zip code)

       Registrant's telephone number, including area code: (651) 704-1800
        Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.001
                               PAR VALUE

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

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

         As of March 27, 2000, 9,470,452 shares of Common Stock of the
Registrant were outstanding, and the aggregate market value of the Common Stock
of the Registrant as of that date (based upon the last reported sale price of
the Common Stock on that date as reported by the Nasdaq National Market),
excluding outstanding shares beneficially owned by directors and executive
officers, was approximately $98,555,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

       Part II of this Annual Report on Form 10-K incorporates by reference
information (to the extent specific pages are referred to herein) from the
Registrant's Annual Report to Shareholders for the fiscal year ended December
31, 1999 (the "1999 Annual Report"). Part III of this Annual Report on Form 10-K
incorporates by reference information (to the extent specific sections are
referred to herein) from the Registrant's Proxy Statement for its 2000 Annual
Meeting to be held May 23, 2000 (the "2000 Proxy Statement").
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                                     PART I

         This Form 10-K contains certain forward-looking statements. For this
purpose, any statements contained in this Form 10-K that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, including those set forth under the heading "Certain
Important Factors" below.

ITEM 1.           BUSINESS.

         Aetrium Incorporated (the "Company") designs, manufactures and markets
a variety of electromechanical equipment used in the handling and testing of
microelectronic components, including semiconductor devices known as integrated
circuits ("ICs") and other forms of electronic components. The Company's primary
focus is on high volume electronic component types and on the latest package
designs. Aetrium's products are purchased primarily by semiconductor
manufacturers, and their assembly and test subcontractors, and are used in the
test, assembly, and packaging portion of semiconductor manufacturing. The
Company's products automate critical functions to improve manufacturing yield,
raise quality levels, increase product reliability and reduce final
manufacturing costs.

         The Company has three principal product lines. The largest, in terms of
revenue, is its broad line of test handlers, which incorporate thermal
conditioning, contactor and automated handling technologies to provide automated
handling of ICs and other electronic components during production test cycles.
Test handler products are primarily produced by the Company's operations in
North St. Paul, Minnesota; San Diego, California; and Dallas, Texas. Change kits
to adapt the Company's test handlers to different IC package configurations or
to upgrade installed equipment for enhanced performance also represent a
significant part of the Company's revenue. The second product line consists of
its IC Automation products, which are produced by the Company's operations in
North St. Paul and in Dallas. The North St. Paul operation's IC Automation
products are sold to original equipment manufacturers ("OEMs") to be
incorporated as the automated handling components of such OEMs' own proprietary
technology equipment for a variety of other IC processing requirements, such as
marking, lead scanning, and lead trim and form. The Dallas operation's IC
Automation products are sold to semiconductor manufacturers, and are used to
automate the loading and unloading of burn-in boards. The Company's third
product line is specialty test equipment, which includes reliability test
equipment and environmental test equipment. The Company's reliability test
equipment provide IC manufacturers with IC performance data to aid in the
evaluation and improvement of IC designs and manufacturing processes to increase
IC yield and reliability and are produced in North St. Paul. The Company's
environmental test equipment products are used for burn-in testing of ICs and
have been manufactured in the Company's operations in Lawrence, Massachusetts.
With the planned closure of the Lawrence operation in early 2000, these products
will be discontinued and the core technology of these products will be
transferred from the Lawrence operation to the Company's operation in North St.
Paul.

         The Company's strategy has focused on revenue growth through product
line expansion, by both internal development and by acquiring complementary
technology, businesses, or product lines, and through customer satisfaction. The
Company's sales have increased at an average annual compounded growth rate of
approximately 23% during the period from 1986 through 1999. Currently, the
Company believes it has the second largest installed base among all domestic
test handler manufacturers.


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<PAGE>

         In 1998, the Company acquired the equipment business of WEB Technology
Inc. ("WEB"), based in Dallas, Texas. The primary products of the acquired
business include IC Automation products used to automate the loading and
unloading of burn-in boards. This equipment can be configured to accommodate any
burn-in board currently being manufactured.

         In 1997, the Company completed two acquisitions that expanded its test
handler product lines. In November 1997, the Company acquired a product line of
pick-and-place test handlers by acquiring certain assets of the Handler Division
of Advantek Inc. ("Advantek"). This acquisition extended the Company's product
line of pick-and-place test handlers for non-memory devices like analog, logic
and microcomponent ICs. The product line acquired from Advantek was incorporated
into and is produced at the Company's North St. Paul operation.

         In April 1997, the Company acquired a line of test handler products
produced in Grand Prairie, Texas, by acquiring substantially all of the assets
of Forward Systems Automation, Inc. ("FSA"). In 1999, the primary products
produced in Grand Prairie, Texas included test handlers for small ICs and
discrete components. The Grand Prairie operation is being merged into the
Company's Dallas operation in early 2000, after which these test handler
products will be produced in the Dallas operation.

         The Company acquired its environmental test products through its
acquisition of substantially all of the assets of E.J. Systems, Inc. ("EJ
Systems") of Lawrence, Massachusetts in December 1995. These products are
primarily environmental conditioning systems using conductive thermal techniques
for burn-in and reliability testing of ICs. With the acquisition, the Company
also obtained some early stage core technology that has been further developed
and integrated into some of the Company's key new test handler product
developments. The ongoing development of this new conductive thermal technology
will be transferred to the Company's North St. Paul operation when the Lawrence
operation is closed in early 2000.

         The Company also acquired certain test handler products through its
acquisition of the assets of Sym-Tek Systems, Inc. ("SymTek") in November 1994,
which allowed the Company to expand its presence in the memory IC market. These
products were configured for high volume multi-site applications (up to 32
sites) and used both pick-and-place and gravity feed technology. The SymTek
acquisition also extended the Company's line of gravity feed test handlers for
non-memory IC test handler applications. These gravity products for non-memory
applications have since been discontinued.

         The Company's reliability test systems product line originated through
the purchase of the assets of Sienna Technologies, Inc. ("Sienna") in December
1993. At the time of the acquisition, the life cycle of Sienna's primary product
was near its end, revenue was declining and customer confidence was eroding due
in part to product performance and customer service issues. Since the
acquisition, a new generation product line has evolved through internal
development and has been introduced to the market. It has been well received by
a growing customer base. The older products are still supported by the Company
and have been enhanced to improve performance and satisfy the needs of the
Company's customers. As a result, customer confidence has been substantially
restored and gross profit margins have increased.

         The Company acquired the core products of its 5050 series of gravity
feed test handlers through its acquisition of Electro-Mechanical Systems, Inc.
("EMS") in 1988. Since then, the Company has expanded this series of products
through internal development to include a full range of thermal conditioning
capabilities, contactors and change kits for a wide range of small outline
package ("SOP") types. These products sell into the largest market segment of
the semiconductor industry and now incorporate high performance contactors and
multi test site capability, and can be configured for the newest IC package
types.


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<PAGE>

         The Company emphasizes both product quality and customer service to
achieve customer satisfaction, which is reflected in the certification of its
Minnesota facility in March 1995 as the first test handler producer to be
certified under the ISO 9001 program established by the European Community. In
1998, the Company's facilities in Lawrence, Massachusetts, and San Diego,
California, obtained ISO 9001 certification. All three of these facilities
successfully completed re-certification audits in 1999.

         The Company was incorporated in Minnesota in December 1982. The
Company's executive offices are located at 2350 Helen Street, North St. Paul,
Minnesota 55109, and its telephone number is (651) 704-1800.

TEST HANDLER PRODUCTS

         Test handlers are electromechanical systems interfaced with a tester to
form a test system designed to handle, thermally condition, contact and sort ICs
and other electronic components automatically during the final test stage of the
manufacturing process. The components are loaded into the handler from bowls,
tubes, trays, or carriers and then typically transported to a temperature
chamber within the test handler where they are thermally conditioned and
controlled to the required testing temperature. The component is then positioned
against the test handler contactor, which provides an electrical connection
between the component and the tester. After testing, the test handler sorts the
component according to test performance. In some cases, additional process steps
are completed by the test handler system. These include marking or visual
inspection of the IC packages, and automatic placement of the ICs into a device
transport media for shipment to the end user.

         Traditionally, test handlers have used gravity to move ICs and other
components from tubes through the handler system and back into tubes. In order
to accommodate more fragile IC package families, gravity feed systems have
incorporated various velocity limiting techniques to reduce the speed of IC
packages and minimize IC damage upon impact with other ICs or other stopping
mechanisms. More recently, pick-and-place test handler systems have been
introduced for the IC package families most easily damaged in handling, such as
quad flatpack families ("QFPs"), ball grid array packages ("BGA") and some SOPs.
Pick-and-place systems move ICs electromechanically, and thus can avoid jarring
stops and the resulting lead damage. Pick-and-place systems are typically slower
and more costly than gravity feed handlers.

         Test handlers are designed with different characteristics for analog
logic ICs, digital logic ICs, or discrete components. Memory ICs require
relatively long test times. In order to achieve acceptable throughput rates,
memory IC test handlers have been designed to test up to 64 devices at a time.
Nonmemory ICs and most forms of discrete components require relatively short
test times and require fewer test sites, as test times have not been a limiting
factor for throughput rates. Test times, however, have increased as certain
types of nonmemory ICs have become more complex and IC manufacturers have also
sought to fully utilize the capacity of their testers. Accordingly, multisite
test handlers, with as many as eight test sites, are now available for certain
nonmemory IC applications.

         Test handlers must meet industry criteria for thermal conditioning,
contactor integrity and minimization of damage to the IC package during the test
cycle. Test handlers compete on the basis of cost, throughput, versatility,
reliability and the specific application requirements of the IC manufacturer.
The combination of these factors measures the cost of ownership of the test
handler per device tested. The Company believes its broad line of test handlers
competes favorably on the basis of cost of ownership for a wide range of
electronic component manufacturer applications.

         The Company's primary focus continues to be on the newer generation of
surface mount devices ("SMD") which represent the largest volumes, the newest IC
device types, and the fastest growing


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<PAGE>

markets in the industry. The Company believes it offers the broadest line of
test handling products to the semiconductor industry, addressing the full
spectrum of the industry device types, IC package types and media transport
types. The Company's test handler products are complementary with minimal
overlap of application and can be distributed and serviced through a common
organization for efficiency.

         GRAVITY FEED TEST HANDLERS

         5500 SERIES. The Company's newly developed 5500 Series of dual site
gravity feed test handlers for analog and logic IC applications addresses a wide
range of IC packages including SOPs and micro leadless package types. These
package types constitute the largest segment of all surface mount ICs and one of
the fastest growing new surface mount packages, respectively. These handlers
compete most favorably in high-volume applications and their high throughput
rates are an added advantage in relatively short test time applications. Models
within this series vary on simple adaptability to different contacting methods
to excel in the digital and analog applications, including the rapidly expanding
telecommunications arena. These methods adapt to third party socket, trace on
board and to internally developed proprietary contactors providing
cost-effective solutions to a wide range of customer test requirements. The
temperature range available for thermal conditioning, using mechanical
refrigeration, is from -55 degrees C to +155 degrees C. The Company expects to
increase the flexibility of this product by offering ergonomically friendly bulk
and tube input and output options in the near future.

         5050 SERIES. The Company's 5050 Series of gravity feed test handlers
for analog and logic IC applications addresses a wide range of SOP package
types, which constitute the largest segment of all surface mount ICs. These
handlers compete most favorably in high-volume applications and their high
throughput rates are an added advantage in relatively short test time
applications. Models within this series can be configured for different IC
package sizes, and thermal conditioning requirements in order to provide
cost-effective solutions to a wide range of customers. The temperature range
available for thermal conditioning, using mechanical refrigeration or LN2, is
from -55 degrees C to +155 degrees C. The Company also offers dual test site and
quad test site capability within its 5050 Series of handlers to increase
productivity and reduce testing costs in certain applications.

         PICK-AND-PLACE TEST HANDLERS

         SERIES DTX. The Series DTX test handler is a pick-and-place,
high-volume test handler for memory and logic ICs. The DTX test handler
addresses the newest form of IC package types used for memory devices, including
chip scale packages ("CSP") and micro ball grid array ("uBGA")-type packages,
and can be adapted for strip or panel formats. Some of these new package types
cannot be effectively processed on older generation pick-and-place test
handlers. The DTX test handler provides multiple temperature massively parallel
testing using the Company's new proprietary conductive thermal technology. The
DTX test handler can be configured with up to 64 test sites. The output can be
configured to sort tested ICs in three bulk categories and 13 individual sort
categories. The temperature range available for thermal conditioning, using
mechanical refrigeration, is from -55 degrees C to +155 degrees C. The DTX test
handler's horizontal tray based system design provides package protection with
input and output modules capable of automatically loading and unloading trays.

         MODELS M3200 AND M3200S. The Model M3200 test handler is a
pick-and-place, high-volume test handler for a wide range of memory ICs
including thin small outline packages ("TSOP"). The M3200 test handler addresses
a wide range of IC package types that cannot be processed on most gravity feed
test handlers. The M3200 test handler provides multiple temperature testing with
up to 32 test sites. The temperature range available for thermal conditioning is
from -55 degrees C to +155 degrees C. The M3200 test handler's horizontal tray
based system design provides package protection with input and output modules
capable of automatically loading and unloading tubes or trays. The Model M3200S
test


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handler incorporates the M3200 thermal chamber and test area, and has an
advanced input/output specifically designed to address the newest form of IC
package types used for memory devices, including CSP and uBGA that cannot be
effectively processed on older generation pick-and-place test handlers.

         MODEL 3000. The Model 3000 test handler is a pick-and-place test
handler for analog, logic and microcomponent ICs in SOP, QFP, BGA and pin grid
array ("PGA") packages, which allows for significantly increased throughput as
compared to single site test handlers. The 3000 test handler provides multiple
temperature and parallel testing using a conventional oven conduction thermal
technique. The 3000 test handler has dual test sites, and can be configured to
sort tested ICs in up to 4 sort categories. The temperature range available for
thermal conditioning, using mechanical refrigeration, is from -55 degrees C to
+155 degrees C. The 3000 test handler features the Soft-Touch Probe(TM) to
handle the most fragile IC packages. Devices are transported with their leads
up, virtually eliminating the possibility of lead damage. The 3000 test handler
features "plunge to board"-type contacting, and offers complete electrostatic
discharge protection. The 3000 test handlers can be modified with change kits,
typically within 15 minutes, to accommodate nearly every IC package
configuration being manufactured in volume today.

         1000 SERIES. The 1000 Series pick-and-place test handlers are offered
in a full range of temperature options for thermal conditioning, and can be
configured to gently handle a wide variety of analog, logic and microcomponent
ICs in SOP, QFP, BGA and PGA packages. The 1000 Series test handlers feature the
Soft-Touch Probe(TM) to safely and reliably handle the most fragile CSP IC
packages. Devices are transported with their leads up, virtually eliminating the
possibility of lead damage. The 1000 Series test handlers feature "plunge to
board"-type contacting, and offer complete electrostatic discharge protection.
The 1000 Series test handlers can be modified with change kits, typically within
15 minutes, to accommodate nearly every IC package configuration being
manufactured in volume today.

         MODEL QT. The Model QT pick-and-place test handler is a bench-top sized
machine designed to accommodate small lot production runs and engineering
characterization testing. The QT test handler can be configured for a wide range
of device packages smaller than 2.5 inches by 2.5 inches, including ICs and
discrete electronic components. The QT test handler input can accept ICs from
metal or plastic tubes, a custom device tray, or a bulk bowl feeder. The QT test
handlers are offered with several different options for contacting, including
"plunge to board"-type contacting.

         2000 SERIES. The 2000 Series of pick-and-place test handlers are
designed for production testing of transister ("TO")-type discrete electronic
components. The 2000 Series test handlers can be configured for up to four test
sites and a variety of options for contacting. The 2000 Series test handlers are
offered with a number of options for input, including bulk bowl feeders or
tubes. The output options include bulk, tube, and radial tape and reel. Other
options include the capability to perform vision inspection of the coplanarity
of leads and to mark individual devices with a laser marking system.

         5000 SERIES. The 5000 Series of pick-and-place test handlers are
designed for production testing of small outline transistor ("SOT")-type
discrete electronic components. The 5000 Series test handlers can be
configured for up to four test sites and a variety of options for contacting,
including "plunge to board"-type contacting. The 5000 Series test handlers
are offered with a bulk bowl feeder input and a variety of output options
including bulk, tube, or radial tape and reel. Tested devices can be sorted
into up to 19 programmable categories. Other options include the capability
to perform vision inspection of the coplanarity of leads and to mark
individual devices with a laser marking system.

         THERMAL FORCING SYSTEM HANDLER

         In 1999, the Company introduced a manual thermal forcing system ("TFS")
which utilizes conductive thermal control to maintain accurate temperature set
points during device testing or characterization. The TFS addresses engineering
and low-volume production applications for a wide range of package types,
including PGAs, BGAs or bare die.


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CHANGE KITS, UPGRADES AND SPARE PARTS

         The Company has an ongoing demand for IC package change kits for its
installed test handler equipment, including test handlers no longer included in
its active product line. The Company sells a variety of change kits to
accommodate the growing variety of IC packages used by the IC industry. The
demand for change kits is driven by the introduction of new IC package types and
increased production volumes experienced by the Company's end customers. Also
included in change kits are upgrade kits to enhance the performance of installed
equipment. Spare parts are sold with new orders as kits or can be purchased at
any time as piece parts or in kit form as required.

IC AUTOMATION PRODUCTS

         The Company believes that the growing number and volume of fine pitch
SO type ICs and other delicate BGA packages is driving a demand for automated
equipment for all IC final manufacturing processes. Existing processing
equipment often will not accommodate these package types or the numerous tray
configurations used to transport the ICs. The Company believes that its IC
Automation product line offers the most effective handling technology to
automate these manufacturing processes for increasingly difficult to handle
newer generation ICs.

         4800 SERIES. The 4800 Series is a line of products used to automate the
loading and unloading of burn-in boards. Burn-in boards vary in size and
density, and are used to place individual ICs into a convection oven for an
extensive reliability screening and stress testing procedure known as "burn-in."
Burn-in board automation products take untested ICs out of trays or other media,
place them into sockets on a burn-in board, and then lock the socket. After the
burn-in test is complete, the machine removes tested ICs from the burn-in board
sockets and sorts the ICs according to the results of the test. The burn-in
process screens for early failures by operating the IC at elevated voltages and
temperatures, usually at 125 degrees C, for periods typically ranging from 12 to
48 hours. Burn-in systems can process thousands of ICs simultaneously, utilizing
multiple boards. Most leading-edge microprocessors, microcontrollers, digital
signal processors, and memory ICs undergo burn-in testing.

         The 4800 Series comes in a single pick-up head version, a dual-head
version, five-head version and a recently introduced ten-head version. The
single and dual head models are best suited for large IC packages or for those
applications requiring a quick conversion of the machine to handle a different
IC package. The five-head and ten-head systems are best suited to very high
volume production applications. All are available with a variety of input and
output options, including tubes, sleeves, or trays. Package positioning stations
ensure device alignment into socket and tray. Each version can be configured to
identify a burn-in board using bar coding, resistor array, or diode array. An
optional stacked burn-in board elevator and trolley allows the system to process
up to 32 burn-in boards without any operator intervention.

         IC AUTOMATION PRODUCTS FOR OEMS. The Company began the development of
its current IC Automation product line in 1990. This product line is marketed to
other semiconductor equipment manufacturers and has been incorporated in trim
and form, marking, mark curing, lead inspection, mark inspection, lead
conditioning, media transfer and prom programming equipment to accommodate
various device characteristics and media packaging. The Company's IC Automation
modules currently consist of a series of robotic electromechanical handling
modules, each designed to perform a specific handling function. Together these
modules perform nearly all of the handling functions necessary for the various
IC manufacturing processes. The principal automation modules are:
pick-and-place; tray transport; conveyor belt; tray stacker; tray un-stacker;
inverting end effector; and taping module. Each handling module has a
microprocessor that directs the handling module's function and communicates with
other


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modules through a proprietary software protocol that enables the transfer of ICs
between modules in a logical and efficient manner.

         The IC Automation handling modules can be readily assembled into
systems configured to provide nearly any IC routing pattern required by an IC
processing application, and can be readily integrated as a component of the
processing equipment. This generic nature of the IC Automation handling modules
allows the Company to provide a versatile, cost effective automation solution to
IC processing equipment OEMs that overcomes the handling automation challenges
presented by more fragile IC package types. The IC Automation modules can also
be adapted to provide an automated linkage between IC manufacturing processes,
thus offering the potential for seamless automated handling of ICs from trim and
form to packaging for shipment.

SPECIALTY TEST EQUIPMENT

         RELIABILITY TEST PRODUCTS

         Since the Company acquired its reliability test systems product line in
December 1993, it has improved product performance to satisfy the needs of its
customers. The IC industry's demand for higher performance devices with smaller
circuit geometries has led to significant technological changes in the materials
and processes used to manufacture ICs, including an emerging shift to copper
materials for the minute circuitry of devices. These changes in technology,
along with IC user demand for increased reliability, have created a need for
increasingly sophisticated reliability testing of IC designs and manufacturing
processes. The reliability test equipment product line includes a variety of
system configurations with which IC manufacturers can force precise levels of
voltage and current through ICs, collect and analyze relevant data, and predict
lifetime performance of ICs. This equipment can be utilized to perform
reliability testing of packaged and unpackaged ICs. The Company has reliability
test equipment installed at 19 of the top 20 semiconductor manufacturers in the
world.

         In 1998, the Company formally introduced its Model 1164, including a
suite of applications for customers to perform a variety of tests. The Model
1164 is a fundamentally improved design from the Company's previous reliability
test products. The Model 1164 features a modular design that allows for great
flexibility in performing reliability tests, and can test up to 4,096 devices at
a time or perform numerous simultaneous tests on smaller batches of ICs. The
Company believes the Model 1164 is the only reliability tester to use a patented
thermal mini chamber and proprietary high temperature electronic contactors to
test semiconductor reliability structures up to 400 degrees C. The copper system
has been shipping in volume since the fourth quarter of 1999.

         In mid-1999, the Company also developed a new test module for the Model
1164 for use in the production testing of MR heads used in computer disc drives.
This is a new market for the Company and the Company believes that it is
currently well positioned to take advantage of any opportunities that may be
available.


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<PAGE>

         ENVIRONMENTAL TEST PRODUCTS

         The Company acquired its environmental test equipment product line from
EJ Systems in December 1995, which developed the line in response to a trend
toward higher power and higher speed device applications. The corresponding
increase in power dissipation resulted from increased device complexity (more
circuits) within smaller geometries. This phenomenon is especially evident in
high pin count application-specific integrated circuits ("ASICs") and
microprocessors. This high degree of power dissipation (heat) led to unique
thermal conditioning problems in the testing of such devices. EJ Systems
developed environmental test equipment that permitted individual IC temperature
control using a conduction (direct contact) method rather than the traditional
convection (forced hot air) method to thermally condition devices. These
techniques were patented and incorporated into the BAK-PAK(TM) Burn-In Systems.
The demand for the Company'S BAK PAK System declined significantly in 1999, and
the Company will discontinue the BAK PAK product line in early 2000 when it
closes its Lawrence operations.

COMPETITION

         The semiconductor capital equipment market is highly competitive. In
the market for test handler products, the Company competes with a number of
companies ranging from very small businesses to large companies, some of which
have substantially greater financial, manufacturing, marketing and product
development resources than the Company. Some of these companies manufacture and
sell both testers and test handlers. The Company believes its test handlers are
compatible with all major testers, including those manufactured by companies
that sell both testers and test handlers. The particular companies with which
the Company competes vary with the Company's different markets, with no one
company dominating the overall test handler market. The companies with which the
Company competes most directly in the surface mount IC test handler market
include Advantest Corporation, Cohu, Inc., Multitest Electronic Systems GmbH and
Micro Component Technology, Inc. The Company also competes with Ismeca S.A. and
Tesec Corporation in the market for test handlers configured to handle passive
and discrete electronic components.

         The Company competes for test handler sales primarily on the basis of
effective handler throughput, cost of ownership, temperature accuracy, contactor
integrity and other performance characteristics of its products, the breadth of
its product lines, the effectiveness of its sales and distribution channels and
its customer service. The Company believes that it competes favorably on all of
these factors.

         The market for burn-in board automation products is highly competitive.
The Company competes with a number of companies ranging from very small
businesses to large companies, some of which have substantially greater
financial, manufacturing, marketing and product development resources than the
Company. The companies with which the Company competes most directly in this
market include Schlumberger Ltd., SIPA, S.p.a., and Todo Seisakusho, Ltd.

         The Company competes for burn-in board automation product sales
primarily on the basis of effective throughput, cost of ownership, versatility,
and other performance characteristics of its products,


                                       9
<PAGE>

the breadth of its product line, the effectiveness of its sales and distribution
channels and its customer service.

         The Company continues to believe that the market for its IC Automation
products sold on an OEM basis has no clearly defined commercial competitors
offering similar automated handling modules to the IC industry. Historically,
OEMs supplying equipment for IC manufacturing processes have developed custom or
semi-custom handling components. Many of these OEMs have internal development
capability for automated handling and many engineering companies also have
automated handling development capability. The Company believes, however, that
its IC Automation product line of generic automation modules offers OEMs a
viable solution for their new automated handling requirements. The Company
believes the economics, the current availability and the effectiveness of its IC
Automation products provide strong incentives to the Company's OEM customers to
forego new product development and to use the Company's IC Automation handling
modules.

         The market for the Company's reliability test systems is also highly
competitive and the Company's competitors include QualiTau, Ltd. and Micro
Instruments, Inc. The Company competes for reliability test system sales on the
basis of technology, price, delivery, system flexibility, and overall system
performance and believes it competes favorably on all of these factors.

         There are also a number of companies that manufacture and sell
conventional burn-in equipment in the United States, which compete with the
Company's environmental test equipment product line, including Aehr Test
Systems, Inc. and Reliability, Inc. The Company is not aware of any competitors
that provide burn-in equipment which addresses the combined needs of high-power
dissipation and high-performance while maintaining sufficiently accurate thermal
conditioning.

MANUFACTURING AND SUPPLIES

         The Company manufactures test handlers, reliability test equipment, and
certain of its IC Automation products in North St. Paul, Minnesota. It also
currently manufactures certain of its test handler products at its facilities in
San Diego, California, and Grand Prairie, Texas. After the Company closes its
Grand Prairie, Texas facility in March 2000, products currently manufactured at
this facility will be manufactured at the Company's Dallas, Texas facility. The
Company's IC Automation products used for burn-in board applications are
manufactured in Dallas, Texas. The Company's environmental test equipment and
TFS products are currently manufactured in Lawrence, Massachusetts. After the
Company closes and vacates the Lawrence facility in May 2000, the environmental
test equipment will be discontinued, and the TFS products and the related core
thermal technology will be transferred to the Company's North St. Paul facility.
The Company's manufacturing operations consist of procurement and inspection of
components and subassemblies, assembly and extensive test of finished products.
Quality and reliability are emphasized in both the design and manufacture of the
Company's products. This emphasis is reflected in the certification of the
Company's North St. Paul facility in March 1995, and its San Diego and Lawrence
facilities in 1998 under the ISO 9001 certification criteria established by the
European Community for the standardization of manufacturing documentation and
processes. Successful re-certification audits at all three of these facilities
were achieved in 1999.

         All components and subassemblies are inspected for mechanical and
electrical compliance to Company specifications. All finished products are
tested against Company and customer specifications, and fully assembled test
handler products are tested at all temperatures for which they are designed and
with all the IC packages to be accommodated. Where appropriate, the Company's
products are shipped in custom-engineered protective packaging to minimize
potential damage during shipment.


                                       10
<PAGE>

         A significant portion of the components and subassemblies of the
Company's products, including PC boards, refrigeration systems, vacuum pumps and
contactor elements, are manufactured by third parties on a subcontract basis. As
a part of the Company's total quality management program, it has an ongoing
supplier quality program under which it selects, monitors and rates its
suppliers, and recognizes suppliers for outstanding performance.

         Certain components are currently available from only a limited number
of sources. The Company believes it may not always be able to replace all of its
suppliers within a time period consistent with its business requirements. The
Company attempts to keep an adequate supply of critical components in its
inventory to minimize any significant impact the loss of a supplier may cause.

CUSTOMERS

         The Company relies on a limited number of customers for a substantial
percentage of its net sales. In 1999, the Company's top three customers
accounted for approximately 30% of its net sales. In 1998, the Company's top
three customers accounted for approximately 37% of its net sales. In 1997, the
Company's top three customers accounted for approximately 44% of its net sales.
The loss of or a significant reduction in orders by these or other significant
customers, including reductions due to market, economic or competitive
conditions in the semiconductor industry, could adversely affect the Company's
financial condition and results of operations.

SALES AND MARKETING

         The Company markets its test handler products, burn-in board automation
products, environmental test equipment and reliability test systems through a
combination of direct salespeople and independent manufacturers' representatives
and distributors. The Company sells its IC Automation products directly to OEM
customers through its internal sales force. As of December 31, 1999, the Company
had 16 U.S. manufacturers' representatives with an average of 3 salespeople each
located throughout the U.S. and Canada in areas critical to the Company's
success. International distributors are located in the United Kingdom, France,
Germany, Switzerland, Holland, Sweden, Japan, Taiwan, Thailand, Malaysia, Korea,
Singapore, Hong Kong, China and the Philippines.

         The Company's direct sales organization, comprised of 14 salespeople,
coordinates the activities of the Company's manufacturers' representatives and
distributors and actively participates with them in selling efforts. This
enables the Company to establish strong direct ties with its customers. The
Company provides sales and technical support to its manufacturers'
representatives and distributors through the Company's sales and service
locations in North St. Paul, Minnesota; San Diego and Santa Clara, California;
Landisville, Pennsylvania; Austin and Dallas, Texas; Saugus, Marblehead and
Lawrence, Massachusetts; and Singapore.

         The Company's marketing efforts include participation in industry trade
shows and production of product literature and sales support tools. These
efforts are designed to generate sales leads for the Company's manufacturers'
representatives, distributors and direct salespeople.

         International shipments accounted for 29%, 25% and 41% of the Company's
net sales in 1997, 1998, and 1999, respectively. In addition, it is not uncommon
for U.S. customers to take delivery of products in the U.S. for immediate
shipment to international sites, particularly the IC Automation products that
are sold on an OEM basis. Most of the Company's international shipments are made
to international sites of U.S. electronic component manufacturers, although
there is a growing foreign customer base included in the Company's international
sales.


                                       11
<PAGE>

         All of the Company's international sales are invoiced in U.S. dollars
and, accordingly, have not historically been subject to fluctuating currency
exchange rates. Credit limits have been established from time to time on the
Company's international distributors, who purchase products from the Company and
resell to end users. Irrevocable letters of credit are often used to minimize
credit risk and to simplify the purchasing/payment cycle.

RESEARCH AND DEVELOPMENT

         The Company believes it must continue to enhance, broaden and modify
its existing product lines to meet the constantly evolving needs of the
semiconductor equipment market. To date, the Company has relied both on internal
development and acquisitions of technology and product lines to extend its
product lines, increase its customer base, avoid reliance on any single
semiconductor equipment market segment, and develop its IC Automation products
that are sold on an OEM basis. The IC Automation product line required the
development of a software protocol that plays an important role in the success
of these products. Software is a critical element in the Company's reliability
test equipment and software development continues to play an increasingly
important role in test handling and burn-in board automation products. The
Company intends to bring additional resources to this area as required.

         Product development expenses are typically split approximately 50% for
new product development and 50% for continuation engineering. In 1997, the
Company completed the initial development of the Model 1164 reliability tester
and added certain models to the 5000 and 7000 Series of test handlers. In 1998,
the Company substantially completed the Model 3000 and the Model M3200S test
handlers, introduced a new version of the 4800 burn-in board loader/unloader,
and developed new test capabilities for the Model 1164 reliability test system.
In 1999, the Company introduced the DTX Series massively parallel pick-and-place
test handler, the 4800 ten-head burn-in board loader/unloader, the 5500 dual
site gravity test handler for SOP and the new micro leadless devices, and a
copper capable version of the Model 1164. The Company's continuing
engineering efforts include the development of additional change kits to meet
the expanding families of IC package types, further advancement of contactor
technologies, and increasing features and performance options for existing
equipment.

         The Company expenses all research and development costs, including
costs for software development as incurred. In 1997, 1998, and 1999, the
Company's expenses relating to research and development were approximately $10.5
million, $12.2 million and $9.8 million, respectively. Over time, the Company's
objective is to invest approximately 13% to 15% of its net sales in research and
development, although the percentage may be higher in periods of reduced sales.
The Company employed 97 engineering personnel as of December 31, 1999.

INTELLECTUAL PROPERTY RIGHTS

         The Company attempts to protect the proprietary aspects of its products
with patents, copyrights, trade secret law and internal nondisclosure
safeguards. The Company currently holds several U.S. patents covering certain
features of its handling systems and IC Automation modules and the contactor
elements incorporated in certain of its test handlers and for elements of its
environmental conditioning chambers. The source code for the software contained
in the Company's products is considered proprietary and is not furnished to
customers. The Company has also entered into confidentiality agreements with
each of its key employees. Despite these restrictions, it may be possible for
competitors or users to copy aspects of the Company's products or to obtain
information that the Company regards as a trade secret.

         There is a rapid pace of technological changes in the microelectronics
industry. The Company believes that patent, trade secret and copyright
protection are less significant to its competitive position than factors such as
the knowledge, ability and experience of the Company's personnel, new product


                                       12
<PAGE>

development, frequent product enhancements, name recognition and ongoing,
reliable product maintenance and support.

BACKLOG

         The Company's backlog, which consists of customer purchase orders that
the Company expects to ship within the next 12 months, was approximately $13.5
million as of December 31, 1999 compared to $15.0 million as of December 31,
1998. Because all purchase orders are subject to cancellation or delay by
customers with limited or no penalty, the Company's backlog is not necessarily
indicative of future revenue or earnings.

EMPLOYEES

         As of December 31, 1999, the Company had 310 employees, including 133
in manufacturing, 97 in engineering and product development, 44 in sales,
marketing and customer service, and 36 in general administration and finance.
None of the Company's employees is represented by a labor union or is subject to
any collective bargaining agreement. The Company has never experienced a work
stoppage and believes that its employee relations are satisfactory.

CERTAIN IMPORTANT FACTORS

         In addition to the factors identified above, there are several
important factors that could cause the Company's actual results to differ
materially from those anticipated by the Company or which are reflected in any
forward-looking statements of the Company. These factors, and their impact on
the success of the Company's operations and its ability to achieve its goals,
include the following:

         1.       the Company's dependence on the microelectronics market and
                  the capital expenditures of electronic component
                  manufacturers;

         2.       the ability of the Company to manage its growth and to
                  integrate and assimilate recent and future acquisitions;

         3.       new product development cycles and market acceptance of new
                  products;

         4.       potential fluctuations in the Company's operating results
                  based on factors such as cancellation or rescheduling of
                  orders, seasonal fluctuations in business activity, and
                  product announcements by the Company or by competitors;

         5.       the impact of competition in the test handler, IC Automation,
                  reliability test equipment and environmental test equipment
                  markets;

         6.       the effect of customer concentration and the loss of any
                  significant customer on the Company's sales; and

         7.       volatility of the Company's stock price based on factors
                  including developments in the microelectronics industry and
                  high-technology industries generally, as well as fluctuations
                  in the Company's quarterly operating results.


                                       13
<PAGE>

ITEM 2.           PROPERTIES.

          The Company conducts manufacturing, product development, sales,
marketing and field service operations in North St. Paul, Minnesota. The Company
currently occupies approximately 45,000 square feet in North St. Paul under a
lease which expires in March 2006, with an annual rent of approximately
$240,000. The lease includes an option for the Company, exercisable at any time
during the initial lease term, to require construction of an additional
approximately 45,000 square feet for lease at the same rental rate. The
Company's corporate functions, and certain sales, marketing and development
activities are conducted in an adjacent, 30,000 square foot facility under a
lease that expires in March 2006, with an annual rent of approximately $198,000.

         The Company conducts manufacturing, product development, and certain
sales and marketing activities in approximately 29,400 square feet in Dallas,
Texas, under a lease that expires in April 2003. The annual rent is
approximately $203,000.

         The Company currently conducts manufacturing, product development, and
certain sales and marketing activities in a facility with approximately 26,600
square feet in Grand Prairie, Texas. The facility is leased from a partnership
controlled by a former officer of the Company who resigned in January 2000. The
lease provides for an annual rent of $133,000 and expires in June 2003. The
Company believes the lease terms for this facility are comparable or favorable
to the rates that could be obtained for similar properties in that area. In
January 2000, the Company announced that it is transferring its Grand Prairie
operations to its Dallas operations and closing the Grand Prairie facility. The
Company expects to vacate the Grand Prairie facility by March 31, 2000. The
Company and the landlord are utilizing a property management firm to locate a
new tenant for this facility. Based on its favorable location, condition and
design, the Company believes that the facility will be re-marketed within nine
months.

         The Company conducts manufacturing, product development and certain
sales and marketing activities in a 45,000 square foot facility located in
Poway, California under a lease that expires in October 2009, with an annual
rent of approximately $421,000. The Company also leases and occupies
approximately 3,000 square feet of space in Santa Clara, California under a
lease that expires in May 2000, with a monthly rent of approximately $4,800. The
Company uses this space for sales and field service operations.

         In Lawrence, Massachusetts, the Company currently conducts
manufacturing, sales and marketing and product development activities for its
environmental test product line. The Company leased approximately 61,500 square
feet under a sublease that expired in December 1999. The Company arranged to
continue leasing this facility on a month-to-month basis in 2000. In January
2000, the Company announced that it would cease the operations in Lawrence,
Massachusetts and expects to vacate this facility by approximately May 15, 2000.

ITEM 3.           LEGAL PROCEEDINGS.

          There are no material pending legal, governmental, administrative or
other proceedings to which the Company is a party or of which any of its
property is the subject.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of fiscal year 1999.


                                       14
<PAGE>

ITEM 4A.          EXECUTIVE OFFICERS OF THE REGISTRANT.

         The executive officers of the Company, their ages and the offices held,
as of February 18, 2000 are as follows:

<TABLE>
<CAPTION>
NAME                       AGE      POSITION
----                       ---      --------
<S>                        <C>      <C>
Joseph C. Levesque         55       Chairman of the Board, President and Chief Executive Officer

Darnell L. Boehm           51       Chief Financial Officer, Secretary and Director

Douglas L. Hemer           52       Group Vice President - North St. Paul & San Diego Operations and
                                    Director

Daniel M. Koch             46       Vice President - Worldwide Sales

Gerald C. Clemens          48       Vice President - Reliability Test Products

Kenneth R. Lee             54       President - Lawrence Operations

Keith E. Williams          56       President - Dallas Operations

John J. Pollock            40       Vice President - Corporate Marketing

Stephen P. Weisbrod        59       Vice President - Corporate Technology

Paul H. Askegaard          47       Treasurer

Venu Turlapaty             39       Vice President - Product Planning
</TABLE>

         Mr. Levesque has served as President, Chief Executive Officer and
Chairman of the Company's Board of Directors since 1986. From 1973 to 1986, Mr.
Levesque served in various capacities and most recently as Executive Vice
President of Micro Component Technology, Inc., a manufacturer of integrated
circuit testers and test handlers. Mr. Levesque is also a director of TSI Inc.,
a publicly-held maker of measurement and instrumentation equipment, and serves
on its compensation committee.

         Mr. Boehm has served as Chief Financial Officer, Secretary and as a
director of the Company since 1986. From December 1994 until July 1995, Mr.
Boehm had also assumed executive management responsibilities for the Company's
San Diego operations. Mr. Boehm is also the principal of Darnell L. Boehm &
Associates, a management consulting firm. Mr. Boehm is also a director of each
of Rochester Medical Corporation, a public company, Versa Companies, a
privately-held company and Alpnet, Inc., a public company. Mr. Boehm serves on
the audit and compensation committees of Rochester Medical Corporation and Versa
Companies, and serves on the audit committee of Alpnet, Inc.

         Mr. Hemer has served as a director of the Company since 1986, and has
served as the Company's Group Vice President since August 1998. Prior to this
appointment, he served as the President of the Company's San Diego operations
since February 1997. From May 1, 1996 until February 1, 1997, Mr. Hemer served
as the Company's Chief Administrative Officer. Mr. Hemer was a partner in the
law firm of Oppenheimer Wolff & Donnelly LLP for more than 15 years before
joining the Company. Mr. Hemer is also a director of Versa Companies, a
privately-held company, and serves on its compensation and audit committees.


                                       15
<PAGE>

         Mr. Koch has served as the Company's Vice President - Worldwide Sales
since March 1991. From March 1990 to March 1991, Mr. Koch served as the Vice
President of Sales of Summation, Inc., a company involved with the testing of
integrated circuit boards. From December 1973 to March 1990, Mr. Koch served in
various sales positions and most recently as Vice President of Sales of Micro
Component Technology, Inc.

         Mr. Clemens has served as the Company's Vice President - Reliability
Test Products since July 1995. From September 1993 to July 1995, Mr. Clemens
served as Vice President - Engineering. Mr. Clemens is also the principal of
Clemens Associates, a consulting firm. From August 1991 to September 1992, Mr.
Clemens was a Vice President at Vectorvision, Inc., a software company. From
June 1990 to April 1991, Mr. Clemens was a Vice President at Elke Corporation, a
software company.

         Mr. Lee has served as President of the Lawrence operations since April
1997, and had served in executive management with that division as a consultant
since January 1996. Mr. Lee previously was a principal of Marlboro Associates, a
consulting practice. Mr. Lee was a co-founder of Aseco Corporation and served in
a number of capacities at Aseco Corporation from 1982 to 1994, most recently as
Vice President of Engineering. In January 2000, the Company announced plans to
close its facility in Lawrence, Massachusetts by approximately May 15, 2000. Mr.
Lee will leave the Company upon the closing of that facility.

         Mr. Williams has served as the President of the Dallas operations since
April 1, 1998, when the Company completed its acquisition of the equipment
business of WEB. Mr. Williams co-founded WEB in 1982, and served as its
President and CEO from its inception until WEB was acquired by the Company.
Pursuant to a letter agreement dated April 1, 1998, the Company offered, and Mr.
Williams accepted, the position of President of the Dallas operations for a
minimum period of three years. Such letter also provides that Mr. Williams
cannot compete with the Company for the three-year period of the agreement.

         Mr. Pollock has served as the Vice President - Corporate Marketing
since August 1998. He served previously as the General Manager of the Arden
Hills operations, and general manager of the North St. Paul operations. From
September 1996 to September 1997, Mr. Pollock was the Business Unit Manager of
the IC Automation products group. From September 1995 to September 1996, Mr.
Pollock was a product director within the Company's IC Automation products
group. From 1985 to 1995 Mr. Pollock was employed in various product engineering
and product marketing positions at Rosemount Aerospace Inc., a supplier of
measurement and instrumentation products to the aerospace industry.

         Mr. Weisbrod has served as the Vice President - Corporate Technology
since March 1998. From 1994 to 1998, Mr. Weisbrod was Vice President for
systems, and a member of the board of directors, of Game Financial Corporation,
a provider of financial services to the gaming industry. From 1992 to 1994 Mr.
Weisbrod was President and Chief Operating Officer for Coda Music Technology, a
producer of technology-based music instruction systems.

         Mr. Askegaard has served as the Company's Treasurer since February
1992. From October 1986 to February 1992, Mr. Askegaard served as the Company's
Corporate Controller.

         Mr. Turlapaty has served as the Company's Vice President - Product
Planning since October 1999. From August 1997 to September 1999, Mr. Turlapaty
served as Director, Technology Planning for the Company. From July, 1994 to July
1997 he served as Engineering Manager for the Company's Reliability Test
Products Group. From March 1993 to June 1994 Mr. Turlapaty was Principal
Electrical Engineer and Project Manager in the Company's North St. Paul
operations.


                                       16
<PAGE>

                                     PART II

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS.

         The information under the caption "Price Range of the Company's Common
Stock" on page 28 of the Company's 1999 Annual Report is incorporated herein by
reference. The prices reflected in the table presented in the 1999 Annual Report
do not include adjustments for retail mark-ups, mark-downs or commissions.

         The Company did not have any unregistered sales of equity securities
during the fourth quarter of 1999.

ITEM 6.           SELECTED FINANCIAL DATA.

         The information under the caption "Selected Consolidated Financial
Data" on page 28 of the 1999 Annual Report is incorporated herein by reference.

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.

         The information under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 8 through 15 of the
Company's 1999 Annual Report is incorporated herein by reference.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The information under the caption "Quantitative and Qualitative
Disclosure about Market Risk" on pages 14 through 15 of the Company's 1999
Annual Report is incorporated herein by reference.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The following Consolidated Financial Statements of the Company and the
Independent Auditor's Report thereon are incorporated herein by reference from
the pages indicated in the Company's 1999 Annual Report:

         Report of Independent Accountants -- page 15.

         Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997 -- page 16.

         Consolidated Balance Sheets as of December 31, 1999 and 1998 -- page
17.

         Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997-- page 18.

         Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997 -- page 19.

         Notes to Consolidated Financial Statements -- pages 20 to 27.


                                       17
<PAGE>

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

         None.

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information under the captions "Election of Directors --
Information About Nominees" and "Election of Directors -- Other Information
About Nominees" in the Company's 2000 Proxy Statement is incorporated herein by
reference.

         The information under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's 2000 Proxy Statement is incorporated
herein by reference.

         The information under the caption "Item 4A. Executive Officers of the
Registrant" on page 15 of this Annual Report on Form 10K is incorporated herein
by reference.

ITEM 11.          EXECUTIVE COMPENSATION.

         The information under the captions "Election of Directors --
Compensation of Directors" and "Executive Compensation and Other Benefits" in
the Company's 2000 Proxy Statement is incorporated herein by reference.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

         The information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's 2000 Proxy Statement is
incorporated herein by reference.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information under the caption "Certain Relationships and Related
Transactions" in the Company's 2000 Proxy Statement is incorporated herein by
reference.

                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                  FORM 8-K

         (a) 1.   FINANCIAL STATEMENTS OF REGISTRANT.

         The following Consolidated Financial Statements of the Company and the
Independent Auditor's Report thereon are incorporated herein by reference from
the pages indicated in the Company's 1999 Annual Report:

         Report of Independent Accountants -- page 15.

         Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997 -- page 16.


                                       18
<PAGE>

         Consolidated Balance Sheets as of December 31, 1999 and 1998 --
page 17.

         Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997-- page 18.

         Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997 -- page 19.

         Notes to Consolidated Financial Statements -- pages 20 to 27.

         (a) 2.   FINANCIAL STATEMENT SCHEDULES OF REGISTRANT.

         The following financial statement schedule is included herein and
should be read in conjunction with the financial statements referred to above:

         Financial Statement Schedule:

                  II.  Valuation and Qualifying Accounts

         All other schedules are omitted as the required information is
inapplicable or the information is presented in the financial statements or
related notes.

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULES

To the Board of Directors
of Aetrium Incorporated

Our audits of the consolidated financial statements referred to in our report
dated January 31, 2000, appearing on page 15 of the 1999 Annual Report to
Shareholders of Aetrium Incorporated (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, such Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota
January 31, 2000


                                       19
<PAGE>

                                   SCHEDULE II

                              AETRIUM INCORPORATED

                        VALUATION AND QUALIFYING ACCOUNTS

                  YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999

<TABLE>
<CAPTION>
                                                                ADDITIONS
                                                     --------------------------------
                                        BALANCE AT      CHARGED TO
   DESCRIPTION                         BEGINNING OF      COSTS AND      ACQUISITION      DEDUCTIONS       BALANCE AT
                                          PERIOD         EXPENSES       RELATED (1)                     END OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>             <C>              <C>            <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
                         1997              799,400              0           50,000        (589,800)         259,600
                         1998              259,600        545,000           50,000        (317,600)         537,000
                         1999              537,000         57,000                0         (75,000)         519,000

INVENTORY OBSOLESCENCE RESERVE:
                         1997            2,015,133      1,076,296           10,000       (1,116,329)      1,985,100
                         1998            1,985,100      3,290,200                0       (1,646,500)      3,628,800
                         1999            3,628,800      3,460,800                0       (3,600,200)      3,489,400

WARRANTY RESERVE:
                         1997              610,576         25,000          235,000         (308,376)        562,200
                         1998              562,200        661,000          120,000         (448,400)        894,800
                         1999              894,800        826,300                0         (899,700)        821,400
</TABLE>

(1) Reserve increases related to the inclusion of newly-acquired businesses.

         (a) 3.   EXHIBITS.

         The exhibits to this Report are listed in the Exhibit Index attached
hereto.

         A copy of any of the exhibits listed or referred to above will be
furnished at a reasonable cost to any person who was a shareholder of the
Company as of March 27, 2000, upon receipt from any such person of a written
request for any such exhibit. Such request should be sent to Aetrium
Incorporated, 2350 Helen Street, North St. Paul, Minnesota 55109; Attn.:
Shareholder Relations.

         The following is a list of each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(a)(3):

         1.       Form of Incentive Stock Option Agreement (incorporated by
                  reference to Exhibit 10.6 to the Company's Form 10-KSB for the
                  year ended December 31, 1993) (File No. 0-22166).

         2.       Form of Non-Statutory Stock Option Agreement (incorporated by
                  reference to Exhibit 10.7 to the Company's Form 10-KSB for the
                  year ended December 31, 1993) (File No. 0-22166).

         3.       1993 Stock Incentive Plan, as amended (incorporated by
                  reference to Exhibit 10.2 to the Company's Annual Report on
                  Form 10-K for year ended December 31, 1997) (File No.
                  0-22166).


                                       20
<PAGE>

         4.       Salary Savings Plan (incorporated by reference to Exhibit 10.3
                  to the Company's Registration Statement on Form SB-2) (File
                  No. 33-64962C).

         5.       Employee Stock Purchase Plan (incorporated by reference to
                  Exhibit 99.1 to the Company's Registration Statement on Form
                  S-8) (File No. 33-74616).

         6.       Employment Agreement dated April 1, 1986 between Joseph C.
                  Levesque and the Company (incorporated by reference to Exhibit
                  10.6 to the Company's Registration Statement on Form SB-2)
                  (File No. 33-64962C).

         7.       Letter Agreement dated April 1, 1998 between the Company and
                  Keith E. Williams. (incorporated by reference to Exhibit 10.18
                  to the Company Form 10-K for the year ended December 31, 1998
                  (file No. 0-22166)).

         (b)      REPORTS ON FORM 8-K.

         The Company did not file any Current Reports on Form 8-K during the
fourth quarter of 1999.


                                       21

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   AETRIUM INCORPORATED


Date:  March 27, 2000              By:  /s/ Joseph C. Levesque
                                       --------------------------------------
                                         Joseph C. Levesque
                                         Chief Executive Officer and President
                                         (principal executive officer)

                                   By: /s/ Darnell L. Boehm
                                       --------------------------------------
                                       Darnell L. Boehm
                                       Chief Financial Officer and Secretary
                                       (principal financial and accounting
                                       officer)

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 27, 2000 by the following persons on
behalf of the registrant and in the capacities indicated.

<TABLE>
<CAPTION>
Signature                                       Title
---------                                       -----
<S>                                             <C>
/s/ Joseph C. Levesque                          Chairman of the Board
----------------------------------
Joseph C. Levesque

/s/ Darnell L. Boehm                            Director
----------------------------------
Darnell L. Boehm

/s/ Terrence W. Glarner                         Director
----------------------------------
Terrence W. Glarner

/s/ Andrew J. Greenshields                      Director
----------------------------------
Andrew J. Greenshields

/s/ Douglas L. Hemer                            Director
----------------------------------
Douglas L. Hemer

/s/ Terrance J. Nagel                           Director
----------------------------------
Terrance J. Nagel
</TABLE>


                                       22
<PAGE>

                              AETRIUM INCORPORATED
                   EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>

  ITEM NO.                    ITEM                                             METHOD OF FILING
  --------                    ----                                             ----------------
  <S>          <C>                                               <C>
     3.1       The Company's Restated Articles of                Incorporated by reference to Exhibit 3.1 to the
               Incorporation, as amended.                        Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-64962C).

     3.2       Articles of Amendment to the Company's            Incorporated by reference to Exhibit 3.2 to the of
               Articles Incorporation, as amended                Company's Quarterly Report for the quarter ended
                                                                 September 30, 1998 (File No. 0-22166).

     3.3       The Company's Bylaws, as amended.                 Incorporated by reference to Exhibit 3.2 to the
                                                                 Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-64962C).

     4.1       Specimen Form of the Company's Common Stock       Incorporated by reference to Exhibit 4.1 to the
               Certificate.                                      Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-64962C).

    10.1       1993 Stock Incentive Plan, as amended.            Incorporated by reference to Exhibit 10.2 to the
                                                                 Company's Annual Report on Form 10-K for year ended
                                                                 December 31, 1997 (File No. 0-22166).

    10.2       Salary Savings Plan.                              Incorporated by reference to Exhibit 10.3 to the
                                                                 Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-64962C).

    10.3       Form of Incentive Stock Option Agreement.         Incorporated by reference to Exhibit 10.6 to the
                                                                 Company's Annual Report on Form 10-KSB for the year
                                                                 ended December 31, 1993 (File No. 0-22166).

    10.4       Form of Non-Statutory Option Agreement.           Incorporated by reference to Exhibit 10.7 to the
                                                                 Company's Annual Report on Form 10-KSB for the year
                                                                 ended December 31, 1993 (File No. 0-22166).

    10.5       Employment Agreement dated April 1, 1986,         Incorporated by reference to Exhibit 10.6 to the
               between the Company and Joseph C. Levesque.       Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-64962C).

    10.6       Credit Agreement dated August 11, 1989, between   Incorporated by reference to Exhibit 10.7 to the
               Harris Bank and the Company.                      Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-64962C).
</TABLE>


                                       23

<PAGE>

<TABLE>
<CAPTION>
  ITEM NO.                    ITEM                                             METHOD OF FILING
  --------                    ----                                             ----------------
  <S>          <C>                                               <C>
    10.7       Lease Agreement, dated July 19, 1995, between     Incorporated by reference to Exhibit 10.12 to the
               KAMKO Investments and the Company                 Company's Registration Statement on Form SB-2 (File
                                                                 No. 33-98040).

    10.8       Amendment to Lease Agreement, dated September     Incorporated by reference to Exhibit 10.13 to the
               26, 1995, between KAMKO Investments and           the Company's Registration Statement on Form SB-2
               (File Company No. 33-98040).

    10.9       Industrial Lease Agreement between Parken         Incorporated by reference to Exhibit 10.14 to the
               Investment Company No. One N.V. and Sym-Tek       Company's Registration Statement on Form SB-2 (File
               Systems, Inc., dated as of July 7, 1994           No. 33-98040).

    10.10      First Amendment to Industrial Lease dated July    Incorporated by reference to Exhibit 10.15 to the
               7, 1994 by and between Parken Investment Co.      Company's Registration Statement on Form SB-2 (File
               No. One N.V. c/o CBS Investment Realty Inc. and   No. 33-98040).
               Aetrium Incorporated

    10.11      Employee Stock Purchase Plan.                     Incorporated by reference to Exhibit 99.1 to the
                                                                 Company's Registration Statement on Form S-8 (File
                                                                 No. 33-74616).

    10.12      Agreement of Sublease, dated January 16, 1990,    Incorporated by reference to Exhibit 10.19 to the
               by and between General Signal Technology          Company's Annual Report on Form 10-KSB for year
               Corporation and E.J. Systems, Inc.                ended December 31, 1995 (File No. 0-22166).

    10.13      Asset Purchase Agreement, dated as of March 20,   Incorporated by reference to Exhibit 2.1 to the
               1998, between Aetrium Incorporated and WEB        Company's Current Report on Form 8-K dated April 15,
               Technology, Inc.                                  1998 (File No. 0-22166).

    10.14      Letter Agreement dated April 1, 1998 between      Incorporated by reference to Exhibit 10.18 to the
               Aetrium Incorporated and Keith E. Williams.       Company's Annual Report on Form 10-K for the year
                                                                 ended December 31, 1998 (File No. 0-22166).

    10.15      Indenture dated June 25, 1998 between KAMKO       Incorporated by reference to Exhibit 10.19 to the
               Investments and the Company.                      Company's Annual Report on Form 10-K for the year
                                                                 ended December 31, 1998 (File No. 0-22166).
</TABLE>


                                       24
<PAGE>

<TABLE>
<CAPTION>
  ITEM NO.                    ITEM                                             METHOD OF FILING
  --------                    ----                                             ----------------
  <S>          <C>                                               <C>
    10.16      Standard Industrial/Commercial Single-Tenant      Filed herewith electronically.
               Lease, dated September 18, 1998, between the
               Company and W.H. Pomerado, LLC, including
               addendum and material exhibits to lease.

    10.17      Standard Lease Agreement, dated December 19,      Filed herewith electronically.
               1987, between Crow-Markison 22-27, Limited
               Partnership and WEB Technology, Inc.,
               including all supplements and amendments
               thereto.

    13.1       Excerpts from 1999 Annual Report to               Filed herewith electronically.
               Shareholders.

    21.1       Subsidiaries of the Registrant.                   Incorporated by reference to Exhibit 21.1 to the
                                                                 Company's Annual Report on Form 10-K for year ended
                                                                 December 31, 1997 (File No. 0-22166).

    23.1       Independent Auditors' Consent.                    Filed herewith electronically.


    27.1       Financial Data Schedule.                          Filed herewith electronically.
</TABLE>


                                       25