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, 1997
                                       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: (612) 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 [X].

       As of March 24, 1998, 8,800,153 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 $127,985,370.

                       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 year ended December 31, 1997
(the "1997 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 1998 Annual
Meeting to be held May 19, 1998 (the "1998 Proxy Statement").

<PAGE>


                                     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 in the section below entitled
"Certain Important Factors."

ITEM 1. BUSINESS.

         Aetrium Incorporated ("Aetrium" or 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 are used in the "back-end" of semiconductor
manufacturing processes. The Company's products automate critical functions to
improve manufacturing yield, raise quality levels, reduce manufacturing costs
and increase product reliability.

         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 North St. Paul,
San Diego, and Aetrium FSA divisions. Change kits to adapt the Company's test
handlers to different IC package configurations and to upgrade installed
equipment for enhanced performance also represent a significant part of the
Company's revenue. The Company's second product line consists of its IC
Automation Products, which are produced by the North St. Paul Division. These
products are sold to original equipment manufacturers ("OEMs") to incorporate as
the automated handling components of such OEM's own proprietary equipment for a
variety of other IC processing requirements, such as marking, lead scanning, and
lead trim and form. The Company's third product line is specialty test
equipment, which include reliability test equipment and environmental test
equipment. The Company's reliability test systems 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, Minnesota. The Company's environmental test equipment products
provide burn-in testing of ICs and are produced in the Company's Lawrence
Division.

         The Company's strategy has focused on revenue growth through product
line expansion and customer satisfaction. Company sales have increased at an
average annual compounded growth rate of approximately 35% during the period
from 1986 through 1997. Currently, the Company has an installed base of over
6,000 test handlers, which the Company believes is the second largest installed
base among all test handler manufacturers.

         The Company's revenue growth and expansion of its product lines have
resulted from both internal product development and the acquisition of
complementary businesses, product lines and technologies. Examples of the
Company's internally developed products are the Company's IC Automation handling
modules, introduced in 1991, and the 900A Series pick-and-place test handler.

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         In 1997, the Company completed two acquisitions that expanded its test
handler product lines. In April 1997, Aetrium acquired the broad line of test
handler products produced in its Aetrium FSA Division by acquiring substantially
all of the assets of Forward Systems Automation, Inc. ("FSA"). Since the date of
the acquisition, the Company has focused its efforts on developing and refining
the technologies present at the time of acquisition into a line of standard
product models. Products produced by Aetrium FSA include test handlers for ICs
as well as so-called discrete components, which are a non-semiconductor form of
electronic component. In November 1997, Aetrium acquired a product line of
pick-and-place test handlers by acquiring certain assets and assuming certain
liabilities of the Handler Division of Advantek Inc., which extended Aetrium's
product line of pick-and-place test handlers for non-memory ICs and increased
Aetrium's test handler customer base.

         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, contactor change kits for a wide range of package types in the
largest segment of surface mount ICs, high performance contactors, dual test
site capability, quad test site capability, and more recently, micro small
outline package ("MSOP") test capability. Aetrium also acquired certain test
handler products from Sym-Tek Systems, Inc. ("SymTek") in November 1994, which
allowed Aetrium to enter the memory IC market with both high volume multisite
pick-and-place and extensive multisite gravity feed test handler lines. The
SymTek acquisition also extended Aetrium's line of gravity feed test handlers
for the non-memory IC market.

         The Company acquired its reliability test systems product line through
the purchase of the assets of Sienna Technologies, Inc. ("Sienna Technologies")
in December 1993. At the time of the acquisition, Sienna Technologies' revenue
was declining and customer confidence was eroding due in part to product
performance and customer service issues. Since the acquisition, this product
line has been improved to address performance issues, customer service has
improved, customer confidence has been substantially restored, and gross profit
margins have increased.

         Aetrium acquired environmental test products from E.J. Systems, Inc.
("EJ Systems") in December 1995, and now operates the business as its Lawrence
Division. The division manufactures and distributes environmental conditioning
chambers for burn-in testing of ICs, and provides board assembly and burn-in
testing services for third parties. Since the acquisition, the Company has
substantially increased marketing and product distribution, increased average
selling prices, and improved manufacturing efficiencies.

         Aetrium 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 company certified under the ISO
9001 program established by the European Community. The Company has since
successfully completed recertification audits and preparations have been made
for IS0 9001 certification audits at two of Aetrium's other facilities.

         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 (612) 704-1800.

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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 testing process. The
components are loaded into the handler from tubes or trays and then typically
transported to a temperature chamber within the test handler where they are
thermally conditioned 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.

         Traditionally, test handlers used gravity to move ICs and other
components through the handler system. 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 small outline packages
("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 for either memory or nonmemory 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 traditionally test times
have not been a limiting factor for throughput rates. Test times, however, have
increased as 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
appropriate nonmemory IC applications.

         Test handlers must meet industry criteria for thermal conditioning,
contactor integrity and minimization of lead damage. 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.
Aetrium 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 ICs
referred to as surface mount devices ("SMD") which represent the largest
volumes, the newest IC device types, and the fastest growing market in the
industry. The Company offers the broadest line of test handling products to the
microelectronics industry and, with the combination of Aetrium's North St. Paul,
San Diego and Aetrium FSA designed products, Aetrium addresses the full spectrum
of the industry, including discrete components. Aetrium's test handler products
are complementary in nature with minimal overlap of application and can be
distributed and serviced through a common organization for efficiency.

         GRAVITY FEED HANDLERS

         5050 SERIES. Aetrium's 5050 Series of gravity feed test handlers for
nonmemory 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

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are an added advantage in relatively short test time applications. Models within
this series vary on adaptability to different IC package sizes and
configurations and the temperature range available for thermal conditioning in
order to provide cost effective solutions to a wide range of customer
requirements. 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.

         MODEL 4098. The Model 4098 was first sold by the Company in 1988 and is
a gravity feed handler used for dual in line packages ("DIP"), the highest
volume through-hole package type. In addition, it serves as the base handler for
a number of custom handler designs. It is designed for high volume handling and
provides ambient and hot temperature capability.

         300 SERIES. The 300 Series is a gravity feed test handler which handles
a wide variety of DIP devices. It provides hot and cold thermal conditioning
with a temperature range of -60(degree)C to +150(degree)C with +/-2(degree)C
control capabilities. A menu driven CRT display allows the operator to set up
the handler's operational parameters as well as continually monitor the handler
status. The handler can be programmed to sort devices into user-defined
categories.

         MODEL M4300. The Model M4300 is a gravity feed test handler that
provides parallel testing of up 32 memory devices. The quick load spool design
reduces the number of moving parts in the test environment, eliminating multiple
test site adjustments common to other systems. The Model M4300 systems are
equipped with two separate environmental chambers, independently controlled with
a cold and hot temperature range of -60(degree)C to +150(degree)C.

         PICK-AND-PLACE HANDLERS

         MODEL M3200. The Model M3200 test handler is a pick-and-place,
high-volume production application test handler for memory ICs. The M3200
addresses a wide range of IC package types that cannot be processed on gravity
feed test handlers without special carriers, and provides hot, ambient and cold
parallel testing with up to 32 test sites. Its horizontal tray based system
design provides package protection with input and output modules capable of
automatically loading and unloading tubes or trays.

         MODEL 6400. The Model 6400 pick-and-place handler is designed for
testing 64 memory devices at a time by presenting two trays of 32 devices each
to the tester. The Model 6400 is designed to accommodate 128 devices during
testing. The Model 6400 is produced by the San Diego Division in a joint
development and manufacturing program with a German technology partner.

         900A SERIES. Aetrium's 900A Series pick-and-place handler provides
gentle handling required for QFPs, BGAs, and the most difficult to handle SOPs.
The 900A Series can be quickly adapted to accept different package types and
configurations, and is well suited for engineering, preproduction and low-volume
production applications. It also competes for high volume nonmemory production
applications where long test times reduce the cost effectiveness of higher
priced production based handlers. Aetrium believes the 900A's "plunge to board"
testing technique, which utilizes temperature controlled thermal nests, gives it
a special advantage in the testing of high performance ICs most sensitive to
signal degradation. Through this technique, the 900A can place the IC under test
directly against a replicated PC board contact site, thus eliminating the test
contactor and the potential for signal degradation resulting from the
contactor's physical and electrical attributes. The 900A Series products can be
modified with change kits to accommodate nearly every IC package configuration
being manufactured in volume today.

<PAGE>


         1000 SERIES. The 1000 Series pick-and-place test handlers, acquired by
the Company from Advantek Inc., are offered in a full range of temperature
options for thermal conditioning, and can be configured to gently handle a wide
variety of non-memory devices. They feature the Soft-Touch Probe(TM) to safely
and reliably handle the most fragile IC packages. Devices are transported with
their leads up, virtually eliminating the possibility of lead damage. The 1000
Series features "plunge to board" contacting, and offers complete electrostatic
discharge protection. The 1000 Series products 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 test handler is a bench-top sized machine
designed to accomplish small lot production runs and engineering
characterization testing. The QT can be configured for any device package
smaller than 2.5 inches wide, including ICs and discrete electronic components.
The QT input can be from metal or plastic tubes, a custom device tray, or a bulk
bowl-fed input. The QT Series products are offered with several different
options for contacting, including "plunge to board"-type contacting.

         2000 SERIES. The 2000 Series of test handlers are designed for
production testing for TO-type discrete electronic components. They can be
configured for up to four test sites and a variety of options for contacting.
The 2000 Series is 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 test handlers are designed for
production testing of SOT-type discrete electronic components. They can be
configured for up to six test sites and a variety of options for contacting,
including "plunge to board"-type contacting. The 5000 Series is 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.

         7000 SERIES. The 7000 Series of test handlers are designed for
high-volume testing of MSOP- and TSOP-type IC packages. They have extruded,
multi-track tray input. Contacting options include standard contacts as well as
"plunge to board"-type contacting. The 7000 Series is offered with the
capability to perform visual inspection of the coplanarity of leads and to mark
individual devices with a laser marking system. Devices can be sorted into
multi-track trays or tape and reel, with up to 19 programmable sort categories.
The Model 7900 version offers a full range of temperature options for thermal
conditioning of ICs prior to testing.

         CHANGE KITS, UPGRADES AND SPARE PARTS

         The Company has ongoing demand for IC package change kits for its
installed test handler equipment, including test handlers no longer included in
its active product line, and it 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 production
volume changes experienced by the Company's end customers. Also included in
change kits are upgrade kits to enhance performance of installed equipment.

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IC AUTOMATION PRODUCTS

         The Company believes that the growing number and volume of fine pitch
and other delicate IC packages is driving a demand for automated equipment for
all IC manufacturing processes. Existing processing equipment often will not
accommodate these package types or the numerous tray configurations used to
transport them. Aetrium 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.

         The Company began the development of the IC Automation product line in
1990. This product line currently consists 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. Each handling module has a
microprocessor that directs the handling module's function and communicates with
other 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. The Company's IC Automation modules have 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.

         Following are the principal automation modules in the IC Automation
product line:

         PICK-AND-PLACE MODULE. The pick-and-place module provides the means to
pick up, transport and place IC packages on an individual basis. The
pick-and-place module adapts to various end effectors that perform the actual
picking and releasing of the IC package as the end effectors are moved along a
horizontal axis between fixed or user programmable locations. The pick-and-place
module can transport most IC packages from or to tray, tube or other transport
media to or from the IC process site. Standard Aetrium end effectors are
commonly purchased with the pick-and-place module, although the module can
easily accommodate customer-designed end effectors. The pick-and-place module is
currently in use by the Company's OEM customers in lead inspection, mark
inspection, mark curing, trim and form, taping, lead conditioning, media
transfer and prom programming equipment.

         TRAY TRANSPORT MODULE. The tray transport module is a user programmable
IC tray handler that precisely indexes a tray of ICs row by row through a
process site. The tray transport module can accommodate a wide variety of IC
trays and tray matrix configurations including all industry standard trays.
Other customer trays can also be accommodated with the addition of appropriate
adapter kits. This module, together with the Company's pick-and-place module, is
used by the Company's OEM customers in lead inspection, mark inspection, taping,
lead conditioning, marking, media transfer and prom programming equipment.

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         CONVEYOR BELT MODULE. The conveyor belt module is designed to transport
and index IC trays through a process. The transport speeds and the number and
size of the index steps are user programmable, providing a versatile transport
mechanism for those applications that require continuous, single directional
flow of IC trays to, through and from manufacturing processes. The conveyor belt
module is commonly used in conjunction with the tray stacker/unstacker modules
as an automation subsystem to provide a continuous supply of trays with minimal
operator intervention, and is currently in use by the Company's OEM customers in
lead inspection, mark inspection, trim and form, media transfer, marking and
mark curing equipment.

         TRAY STACKER/UNSTACKER MODULE. The tray stacker/unstacker module
separates a single tray from a stack of up to 30 IC trays for individual
processing with no operator intervention, and operates in reverse sequence to
stack trays after processes are complete. This module, in conjunction with the
conveyor, is user programmable and precisely positions trays for further
processing and/or transport. Tray stacker/unstacker modules are currently in use
by the Company's OEM customers in lead inspection, mark inspection, marking,
mark curing, burn-in board loading, trim and form, media transfer and prom
programming equipment.

         INVERTING END EFFECTOR. One of several end effector configurations,
this end effector inverts an IC 180 degrees from its previous position. This
capability is required, for example, in some inspection processes where the IC
is transported with the leads pointing down but must be inspected with the leads
pointing up and returned to the transport media with the leads pointing down.
The inverter module is used in conjunction with a programmable pick-and-place
module by the Company's OEM customers in lead inspection and mark inspection
equipment.

         TAPING MODULE. The taping module provides an automated means for
indexing tape media to a position for placement of devices commonly transferred
with the pick-and-place module. A reel of tape is a medium often used to ship
ICs to customers. This module is currently used by the Company's OEM customers
in lead inspection, mark inspection and taping equipment.

RELIABILITY TEST AND ENVIRONMENTAL TEST EQUIPMENT

         RELIABILITY TEST PRODUCTS

         In December 1993, the Company acquired its reliability test systems
product line from Sienna Technologies. Since the acquisition the Company has
developed and improved this product line to improve performance and 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. 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 systems with which
IC manufacturers can force precision 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 recently has completed its first installations of the Model
1164, 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

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devices at a time or perform numerous simultaneous tests on smaller batches of
ICs.

         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 in
increased power dissipation in ICs. This increase in power dissipation resulted
from increased device complexity (more circuits) within smaller geometries. This
phenomenon is especially evident in high-end microprocessors. This power
dissipation led to unique thermal conditioning problems in the testing of such
devices. EJ Systems developed environmental test equipment that permitted
individual IC temperature control and used the conduction (direct contact)
method rather than the traditional convection (forced hot air) method to
thermally condition devices in a patented process called BAKPAK(TM). This
equipment also provides for the placement of ICs being tested in close proximity
to the test circuitry.

         The BAKPAK technology has been designed into a series of modules
("QUBEPAK(R)") and can be mounted in equipment cabinets to provide for up to 64
devices to be burned-in and tested in parallel. Each device is under individual
thermal control and BAKPAK designs can accommodate up to 100 watts power
dissipation per device under test.

         In November 1997, the Company introduced its TMU-100 Thermal Management
System at an international trade show. The TMU-100 uses the BAKPAK conductive
thermal conditioning technology to control temperature and perform thermal
conditioning during the manual testing of semiconductor devices. The Company
believes the TMU-100 provides the tightest temperature control for
characterization-type testing in the industry. The TMU-100 is easily configured
for packaged IC devices or bare die, allowing the one system to be used for
multiple requirements. The thermal operating range is 0(degree) C to 100(degree)
C.

         The Company believes the BAKPAK technology will meet the needs of the
sophisticated IC requirements for environmental test applications of the future.
The Company is adapting this thermal conditioning technology for use in test
handlers.

COMPETITION

         The test handler market is highly competitive. Aetrium 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, Aseco
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

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distribution channels and its customer service. The Company believes that it
competes favorably on all of these factors.

         The Company believes that the market for its IC Automation products is
emerging, with no clearly defined 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 the only existing,
developed solution for their new automated handling requirements. In addition,
the Company believes it offers standard generic handling modules to its OEM
customers at a price difficult for its OEM customers to achieve from competitors
or by developing internal capabilities, because of the greater product volumes
the Company can reach through multiple customers and applications. 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 Aetrium's IC Automation handling
modules.

         The market for the Company's reliability test systems also is
competitive and the Company's competitors include QualiTau, Ltd. and Micro
Instruments, Inc.

         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
who provide burn-in equipment that 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
its automation modules in North St. Paul, Minnesota; certain of its test handler
products at its facilities in San Diego, California, and Dallas, Texas; and its
environmental test equipment in Lawrence, Massachusetts. The Company's
manufacturing operations consist of procurement and inspection of components and
subassemblies, assembly and extensive testing 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 under the ISO 9001 certification criteria
established by the European Community for the standardization of manufacturing
documentation and processes. The Company has also commenced a program to become
ISO 9001 certified at its San Diego and Lawrence facilities.

         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
handler products are shipped in custom engineered protective packaging to
minimize potential damage during shipment.

         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 Aetrium's total quality management program, the Company has an ongoing
supplier quality program under which it selects, monitors and rates its

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suppliers, and recognizes suppliers for outstanding performance.

         Certain components are currently available only from sole sources, and
certain other components are available from only a limited number of sources.
Aetrium believes it can replace any of its suppliers within a time period
consistent with its business requirements. The Company also attempts to keep an
adequate supply of critical components in its inventory to minimize any
significant impact the loss of a supplier may cause.

SALES AND MARKETING

         The Company markets its test handler products, environmental test
equipment and reliability test systems through a combination of direct
salespeople and independent manufacturers' representatives and distributors.
Aetrium sells its IC Automation Products directly to OEM customers through its
internal sales force. As of December 31, 1997, the Company had 12 United States
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.

         Aetrium'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 Grand Prairie, Texas; and Saugus and
Lawrence, Massachusetts.

         Aetrium's marketing efforts include advertising in trade and business
publications, 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 47%, 28% and 30% of the Company's
net sales in 1995, 1996, and 1997, 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 IC Automation products, which
products 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.

         All of Aetrium'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 test handlers 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

         Aetrium believes it must continue to enhance, broaden and modify its
existing product lines to meet the constantly evolving needs of the test handler
market. To date, the Company has relied both on

<PAGE>


internal development and acquisitions of technology and product lines to extend
its product lines, increase its customer base, avoid reliance on any single test
handler market segment and develop its IC Automation generic handling modules.
The IC Automation product line required development of a software protocol that
plays an important role in the success of that product. 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 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 1996, Aetrium
completed development of the 5050MSOP which handles a small, new package type
called the MSOP. Other new products include the Model 1164 Reliability Test
System and a version of the Model 900A tester handler that features mechanical
refrigeration. In 1997 the Company continued to refine the Model 1164, and
completed development of several models each in the 5000 Series and the 7000
Series of test handlers. The Company completed and has introduced the TMU-100
Thermal Management System. The Company completed development of an upgraded
Model 5050QTS to increase throughput and reliability and commenced redesign of
its Model M3200 to reduce its footprint, increase its sort capability, and
improve functionality. The Company substantially completed the development of an
all-new software command and control program and new electronics for the IC
Automation product line. The Company's continuing engineering efforts include
development of additional change kits to meet the expanding families of IC
package types, advancement of contactor technologies to meet the challenges of
high performance ICs, enhancement of the M3200 to increase throughput and
reliability, and enhancement of the command and control features of the 5050
product line.

         The Company expenses all research and development costs, including for
software development as incurred. In 1995, 1996 and 1997, the Company's expenses
relating to research and development were approximately $5.0 million, $7.6
million and $10.5 million, respectively. The Company's objective is to invest
approximately 13% to 15% of its net sales in research and development each year.
The Company employed 119 engineering personnel as of December 31, 1997.

INTELLECTUAL PROPERTY RIGHTS

         Aetrium 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. Some OEM customers have signed non-compete agreements with the
Company that deter them from direct competition with the IC Automation product
line. 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.

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

<PAGE>


BACKLOG

         The Company's backlog, which consists of customer purchase orders that
the Company expects to fill within the next 12 months from December 31, 1997,
was approximately $32.5 million as of such date. 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, 1997 the Company had 445 employees, including 226 in
manufacturing, 119 in engineering and product development, 58 in sales,
marketing and customer service, and 42 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, 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.

<PAGE>


ITEM 2. PROPERTIES.

         The Company's primary administrative, manufacturing, product
development, sales, marketing and field service operations are located in North
St. Paul, Minnesota, where the Company currently occupies approximately 45,000
square feet under a lease which expires in March 2006, with an annual rent of
approximately $240,000. The lease includes an option to 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 has moved its corporate staff to an adjacent facility and is in the
process of negotiating the terms of a lease for such facility.

         The Company's manufacturing, product development, and certain sales and
marketing activities of its Aetrium FSA Division occupy approximately 26,600
square feet in Grand Prairie, Texas. The facility is leased from a partnership
controlled by an officer of the Company, under a lease that expires in 2003,
with an annual rent of $146,000. The Company believes the lease terms obtained
at this facility approximate the rates that could be obtained at comparable
properties in that area.

         The Company's manufacturing, product development and certain sales and
marketing activities for its San Diego Division are conducted in facilities with
approximately 42,000 square feet located in San Diego, California under a lease
that expires in July 1999, with an annual rent of approximately $275,000. The
Company also leases and occupies approximately 3,000 square feet of space in
Santa Clara, California under a lease that expires in March 1998, with a monthly
rent of approximately $3,700. The Company uses this space for sales and field
service operations.

         The Company's Lawrence Division is located in Lawrence, Massachusetts,
and conducts its manufacturing and product development activities for its line
of environmental test equipment in facilities with approximately 61,500 square
feet under a sublease that expires in December 1999, at an annual rent of
approximately $332,000.

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 1997.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.

         The executive officers of the Company, their ages and the offices held,
as of February 21, 1998 are as follows:

NAME                       AGE      POSITION
----                       ---      --------

Joseph C. Levesque         53       Chairman of the Board, President and Chief
                                    Executive Officer

Darnell L. Boehm           49       Chief Financial Officer, Secretary and
                                    Director

Douglas L. Hemer           51       President - San Diego Division

<PAGE>


Daniel M. Koch             44       Vice President - Worldwide Sales

Gerald C. Clemens          46       Vice President - Reliability Test Products

James E. Serley            51       Vice President and General Manager - IC
                                    Handling Products

Kenneth R. Lee             52       President - Lawrence Division

Farid J. Sabounchi         40       President - Aetrium FSA Division

John J. Pollock            38       General Manager - Arden Hills Division

Lee A. Schafer             37       Vice President - Corporate Planning

Paul H. Askegaard          46       Treasurer

         Mr. Levesque has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Company 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 was also a director of Arden
Industrial Products, Inc., a public company, until it was acquired in August
1997. 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 Division. Mr. Boehm is also the principal of Darnell L. Boehm &
Associates, a management consulting firm. From October 1988 to March 1993, Mr.
Boehm served as the Acting President of Genesis Labs, Inc., a manufacturer of
medical diagnostic products. Mr. Boehm is also a director of Rochester Medical
Corporation, a public company, and serves on the audit and compensation
committees of such company. Mr. Boehm is also a director of Versa Companies, a
privately-held company and serves on its compensation and audit committees.

         Mr. Hemer has served as a director of the Company since 1986, and has
served as the President of the San Diego Division since February 1, 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 for over 15 years before joining the Company. Oppenheimer Wolff
& Donnelly has provided and is expected to continue to provide legal services to
the Company.

         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

<PAGE>


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. Serley has served as the Company's Vice President and General
Manager, IC Handling Products since April 1996. From June 1995 to April 1996,
Mr. Serley served as Vice President-Versatus Business Unit. From July 1990 to
January 1995, Mr. Serley was Vice President of Operations at Rosemount Aerospace
Inc., a supplier of measurement/instrumentation products to the aerospace
industry. Mr. Serley has resigned from the Company effective March 31, 1998.

         Mr. Lee has served as President of the Lawrence Division 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 from 1982 to 1994, most recently as Vice
President of Engineering.

         Mr. Sabounchi has served as the President of the Aetrium FSA Division
since April 1, 1997, when Aetrium completed its acquisition of FSA. Mr.
Sabounchi founded FSA in 1990 and served as its President and CEO until it was
acquired by the Company. Prior to founding FSA, Mr. Sabounchi served in various
engineering and engineering management roles in the semiconductor process
equipment group of Teccor Electronics Inc.

         Mr. Pollock has served as the General Manager of the Arden Hills
Division since the Company's acquisition of Handler Division of Advantek Inc.,
which became the Company's Arden Hills Division upon the closing of the
transaction in November 1997. 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. Schafer has served as the Vice President - Corporate Planning since
August 1997. From August 1996 to August 1997, Mr. Schafer served as the
Company's Director of Investor Relations. From June 1990 to July 1996, Mr.
Schafer was senior editor and financial columnist for CORPORATE REPORT
MINNESOTA, a monthly business magazine published in Minneapolis, Minnesota.

         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.

<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 1997 Annual Report is incorporated herein by
reference. The prices reflected in the table presented in the 1997 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 1997.

ITEM 6. SELECTED FINANCIAL DATA.

         The information under the caption "Selected Consolidated Financial
Data" on page 28 of the 1997 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 14 through 17 of the
Company's 1997 Annual Report is incorporated herein by reference.

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

         Not applicable.

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 1997 Annual Report:

         Report of Independent Accountants--page 17.

         Consolidated Statements of Income for the years ended December 31,
         1997, 1996 and 1995--page 18.

         Consolidated Balance Sheets as of December 31, 1997 and 1996--page 19.

         Consolidated Statements of Changes in Shareholders' Equity for the
         years ended December 31, 1997, 1996 and 1995--page 20.

<PAGE>


         Consolidated Statements of Cash Flows for the years ended December 31,
         1997, 1996 and 1995--page 21.

         Notes to Consolidated Financial Statements--pages 22 to 27.

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 1998 Proxy Statement is incorporated herein by reference.

         The information under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's 1998 Proxy Statement 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
1998 Proxy Statement is incorporated herein by reference.

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

         The information under the caption "Principal Shareholders and
Beneficial Ownership of Management" in the Company's 1998 Proxy Statement is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         None.

<PAGE>


                                     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 1997 Annual Report:

         Report of Independent Accountants--page 17.

         Consolidated Statements of Income for the years ended December 31,
         1997, 1996 and 1995--page 18.

         Consolidated Balance Sheets as of December 31, 1997 and 1996--page 19.

         Consolidated Statements of Changes in Shareholders' Equity for the
         years ended December 31, 1997, 1996 and 1995--page 20.

         Consolidated Statements of Cash Flows for the years ended December 31,
         1997, 1996 and 1995--page 21.

         Notes to Consolidated Financial Statements--pages 22 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 30, 1998, appearing on page 17 of the 1997 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

<PAGE>


forth therein when read in conjunction with the related consolidated financial
statements.

                                      /s/ Price Waterhouse LLP

Minneapolis, Minnesota
January 30, 1998

                                   Schedule II

                              AETRIUM INCORPORATED
                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997

<TABLE>
<CAPTION>

                                                               ADDITIONS
                                                       --------------------------
                                       BALANCE AT      CHARGED TO
                                      BEGINNING OF     COSTS AND      ACQUISITION                       BALANCE AT
  DESCRIPTION                            PERIOD         EXPENSES      RELATED (1)      DEDUCTIONS     END OF PERIOD
-------------------------------------------------------------------------------------------------------------------
<S>                     <C>              <C>              <C>             <C>           <C>              <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
                        1995             235,700          45,337          25,668        (19,505)         287,200
                        1996             287,200         515,467               0         (3,267)         799,400
                        1997             799,400               0          50,000       (589,800)         259,600

INVENTORY OBSOLESCENCE RESERVE:
                        1995           2,703,000         429,000         726,457       (550,713)       3,307,744
                        1996           3,307,744         488,000               0     (1,780,611)       2,015,133
                        1997           2,015,133       1,076,296          10,000     (1,116,329)       1,985,100

WARRANTY RESERVE:
                        1995             803,000         361,781          25,000       (604,781)         585,000
                        1996             585,000         631,535               0       (605,959)         610,576
                        1997             610,576          25,000         235,000       (308,376)         562,200

</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 26, 1998, 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).

<PAGE>


         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 (filed herewith
                  electronically).

         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)).

         (b) REPORTS ON FORM 8-K.

         The Company did not file any Current Reports on Form 8-K during the
fourth quarter of 1997.

<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 28, 1998                  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 28, 1998 by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

Signature                                              Title
---------                                              -----

/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

                                                       Director
---------------------------
Terrance J. Nagel

<PAGE>


                              AETRIUM INCORPORATED
                   EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

<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          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         1987 Non-Statutory Stock Option Plan.              Incorporated by reference to Exhibit 10.1 to the
                                                                Company's Registration Statement on Form SB-2 (File
                                                                No. 33-64962C).

10.2         1993 Stock Incentive Plan, as amended.             Filed herewith electronically.

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

10.4         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).

10.5         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).

10.6         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).

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

10.8         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).

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

10.10        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).

<PAGE>

ITEM NO.                          ITEM                                            METHOD OF FILING
--------                          ----                                            ----------------

10.11        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.        No. 33-98040).
             and Aetrium Incorporated

10.12        Asset Purchase Agreement, dated as of December     Incorporated by reference to Exhibit 2.1 to the
             29, 1995, between Aetrium Incorporated and         Company's Current Report on Form 8-K dated January
             E.J. Systems, Inc.                                 16, 1996 (File No. 0-22166).

10.13        Amendment No. 1 to Asset Purchase Agreement,       Incorporated by reference to Exhibit 2.2 to the
             dated as of December 29, 1995, between Aetrium     Company's Current Report on Form 8-K dated January
             Incorporated and E.J. Systems, Inc.                16, 1996 (File No. 0-22166).

10.14        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).

10.15        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).

10.16        Asset Purchase Agreement, dated as of March        Filed herewith electronically.
             28, 1997, between Aetrium Incorporated and
             Forward Systems Automation, Inc.

10.17        Asset Purchase Agreement, dated as of November     Filed herewith electronically.
             3, 1997, between Aetrium Incorporated and
             Advantek Inc.

13.1         Excerpts from 1997 Annual Report to                Filed herewith electronically.
             Shareholders.

21.1         Subsidiaries of the Registrant.                    Filed herewith electronically.

23.1         Independent Auditors' Consent.                     Filed herewith electronically.


27.1         Financial Data Schedule.                           Filed herewith electronically.

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