<PAGE>

CONFIDENTIAL


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
[ X ]  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
       Act of 1934

                     For the fiscal year ended May 30, 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 Number 1-11344
                                                --------

                       INTERMAGNETICS GENERAL CORPORATION
             -------------------------------------------------------
             (Exact name of registrant as specified in its charter.)

                 New York                                14-1537454
      -------------------------------                -------------------
      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                Identification No.)

          450 Old Niskayuna Road,
             Latham, New York                              12110
    --------------------------------------              ---------
   (Address of principal executive offices)             (Zip Code)

        Registrant's telephone number, including area code (518) 782-1122

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

          Title of each class          Name of each exchange on which registered

    Common Stock - $.10 par value               American Stock Exchange
-------------------------------------  -----------------------------------------

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

                                      None
                                 --------------
                                (Title of Class)

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 the registrant's knowledge, in definitive proxy or information
statements in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]




<PAGE>


The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $66,000,000. Such aggregate market value was
computed by reference to the closing price of the Common Stock as reported on
the American Stock Exchange on August 16, 1999. It assumes that all directors
and officers of the registrant are affiliates. In making such calculation, the
registrant does not determine whether any director, officer or other holder of
Common Stock is an affiliate for any other purpose.

The number of shares of the registrant's Common Stock outstanding, net of
Treasury shares, as of August 16, 1999 was 12,382,807.


                       DOCUMENTS INCORPORATED BY REFERENCE

The information required for Part III hereof is incorporated by reference from
the registrant's Proxy Statement for its 1999 Annual Meeting of Shareholders to
be filed within 120 days after the end of the registrant's fiscal year.

                                       ii
<PAGE>


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                                            <C>
PART I............................................................................................................1

ITEM 1. BUSINESS DESCRIPTION......................................................................................1
   ELECTROMAGNETICS SEGMENT.......................................................................................1
   SUPERCONDUCTING MATERIALS SEGMENT..............................................................................8
   REFRIGERATION SEGMENT.........................................................................................10
   RESEARCH AND DEVELOPMENT......................................................................................13
   INVESTMENTS...................................................................................................15
   PERSONNEL.....................................................................................................17
   EXECUTIVE OFFICERS OF THE REGISTRANT..........................................................................17

ITEM 2. PROPERTIES...............................................................................................19

ITEM 3. LEGAL PROCEEDINGS........................................................................................19

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................................20


PART II..........................................................................................................20

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....................................20

ITEM 6. SELECTED FINANCIAL DATA..................................................................................21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................22

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK..............................................29

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............................................................29

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.....................29


PART III.........................................................................................................29

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................................................29

ITEM 11. EXECUTIVE COMPENSATION..................................................................................29

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................................30

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................................30


PART IV..........................................................................................................30

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.........................................30
   (a)       FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS........................................................30
   (b)       REPORTS ON FORM 8-K.................................................................................33


SIGNATURES.......................................................................................................34

</TABLE>
                                      iii



<PAGE>


                         SAFE HARBOR STATEMENT UNDER THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Intermagnetics General Corporation ("Intermagnetics" or "Company") makes
forward-looking statements in this document. Typically, we identify
forward-looking statements with words like "believe," "anticipate," "perceive,"
"expect," "estimate" and similar expressions. Unless a passage describes an
historical event, it should be considered a forward-looking statement. These
forward-looking statements are not guarantees of future performance and involve
various important assumptions, risks, uncertainties and other factors that could
cause the Company's actual results for fiscal year 2000 and beyond to differ
materially from those expressed in such forward-looking statements. These
important factors include, without limitation, the assumptions, risks, and
uncertainties set forth in Management's Discussion and Analysis of Financial
Condition and Results of Operations, as well as other assumptions, risks,
uncertainties and factors disclosed throughout this report.


                                     PART I

ITEM 1. BUSINESS DESCRIPTION

         Intermagnetics is a leading developer of superconducting materials and
related products. Superconductivity is the phenomenon in which certain materials
lose all resistance to the flow of electrical current when cooled below a
critical temperature. Devices made with superconductive materials require
special refrigeration equipment, known as cryogenic systems, to maintain
materials at the very cold temperatures at which superconductivity occurs.
Superconductors offer advantages over conventional conductors, such as copper,
by carrying electricity with virtually no energy loss, and generating
comparatively more powerful magnetic fields.

         The Company designs, develops, manufactures and sells products in three
significant segments: Electromagnetics, Superconducting Materials and
Refrigeration. Electromagnetics consists primarily of low temperature
superconducting ("LTS") magnets, and radio frequency ("RF") coils. These
products are developed and sold through a corporate division, the IGC-Magnet
Business Group ("IGC-MBG"), and through IGC-Medical Advances Inc. ("IGC-MAI"), a
wholly-owned subsidiary. The Electromagnetics segment also includes development
of high temperature superconducting ("HTS") products and industrial magnetic
resonance ("MR") systems through the Company's Technology Development division
("IGC-TD"). Superconducting Materials consist of wire and cable manufactured and
sold by the Company's IGC-Advanced Superconductors division ("IGC-AS"). Three
wholly-owned subsidiaries make up the Company's Refrigeration segment. IGC-APD
Cryogenics Inc. ("IGC-APD") and IGC-Polycold Systems Inc. ("IGC-Polycold")
design, develop, manufacture and sell low and very low temperature refrigeration
equipment, and InterCool Energy Corporation ("ICE") designs, develops and sells
refrigerants for mobile and stationary applications. Prior to its fiscal year
1999, the Company divided its business into two industry segments for reporting
purposes: Magnetic Products and Refrigeration Products. In fiscal year 1999, the
Company adopted the "management approach" to segment disclosure required by
Statement of Financial Accounting Standards No. 131 effective for fiscal years
beginning after December 15, 1997. As a result, the Company now discusses its
business using the three segments listed above.


                            ELECTROMAGNETICS SEGMENT
                            -------------------------

A. Introduction

         1. About MRI and other magnets generally



                                       1
<PAGE>


         The single largest existing commercial application for
superconductivity is the magnetic resonance imaging medical diagnostic system
("MRI System"). MRI Systems are used in hospitals and clinics for non-invasive,
diagnostic imaging of organs within a patient's body. At the core of an MRI
System is a large, highly engineered magnet system. The magnet system can be
based upon a conventional resistive electro-magnet, a permanent magnet or a more
sophisticated superconductive magnet. Superconductive magnets offer far more
powerful, high-quality magnetic fields (measured in Tesla) with virtually no
power loss. Higher magnetic field strengths correlate with improved
"signal-to-noise" ratios which can in turn lead to higher quality images in
shorter acquisition times. The annual commercial market for new MRI Systems in
calendar year 1999 is estimated at approximately $2 billion worldwide. The MRI
industry is dominated by a small number of system integrators who sell MRI
Systems to end-users. The General Electric Company ("GE"), Siemens Corporation
("Siemens"), Philips Medical Systems Nederlands B.V. ("Philips"), Hitachi
Medical Corporation ("Hitachi"), Toshiba Corporation ("Toshiba") and Picker
International Ltd. are the major MRI System integrators. The Company is a
supplier of key components to a number of these integrators. (See "Principal
Products" below.)

         Other existing applications for superconductivity include nuclear
magnetic resonance ("NMR") spectroscopy, used in biological and chemical
research and testing of the composition and structure of non-ferrous materials,
and other scientific, defense and research applications. (See "Principal
Products - Other Superconductive Magnet Systems" below.)

          2. About MRI Radio Frequency (RF) Coils Generally

         An RF coil is a necessary component of an MRI System. An RF coil is
placed inside the bore of the magnet of an MRI System, or more generally placed
onto the patient. The RF coil acts as an antenna to receive, or transmit and
receive, radio frequency signals from the human body as it lies inside the
strong magnetic field of the MRI System. These radio frequency signals are
transferred electronically to the MRI System computer where they are
reconstructed into a clinically useful diagnostic image.

         Specialized RF coils -- those dedicated to imaging particular parts of
the human anatomy, such as the knee, neck, wrist, foot, etc. -- increase the
number of diagnostic applications for which an MRI System can be used. The
increased number of applications increases the potential utilization rate of a
given MRI System, which typically helps to justify economically the acquisition
of that system. In addition, specialized RF coils designed to image a specific
part of the human body will yield a sharper, more detailed image that typically
is more clinically useful than a similar image produced with a multi-purpose RF
coil. The Company believes each MRI System could benefit from an array of six to
nine separate specialized RF coils.

         An RF coil must work very closely with the MRI system in which it is
used. Consequently, RF coils are designed for a specific manufacturer's system
configuration and its related characteristics. Hence, RF coils may not be moved
easily between MRI Systems manufactured by different companies, from one field
strength magnet to another, or even among different models manufactured by a
single company. Consequently, the market opportunity for any particular RF coil
model usually is limited to the specific system for which it is designed and
built.


                                       2
<PAGE>


B. Principal Products

         The Company derived approximately 58% and 63% of its net sales in
fiscal years 1999 and 1998, respectively, from the sale of products in its
Electromagnetics segment. Those sales consisted primarily of MRI-related
products, including superconductive MRI magnet systems, and RF coils. Within its
Electromagnetics segment, the Company produces the following:

o Superconductive MRI Magnet Systems. Through IGC-MBG, the Company manufactures
  and sells superconductive MRI magnet systems to MRI System integrators for use
  in stationary and mobile applications. During fiscal years 1999, 1998 and
  1997, MRI magnet systems accounted for 45%, 52% and 58%, respectively, of the
  Company's net sales. The Company's latest generation of superconductive MRI
  magnet systems consists of three types of systems with field strengths of 0.5,
  1.0 and 1.5 Tesla ("T").

  The Company's MRI magnet systems are made with wire from IGC-AS and fitted
  with cryogenic refrigerators (shield coolers) supplied by IGC-APD. In fact,
  the Company is the only vertically integrated manufacturer of superconductive
  MRI magnet systems, which the Company believes is an important source of
  competitive strength.

o Other Superconductive Magnet Systems. Through IGC-MBG, the Company also
  designs and builds superconductive magnet systems for various scientific and
  defense applications. These usually are one-of-a-kind, custom-built systems.
  For example, in fiscal year 1999, the Company manufactured and delivered an 8T
  magnet for Fourier Transform Ion Cyclotron Resonance (FTICR) mass
  spectrometry, which is used by research chemists to examine the structure of
  large molecules. In addition, the Company is working with the National High
  Magnetic Field Laboratory at Florida State University, to design and
  manufacture a technology-leading superconductive magnet for a 900 MHz NMR
  system. Systems with higher operating frequencies offer better sensitivity and
  discrimination in the analysis of complex molecules.

o RF Coils for MRI Systems. Through IGC-MAI, the Company manufactures and sells
  RF coils for use in MRI Systems. IGC-MAI's current product line includes ten
  anatomical applications with more than fifty product groups available in
  magnetic field strengths from 0.2T to 3.0T, for a total of more than 150
  products. Typical RF coils have a selling price between $5,000 and $30,000,
  although some custom or high end coils may sell for substantially more. In
  fiscal years 1999 and 1998, RF coils accounted for 13% and 11%, respectively,
  of the Company's net sales. Because the Company acquired IGC-MAI in March,
  1997, RF coils accounted for substantially less than 5% of net sales in fiscal
  year 1997.

                                       3
<PAGE>

C. Marketing

         The Company markets its magnet systems through its own personnel. In
addition, it licenses the manufacture and marketing of superconductive MRI
magnet systems to its European joint venture. That license will expire on
December 31, 1999. (See "European Joint Venture" below.) The Company also has a
wholly-owned European marketing and service subsidiary in the U.K., as well as a
foreign sales corporation located in Barbados. IGC-MAI markets its RF coils
through a direct sales force to domestic MRI System integrators and end-users,
such as hospitals, clinics and research facilities. IGC-MAI markets its RF coils
internationally to foreign-based MRI System integrators through direct sales and
to end-users through a distributor network.

         Export Sales. Products sold to foreign-based companies, such as Philips
in the Netherlands, or Hitachi and Toshiba in Japan, were accounted for as
export sales even if some of the products sold were installed in the U.S. On
that basis, the Company's net export sales (including the Refrigeration segment)
for fiscal years 1999, 1998 and 1997 totaled $61.1, $57.3 and $53.1 million,
respectively, most of which were to European customers.

         Principal Customers. Sales to customers accounting for more than 10% of
the Company's net sales aggregated approximately 54% of net sales in fiscal
1999, 55% of net sales in fiscal 1998 and 50% of net sales in fiscal 1997. (See
Note K of Notes to Consolidated Financial Statements included in response to
Item 8.)

         A substantial portion of the Company's sales to the MRI industry are to
four customers, two of which are significant. Philips is the principal customer
for the Company's MRI magnet systems. The Company sells Philips certain
superconductive MRI magnet systems of various field strengths for incorporation
into Philips' proprietary MRI Systems. In fiscal year 1999, Intermagnetics and
Philips executed a new sales agreement with an initial five-year term. The term
is extended each year such that the agreement will continue in effect on a
rolling five-year basis, unless otherwise terminated in accordance with certain
provisions of the agreement. Under the new agreement, which will cover all sales
to Philips beginning on January 1, 2000, Intermagnetics will be the sole
supplier of certain MRI magnet systems to Philips. Sales prior to that date are
covered by a pre-existing supply agreement among Intermagnetics, Philips and
Intermagnetics' joint venture. (See "European Joint Venture" below.) Sales to
Philips (including sales by the Refrigeration segment) amounted to approximately
41%, 44% and 50% of the Company's net sales for fiscal 1999, 1998 and 1997,
respectively.

         The Company's second principal customer for MRI products is GE. The
Company sells LTS wire to GE for use in GE's MRI magnet systems, as well as RF
coils for use with GE's MRI Systems. Under the Company's current arrangement
with GE, GE places orders for LTS wire and RF coils from time to time with the
Company. Sales to GE (including sales by the Superconducting Materials segment)
accounted for approximately 13%, 11% and 9% of the Company's net sales for
fiscal 1999, 1998 and 1997, respectively.

D. European Joint Venture

         In 1987, the Company and Alstom Energy, S.A. ("Alstom"), a leading
French industrial group in the areas of electrical and electromechanical
equipment, created a joint venture named Alstom Intermagnetics ("AISA") located
in France. AISA manufactures superconductive MRI magnet systems under a license
from the Company. AISA pays a royalty to the Company for the licensed
technology, and the Company shares in AISA's profits in proportion to its
ownership interest (45%). The Company accounts for its investment in AISA using
the equity method of accounting. AISA is party to a supply agreement with
Philips, and supplies a portion of Philips' requirements for superconductive MRI
magnet systems. That supply agreement will expire on December 31, 1999, and AISA
is not a party to any subsequent supply agreements.

         On May 28, 1999, Intermagnetics, Alstom and AISA signed an agreement
terminating their joint venture. Effective May 30, 1999, the Company sold its
interest in AISA to Alstom for three hundred thousand dollars ($300,000 U.S.
currency). Effective December 31, 1999, AISA's magnet production will be
consolidated in the Company's Latham, New York facility, and AISA will cease
production of superconductive MRI magnet systems. In consideration of the
obligations of AISA and Alstom under the termination agreement, Intermagnetics
agreed to pay AISA nine million dollars ($9,000,000 U.S. currency) (the
"Payment"). The Company paid four million two hundred fifty thousand dollars
($4,250,000 U.S. currency) of the Payment to AISA in fiscal year 1999; the
remainder is due on or before March 31, 2000.

                                       4
<PAGE>


E. Competition/Market

         U.S. demand for MRI Systems recovered from flat sales recorded in 1995
and 1996 and rose to new highs in 1997 and 1998. The Company believes that
worldwide sales of MRI Systems in calendar 1999 should be about the same as the
strong sales in calendar 1998. The Company's growth in this segment is dependent
on its customers' ability to grow their respective businesses, and on the
Company's ability to attract new customers. There are no assurances that such
growth will occur. In addition, while the economic slowdown in Asia and Latin
America was offset by strong MRI System sales in the U.S., there are no
assurances that the slowdown will not adversely impact overall growth in sales
of MRI Systems over the next year.

         MRI Systems compete indirectly with other diagnostic imaging methods
such as conventional and digital X-ray systems, nuclear medical systems,
ultrasound and X-ray CT scanners. Most large MRI Systems suppliers perceive
higher field strength imaging systems (1.0T or greater) based upon
superconductive magnets to have technical advantages over MRI Systems that use
resistive electromagnets and permanent magnets, which are limited in field
strength either by high power consumption or by basic material properties. Lower
field strength systems generally produce lower quality images, although rapid
gains in computer technology have offset some of this quality loss. In addition,
"open" magnet configurations based on permanent and resistive magnets have
enjoyed rapid growth in market share over the past four years.

o Superconductive MRI Magnet Systems. Within the market for superconductive
  MRI magnet systems, the Company's competitors fall into two categories: (1)
  magnet manufacturers that make MRI magnet systems for sale to MRI System
  integrators; and (2) MRI System integrators that manufacture superconductive
  magnet systems for their own use.

  The Company considers Oxford Magnet Technology Limited ("OMT") its principal
  competitor in the first category. OMT is a joint-venture between Siemens (51%)
  and Oxford Instruments Group, plc ("Oxford") (49%). OMT supplies MRI magnet
  systems to Siemens, a leading MRI System integrator. OMT has sold
  substantially more superconductive MRI magnet systems, has greater production
  capacity and greater financial resources than the Company; however, the
  Company believes it can compete effectively against OMT on the basis of
  technology and price.

  Competitors in the second category include companies like GE and Toshiba that
  manufacture MRI magnet systems for use in their own MRI Systems. Historically,
  such integrators have been unavailable to the Company as customers for its MRI
  magnet systems. The Company has instead treated these companies as customers
  or potential customers for component products, such as superconductive wire,
  cryogenic systems and RF coils.

  Within the market for superconductive MRI magnet systems, the Company also has
  seen increased competition from low-field "open" MRI magnet systems. These
  systems are designed to reduce the feeling of claustrophobia in a patient
  undergoing imaging, and may give medical personnel greater access to the
  patient during imaging. While the Company does not currently manufacture an
  "open" MRI magnet system, such magnet systems have represented one of the
  fastest growing segments of the market. The Company does manufacture a magnet
  system for another rapidly growing segment of the market: compact high field
  MRI systems. Philips is the Company's primary customer for this magnet system.

                                       5
<PAGE>


o Other Superconductive Magnet Systems. Historically, the Company has competed
  against many different companies domestically and internationally (including
  Oxford, which dominates the worldwide market for NMR systems) for the
  opportunity to design and build non-MRI superconductive magnet systems. To
  date, the Company's sales of such systems have not been significant.

o RF Coils for MRI Systems. The Company believes that the market for RF coils
  will grow faster than the market for MRI Systems because: (i) the number of
  MRI applications using specialized RF coils is increasing, requiring that
  additional, and more technically sophisticated RF coils be purchased for each
  new and existing MRI System; (ii) RF coil technology is being improved
  continuously, and with an average technology obsolescence rate of
  approximately three years, existing coils need to be upgraded to
  later-generation products; and (iii) an increasing number of existing MRI
  Systems are being upgraded by MRI System integrators at a much lower cost than
  replacing an entire MRI System. An added set of RF coils typically is needed
  in connection with each upgrade.

  The Company's primary RF coil competitors consist of independent manufacturers
  that make RF coils for sale to MRI System integrators and end-users. The
  Company also experiences competition from MRI System integrators that
  manufacture RF coils for sale with their MRI Systems.

  Most MRI System integrators outsource RF coil development and manufacture to
  companies such as IGC-MAI, although, the Company believes Siemens and Philips
  have maintained the most extensive in-house coil development activities of the
  major MRI System integrators. If the MRI System integrators decide to pull RF
  coil development in-house, access to the market for independent RF coil
  manufacturers could be limited. The Company believes this risk is remote,
  however, because outsourcing specialized RF coils generally results in lower
  cost and faster time-to-market than with in-house resources.

  There are several independent RF coil manufacturers of various size. The
  Company believes that, of these companies, two compete with IGC-MAI against
  its full product range. The other competitors offer limited product lines and
  generally lack an organizational infrastructure and extensive product
  development capabilities to compete across IGC-MAI's broad product line at
  this time. Competition generally is based upon price and diagnostic image
  quality. To remain competitive, the Company must continue to offer high
  quality, technically advanced products while reducing costs. As competition
  increases, however, price pressures grow and there are no assurances that
  IGC-MAI can remain competitive in the marketplace.

                                       6
<PAGE>


F. Patents

         The Company believes at the present time that patents are not a
significant competitive factor in the conduct of its business in the
Electromagnetics segment. The Company directly or indirectly either owns, or is
a licensee under a number of patents relating to RF coils and permanent magnet
systems. There are no assurances that changing technology and/or emerging
patents will not adversely impact the Company's current patent position or its
competitiveness. In addition, the Company's patent protection for emerging
technologies will have commercial value only to the extent the associated
technologies become commercially significant, of which there can be no
assurance.

G. Backlog

         The Company does not consider backlog material to an understanding of
the Electromagnetics segment for two main reasons: (1) the manufacturing cycle
for magnet products has shortened significantly and the Company believes this
trend will continue and (2) because of short manufacturing lead times, backlog
is not a factor in the Company's RF coil business.

H. Raw Materials and Inventory

         Most materials and parts used in the manufacturing process for
superconducting magnet systems are ordered for delivery based on production
needs. The Company's investment in inventories for production of MRI magnet
systems is based primarily on production schedules required to fill existing and
anticipated customer orders.

         IGC-MAI believes that there are alternative suppliers at competitive
prices for most of the parts, materials and components that it purchases for the
manufacture of its RF coils. There are, however, discrete electrical components
and mechanical housings that are sole sourced because of the uniqueness of their
specifications. In the event that a sole source supplier cannot meet demand, a
re-engineering or re-tooling of the sourced component would be required.

I. Warranty

         The expense to the Company to date for performance of its warranty
obligations in the Electromagnetics segment has not been significant.

                                       7
<PAGE>


                       SUPERCONDUCTING MATERIALS SEGMENT
                       ---------------------------------

A. Introduction

         There are two broad classes of superconductive materials. LTS materials
are metals and alloys that become superconductive when cooled to temperatures
near absolute zero (4.2 Kelvin or minus 452 F). Because of their superior
ductile characteristics, LTS materials generally are used in the form of
flexible wire or cable (LTS cable is made up of bundles of LTS wire). HTS
materials are composed of ceramic-like compounds that become superconductive
when cooled to temperatures close to that of liquid nitrogen (77 Kelvin or minus
321 F) and primarily are manufactured in the form of tape (basically, flat
wire). Although currently available HTS materials are economically viable only
in a rather narrow range of existing applications, the Company is working to
develop practical applications for HTS technology. (See "Research and
Development - New Products" below.)

        LTS wire is used today mainly in the manufacture of MRI magnet systems
and for large sized accelerators. Emerging areas for application of LTS
wire/cable and HTS tape/wire include fault current limiters, transformers and
other electric power equipment. (See "New Product Development: HTS Materials &
Devices" below.)

B. Principal Products

         Through IGC-AS, the Company manufactures and sells the two principal
LTS materials that are commercially available for the construction of
superconductive magnets: niobium-titanium ("NbTi") wire, and niobium-tin
("Nb3Sn") wire. In contrast to the relatively large market for NbTi wire, Nb3Sn
multi-filamentary wire, which has been under development for many years, is sold
only in limited quantities. This is because NbTi wire is more cost effective for
MRI magnet systems, which is the leading market for superconductive wire. The
Company has seen a significant increase in government-sponsored work for non-MRI
applications through its participation in the Large Hadron Collider project for
the European Organization for Nuclear Research ("CERN") in Switzerland, and the
Superconducting Tokamak Advanced Research Project in Korea. These multi-year
programs offer potential for increased non-MRI wire and cable orders. During
each of fiscal years 1999, 1998 and 1997, sales of superconductive wire and
cable (excluding intercompany sales) accounted for approximately 12% of the
Company's net sales.

C. Marketing

         The Company markets its wire/cable through its own personnel. (See
"Electromagnetics Segment - Marketing" for information about principal
customers.)

D. Competition/Market

         The single largest commercial market for superconductive wire is MRI.
In fact, most of the superconductive wire manufactured by the Company is used
for superconductive MRI magnet systems (either internally by IGC-MBG, or
externally by other customers). The Company believes that it, Oxford
Superconducting Technology and VACUUMSCHMELZE, A.G. are the major suppliers of
NbTi wire for the MRI market. While there are several other foreign and domestic
manufacturers of NbTi superconductive wire, none of them have been a significant
factor in the worldwide MRI market.

         The Company has a contract to supply nearly 100 tons of superconductive
cable to CERN for the Large Hadron Collider Project, a European
government-sponsored program. An additional 1,400 tons of cable will be supplied
to CERN by European companies (Alstom, VACUUMSCHMELZE and Europa Metalli) and
100 tons of cable will be supplied by Furukawa Electric, a Japanese company. The
Company believes that the quantity of wire required for this project exceeds
that required for the global MRI market. Even with this significant project,
industry capacity for NbTi wire is greater than current demand, and the Company
has seen substantial pressure on prices. The Company's prices for
superconductive wire/cable currently are competitive, and the Company believes
that product quality and the ability to meet delivery schedules are factors
important to its market position. There are no assurances, however, that the
Company can remain competitive without future price reductions, or that the
Company can find means to offset price reductions with further cost reductions.



                                       8





<PAGE>



         The Company is also a major U.S. supplier of Nb3Sn superconducting
wire. Oxford Superconducting Technology also participates in the domestic
market, and there are a number of manufacturers of Nb3Sn wire in Japan and
Europe. Nb3Sn wire is used in the commercial nuclear magnetic resonance and high
field magnet markets, as well as in government-sponsored programs. The Company
believes that it and one other Company in Japan, Mitsubishi Electric, are the
only companies supplying substantial quantities of Nb3Sn material needed for the
Superconducting Tokamak Advanced Research Project in Korea.

         In the area of LTS wire/cable, practical and more cost-effective HTS
materials developed by the Company and others could eventually reduce the market
for the Company's current LTS products, although the Company does not, at this
time, believe this is likely to happen in the near future. (See "Research and
Development - New Product Development: HTS Materials & Devices" below.)

E. Patents

         The Company believes at the present time that patents are not a
significant competitive factor in the conduct of its business in the
Superconducting Materials segment. The Company directly or indirectly either
owns, or is a licensee under a number of patents relating to superconducting
materials and the manufacture thereof. There are no assurances that changing
technology and/or emerging patents will not adversely impact the Company's
current patent position or its competitiveness. In addition, the Company's
patent protection for emerging technologies will have commercial value only to
the extent the associated technologies become commercially significant, of which
there can be no assurance.

F. Backlog

         The Company does not consider backlog material to an understanding of
the Superconducting Materials segment because the manufacturing cycle for such
material has shortened significantly and the Company believes this trend will
continue.

G. Raw Materials and Inventory

         The number of sources for NbTi raw material required for production of
NbTi superconductive wire is declining. While the Company has not experienced
substantial difficulty in obtaining such materials, fluctuation in demand caused
by large projects such as the Large Hadron Collider being constructed by CERN in
Switzerland, could create temporary imbalances in supply and demand and thus
adversely impact the price of such raw material. The Company has negotiated a
multi-year contract with a key supplier in order to reduce this risk and
stabilize supply and price.

H. Warranty

         The expense to the Company to date for performance of its warranty
obligations in the Superconducting Materials segment has not been significant.



                                       9


<PAGE>



                              REFRIGERATION SEGMENT
                              ---------------------

A. Introduction

         Three wholly-owned subsidiaries comprise the Company's Refrigeration
segment: IGC-APD and IGC-Polycold, which design, manufacture and sell low
temperature (semi-cryogenic) and very low temperature (cryogenic) refrigeration
equipment; and ICE, which designs, develops and sells refrigerants, and is
developing refrigeration equipment. (See "New Product Development: Refrigerants
and Refrigeration Equipment" below.)

         The Company derived approximately 30% and 25% of its net sales in
fiscal years 1999 and 1998, respectively, from the sale of products in its
Refrigeration segment.

B. Principal Products

         IGC-APD's product line includes shield coolers (refrigerators) used in
the production of MRI magnet systems, a specialized cryogenic refrigeration
system sold under the registered tradename CRYOTIGER and specialized water pump
systems and cryopumps sold under the registered tradenames AquaTrap and Marathon
that are used primarily in the manufacture of semiconductors. Shield coolers
make up IGC-APD's largest product line.

         IGC-Polycold manufactures and sells a line of low temperature
refrigeration systems in the -40 to -90 Celsius range. The Company acquired
IGC-Polycold in fiscal year 1998. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations: Liquidity and Capital
Commitments" included in response to Item 7.) IGC-Polycold's refrigeration
systems are used in several markets, including optical coating, semiconductor
manufacturing, magnetic media, decorative coating, plastic coating and roll/web
coating. Sales to the optical coating industry made up the largest single market
for IGC-Polycold's products.

         ICE sells a family of environmentally acceptable refrigerants under the
registered tradename of FRIGC. These products are marketed to replace
ozone-depleting chlorofluorocarbons ("CFC's"). CFC's are being phased out of use
globally under the Montreal Protocol, an international treaty signed by the U.S.
and ninety-three other nations. ICE's core product, FRIGC FR-12 (sold under
ASHRAE designation R-416A), is an EPA-approved replacement for R-12 (the leading
CFC refrigerant) in mobile and certain stationary air conditioning systems.

         IGC-APD, IGC-Polycold and ICE also license certain mixed gas
refrigerant technology to third parties for use in markets in which the Company
does not otherwise participate.

C. Marketing

         IGC-APD markets its shield coolers through a direct sales force located
in its Allentown, Pennsylvania headquarters, its office in Sunnyvale, California
and its European office in the U.K. IGC-APD's other cryogenic and semi-cryogenic
products are marketed worldwide through its direct sales force and through
scientific and vacuum equipment sales representatives and distributors. In
addition, IGC-APD has a worldwide partnership with Daikin Industries, Ltd.
("Daikin"), a Japanese company, pursuant to which the parties sell common
cryopumps under the "Marathon" trademark in well-defined territories. In fiscal
year 1999, IGC-APD licensed a non-core portion of its laboratory systems
business to a third party, which now markets and sells IGC-APD's laboratory
systems on an exclusive basis.

         IGC-Polycold markets its line of refrigeration systems through a direct
sales force based in its San Rafael, California headquarters, and through a
worldwide network of sales representatives and two key distributors located in
Japan and Germany. In addition, IGC-APD and IGC-Polycold share common direct
sales and marketing teams.

         ICE employs a direct sales force based in the Company's corporate
headquarters, and also continues to pursue a strategy of securing distributors,
nationally and internationally. In the North American market, ICE successfully
integrated the former market coverage of Pennzoil Products Company ("Pennzoil"),
into ICE's internal operations. Pennzoil withdrew from the refrigerant
distribution market at the end of calendar year 1998. In addition, in fiscal
year 1999, ICE successfully added a number of regional and national FRIGC FR-12
distribution outlets in North America. Internationally, ICE continues to explore
distribution opportunities in the Asian-Pacific markets. While Sumitomo
Corporation of America ("SCOA") is no longer an exclusive distributor of FRIGC
FR-12 in that region, ICE has developed strong relationships with a number of
other distributors in the market. ICE's lead distributor in Australia has been
particularly successful, making FRIGC FR-12 refrigerant the number one
alternative to R-12 in mobile applications during the 1998-1999 Australian
summer.

                                       10
<PAGE>

D. Competition/Market

         IGC-APD supplies shield coolers to IGC-MBG for its superconductive MRI
magnet systems. In addition, IGC-APD sells these refrigerators to other
manufacturers of superconducting MRI magnet systems. IGC-APD licenses Daikin to
produce shield coolers and other cryogenic products for the Japanese market.
Daikin has captured a significant portion of that market for shield coolers. The
Company considers its principal competitor in the manufacture of shield coolers
to be Leybold AG ("Leybold"). Leybold has greater production capacity and
financial resources than the Company, and has successfully locked up many of
IGC-APD's potential customers in multi-year supply agreements. In addition,
Sumitomo Heavy Industries supplies shield coolers to a major MRI System
integrator.

         IGC-APD's principal competitors in its other markets include Helix
Technology Corporation ("Helix") (which markets its products under the names
"CTI Cryogenics" and "CTI") and Ebara Technologies, Inc. Helix is believed to
control 80% or more of the world market for cryopumps. Notwithstanding Helix's
market predominance, the Company believes that it can retain its position in the
market on the basis of technology and equipment performance. In addition,
IGC-APD's CRYOTIGER refrigeration system competes against machines known as
Stirling refrigerators (which the Company believes are more costly and less
reliable than CRYOTIGER), and against open-cycle coolers that rely on reservoirs
of liquid nitrogen which must be replenished periodically. Although the initial
purchase price for a CRYOTIGER refrigerator may exceed the price of a comparable
liquid nitrogen cooler, this higher initial cost is offset by lower operating
and maintenance costs and greater ease of use. The Company believes there is a
significant opportunity for this product in the marketplace, however, there are
no assurances it will achieve widespread commercial success.

         IGC-Polycold's major competitors include Sanyo and Shin Meiwa in Japan,
and Helix domestically. IGC-Polycold also competes with the use of liquid
nitrogen as an alternative to IGC-Polycold's low temperature refrigeration
systems. The Company generally competes in this area on the basis of price,
availability and product quality. In addition, with respect to both IGC-APD and
IGC-Polycold, there are no assurances that emerging technology will not
adversely impact their competitiveness.

         In its mobile application, FRIGC FR-12 refrigerant is a substitute for
R-12 in automobile, truck and bus air conditioning systems. Since 1994, new
mobile air conditioning systems have been designed to use R-134a (an HFC offered
by DuPont) and FRIGC FR-12 does not compete in the new car market. Mobile air
conditioning systems manufactured before 1994 relied on R-12. ICE believes that
FRIGC FR-12 refrigerant is the most cost-effective alternative refrigerant for
these systems because its use does not require equipment changes. By contrast,
the use of R-134a refrigerant entails, in most cases, substantial equipment
changes to deliver effective and reliable cooling. There are several other
alternative refrigerants offered by competitors including some that sell at
lower prices than FRIGC FR-12. The Company believes that FRIGC FR-12's superior
technical performance and safety record give it a strategic advantage. Within
the mobile market, the Company believes that its biggest competitive challenges
come from the continuing availability of R-12, lower cost alternatives and low
cost (incomplete or "dirty") retrofit kits to adapt R-12 systems to the use of
R-134a.

         ICE also markets FRIGC FR-12 as a direct substitute for R-12 in certain
stationary applications, such as building air conditioning systems,
refrigeration systems and food chillers. The stationary market employs a wide
variety of refrigerants. R-12 sales in the stationary market accounted for
approximately 12 million pounds of refrigerant sold nationally in calendar 1998.
Since 1994, vendors and end-users have been looking for alternative refrigerants
that provide effective, cost-efficient cooling. The Company believes that
end-users with R-12-based equipment who wish to end their use of ozone-depleting
R-12 face three choices: (1) make an expensive hardware purchase of either new
equipment (that uses other refrigerants) or major new components that convert
existing systems to R-134a refrigerant; (2) purchase an R-22-based alternative
blended refrigerant, such as R-401A offered by DuPont, R-409A or R-414B; or (3)
purchase FRIGC FR-12. The Company believes that FRIGC FR-12 refrigerant provides
a superior alternative to items (1) and (2) above. With respect to item (1)
above, FRIGC FR-12 requires little to no investment in hardware upgrades. This
is particularly true for medium temperature refrigeration applications such as
vending and ice machines. With respect to item (2) above, FRIGC FR-12 provides

                                       11
<PAGE>

superior operating performance relative to R-22-based refrigerant blends,
primarily in the form of ease of installation, leak tolerance and potentially
less wear and tear on refrigeration equipment. R-409A and R-401A are marketed by
companies with significantly greater resources and access to better-established
distribution systems than those currently available to ICE, and R-414B gained
significant market acceptance in fiscal year 1999 based on price and aggressive
marketing. Nonetheless, the Company believes that the technical and operating
advantages of FRIGC FR-12 refrigerant are such that it can compete effectively
against these alternative refrigerants.

         The Company believes that ICE's FRIGC refrigerants still face
significant challenges ahead, and there are no assurances they will win
wide-spread acceptance. In addition, notwithstanding the phase-out of domestic
production of R-12 refrigerant at the end of 1996, there remain substantially
greater stocks of such refrigerant today than previously anticipated. Relatively
easy access to R-12 has had an adverse impact on the near-term ability of ICE to
market FRIGC FR-12 refrigerant in both the mobile and stationary markets.

E. Patents

         Patents are a significant competitive factor for the Company's
Refrigeration segment. The formula for FRIGC FR-12 is protected by a U.S. patent
and foreign patents are pending for certain countries targeted by ICE as
potentially viable markets. IGC-APD's CRYOTIGER line is based upon its patented
proprietary technology. IGC-APD's AquaTrap systems are based principally on
IGC-APD's proprietary CRYOTIGER technology. While IGC-Polycold does have some
patent protection for its products, patents currently are not a significant
competitive factor for IGC-Polycold. Patents may become more significant in the
future, however, as IGC-Polycold develops new products. The Company's success in
marketing its Refrigerant Products will depend on its continued ability to
obtain patents, maintain trade secret protection and operate without infringing
on the proprietary rights of others. No assurance can be given that any
additional patents will issue with respect to patent applications filed or to be
filed by the Company. Furthermore, even if such patents issue, there can be no
assurance that any issued patents will protect against competitive products or
otherwise be commercially valuable. No patents that the Company considers
significant expire during the next five years.

F. Backlog

         Due to the relatively short production cycle for products in this
segment, the Company does not consider backlog to be material to an
understanding of the Refrigeration business.

G. Raw Materials and Inventory

         IGC-APD purchases certain major components from single sources, but the
Company believes alternate sources are available. IGC-APD generally maintains a
sufficient inventory of raw materials, assembled parts, and partially and fully
assembled major components to meet production requirements.

         IGC-Polycold purchases certain major standard components for its
products from a single source. While alternative sources are available, an
unplanned loss or severe reduction in supply from this source could result in
added cost and temporary production delays. IGC-Polycold generally maintains a
sufficient inventory of raw materials, assembled parts and partially and fully
assembled major components to meet production requirements.

         With respect to its refrigerant products, ICE has an agreement with
Schenectady International, Inc. ("SII") for the purchase of FRIGC FR-12
refrigerant for the domestic market. SII's ability to supply commercial
quantities of FRIGC FR-12 refrigerant, however, will depend on the availability
of certain raw materials, which are manufactured by a small number of companies.

H. Warranty

         In fiscal year 1999, IGC-APD experienced significant warranty
obligations which adversely affected its overall financial performance. IGC-APD
has addressed the warranty issue and does not believe performance of warranty
obligations will be significant in fiscal year 2000. The expense to the Company
in fiscal 1999 for IGC-APD's warranty obligations was $1,205,000.

                                       12
<PAGE>



                            RESEARCH AND DEVELOPMENT
                            ------------------------

A. General Research and Development

         The Company believes its research and development activities are
important to its continued success in new and existing markets. Externally
funded development programs have directly increased sales of design services and
products and, at the same time, assisted in expanding the Company's technical
capabilities without burdening operating expenses. Under many of the Company's
government contracts, it must share any new technology resulting from such
contracts with the government, which includes the right to transfer such
technology to other government contractors; however, the Company currently does
not expect such rights to have a material adverse effect on it.

         Previously, a substantial portion of the Company's research and
development expenditures had been covered by external funding, principally from
the U.S. government. In fiscal 1999, approximately 43% of total research and
development activities were paid by such external programs compared to
approximately 37% and 47% in fiscal years 1998 and 1997, respectively. During
fiscal years 1999, 1998 and 1997, product research and development expenses in
all segments were $10,886,000, $13,072,000 and $13,012,000, respectively. The
decline in fiscal year 1999 primarily resulted from the closure of the Company's
Field Effects division in December 1998, and the completion of certain
internally-funded programs.

         The Company believes that, apart from continued reductions in federal
spending on research and development, three other factors will reduce external
funding from U.S. government sources. First, and especially in the context of
HTS technology, government contracts are emphasizing cost-sharing, which
requires the awardee to contribute 20% to 50% of the total cost of the
development effort. This cost-sharing requirement may limit the Company's
reliance on the government as a significant source of research and development
funds. Second, because the Company has more than 500 employees, it is not
eligible for certain government-sponsored research and development programs for
small businesses (defined as fewer than 500 employees). Third, the Company
expects in the future only to solicit government funding for programs of direct
strategic importance.

         The Company can experience, in any given year, significant increases or
decreases in external funding depending on its success in obtaining funded
contracts.

B. New Product Development: HTS Materials & Devices

         The Company believes that HTS materials in the form of tape (and to a
lesser extent wire) may, in the future, have a substantial impact on commercial
markets and applications for superconductors. In particular, the Company
believes HTS materials could be suitable for larger scale, specialized electric
power applications and high field magnets in five to ten years, depending upon
further advances. The Company's activities in this area have been funded in part
through government-supported research and development programs, including joint
research agreements.

         The Company's activities in HTS include: (1) converting HTS materials
into usable tape/wire with acceptable electrical current densities and
competitive pricing levels; and (2) creating devices and equipment based upon
HTS tape/wire. The Company has focused primarily on bismuth-based HTS materials,
but it also is investigating tape using yttrium-based materials, which show
promise of even higher superconducting performance than their bismuth-based
counterparts. Currently, the Company does not participate in the costly and
highly competitive endeavor of identifying new HTS materials.


                                       13
<PAGE>

         The Company has continued to develop applications of HTS materials and
advanced devices in partnership with various utilities, manufacturers and
government laboratories, including a 5/10 MVA HTS transformer, a 15-kV HTS Fault
Current Limiter, HTS RF coils for low field MRI systems, and HTS current leads.
All of these products are in the development stage, and as yet remain
technologically and economically unproven. The Company has established a
dedicated facility for the manufacture of bismuth-based HTS tape for use in
sufficient quantities to develop certain of these prototype devices.

         The Company does not believe its current operations depend upon
successful market acceptance of HTS-based products or devices, nor are the
Company's continued operations necessarily dependent on its success in the HTS
marketplace, even if HTS-based products or devices do become commercially
viable. However, if technical problems are solved and HTS materials become
economically feasible for commercial applications in fields in which the Company
competes, then the Company could be adversely affected unless it is able to
develop products or devices using HTS materials. Accordingly, while representing
a relatively high-risk, long-term investment of its resources, the Company
perceives HTS technology as being of important strategic interest.

         Because of the perceived high commercial potential of HTS materials,
HTS research is a highly competitive field, and currently involves many
commercial and academic institutions around the world that may have more
substantial economic and human resources to devote to HTS research and
development than the Company. There can be no assurances that the Company will
have sufficient resources to bring HTS products to market or that emerging
patents will not adversely impact the Company's competitiveness.

C. New Product Development: Industrial Applications of Magnetic Resonance (MR)

         In the area of specialty MR applications, the Company's principal
activity focuses on determining the commercial and technological feasibility of
using MR in industrial manufacturing -- specifically, for the automated sensing
and control of manufacturing processes and/or for testing the quality of
in-process or manufactured goods.

         In principle, many fundamental properties of liquids and solids are
amenable to analysis by MR. In the industrial context referred to here, it has
been employed thus far primarily on a research basis and primarily by academic
research groups in the analysis of foods and beverages, plastics and rubbers,
petrochemicals, ceramics, explosives and narcotics, fuel propellants and even
timber.

         Commercial sales of such products currently represent an insignificant
portion of the Company's total sales. The Company's sole commercial sales have
been two customized MR systems for the automated, on-line detection of the
presence of bacterial spoilage in aseptically packaged foods. The Company's MR
system performs a 100% non-destructive detection of spoilage in finished
packages. The method is sensitive to many types of contamination, is rapid
(throughput rates of several hundred containers per minute are typical) and is
non-contact -- indeed, multiple containers within a sealed shipping carton can
be inspected simultaneously but independently.

         The Company's efforts currently are directed towards determining
applications that are technically and commercially viable, as well as further
exploiting the above-described spoilage detection application. There can be no
assurances that such efforts will be successful, or, if technically feasible,
that such applications will be cost-effective. An additional risk is that
commercialization of such products requires the Company to enter markets in
which it has little or no involvement. Finally, the Company expects to outsource
certain key technology components (e.g., MR systems electronics and software)
from third parties. Historically, the Company has obtained such services and
products from its strategic partner, SMIS Limited (See "Investments: SMIS
Limited" below.) There can be no assurance that the Company will be able to
secure such third party services and products, or that such services and
products will be available at the prices required to make the Company's proposed
products commercially attractive.



                                       14
<PAGE>


D. New Product Development: Refrigerants and Refrigeration Equipment

         ICE currently expects that in the future it will introduce other
refrigerants from its FRIGC family of refrigerants for other carefully targeted
market opportunities. ICE believes that its refrigerant technology -- which is
an outgrowth of its expertise in cryogenic technology -- may give it a superior
insight into refrigerant design and more flexibility in designing refrigerating
hardware. Nonetheless, many other companies and research facilities currently
are working to identify environmentally acceptable alternatives to the existing
CFC- and HCFC-based refrigerants. Many of these companies are larger, better
financed, better staffed and more experienced in the refrigerant business than
ICE. There can be no assurances that ICE's future refrigerants will win market
acceptance.

         In fiscal year 1998, ICE obtained a patent for an advanced subcooler
device. ICE is in the process of Beta Site testing this device for the
stationary market. This hardware could dramatically increase the energy
efficiency of existing and new stationary refrigeration systems, such as display
case systems (typically found in supermarkets), refrigerated warehouses and ice
rinks. ICE will be competing in this market with other larger companies with
potentially greater resources, and there are no assurances that the Company can
create a device with sufficient technical and cost advantages to compete in the
market.

E. New Product Development: Superconducting Magnetic Energy Storage ("SMES")

         A SMES system acts as an electro-magnetic storage system that can
protect critical electrical power loads from interruptions, spikes and sags. The
Company has developed an advanced prototype micro-SMES unit for the U.S. Air
Force. That system was delivered and installed in fiscal year 1998 and field
testing was carried out in fiscal year 1999. At this time, the Company has no
additional orders for SMES systems, and does not anticipate investing in
additional development.

         While SMES may become commercially viable in the future, at this time
the cost of SMES is significantly higher than for other energy storage systems.
Additionally, the Company faces other competitors interested in the SMES market,
some of which may have superior resources and patent positions.

F. New Product Development: Low-cost, Permanent Magnet-Based MRI Systems

         The Company ceased production of this product in November, 1998 and
closed its Field Effects division, which previously had manufactured this
system. (See Note C of the Notes to Consolidated Financial Statements included
in response to Item 8.)


                                   INVESTMENTS
                                   -----------

A. ULTRALIFE BATTERIES, INC.

         The Company owns 975,753 shares of the common stock (approximately 9.3%
of the outstanding common stock) of Ultralife Batteries, Inc. ("Ultralife"),
acquired at a cost of $7,015,000. Headquartered in Newark, N.Y., Ultralife
focuses on markets that require increased energy density and extended shelf
life. Ultralife produces lithium batteries that are the same size and voltage as
standard batteries, but have double the operating life and a longer shelf life
(up to 10 years) than alkaline or zinc carbon batteries. These batteries
currently command a premium price in the market for long-life batteries. In
addition, Ultralife produces advanced rechargeable batteries that are being
commercialized for notebook computers, cellular telephones and other portable
electronic products.

                                       15
<PAGE>


         The Company is represented on Ultralife's Board of Directors.
Ultralife's common stock is traded on the NASDAQ National Market System under
the symbol ULBI. The market value of the Company's total investment in
Ultralife, the sale of which is restricted under U.S. securities laws, was
$4,452,000 and $11,221,000 at May 30, 1999 and May 31, 1998, respectively. The
Company believes the current decline in Ultralife's market value is temporary.
The Company sold no shares of its Ultralife holdings in its fiscal years 1999,
1998 and 1997; however, it may in the future sell Ultralife shares as market
conditions warrant.

B. SMIS LIMITED

         As of May 30, 1999, the Company owned 354,223 of the outstanding
ordinary shares (approximately 23%) of SMIS, Limited, acquired at a cost of
$3,530,000, and 980,000 redeemable preference shares of SMIS purchased at a cost
of $1,511,000. The Company also has provided additional loans to SMIS which are
convertible into capital stock of SMIS. (See Note D to the Notes of Consolidated
Financial Statement included in response to Item 8.) During the year ended May
31, 1998, SMIS obtained a line of credit in the amount of 2,500,000 British
Pounds Sterling ("Pounds") (approximately $4,025,000 as of May 30, 1999). The
Company guaranteed repayment of one half of the outstanding balance up to
1,250,000 Pounds (approximately $2,000,000 as of May 30, 1999) in the event of
default by SMIS. As of May 30, 1999, SMIS had drawn approximately 2,250,000
Pounds (approximately $3,622,000) against the line.

         During the Company's fiscal year 1999, SMIS experienced cash flow
problems, and in the second half of the fiscal year, also experienced declining
sales and operating losses as a result of its inability to achieve the
anticipated improvements in its business plan, including new product orders,
improved manufacturing results and cost reductions. In March, 1999, it was
determined by SMIS management that additional funds would be required to sustain
operations based on projected cash flows and the deterioration in its backlog.
Based on the Company's evaluation of SMIS' past performance and projections for
future results it was determined by Intermagnetics' management in the fourth
quarter of fiscal 1999 that it would not provide additional funding to SMIS.
Additionally, during July, 1999, SMIS management agreed in principle to sell the
majority of its operations for a price which will result in no return to the
Company. The Company, therefore, has written off its investment in, and advances
to, SMIS and provided for the estimated amount of guaranteed debt it will be
required to re-pay on SMIS' behalf. The total amount of this charge was $7.3
million, of which approximately $2 million related to guaranteed debt. (See Note
D of the Notes to Consolidated Financial Statements included in response to Item
8.)

C. KRYOTECH, INC.

         On March 23, 1998, the Company acquired 1,172,840 shares (the "B
Shares") of the Series B Convertible Preferred Stock, $.01 par value per share
(the "Series B Stock"), of KryoTech, Inc. a privately-held, South Carolina
corporation, and a warrant (the "Warrant") to purchase an additional 237,416
shares (the "Warrant Shares") of Series B Stock. The Company paid $4,750,000 for
the B Shares. The Warrant may be exercised, in whole or in part, at any time
before it expires on March 23, 2008. The Warrant may be exercised at a price
equal to $1.053 per Warrant Share. On an as-converted basis, the Company's
holdings represent 20.7% of the outstanding equity of KryoTech.

         KryoTech was formed on March 15, 1996 for the purpose of developing,
marketing, manufacturing and selling thermal management products which are
designed specifically for the computer industry. More specifically, KryoTech has
successfully demonstrated that active cooling of computer chips can improve chip
performance.

         As partial consideration for the Warrant, Intermagnetics granted to
KryoTech an exclusive, worldwide, fully paid up, irrevocable right (the "Right")
to represent and sell products for application to, and use in, computer chip
cooling, based upon IGC-APD's and IGC-Polycold's refrigeration technology
(including mixed gas technology). Unless otherwise renewed or extended by
agreement of the parties, the Right has a term ending on the later of (1) March
28, 2005, or (2) the date on which Intermagnetics' equity ownership interest in
KryoTech falls below 15% on a fully diluted basis. KryoTech may not sublicense,
sell or transfer the Right. The scope of the Right expressly excludes the
cryo-cooling of other electronic devices, such as communications equipment of
any type. The Company's equity ownership interest may be diluted in fiscal year
2000 as a result of a direct public offering being made by KryoTech in calendar
year 1999; however, the Company does not expect that offering to cause its
ownership interest to fall below 15%.

                                       16

<PAGE>


D. POWERCOLD CORPORATION

         In September 1998, the Company acquired 1,250,000 shares of the Series
A Preferred Stock of PowerCold Corporation ("PowerCold") for approximately
$1,000,000. PowerCold is a solution provider of energy-efficient products in the
refrigeration, air-conditioning and power industries and has strong ties to the
supermarket refrigeration industry. (See "Management's Discussion and Analysis
of Financial Condition and Results of Operations: Liquidity and Capital
Commitments" included in response to Item 7 hereto.)


                                    PERSONNEL
                                    ---------

         On May 30, 1999, the Company employed 583 people.

         Within the Superconducting Materials segment, the production and
maintenance employees of IGC-AS, in Waterbury, Connecticut, are represented by
the United Steelworkers of America ("United Steelworkers"). The Company and the
United Steelworkers have a five-year collective bargaining agreement effective
June 1, 1998. Within the Refrigeration segment, the production employees at
IGC-APD in Allentown, Pennsylvania, are represented by the International
Association of Machinists and Aerospace Workers ("IAMAW"). The Company and IAMAW
have a three-year collective bargaining agreement effective August 23, 1997.

         There is great demand for trained scientific and technical personnel,
and the Company's growth and success will require it to attract and retain such
personnel. Many of the prospective employers of such personnel are larger and
have greater financial resources than the Company and may be in a better
position to compete with the Company for prospective employees.


                      EXECUTIVE OFFICERS OF THE REGISTRANT
                      ------------------------------------

         As of the date of this report, the executive officers of the Company
were:
<TABLE>
<CAPTION>


Name                                        Position                                             Age
----                                        --------                                             ---
<S>                                         <C>                                                  <C>
Carl H. Rosner                              Chairman of the Board of Directors                   70
                                            and Chief Executive Officer (Retired as
                                            Chief Executive Officer effective May 31, 1999)

Glenn H. Epstein                            President and Chief Operating Officer                41
                                            (Appointed Chief Executive Officer
                                            effective June 1, 1999)

Michael C. Zeigler                          Senior Vice President -- Finance                     53
                                            & Chief Financial Officer

Leo Blecher                                 Vice President and General Manager --                53
                                            IGC-Magnet Business Group

David Dedman                                Vice President and General Manager --                45
                                            IGC-APD Cryogenics Inc.
                                            and IGC-Polycold Systems Inc.
</TABLE>
                                       17


<PAGE>

<TABLE>
<CAPTION>

Name                                        Position                                             Age
----                                        --------                                             ---
<S>                                         <C>                                                  <C>
Ian L. Pykett                               Vice President -- IGC-Technology                     46
                                            Development

Robert S. Sokolowski                        Vice President and General Manager --                46
                                            IGC-Advanced Superconductors
                                            (Transferred to Vice President of
                                            Market Development, a non-officer position,
                                            effective June 1, 1999)

Richard J. Stevens                          Vice President and General Manager --                57
                                            IGC-Medical Advances Inc.
</TABLE>

         Carl H. Rosner is a principal founder of the Company and has been
Chairman of the Board of Directors of the Company since the Company's formation
in 1971. Before that Mr. Rosner headed the Superconductive Products Operation of
the General Electric Company. Mr. Rosner retired as the Company's Chief
Executive Officer effective May 31, 1999.

         Glenn H. Epstein was named President and Chief Operating Officer on May
5, 1997. Effective June 1, 1999, he was appointed Chief Executive Officer. Prior
to joining the Company, Mr. Epstein worked for Oxford Instruments Group, plc in
various capacities between 1986 and April, 1997, and most recently held the
position of President of the Nuclear Measurements Group, Inc., a wholly-owned
subsidiary of Oxford Instruments, plc. Mr. Epstein also worked for the General
Electric Company between 1981 and 1986.

         Michael C. Zeigler was appointed Senior Vice President -- Finance and
Chief Financial Officer of the Company in September, 1993. He previously served
as Vice President-Finance and Chief Financial Officer of the Company from June,
1987 until his appointment as a Senior Vice President, and served as the
Company's Controller from June, 1985 through June, 1987.

         Leo Blecher was appointed Vice President and General Manager of IGC-MBG
in April, 1997. He previously held the title of Deputy Manager of IGC-MBG. He
originally joined the Company in 1988 as Manager of Technology Projects. Prior
to joining the Company, Mr. Blecher held various positions of responsibility
with Israel Aircraft Industry, holding the title of Manager Engineering and
Project Manager, for the Space Technology Division.

         David Dedman was appointed Vice President and General Manager of
IGC-APD and IGC-Polycold in September, 1998. Prior to joining the Company, Mr.
Dedman served as Executive Vice President, Global Business Development for
SubMicron Systems Corporation and has held various executive management
positions in a range of technology companies including EI DuPont de Nemours,
Emerson Electric and Tylan General.

         Ian L. Pykett, Ph.D., was appointed Vice President of IGC-TD in 1991.
Prior to joining the Company, Dr. Pykett had been President and Chief Executive
Officer of Advanced NMR Systems, Inc., a diagnostic imaging company he
co-founded in 1983.

         Robert S. Sokolowski, Ph.D., was appointed Vice President and General
Manager of IGC-AS in February, 1996. Dr. Sokolowski served as the Company's
Manager of High Temperature Superconductor Operations between November, 1992 and
February, 1996. Effective June 1, 1999, Dr. Sokolowski was named Vice President
of Market Development, a new, non-officer position within the Company.

         Richard J. Stevens became Vice President and General Manager - IGC-MAI
upon its acquisition by the Company in March, 1997. An original founder of
Medical Advances, Inc., Mr. Stevens had been its President since 1985. Prior to
that, Mr. Stevens was a marketing and advertising executive for seventeen years
with the General Electric Company. He spent twelve years of his career at the
General Electric Company in the Medical Systems Group and five years in
materials technologies businesses, and held the title of Manager of Computed
Tomography Marketing in the Medical Systems Group from 1981 to 1985.

                                       18
<PAGE>

ITEM 2. PROPERTIES

         The Company's corporate offices, IGC-MBG, IGC-TD and ICE offices are
located in approximately 146,000 square feet of space located in Latham, New
York (the "Latham Facility"). The Company owns the Latham Facility, which is
subject to a mortgage. (See Note E of the Notes to Consolidated Financial
Statements included in response to Item 8 hereto.) In fiscal year 1999, the
Company entered into a lease agreement for up to 65,000 square feet of office
and manufacturing space in nearby Schenectady, New York. Approximately 32,600
square feet of that space is expected to be available for occupancy in fiscal
year 2000, and is expected to become the future home of ICE and certain R&D
activities related to HTS manufacturing. The lease has a 20 year term beginning
on the date the premises are available for occupancy.

         The Company's HTS facility is located in approximately 19,000 square
feet of leased space located in Cohoes, New York. The three-year lease expires
on January 31, 2000, with two consecutive three year renewal terms. The Company
plans to move some or all of this activity to the manufacturing space it is
renting in Schenectady (see above).

         IGC-AS' offices and production facilities are located in Waterbury,
Connecticut in premises of approximately 212,700 square feet (of which 57,900
square feet are presently being used) pursuant to a thirty-year prepaid lease
that expires in December, 2021. The facility's equipment includes a drawbench
with a pulling force of up to 150,000 pounds and a length of approximately 400
feet. The Company believes that this drawbench is one of the largest in the
world.

         The former IGC Field Effects division operated out of premises totaling
approximately 21,900 square feet in Tyngsboro, Massachusetts. The facility is
subject to a five-year lease expiring in July of 2001.

         IGC-APD operates out of a building, which it owns, in Allentown,
Pennsylvania totaling approximately 56,550 square feet.

         IGC-MAI leases approximately 19,650 square feet in a multi-tenant
building located in the Milwaukee County Research Park's Technology Innovation
Center (the "Research Park"). Approximately 9,000 square feet are used for
office space with the remaining space dedicated to lab, assembly, shipping and
material storage. The lease expires in August, 1999, and may be renewed for a
successive one-year term. While the Company currently believes that it will be
able to renew this lease, the Research Park expects that IGC-MAI eventually will
purchase or lease property within the Park for the purpose of building a new
facility. IGC-MAI is studying the possibility of building or moving to a new
facility.

         IGC-Polycold Systems Inc. leases approximately 27,900 square feet of
manufacturing and office space in three buildings located in San Rafael,
California. The lease for one building expires in 1999 and is in the process of
being renewed. Leases for the two other buildings expire in 2002.

         The Company believes its facilities are adequate and suitable for its
current and near-term needs.


ITEM 3. LEGAL PROCEEDINGS

         Neither the Company nor any of its subsidiaries is a party to any
material legal proceeding. The Company is, from time to time, a party to
litigation arising in the normal course of its business.

                                       19
<PAGE>


         To the Company's knowledge, no director, officer, affiliate of the
Company, holder of 5% or more of the Company's Common Stock, or associate of any
of the foregoing, is a party adverse to, or has a material interest adverse to,
the Company or any of its subsidiaries in any proceedings.

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

         Not applicable.


                                     PART II

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

         The Company's Common Stock is traded on the American Stock Exchange
under the symbol IMG. The high and low sales prices of the Common Stock for each
quarterly period for the last two fiscal years, as reported on the American
Stock Exchange, are shown below.


                                                       Closing Prices(1)
                                                      -----------------
Fiscal Year 1998                                   High                  Low
----------------                                   ----                  ---
Quarter Ended August 24, 1997                    $13  7/16            $ 9 15/16
Quarter Ended November 23, 1997                   11 7/8                8 7/16
Quarter Ended February 22, 1998                    9 3/16               7 3/4
Quarter Ended May 31, 1998                        11 1/2                9

Fiscal Year 1999
----------------
Quarter Ended August 30, 1998                    $ 9 15/16           $  6 3/4
Quarter Ended November 29, 1998                    7 3/4                5 7/16
Quarter Ended February 28, 1999                    6 1/2                5 5/16
Quarter Ended May 30, 1999                        12 1/4                5 9/16

------
 (1) The closing prices have been adjusted to reflect a two percent stock
     dividend distributed on September 17, 1998, to stockholders of record
     on August 27, 1998.

         There were 1,941 holders of record of Common Stock as of August 16,
1999. The Company has not paid cash dividends in the past ten years, and it does
not anticipate that it will pay cash dividends or adopt a cash dividend policy
in the near future. The Board of Directors of the Company has declared a policy
of granting annual stock dividends where, and to the extent that, the
performance of the Company warrants such a declaration. The Company did not
declare any stock dividend for fiscal year 1999. Under the Company's bank
agreements, prior bank approval is required for cash dividends in excess of the
Company's net income for the year to which the dividend pertains.

                                       20
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

                  The following selected financial information has been taken
from the consolidated financial statements of the Company. The selected
statement of operations data and the selected balance sheet data set forth below
should be read in conjunction with, and is qualified in its entirety by,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and related Notes included
in response to Items 7 and 8.
<TABLE>
<CAPTION>


                                                        (Dollars in Thousands Except Per Share Amounts)
                                     ---------------- ----------------- ---------------- ----------------- ---------------
For the Fiscal Year Ended               May 30, 1999      May 31, 1998     May 25, 1997      May 26, 1996    May 28, 1995
                                        ------------      ------------     ------------      ------------    ------------
<S>                                         <C>                <C>              <C>               <C>             <C>
Net sales                                   $102,871           $95,894          $87,052           $88,467         $83,877
Gross Margin                                  32,739            35,685           26,200            22,279          23,703


Income (loss) before
  income taxes                                (8,241)            4,744            4,035             6,882           6,512
Net income (loss)                             (7,029)            2,753            2,615             4,427           4,007

Per common share                               (0.57)             0.21             0.20              0.35            0.33




At End of Fiscal Year                           1999              1998             1997              1996            1995
                                                ----              ----             ----              ----            ----

Working capital                              $34,389          $45, 493          $49,346           $53,642         $52,655
Total assets                                 125,458           127,776          115,889           112,397         103,706
Long-term debt
 (net of current maturities)                  26,631            28,833           29,105            29,364          39,807
Accumulated deficit                           (8,061)           (1,081)          (1,643)           (1,727)         (2,495)
Shareholders' equity                          72,173            83,801           73,087            67,296          53,305
</TABLE>
------
(a) Income (loss) per common share has been computed during each period based
    on the weighted average number of shares of Common Stock outstanding plus
    dilutive potential common shares (where applicable).

(b) The Company did not pay a cash dividend on its Common Stock during any of
    the periods indicated.

(c) Net income (loss) per common share has been restated to give effect to the
    2% stock dividend distributed in September 1998, September, 1997 and August,
    1996 and the 3% stock dividend distributed in June, 1995.

                                       21

<PAGE>


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

SUMMARY
-------

         The following tables set forth, for the periods indicated, the
percentages which certain items reflected in the financial data bear to net
sales of the Company and the percentage change of such items from period to
period. See the Consolidated Financial Statements, located elsewhere in this
report, for financial information to which the percentages set forth below
relate.
<TABLE>
<CAPTION>

                                                                                               Period to Period
                                                  Relationship to Net Sales                   Increase (Decrease)
                                    ------------------------------------------------------   ----------------------
                                                      Fiscal Year Ended                          Fiscal Years
                                    ------------------------------------------------------   ----------------------
                                      May 30,         May 31,        May 25,         1998-          1997-
                                      1999            1998           1997            1999           1998
                                    ------------    -----------    ------------    -----------    -----------
<S>                                     <C>             <C>            <C>              <C>           <C>
Net sales                               100.0%          100.0%         100.0%           7.3%          10.2%
Cost of products sold                    66.4            62.8           69.9            13.5          (1.1)
Inventory written off in
  restructuring                           1.8            --             --               **           **
                                      -------        --------       --------

Gross margin                             31.8            37.2           30.1           (8.3)          36.2

Product research and
  development                             6.0             8.4            7.8          (23.5)          19.9
Marketing, general and
  administrative                         20.9            21.7           18.2            3.0           31.6
Amortization of
  intangible assets                       1.3             1.3            0.4           12.1          261.3
Restructuring charges                     2.8            --             --              **             **
                                      -------        --------       --------

                                         31.0            31.4           26.4            5.9           31.5
                                      -------        --------       --------

Operating income                          0.8             5.8            3.7          (85.9)          69.6
Interest and other
  income                                  1.9             2.5            3.4          (17.9)         (20.2)
Interest and other
  expense                               (2.1)           (2.2)          (2.3)            2.2            6.5
Write-off of investment in
  unconsolidated affiliate              (7.1)            --           --               **             **
Equity in net loss of
  unconsolidated affiliates             (1.5)          (1.1)           (0.2)           47.8          454.4
                                     --------       --------        --------

     Income (loss) before
       income taxes                      (8.0)            5.0            4.6         (273.7)          17.6
Provision for income
  taxes (benefit)                        (1.2)            2.1            1.6         (160.9)          40.2
                                      --------        -------        -------

Net income (loss)                       (6.8%)           2.9%            3.0%       (355.3%)          5.3%
                                     =========       ========        ========
</TABLE>

-------

** Not applicable for purposes of this table.

                                       22
<PAGE>


         The statements contained in this annual report which are not historical
fact are "forward-looking statements" that involve various important
assumptions, risks, uncertainties and other factors which could cause the
Company's actual results for fiscal year 2000 and beyond to differ materially
from those expressed in such forward-looking statements. These important factors
include, without limitation, the assumptions, risks, and uncertainties set forth
herein, as well as other assumptions, risks, uncertainties and factors disclosed
elsewhere in this report and in the Company's press releases, shareholders'
reports and filings with the Securities and Exchange Commission.

RESULTS OF OPERATIONS -- FISCAL 1999 and FISCAL 1998

Consolidated

         Net sales increased 7.3% in fiscal 1999 compared to an increase of
10.2% in fiscal 1998. Sales for fiscal 1999 grew mainly due to the inclusion of
full year results from the acquisition of IGC-Polycold Systems Inc.
("IGC-Polycold"), which was added to the Refrigeration segment in November,
1997. Sales for fiscal 1998 increased because of the IGC-Polycold acquisition
and the inclusion of a full years results of IGC-Medical Advances Inc.
("IGC-MAI"), which was added to the Electromagnetics segment in March, 1997.

         As a percentage of net sales, gross margins declined in fiscal 1999 due
mainly to inventory write-offs, production problems, and an unfavorable sales
mix in certain business groups. Gross margins had improved in fiscal 1998 due to
cost-reduction efforts and a favorable product mix, including the acquisition of
IGC-MAI and IGC-Polycold.

         Looking forward, the Company expects greater sales and earnings in
fiscal 2000. This expectation is based on the following assumptions, among
others:
         -the market for MRI systems continues to grow;
         -the Company can successfully contend with continued competitive
         pressure on selling prices in the MRI marketplace for magnets and
         materials;
         -anticipated sales of refrigerants occur;
         -sales of refrigeration products to Asian customers increase;
         -reductions in production costs in the operating segments continue,
         including resolution of production problems at IGC-APD Cryogenics Inc.
         ("IGC-APD");
         -no adverse consequences of the "Year 2000 Problem" or any
         litigation occur; and,
         -unconsolidated affiliate improves operating performance.

Also, the Company expects future sales growth due to:
         -the signing of a five-year agreement with Philips Medical Systems to
         be the exclusive developer and supplier of advanced superconductive
         magnet systems, with a total value estimated to exceed $350,000,000;
         -the purchase of manufacturing rights from the Company's European joint
         venture partner, as described below; and
         -the signing of a $16,400,000 agreement to supply over four years
         superconducting materials for the Large Haldron Collider (which will
         be, when completed, the world's most powerful particle accelerator), at
         the European Laboratory for Particle Physics located near Geneva,
         Switzerland.

         Company-funded product research and development expenses decreased in
fiscal 1999 by 23.5% compared to an increase of 19.9% in fiscal 1998, almost all
of which was due to acquisitions. The decline in 1999 resulted from the
completion of certain internal programs and the termination of the Field Effects
Division business.

         Marketing, general and administrative expenses increased 3.0% in fiscal
1999 compared with an increase of 31.6% in fiscal 1998. The modest increase in
1999 was due to the inclusion of IGC-Polycold for a full year, offset by
reductions in other refrigeration products and the termination of Field Effects.
The 1998 increase was due primarily to acquisitions, increased marketing
expenses for IGC-APD, and a non-cash charge of $600,000 associated with the
issuance of a warrant to Sumitomo Corporation of America in connection with a
distribution agreement.
                                       23
<PAGE>

         In November, 1998 the Company decided to close the Field Effects
Division after the unilateral cancellation of a marketing agreement by the
exclusive distributor of the Field Effects' permanent magnet-based clinical MRI
system. As a result, the Company wrote off $1,820,000 of inventory and recorded
a charge to operations of $2,919,000 relating to the costs associated with the
expenses necessary to close out the business unit.

         In fiscal 1998 the Company began to separately report the amortization
of intangible assets due to the significance of such expense resulting from
acquisitions. The excess of the purchase price over the fair market value of net
assets acquired for these acquisitions and investments is being written off over
15 years.

         In fiscal 1999 the Company froze all pension benefits as of December
31, 1998 (with the exception of approximately 50 bargaining union members at
IGC-APD Inc.). Therefore, no additional benefits were accrued after that date.
Since prior Company contributions were intended to fund both benefits earned and
those expected to be earned in the future, the freezing of the benefits
generated a "curtailment gain" of $1,465,000, which has been credited to the
appropriate operating expenses containing salary and wages expense. The Company
has been advised that the pension plan has sufficient assets to permit
termination of the plan and has begun the required steps to do so in accordance
with statutory requirements. The actual termination date depends on economic
conditions and receiving regulatory approval and may require the Company to
recognize additional pension expense to provide full funding of vested benefits
upon termination.

         Interest expense was slightly higher in fiscal 1999 due to utilization
of short-term borrowings, and in 1998 principally due to the issuance of a
short-term note as part of the IGC-Polycold acquisition.

         During the Company's fiscal year 1999, SMIS experienced cash flow
problems and continued operating losses as a result of its inability to achieve
the anticipated improvements in its business plan, including new product orders,
improved manufacturing results and cost reductions. In March, 1999, it was
determined by SMIS management that additional funds would be required to sustain
operations based on projected cash flows and the deterioration in its backlog.
Based on the Company's evaluation of SMIS' past performance and projections for
future results it was determined by Intermagnetics' management in the fourth
quarter of fiscal 1999 that it would not provide additional funding to SMIS.
Subsequent to the close of the Company's fiscal year, SMIS agreed in principle
to sell the majority of its business at a price that will not result in any
return to its shareholders. Accordingly, the Company recorded a impairment
charge of $7.3 million to write off its investment in and advances to SMIS,
consisting of ordinary and redeemable preference shares in the amount of
$2,337,000 and notes receivable in the amount of $2,924,000, and to provide for
the estimated $2 million that will be required to settle third-party debt of
SMIS guaranteed by the Company.

         In fiscal 1999 the Company incurred a net loss and recognized a tax
benefit of $1,212,000 relating to the portion of the loss which can be reflected
on income tax returns. During fiscal year 1999, the Company recognized
approximately $5,583,000 of capital losses for income tax purposes, including
approximately $5,056,000 in connection with the write off of SMIS. Under current
tax law, only $1,683,000 can be carried back against previously recognized
capital gains. The Company's effective income tax rate increased in fiscal 1998
to 42%, up from 35% in fiscal 1997, due mainly to the effect of non-deductible
amortization of intangible assets associated with the acquisitions. See Note H
of Notes to Consolidated Financial Statements, located elsewhere in this report,
for detailed information regarding income taxes.

         In May, 1997, the Company entered into a distributorship agreement with
Sumitomo Corporation of America to market FR-12 refrigerant in the Asia-Pacific
market. In June, 1997, the Company entered into a Warrant Agreement with
Sumitomo under which Sumitomo could purchase up to 1,200,000 shares of Common
Stock. Sumitomo paid $120,000 for the rights to the warrants. The Company issued
an initial warrant to purchase 500,000 shares at $12.50 per share. In connection
with the initial Warrant, the Company incurred a non-cash charge of $600,000 in
fiscal 1998. The Warrant expired unexercised in November 1998.

         In December, 1998, Pennzoil Products Company announced that it was
merging with Quaker State and, as a consequence, was discontinuing the
distribution of FRIGC refrigerants to concentrate on its core businesses.
Pennzoil turned over to the Company their FRIGC related mobile air-conditioning
refrigerant business and the Company repurchased Pennzoil's FRIGC refrigerant
inventory. The Company is servicing the former Pennzoil customers through direct
sales and wholesale distributors.

                                       24
<PAGE>


Segment Discussion
------------------

         Electromagnetics Segment. This segment consists of the design,
         development, manufacture and sale of superconductive magnets, RF coils,
         and other magnetic products. Sales for the segment decreased 1.6% in
         fiscal 1999 compared to an increase of 14.6% in fiscal 1998. The 1999
         decrease was due decreased sales by IGC-MBG and decreased sales as a
         result of the closing of the Field Effects Division, offset by
         increased sales from IGC-MAI. The 1998 increase was principally due to
         the inclusion of IGC-MAI for the full year. Magnet system sales
         decreased by 6.3% in fiscal 1999 compared to an decrease of 2.0% in
         fiscal 1998, whereas RF Coil sales increased 20.3% and 442.5% in fiscal
         1999 and fiscal 1998, respectively. The increase in fiscal 1998 sales
         is due to the inclusion of IGC-MAI's full year results. In fiscal 1999,
         gross profit margins declined for electromagnetic products, principally
         because of the write-off of the Field Effects Division and an
         unfavorable sales mix. In fiscal 1998, gross profit margins increased
         for electromagnetic products due to continued cost improvements, higher
         sales and improved product mix, including IGC-MAI's impact on the full
         year. Operating profit increased in this segment during the past two
         years, mainly due to the acquisition of IGC-MAI. The fiscal 1999
         results were adversely affected by the termination of the Field
         Effects Division.

         Superconducting Materials Segment. This segment consists of the design,
         development, manufacture and sale of Superconducting wire and cable.
         Superconducting Material sales increased 9.2% in fiscal 1999 compared
         to an increase of 4.0% in fiscal 1999; these increases were principally
         due to substantially higher superconducting material sales to a major
         customer who had previously decided not to renew a long-term supply
         agreement. Gross margins in this segment increased in fiscal 1999 and
         fiscal 1998 due mainly to increased sales. Operating profit has
         increased for the past two years due to increased sales and improved
         cost controls.

         Refrigeration Segment. This segment, which consists of the design,
         development, manufacture and sale of refrigeration equipment and
         refrigerants, had increased sales of 28.7% in fiscal 1999 and 2.8% in
         fiscal 1998. The increase in fiscal 1999 was due to the inclusion of
         IGC-Polycold for a full year, which more than offset the decline
         in sales for IGC-APD. Fiscal 1998 includes IGC-Polycold's sales
         for six months, which slightly exceeded the reduction in sales of FRIGC
         refrigerants and IGC-APD's refrigeration equipment due to reduced
         demand for both product lines. Gross margin, as a percentage of net
         sales, declined substantially in fiscal 1999 after having increased
         slightly in fiscal 1998. The fiscal 1999 decline was due to production
         problems, manufacturing variances, inventory write-offs, and lower
         sales for cryogenic refrigeration equipment, principally in the IGC-APD
         business. This segment has experienced operating losses during the past
         two years, despite the acquisition of IGC-Polycold. In fiscal 1999,
         this segment experienced significant inventory write-downs together
         with continuing higher than normal warranty expenses. In fiscal 1998
         this segment recorded a $600,000 non-cash charge to operations for the
         issuance of a warrant.

         See Note K of Notes to Consolidated Financial Statements, located
         elsewhere in this report, for financial information by reportable
         operating segment.

Year 2000 Compliance

         The transition to the Year 2000 could potentially affect any computer
system or software application that uses date data. The "Year 2000 Problem"
(sometimes called the "year 2000 bug" or "millennium bug") refers to the fact
that some computer systems store the year portion of dates in two-digit form
identifying 1999 as "99," for example.

State of Readiness:

         The Company recognizes the importance of providing customers with
products that will continue to function correctly during the year 2000 and
beyond. We continue to assess the potential impact of the year 2000 on our
internal business systems, products, and operations. Our year 2000 initiatives
include testing and upgrading significant information technology systems and
facilities; testing and developing upgrades; contacting key vendors to determine
their year 2000 compliance status; and developing contingency plans. The Company
has developed and is implementing a remediation plan to identify and, if
necessary, correct potential year 2000 problems in the following areas:

                                       25
<PAGE>

1.       Products. The Company has implemented a compliance program to test and
         evaluate the year 2000 readiness of the material products that it
         currently manufactures and sells. The Company has determined that all
         material products (superconducting magnets, radio frequency imaging
         coils, superconducting wire and cable, cryogenic equipment, and
         refrigeration systems) are year 2000 compliant. However, as many of the
         Company's products are complex, interact with or incorporate
         third-party products, and operate on computer systems that are not
         under the Company's control, there can be no assurance that the Company
         has identified all of the year 2000 problems with its current products.

2.       Computer Systems. The Company has completed the evaluation of all
         desktop and server systems for the existence of year 2000 problems
         using commercial evaluation software. The majority of our non-compliant
         desktop and server systems have been replaced or upgraded to become
         year 2000 compliant. The small number of remaining non-compliant
         desktop and server systems will be corrected and tested before the end
         of October, 1999.

3.       Business Software. The Company's assessment and remediation plan has
         identified that several of the present business systems are not year
         2000 compliant. The Company has had an ongoing project to install an
         enterprise-wide resource planning system designed to integrate all
         business entities. This project began in 1996. The software and
         hardware selected for this project is year 2000 compliant and is
         expected to be implemented by the end of October, 1999. This represents
         a five-month delay from the originally expected implementation date of
         May, 1999. One of our business units has rendered its existing business
         system year 2000 compliant and will be implementing the corporate-wide
         enterprise resource planning system in fiscal 2000.

4.       Non-Information Technology Systems. Non-information technology systems
         include facilities and communications systems such as HVAC, telephone,
         voice-mail, and security systems, as well as machine tools and controls
         used in the manufacturing process. The Company has completed its
         evaluation of these systems and has developed replacement or upgrade
         plans to correct the problems incurred. Non-compliant phone and
         voice-mail systems at two of our locations will be replaced by the end
         of October 1999.

5.       Business Partners. The Company is in the process of identifying and
         assessing the year 2000 readiness of key vendors that are believed to
         be significant to the Company's business operations. Beginning in 1998,
         the Company requested year 2000 readiness information from all its
         vendors. The Company is now in the process of performing year 2000 risk
         assessments for all critical suppliers. For our most critical vendors,
         contingency plans have been developed, and in some cases implemented,
         to mitigate year 2000 risks. The Company believes that its major
         customers have substantially mitigated their year 2000 risks.

Costs:

         The Company estimates that the total cost of its assessment and
remediation plan will amount to approximately $2.2 million, which is being
funded through operating cash flows. Included in this amount is approximately $2
million for the replacement of the business systems described above, which is
being capitalized because its purchase and implementation was primarily related
to increases in system functionality. Approximately $1.8 million of the expected
total cost has been expended as of July 31, 1999.

Contingency Plans:

         The Company is performing year 2000 risk assessments for all its
critical suppliers to ensure the uninterrupted flow of good and services into
the year 2000. As part of risk mitigation, the Company is developing contingency
plans that will allow its primary business operations to continue despite
disruptions due to year 2000 problems. These plans include identifying and
securing alternate suppliers, increasing inventories, and modifying production
facilities and schedules. The Company expects to complete the year 2000 risk
assessment of all critical suppliers and to implement contingency plans, where
deemed appropriate, by the end of September 1999.

                                       26
<PAGE>

Risks of the Company's Year 2000 Issues:

         While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Despite its efforts to ensure that its material current products are year 2000
compliant, the Company may see an increase in warranty and other claims,
especially those related to Company products that incorporate, or operate using,
third-party software or hardware. If any of the Company's significant vendors
experience business disruptions due to year 2000 issues, there may also be a
material adverse effect on the Company. There can be no assurance that the
Company will not incur material costs in defending or bringing lawsuits related
to year 2000 issues. In addition, if any year 2000 issues are identified, there
can be no assurance that the Company will be able to retain qualified personnel
to remedy such issues. Any unexpected costs or delays arising from the year 2000
issue could have a significant adverse impact on the Company's business,
operations, and financial condition in amounts that cannot be reasonably
estimated at this time.

LIQUIDITY AND CAPITAL COMMITMENTS
---------------------------------

         In fiscal 1999 the Company generated net cash of $8,713,000 from
operating activities, which, together with available cash and short-term
borrowings, was used to purchase property, plant and equipment, to make an
advance payment for the purchase of the production rights of a joint venture as
described below, to purchase Treasury Stock, repay debt and to make additional
investments.

         On November 24, 1997, the Company acquired IGC-Polycold of San Rafael,
CA., a manufacturer of low-temperature refrigeration systems including water
vapor cryopumps, cryocoolers, cold trap chillers and gas chillers, for an
aggregate consideration of approximately $16,500,000, consisting of a 90-day
promissory note for $6,821,000 (paid in March 1998), 281,568 shares of the
Company's Common Stock and 69,992 shares of Series A Preferred Stock, which is
redeemable in cash or Common Stock at the option of the Company. The $10,175,000
excess of purchase price over the fair market value of net assets acquired is
being amortized over 15 years. The Preferred Stock is redeemable in cash by the
Company at any time at $102 per share. Also, the Company may convert some or all
of the Preferred Stock into Common Stock at any time after December 11, 1998,
but before December 1, 1999. If any of the Preferred Stock is not so converted
by the Company, it shall automatically convert into Common Stock as of December
1, 1999. The conversion shall be effected by dividing the conversion price ($102
per share) by the average of the closing prices of the Common Stock on the ten
trading days preceding the date of conversion.

         In fiscal 1999, the Company entered into an agreement to purchase, from
its European joint venture partner, all of the manufacturing rights and
licenses, as well as certain other assets of the joint venture, for a total
consideration of $9,000,000. The joint venture will cease operating about the
beginning of the year 2000 when increased shipments will begin from the
Company's Latham, NY factory. In fiscal 1999, the Company made an initial
payment of $4,250,000 of the purchase price with the balance scheduled for
payment in March, 2000. It is expected that this transaction will result in up
to a 50% increase in the Company's MRI magnet shipments, as well as a similar
increase in the manufacture of superconducting wire by IGC-Advanced
Superconductors beginning in mid-2001. It is not expected that these increased
production rates will require substantial investments in additional capital
equipment.

         During fiscal 1999, under the Company's stock buy-back program, the
Company repurchased a total of 530,500 shares of Common Stock for $4,046,000.
Also in fiscal 1999, the Company paid $1,550,000 for the early retirement of
$1,860,000 5.75% Convertible Subordinated Debentures due September 2003 and
recorded a pre-tax gain of $275,000, which is included in interest and other
income.

         During the year ended May 31, 1998, SMIS obtained line of credit
financing in the amount of 2,500,000 Pounds ($4,025,000) as of May 30, 1999. The
Company has guaranteed (by issuing a letter of credit) repayment of one half of
the outstanding balance, up to 1,250,000 Pounds, approximately $2,000,000, as of
May 30, 1999 in the event of default by SMIS. The Company has included the
expected cost of honoring this guarantee in the amount written off restricted
with the impairment loss recorded on investment in and advanced to SMIS.

                                       27
<PAGE>


         In September 1998, the Company acquired 1,250,000 shares of the Series
A Preferred Stock, of PowerCold Corporation, a publicly held corporation
("PowerCold") for approximately $1,000,000. PowerCold has strong ties with the
supermarket refrigeration industry and is a solution provider of
energy-efficient products for refrigeration, air-conditioning and power
industries. The Series A Preferred Stock is convertible by the Company at any
time until September 14, 2002 when it will automatically be converted into
shares of PowerCold common stock. The conversion price (subject to adjustments)
will be based on a percentage of the thirty-day average closing bid price for
the PowerCold common stock on the OTC Bulletin Board prior to conversion or, if
lower, prior to September 14, 1998.

         See the Consolidated Statements of Cash Flows in the Consolidated
Financial Statements, located elsewhere in this report, for a detailed
description of the sources and uses of cash during fiscal 1999 as well as the
two preceding years.

         The Company's capital resource commitments as of August 1, 1999
consisted principally of capital equipment commitments of approximately
$1,500,000, approximately $2,000,000 for the SMIS loan guarantee and the balance
due on the purchase of rights from the European joint venture.

         The Company has an unsecured line of credit of $25,000,000, which
expires in November 2000, of which $4,850,000 was in use at May 30, 1999 and
none at May 31, 1998. The Company may elect to apply interest rates to
borrowings under the line which relate to either the London Interbank Offered
Rate (LIBOR) or prime, whichever is the most favorable. The weighted average
interest rate with respect to borrowings at May 30, 1999 was 5.4134%. The line
of credit agreement provides for various covenants, including requirements that
the Company maintain specified financial ratios. The Company was not in
compliance with its minimum tangible net worth and interest coverage ratios for
the fiscal year ended May 30, 1999. The Company has received a waiver dated
August 30, 1999 from the financial institutions related specifically to these
events of default as of May 30, 1999 and a commitment from the financial
institutions to amend the aforementioned financial ratios. The Company has
issued letters of credit in the aggregate amount of 1,250,000 pounds
(approximately $2,000,000 at May 30, 1999) in support of guarantees of
indebtedness for SMIS and the performance of a contract.

         The Company believes that it will have sufficient working capital to
meet its needs for the short term by using internally generated funds and
existing credit facilities. However, on a longer-term basis with substantial
increases in sales volume and/or unusually large expenditure requirements to
commercialize the FRIGC family of refrigerants or high temperature
superconducting materials and devices, the Company may be required to obtain
additional lines of credit for working capital purposes and possibly make
periodic public offerings or private placements in order to meet the liquidity
needs of such growth. While the Company does not believe it will be restricted
in financing such growth, there can be no assurances that such sources of
financing will be available to the Company in sufficient amounts or on
acceptable terms. Under such circumstances, the Company would expect to manage
its growth within the financing available.

                                       28

<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK

         The Company's exposure to market risk through derivative financial
instruments and other financial instruments such as investments in short-term
marketable securities and long-term debt, is not material. The financial
instruments of the Company that are interest rate dependent are revenue bonds
issued in connection with the acquisition of certain land, building and
equipment, an unsecured line of credit and a mortgage payable. The Company
manages interest rates through various methods within contracts. For the revenue
bonds, the Company negotiated variable rates with the option to set fixed rates.
On its mortgage payable, the Company negotiated an "interest rate swap"
agreement that, in effect, fixes the rate at 6.88%. With respect to its
unsecured line of credit, the Company may elect to apply interest rates to
borrowings under the line which relate to either the London Interbank Offered
Rate or prime, whichever is most favorable. (See Note E of the Notes to
Consolidated Financial Statements included in response to Item 8 for more
details regarding these instruments.) The Company's objective in managing its
exposure to changes in interest rates is to limit the impact of changing rates
on earnings and cash flow and to lower its borrowing costs.

         The Company does not believe that its exposure to commodity and foreign
exchange risk are material.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Attached hereto and filed as part of this report are the consolidated
financial statements and supplementary data listed in the list of Financial
Statements and Schedules included in response to Item 14 of this report.


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 concerning directors called for by Item 10 of Form 10-K
will be set forth under the heading "Election of Directors" in the Company's
definitive proxy statement relating to the 1999 Annual Meeting of Shareholders
(the "Proxy Statement"), and is hereby incorporated herein by reference.

         The information concerning executive officers called for by Item 10 of
Form 10-K is set forth in "Item 1. Business" of this annual report on Form 10-K.


ITEM 11. EXECUTIVE COMPENSATION

                  The information with respect to compensation of certain
executive officers and all executive officers of the Company as a group to be
contained under the headings "Executive Compensation" and "Certain Transactions"
in the Proxy Statement is hereby incorporated herein by reference.

                                       29
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information with respect to ownership of the Company's Common Stock
by management and by certain other beneficial owners to be contained under the
heading "Security Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement is hereby incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information with respect to certain relationships and related
transactions to be contained under the heading "Certain Transactions" in the
Proxy Statement is hereby incorporated herein by reference.


                                     PART IV

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

                (a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

Attached hereto and filed as part of this report are the financial statements,
schedules and the exhibits listed below.

1.       Financial Statements
         --------------------

         Independent Auditors Report

         Consolidated Balance Sheets as of May 30, 1999 and May 31, 1998

         Consolidated Statements of Operations for fiscal years ended May 30,
         1999, May 31, 1998 and May 25, 1997

         Consolidated Statements of Changes in Shareholders' Equity and
         Comprehensive Income (Loss) for fiscal years ended May 30, 1999, May
         31, 1998 and May 25, 1997

         Consolidated Statements of Cash Flows for the fiscal years ended May
         30, 1999, May 31, 1998 and May 25, 1997

         Notes to Consolidated Financial Statements

2.       Schedule
         --------

         II       Valuation and Qualifying Accounts

         All other schedules are not required or are inapplicable and,
therefore, have been omitted.

3.       Exhibits
         --------

Articles of Incorporation and By-laws

         3(i)              Restated Certificate of Incorporation (11) (Exhibit
                           3)

         3(ii)             By-laws, as amended (3) (Exhibit 3.2)

                                       30
<PAGE>

Instruments defining the rights of security holders, including indentures

         4.1               Form of Common Stock certificate (5) (Exhibit 4.1)

         4.2               Intermagnetics General Corporation Indenture dated as
                           of September 15, 1993 (11) (Exhibit 4.1)

         4.3               Second Amended and Restated Loan and Agency Agreement
                           dated as of October 23, 1997 among Corestates Bank,
                           N.A. and Intermagnetics General Corporation, APD
                           Cryogenics Inc., Magstream Corporation, Medical
                           Advances, Inc. and InterCool Energy Corporation (11)
                           (Exhibit 4.2)

         4.4               First Amendment dated as of May 18, 1998 to the
                           Second Amended and Restated Loan Agreement dated as
                           of October 23, 1997 among Corestates Bank, N.A. and
                           Intermagnetics General Corporation, APD Cryogenics
                           Inc., Magstream Corporation, Medical Advances, Inc.
                           and InterCool Energy Corporation (11) (Exhibit 4.3)

Material Contracts

         10.1              Agreement Restating and Superseding Lease and
                           Granting Rights to Use Common Areas and Other Rights
                           dated as of December 23, 1991 between Waterbury
                           Industrial Commons Associates, IGC Advanced
                           Superconductors Inc. and Intermagnetics General
                           Corporation (5) (Exhibit 10.1)

+        10.2              1990 Stock Option Plan (4) (Appendix A)

+        10.3              1981 Stock Option Plan, as amended (2) (Exhibit 10.7)

+        10.4              Supplemental Executive Benefit Agreement (1) (Exhibit
                           10.37)

         10.5              Agreement dated June 2, 1992 between Philips Medical
                           Systems Nederlands B.V. and Intermagnetics General
                           Corporation for sales of magnet systems (7) (Exhibit
                           10.6)

         10.6              Amendment No. 3 dated January 1, 1997 to the
                           Agreement of June 2, 1992 between Philips Medical
                           Systems Nederlands B.V. and Intermagnetics General
                           Corporation for sales of magnet systems (8) (Exhibit
                           10.6)

#        10.7              Agreements dated April 29, 1999 between Philips
                           Medical Systems Nederlands B.V. and Intermagnetics
                           General Corporation for sales of magnet systems

+        10.8              Employment Agreement dated April 20, 1998 between
                           Intermagnetics General Corporation and Carl H. Rosner
                           (11) (Exhibit 10.1)

+*       10.9              Employment Agreement dated June 1, 1999 between
                           Intermagnetics General Corporation and Glenn H.
                           Epstein

+        10.10             Employment Agreement dated March 10, 1997 between
                           Intermagnetics General Corporation and Richard J.
                           Stevens (9) (Exhibit 10.1)

+        10.11             Employment Agreement dated November 24, 1997 between
                           Intermagnetics General Corporation and Ronald W.
                           Sykes (10) (Exhibit 10.1)

                                       31
<PAGE>


         10.12             Share Purchase Agreement, dated January 23, 1992, by
                           and between Ultralife Batteries, Inc. and
                           Intermagnetics General Corporation (6) (Exhibit 10.1)


Subsidiaries of the registrant

*        21                Subsidiaries of the Company

Consents of experts and counsel

*        23                Consent of KPMG LLP with respect to the Registration
                           Statements Numbers 2-80041, 2-94701, 33-2517,
                           33-12762, 33-12763, 33-38145, 33-44693, 33-50598,
                           33-55092, 33-72160, 333-10553, 333-42163 and
                           333-75269 on Form S-8.

----------------------------------------------------------

         (1)               Exhibit incorporated herein by reference to the
                           Registration Statement on Form S-2 (Registration No.
                           2-99408) filed by the Company on August 2, 1985.

         (2)               Exhibit incorporated herein by reference to the
                           Annual Report on Form 10-K filed by the Company for
                           the fiscal year ended May 31, 1987.

         (3)               Exhibit incorporated herein by reference to the
                           Annual Report on Form 10-K filed by the Company for
                           the fiscal year ended May 27, 1990.

         (4)               Exhibit incorporated herein by reference to the Proxy
                           Statement dated October 4, 1991 for the 1991 Annual
                           Meeting of Shareholders.

         (5)               Exhibit incorporated herein by reference to the
                           Annual Report on Form 10-K filed by the Company for
                           the fiscal year ended May 31, 1992, as amended by
                           Amendment No. 1 on Form 8 dated November 17, 1992.

         (6)               Exhibit incorporated herein by reference to the
                           Quarterly Report on Form 10-Q filed by the Company
                           for the six months ended November 29, 1992.

         (7)               Exhibit incorporated herein by reference to the
                           Annual Report on Form 10-K/A2 for the fiscal year
                           ended May 29, 1994. Portions of this Exhibit were
                           omitted and filed separately with the Secretary of
                           the Securities and Exchange Commission pursuant to an
                           Application for Confidential Treatment under Rule
                           24b-2 of the Securities Exchange Act of 1934, as
                           amended.

         (8)               Exhibit incorporated herein by reference to the
                           Annual Report on Form 10-K/A filed by the Company for
                           the fiscal year ended May 25, 1997.

         (9)               Exhibit incorporated herein by reference to the
                           Current Report on Form 8-K filed by the Company on
                           March 10, 1997.

         (10)              Exhibit incorporated herein by reference to the
                           Current Report on Form 8-K filed by the Company on
                           November 24, 1997.

                                       32
<PAGE>


         (11)              Exhibit incorporated herein by reference to the
                           Annual Report on Form 10-K filed by the Company on
                           August 28, 1998.


*        Filed with the Annual Report on Form 10-K for the fiscal year ended
         May 30, 1999.

+        Management contract or compensatory plan or arrangement required to be
         filed as an exhibit to this annual report on Form 10-K.

#        To be filed by amendment.

         The Company agrees to provide the SEC upon request with copies of
certain long-term debt obligations which have been omitted pursuant to the
applicable rules.

         The Company agrees to furnish supplementally a copy of omitted
Schedules and Exhibits, if any, with respect to Exhibits listed above upon
request.


                             (b) REPORTS ON FORM 8-K

         None.


                                       33
<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.

                                  INTERMAGNETICS GENERAL CORPORATION


Date: August 30, 1999             By: /s/ Glenn H. Epstein
                                      ------------------------------------------
                                           Glenn H. Epstein
                                           President and Chief Executive Officer


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

                  Each person in so signing also makes, constitutes and appoints
Glenn H. Epstein, President and Chief Executive Officer, Michael C. Zeigler,
Senior Vice President - Finance and Chief Financial Officer, and each of them,
his true and lawful attorneys-in-fact, in his name, place and stead to execute
and cause to be filed with the Securities and Exchange Commission any or all
amendments to this report.

<TABLE>
<CAPTION>

Name                                        Capacity                                    Date
--------------------------------------------------------------------------------------------------------
<S>                                         <C>                                         <C>
/s/ Glenn H. Epstein
---------------------------                 President and                               August 30, 1999
   Glenn H. Epstein                         Chief Executive Officer
                                            (principal executive
                                            officer) and Director

/s/ Michael C. Zeigler
---------------------------                 Senior Vice President-                      August 30, 1999
   Michael C. Zeigler                       Finance; Chief Financial
                                            Officer (principal financial
                                            and accounting officer)


/s/ Carl H. Rosner                          Chairman of the Board                       August 30, 1999
---------------------------                 of Directors
   Carl H. Rosner

/s/ Joseph C. Abeles
---------------------------                 Director                                    August 30, 1999
   Joseph C. Abeles

/s/ John M. Albertine
---------------------------                 Director                                    August 30, 1999
   John M. Albertine
</TABLE>
                                       34



<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>                                         <C>
/s/ Edward E. David, Jr.
---------------------------                 Director                                    August 30, 1999
   Edward E. David, Jr.

/s/ James S. Hyde
---------------------------                 Director                                    August 30, 1999
   James S. Hyde

/s/ Thomas L. Kempner
---------------------------                 Director                                    August 30, 1999
   Thomas L. Kempner

/s/ Stuart A. Shikiar
---------------------------                 Director                                    August 30, 1999
   Stuart A. Shikiar

/s/ Sheldon Weinig
---------------------------                 Director                                    August 30, 1999
   Sheldon Weinig
</TABLE>
                                       35






<PAGE>




                             1. Financial Statements




                                       36
<PAGE>


                          Independent Auditors' Report
                          ----------------------------


The Board of Directors and Shareholders
Intermagnetics General Corporation:


We have audited the consolidated financial statements of Intermagnetics General
Corporation and subsidiaries, as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Intermagnetics General Corporation and subsidiaries as of May 30, 1999 and May
31, 1998, and the results of their operations and their cash flows for each of
the years in the three-year period ended May 30, 1999, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.


                                              /s/ KPMG LLP
                                              ----------------------------------


Albany, New York
July 16, 1999, except as to Note E
  which is as of August 30, 1999.


                                       37

<PAGE>

CONSOLIDATED BALANCE SHEETS
INTERMAGNETICS GENERAL CORPORATION
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                                      May 30,       May 31,
                                                                                       1999          1998
                                                                                    ---------     ---------
<S>                                                                                 <C>           <C>
ASSETS
CURRENT ASSETS
  Cash and short-term investments                                                    $ 2,283       $ 2,993
  Trade accounts receivable, less allowance
    (1999 - $432; 1998 - $350)                                                        22,275        14,802
  Costs and estimated earnings in excess of
    billings on uncompleted contracts                                                  1,788         4,660
  Inventories:
    Finished products                                                                  1,106         1,045
    Work in process                                                                   15,725        18,313
    Materials and supplies                                                             9,748        13,491
                                                                                   ---------     ---------
                                                                                      26,579        32,849
  Income tax refund receivable                                                         1,717
  Deferred income taxes                                                                4,069         3,583
  Prepaid expenses and other                                                           2,020         1,423
                                                                                   ---------     ---------
    TOTAL CURRENT ASSETS                                                              60,731        60,310

PROPERTY, PLANT AND EQUIPMENT
  Land and improvements                                                                1,479         1,479
  Buildings and improvements                                                          16,639        16,604
  Machinery and equipment                                                             38,500        39,421
  Leasehold improvements                                                                 649           649
                                                                                   ---------     ---------
                                                                                      57,267        58,153
  Less allowances for depreciation and amortization                                   33,090        32,445
                                                                                   ---------     ---------
                                                                                      24,177        25,708
  Equipment in process of construction                                                 1,798         2,231
                                                                                   ---------     ---------
                                                                                      25,975        27,939

INTANGIBLE AND OTHER ASSETS
  Available for sale securities                                                        1,366         3,450
  Other investments                                                                    5,904         5,178
  Investment in affiliate                                                              3,736         7,564
  Notes receivable from affiliate                                                                    2,476
  Excess of cost over net assets acquired, less
    accumulated amortization (1999 - $2,514; 1998 - $1,166)                           17,618        18,966
  Other intangibles                                                                    8,750
  Other assets                                                                         1,378         1,893
                                                                                   ---------     ---------

    TOTAL ASSETS                                                                    $125,458      $127,776
                                                                                   =========     =========

                                                                                               (Continued)
</TABLE>
                                       38




<PAGE>
<TABLE>
<CAPTION>


                                                                                     May 30,      May 31,
                                                                                      1999         1998
                                                                                    --------     --------
<S>                                                                                   <C>          <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Current portion of long-term debt                                                  $  317       $  272
  Borrowings under line of credit                                                     4,850
  Accounts payable                                                                    5,641        6,076
  Salaries, wages and related items                                                   3,396        3,647
  Customer advances and deposits                                                      2,065          298
  Product warranty reserve                                                            1,577          996
  Accrued income taxes                                                                             2,411
  Accrued termination payment                                                         4,750
  Accrual for affiliate financial guarantee                                           2,000
  Other liabilities and accrued expenses                                              1,746        1,117
                                                                                   --------     --------
    TOTAL CURRENT  LIABILITIES                                                       26,342       14,817

LONG-TERM DEBT, less current portion                                                 26,631       28,833
DEFERRED INCOME TAXES                                                                   312          325

SHAREHOLDERS' EQUITY
  Preferred Stock, par value $.10 per share:
    Authorized - 2,000,000 shares
    Issued and outstanding - 69,992 shares                                            6,999        6,999
  Common Stock, par value $.10 per share:
    Authorized - 40,000,000 shares
    Issued and outstanding (including shares in treasury):
      1999 - 13,522,900 shares
      1998 - 13,334,280 shares                                                        1,352        1,334
  Additional paid-in capital                                                         82,175       81,008
  Accumulated deficit                                                                (8,061)      (1,081)
  Accumulated other comprehensive income (loss)                                        (668)         496
                                                                                   --------     --------
                                                                                     81,797       88,756
  Less cost of Common Stock in treasury
    (1999 - 1,161,690 shares; 1998 - 562,175 shares)                                 (9,624)      (4,955)
                                                                                   --------     --------
                                                                                     72,173       83,801
                                                                                   --------     --------

TOTAL LIABILITIES AND SHAREH0LDERS' EQUITY                                         $125,458     $127,776
                                                                                   ========     ========
</TABLE>
See notes to consolidated financial statements.

                                       39


<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS
INTERMAGNETICS GENERAL CORPORATION
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                                        Fiscal Year Ended
                                                                        ---------------------------------------------
                                                                          May 30,            May 31,          May 25,
                                                                           1999               1998             1997
                                                                         --------           -------          -------
<S>                                                                      <C>                <C>              <C>
Net sales                                                                $102,871           $95,894          $87,052
Cost of products sold                                                      68,312            60,209           60,852
Inventory written off in restructuring                                      1,820                --               --
                                                                         --------           -------          -------
        Total cost of products sold                                        70,132            60,209           60,852
                                                                         --------           -------          -------

Gross margin                                                               32,739            35,685           26,200

Product research and development                                            6,220             8,128            6,779
Marketing, general and administrative                                      21,472            20,840           15,836
Amortization of intangible assets                                           1,348             1,203              333
Restructuring charges                                                       2,919                --               --
                                                                         --------           -------          -------
                                                                           31,959            30,171           22,948
                                                                         --------           -------          -------

Operating income                                                              780             5,514            3,252
Interest and other income                                                   1,942             2,364            2,961
Interest and other expense                                                 (2,172)           (2,125)          (1,996)
Write off of investment in unconsolidated affiliate                        (7,300)               --               --
Equity in net loss of unconsolidated affiliates                            (1,491)           (1,009)            (182)
                                                                         --------           -------          -------
  Income (loss) before income taxes                                        (8,241)            4,744            4,035
Provision for income taxes (benefit)                                       (1,212)            1,991            1,420
                                                                         --------           -------          -------

NET INCOME (LOSS)                                                        $ (7,029)          $ 2,753          $ 2,615
                                                                         ========           =======          =======

Earnings (loss) per Common Share:
  Basic                                                                    $(0.57)           $  .22           $  .21
                                                                         ========           =======          =======
  Diluted                                                                  $(0.57)           $  .21           $  .20
                                                                         ========           =======          =======
</TABLE>
See notes to consolidated financial statemetns.

                                       40


<PAGE>


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE
INCOME (LOSS)
INTERMAGNETICS GENERAL CORPORATION
Fiscal Years Ended May 30, 1999, May 31, 1998, May 25, 1997
(Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                              Additional                       Other
                                                   Common      Paid-in      Accumulated    Comprehensive  Treasury     Comprehensive
                                                   Stock       Capital        Deficit      Income (Loss)    Stock      Income (Loss)
                                                   --------   ----------    -----------    ------------   ----------   -------------
<S>                                                 <C>         <C>            <C>              <C>         <C>         <C>
Balances at May 26, 1996                            $1,208      $69,040        $(1,727)         $2,250      $(3,475)
Comprehensive income:
   Net income                                                                    2,615                                       $2,615
   Unrealized loss on available for
      sale securities, net                                                                      (1,733)                      (1,733)
   Unrealized gain on foreign currency
      translation                                                                                   80                           80
                                                                                                                       =============
         Total comprehensive income                                                                                            $962
                                                                                                                       =============
Tax benefit from exercise of stock options                          412
Sale of 133,024 shares of Common Stock,
  including receipt of 15,644 shares of
  Treasury Stock, upon exercise of stock
  options                                               13          669                                        (185)
Sale of 8,356 shares of Common Stock
  to IGC Savings Trust                                   1          116
Stock dividends and payments for
  fractional shares                                     23        2,495         (2,531)
Purchase of 291,100 shares of Treasury Stock                                                                 (3,358)
Issuance of 678,517 shares of Common Stock,
  including 474,895 Treasury Shares in
  payment for acquisition                               19        1,646                                       5,509
                                                   --------   ----------    -----------    ------------   ----------

Balances at May 25, 1997                             1,264       74,378         (1,643)            597       (1,509)
Comprehensive income:
   Net income                                                                    2,753                                       $2,753
   Unrealized gain on available for
      sale securities, net                                                                         237                          237
   Unrealized loss on foreign currency
      translation                                                                                 (338)                        (338)
                                                                                                                       -------------
         Total comprehensive income                                                                                          $2,652
                                                                                                                       =============
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

<S>                                                 <C>         <C>            <C>              <C>         <C>         <C>
Tax benefit from exercise of stock options                          177
Sale of 132,214 shares of Common Stock,
  including receipt of 21,843 shares of
  Treasury Stock, upon exercise of stock
  options                                               13          739                                        (226)
Sale of 7,023 shares of Common Stock
  to IGC Savings Trust                                   1           69
Stock dividends and payments for
  fractional shares                                     25        2,157         (2,191)
Purchase of 465,650 shares of Treasury Stock                                                                 (4,065)
Issuance of 312,650 shares of Common Stock
  and 69,992 shares of Series A Preferred Stock
  in payment for acquisitions                           31        2,719
Issuance of 89,018 shares of Treasury Stock
  for purchase of inventory                                          25                                         845
Issuance of warrant to acquire 500,000
  shares of Common Stock                                            720
Option based compensation                                            24
                                                   --------   ----------    -----------    ------------   ----------
Balances at May 31, 1998                             1,334       81,008         (1,081)            496       (4,955)
Comprehensive income:
   Net loss                                                                     (7,029)                                     $(7,029)
   Unrealized loss on available for
      sale securities, net                                                                      (1,358)                      (1,358)
   Unrealized gain on foreign currency
      translation                                                                                  194                          194
                                                                                                                       -------------
         Total  comprehensive loss                                                                                          $(8,193)
                                                                                                                       =============
Tax benefit from exercise of stock options                          185
Sale of 188,556 shares of Common Stock,
  including receipt of 69,015 shares of
  Treasury Stock, upon exercise of stock
  options                                               19          911                                        (623)
Sale of 8,741 shares of Common Stock
  to IGC Savings Trust                                               58
Stock dividend adjustment of 8,677 shares and
    payments for fractional shares                      (1)         (48)            49
Option based compensation                                            61
Purchase of 530,500 shares of Treasury Stock                                                                 (4,046)
                                                   --------   ----------    -----------    ------------   ----------

Balances at May 30, 1999                            $1,352      $82,175        $(8,061)          $(668)     $(9,624)
                                                   ========   ==========    ===========    ============   ==========
</TABLE>

See notes to consolidated financial statements.

                                       41


<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
INTERMAGNETICS GENERAL CORPORATION
(Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                                                Fiscal Year Ended
                                                                                  --------------------------------------------------
                                                                                     May 30,            May 31,          May 25,
                                                                                       1999              1998             1997
                                                                                  ---------------    --------------   --------------
<S>                                                                               <C>                <C>              <C>
OPERATING ACTIVITIES
Net income (loss)                                                                      $(7,029)          $ 2,753          $ 2,615
Adjustments to reconcile net income (loss) to net cash provided by
  operating activities:
    Depreciation and amortization                                                        5,636             5,424            3,964
    Non-cash restructuring charges                                                       4,739
    Write off of investment in unconsolidated affiliate                                  7,300
    Gain on debt redemption                                                               (275)
    Provision for deferred taxes                                                           227            (1,028)            (589)
    Equity in net loss of unconsolidated affiliates                                      1,491             1,009              182
    Loss (gain) on sale and disposal of assets                                             306                60             (374)
    Non-cash expense from warrants issued                                                                    600
    Gain on sale of joint venture                                                         (300)
    Other non-cash activity                                                                 61                               (118)
    Change in operating assets and liabilities, net of effects of acquisitions:
      (Increase) decrease in accounts receivable and costs and estimated
         earnings in excess of billings on uncompleted contracts                        (4,858)            3,494            3,299
      (Increase) decrease in inventories and prepaid expenses and other                  2,583            (5,579)          (1,447)
      (Decrease) increase in accounts payable and accrued expenses                      (1,362)               27              919
      Change in foreign currency translation adjustments                                   194              (338)              80
                                                                                      --------           -------          -------
   NET CASH PROVIDED BY OPERATING ACTIVITIES                                             8,713             6,422            8,531
                                                                                      --------           -------          -------
INVESTING ACTIVITIES
Purchases of property, plant and equipment                                              (3,139)           (3,146)          (5,446)
Proceeds from sale of assets                                                                51                92              935
Advance on purchase of production rights                                                (4,250)
Acquisitions, net of cash acquired                                                                        (3,115)          (4,139)
Purchase of other investments                                                           (1,043)
Investment in and advances to unconsolidated affiliates                                 (1,015)           (6,855)            (972)
Repayment of advances by unconsolidated affiliate                                          611               470
Decrease in other assets                                                                    41                66               83
                                                                                      --------           -------          -------
    NET CASH USED IN INVESTING ACTIVITIES                                               (8,744)          (12,488)          (9,539)
                                                                                      --------           -------          -------

FINANCING ACTIVITIES
Net proceeds from short term borrowings                                                  4,850
Early debt redemption                                                                   (1,550)
Proceeds from sale of warrants                                                                               120
Purchase of Treasury Stock                                                              (4,046)           (4,065)          (3,358)
Proceeds from sales of Common Stock                                                        365               596              614
Principal payments on note payable and long-term debt                                     (298)             (259)          (2,277)
                                                                                      --------           -------          -------
    NET CASH USED IN FINANCING ACTIVITIES                                                 (679)           (3,608)          (5,021)
                                                                                      --------           -------          -------

DECREASE IN CASH AND SHORT-TERM INVESTMENTS                                               (710)           (9,674)          (6,029)

CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD                                   2,993            12,667           18,696
                                                                                      --------           -------          -------

CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD                                       $ 2,283           $ 2,993          $12,667
                                                                                      ========           =======          =======

SUPPLEMENTAL  SCHEDULE OF NON-CASH INVESTING AND
  FINANCING ACTIVITIES:

Exchange of Common Stock in partial payment of exercise
  price on options                                                                       $ 623             $ 226            $ 185
                                                                                      ========           =======          =======

Tax benefit from exercise of stock options                                               $ 185             $ 177            $ 412
                                                                                      ========           =======          =======

Accrual of termination payment                                                        $  4,750
                                                                                      ========
Issuance of Common Stock, Preferred Stock, and Treasury Stock
  for acquisitions                                                                                       $ 9,749          $ 7,174
                                                                                                         =======          =======

Issuance of Treasury Stock for purchase of inventory                                                     $   870
                                                                                                         =======

Stock dividends                                                                                          $ 2,191          $ 2,531
                                                                                                         =======          =======
</TABLE>
                                       42


<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERMAGNETICS GENERAL CORPORATION

NOTE A - ACCOUNTING POLICIES

Description of Business:

Intermagnetics General Corporation (the "Company") operates in three reportable
operating segments: Electromagnetics, Superconducting Materials and
Refrigeration. The Electromagnetics segment consists primarily of the
manufacture and sale of magnets and radio frequency coils and the
Superconducting Materials segment consists primarily of the manufacture and sale
of superconducting wire and cable, all of which are used mainly in Magnetic
Resonance Imaging ("MRI") for medical diagnostics. The majority of the Company's
sales in these two segments are to US and European customers. The Refrigeration
segment consists of refrigeration equipment produced by two subsidiaries,
IGC-APD Cryogenics (IGC-APD) and IGC-Polycold Systems Inc., (IGC-Polycold) and
refrigerants which are sold by another subsidiary, InterCool Energy Corporation
(ICE). Refrigeration equipment is used in the vacuum deposition industry, the
semiconductor manufacturing process, MRI, and in a variety of research
applications. Refrigerants consist of a family of environmentally friendly
refrigerants designed to replace recently banned CFC refrigerants. Sales of this
segment are primarily to US, Asian and European customers. The Company operates
on a 52/53 week fiscal year ending the last Sunday during the month of May. See
Note K for further discussion regarding segment and related information.

Basis of Presentation:

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions have been eliminated
in consolidation. The Company's 45% investment in ALSTOM Intermagnetics, 23%
investment in SMIS Limited ("SMIS"), and 21% investment in KryoTech, Inc.
("KryoTech") are accounted for using the equity method of accounting. See notes
B and D for additional information regarding ALSTOM Intermagnetics and SMIS.

The Company is presenting its consolidated statements of operations in a
multi-step format and, accordingly, certain reclassifications of fiscal 1997
amounts have been made to conform to this presentation. In addition, it is the
Company's policy to reclassify prior year consolidated financial statements to
conform to the current year presentation.

Cash Equivalents:

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

Short-term investments ($139,000 at May 30, 1999 and $68,000 at May 31, 1998)
consist primarily of US Government and Agency obligations, commercial paper, and
other corporate obligations and are stated at market. The Company considers
these short-term investments to be cash equivalents for purposes of the
Consolidated Statements of Cash Flows.

Sales:

Sales are generally recognized as of the date of shipment or in accordance with
customer agreements.

Sales to the United States Government or its contractors under cost
reimbursement contracts are recorded as costs are incurred and include estimated
earned profits.

                                       43
<PAGE>


Sales of products involving long-term production periods and manufactured to
customer specifications are generally recognized by the percentage-of-completion
method, by multiplying the total contract price by the percentage that incurred
costs to date bear to estimated total job costs, except when material costs are
substantially incurred at the beginning of a contract, in which case material
costs are charged to the contract as they are placed into production. At the
time a loss on a contract is indicated, the Company accrues the entire amount of
the estimated ultimate loss.

The Company accrues for possible future claims arising under terms of various
warranties made in connection with the sale of products.

Inventories:

Inventories are stated at the lower of cost (first-in, first-out) or market
value.

Property, Plant and Equipment:

Land and improvements, buildings and improvements, machinery and equipment and
leasehold improvements are recorded at cost. Provisions for depreciation are
computed using straight-line and accelerated methods in a manner that is
intended to amortize the cost of such assets over their estimated useful lives.
Leasehold improvements are amortized on a straight-line basis over the remaining
initial term of the lease. For financial reporting purposes, the Company
provides for depreciation of property, plant and equipment over the following
estimated useful lives:

              Land improvements                          25 years
              Buildings and improvements             7 - 40 years
              Machinery and equipment                3 - 15 years
              Leasehold improvements                 2 - 15 years

Investments:

Certain investments are categorized as available for sale securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Available
for sale securities are reported at fair value, with unrealized gains and losses
included in shareholders' equity.

A decline in the market value of any available for sale security below cost that
is deemed other than temporary is charged to earnings, resulting in the
establishment of a new cost basis for the security.

Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available for sale are included in earnings
and are derived using the specific identification method for determining the
cost of securities sold.

Income Taxes:

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.


                                       44
<PAGE>

Foreign Currency Translation:

Foreign currency translation adjustments arise from conversion of the Company's
foreign subsidiary's financial statements to US currency for reporting purposes,
and are reflected in shareholders' equity in the accompanying consolidated
balance sheets. Realized foreign currency transaction gains and losses are
included in interest and other expense in the accompanying consolidated
statements of operations.

Pension Plan:

On June 1, 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about
Pension and Other Postretirement Benefits." SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefit plans. SFAS No. 132
does not change the method of accounting for such plans.

Excess of Cost Over Net Assets Acquired and Other Intangibles:

Excess of cost over the fair value of net assets acquired in acquisitions is
being amortized on a straight-line basis over 15 years. Other intangibles, as
discussed further in Note B, will be amortized on a straight-line basis over 5
years. The Company periodically assesses recoverability, and impairments would
be recognized in operating results if a permanent diminution in value were to
occur.

Impairment of Long-Lived Assets:

Long-lived assets, including intangible assets, used in the Company's operations
are reviewed for impairment when circumstances indicate that the carrying amount
of an asset may not be recoverable. The primary indicators of recoverability are
the associated current and forecasted undiscounted operating cash flows.

Stock-Based Compensation:

The intrinsic value method of accounting is used for stock-based compensation
plans. Under the intrinsic value method, compensation cost is measured as the
excess, if any, of the quoted market price of the stock at the grant date over
the amount an employee must pay to acquire the stock.

Per Share Amounts:

Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity (such as stock
options).

Comprehensive Income:

On June 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income (loss) and its components in a full set of financial
statements. Comprehensive income (loss) consists of net income,net unrealized
gains (losses) on available-for-sale securities and foreign currency translation
adjustments and is presented in the consolidated statements of changes in
shareholders' equity and comprehensive income (loss). SFAS No. 130 requires only
additional disclosures in the consolidated financial statements; it does not
affect the Company's financial position or results of operations. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.

Derivative Financial Instruments:

The Company enters into interest rate hedge agreements which involve the
exchange of fixed and floating rate interest payments periodically over the life
of the agreement, without the exchange of underlying principle amounts. The
differential to be paid or received is accrued as interest rates change and is
recognized over the life of the agreements as an adjustment to interest expense.

                                       45
<PAGE>

Use of Estimates:

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, and the disclosure of
contingent assets and liabilities, to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

New Accounting Pronouncements:

In March, 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that certain
costs related to the development or purchase of internal-use software be
capitalized and amortized over the estimated useful life of the software. SOP
98-1 also requires that costs related to the preliminary project stage and
post-implementation/operations stage of an internal-use computer software
development project be expensed as incurred. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. The Company will comply with the
reporting requirements of SOP 98-1 for the fiscal year ending May 28, 2000.
Management anticipates that the adoption of SOP 98-1 will not have a material
effect on the Company's consolidated financial statements.

In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 has subsequently been amended by SFAS No. 137,
issued in June, 1999, which delays the effective date for implementation of SFAS
No. 133 until fiscal quarters of fiscal years beginning after June 15, 2000.
Management is currently evaluating the impact of SFAS No. 133 on the Company's
consolidated financial statements.

NOTE B - ACQUISITIONS

Polycold Systems International, Inc.

On November 24, 1997, the Company issued a note for, and on March 11, 1998, paid
$3,115,000 in cash, net of cash acquired, and issued 281,568 shares of Common
Stock, valued at $8.879 per share, and 69,992 shares of Series A Preferred
Stock, valued at $100 per share, for all of the outstanding shares of Polycold
Systems International, Inc. ("Polycold") Common Stock.

The acquisition has been accounted for using the purchase method of accounting,
and the results of operations of Polycold have been included in the consolidated
financial statements since November 24, 1997, the date of acquisition. The
excess of cost over the fair value of net assets acquired of approximately
$10,175,000 is being amortized on a straight-line basis over 15 years.

Medical Advances, Inc.
On March 11, 1997, the Company paid $4,139,000 in cash, net of cash acquired,
and issued 678,517 shares of Common Stock, valued at $10.573 per share,
including 474,895 shares of Treasury Stock, for all of the outstanding shares of
Medical Advances, Inc. ("MAI") Common Stock. The acquisition agreement provided
for the issuance of up to 101,777 additional shares as part of the purchase
price if the average of the Company's closing price on the American Stock
Exchange during the ninety calendar day period following the release of earnings
for fiscal 1997 was less than $11.053. During fiscal 1998 this contingency was
resolved and the Company issued 31,082 additional Common Shares.

The acquisition has been accounted for using the purchase method of accounting,
and the results of operations of MAI have been included in the consolidated
financial statements since March 11, 1997, the date of acquisition. The excess
of cost over the fair value of net assets acquired of approximately $9,700,000
is being amortized on a straight-line basis over 15 years.


                                       46
<PAGE>

The following unaudited pro forma information presents a summary of consolidated
results of operations of the Company, Polycold and MAI as if the acquisitions
had occurred at the beginning of fiscal year 1998, with pro forma adjustments to
give effect to amortization of the excess of cost over the fair value of net
assets acquired and interest income on short-term investments, together with
related income tax effects.

(Dollars in Thousands, Except Per Share Amounts)
                                                         Fiscal Year Ended
                                                           May 31, 1998
                                                      -------------------------

  Total revenue                                             $107,518
  Net income                                                   2,900
  Earnings per Common Share:
     Basic                                                       .22
     Diluted                                                     .21

Total amortization of excess of cost over the fair value of net assets acquired
for the fiscal years ended May 30, 1999, May 31, 1998, and May 25, 1997 amounted
to $1,348,000, $997,000, and $169,000, respectively.

ALSTOM Intermagnetics
---------------------

Effective May 30, 1999, the Company completed an agreement with Alstom, S.A.
("Alstom") to terminate the parties' joint venture, ALSTOM Intermagnetics
("AISA"). AISA, a previously 45% owned unconsolidated joint venture located in
Belfort, France, was created for the manufacture and sale of superconductive MRI
magnet systems under license from the Company. Effective December 31, 1999,
AISA's magnet production will be consolidated in the Company's Latham, New York
facility, and AISA will cease production of superconductive MRI magnet systems.
Under the termination agreement, the Company sold its interest in AISA to Alstom
for $300,000, payment of which was outstanding at May 30, 1999 and is included
in "Prepaid expenses and other" in the consolidated balance sheet. In
consideration of the contractual rights of AISA and Alstom under the termination
agreement, the Company agreed to pay AISA $9,000,000 ("Termination Payment") for
the purchase of certain assets with an approximate fair value of $250,000, and
other intangibles, primarily comprised of future production rights, as well as
technology and a covenant not to compete, with a total value of $8,750,000.
During fiscal 1999, the Company paid $4,250,000 of the "Termination Payment" to
AISA, while the remainder, $4,750,000, is due on or before March 31, 2000.

                                       47


<PAGE>


NOTE C - RESTRUCTURING

In October, 1998, the Company received notice from Trex Medical Corporation
("Trex") that it was not prepared to continue operating under a distributor
agreement under which Trex was to distribute the Company's permanent
magnet-based clinical MRI systems. The Company has filed suit against Trex for
breaching and repudiating the agreement. In November 1998, the Company decided
to exit this business and restructured its operations through the closure of its
Field Effects division, which was engaged in the manufacture and sale of
clinical MRI systems. As a result, the Company recorded a total restructuring
charge, as adjusted in the fourth quarter, of $4,739,000, including liabilities
of $1,277,000, comprised of the following:

(Dollars in Thousands)

Inventory write-down included in cost of products sold                    $1,820

Restructuring charges:
      Write-down of equipment to net realizable value        $ 1,267
      Write-off of accounts receivable and other assets          375       1,642
                                                                ----

Liabilities for:
      Severance and lease obligations                            750
      Other                                                      527       1,277
                                                                ----     -------
                                                                           2,919
                                                                         -------
   Total                                                                 $ 4,739
                                                                         =======

The Company vacated the premises and moved existing equipment and inventory to
storage near its corporate headquarters. All usable equipment has been
transferred to other operations at its book value. Other equipment and inventory
were initially held for sale and written down to estimated realizable value,
however, these assets have been subsequently adjusted to zero based on
unsuccessful attempts by the Company to sell the associated equipment and
inventory. It is estimated that the remaining activities under the plan, with
the exception of the Company's existing lease commitment that expires in July,
2001, will be completed by November, 1999.

The Company made a total of $603,000 in payments on liabilities recorded in the
restructuring, as follows:

(Dollars in Thousands)
                            Initial                             Balances as of
                           Accruals    Adjustments   Payments    May 30, 1999
                           --------    -----------   --------   --------------
Lease obligation            $ 492        $  33        $(120)        $ 405
Severance                     226         --           (226)         --
Product liability            --            304         --             304
Other                         201           21         (222)         --
                            -----        -----        -----         -----

    Totals                  $ 919        $ 358        $(568)        $ 709
                            =====        =====        =====         =====

NOTE D - INVESTMENTS AND NOTES RECEIVABLE

Available for Sale Securities:

As of May 30, 1999 and May 31, 1998, the Company owned 975,753 shares
(approximately 9%) of the common stock of Ultralife Batteries, Inc.
("Ultralife"), a manufacturer of lithium batteries, acquired at a cost of
$7,015,000. The market value of the Company's total investment in Ultralife, the
sale of which is restricted under US Securities laws, was $4,452,000 and
$11,221,000 at May 30, 1999 and May 31, 1998, respectively. The cost and market
value of "Available for Sale" securities, representing those shares saleable
under Securities laws, were as shown below:

                                       48
<PAGE>


(Dollars in Thousands)

                                              May 30, 1999      May 31, 1998
                                              ------------      ------------

   Cost                                           $2,154            $2,154
   Gross unrealized holding gain (loss)             (788)            1,296
                                                  ------            ------
   Market value                                   $1,366            $3,450
                                                  ======            ======

The balance of the Ultralife investment is included at cost in other
investments.

Other Investments:

Investments in other securities at May 30, 1999 and May 31, 1998 consist of:

(Dollars in Thousands)
                                                1999                1998
                                                ----                ----


           Ultralife                           $4,861              $4,861
           PowerCold                            1,043                  --
           Other                                   --                 317
                                               ------              ------
                                               $5,904              $5,178
                                               ======              ======

In September 1998, the Company acquired 1,250,000 shares of Series A Convertible
Preferred Stock of PowerCold Corporation ("PowerCold"), a publicly held
corporation, for approximately $1,000,000. PowerCold is a provider of
energy-efficient products for refrigeration, air conditioning and power
industries. The Series A Convertible Preferred Stock is entitled to a number of
votes per share equal to the number of shares of PowerCold common stock into
which each such share of Series A Convertible Preferred Stock is convertible at
the time of such vote. As of May 30, 1999, the Company's voting interest in
PowerCold was approximately 15%. The Company accounts for its investment in
PowerCold at cost.

Investments in Affiliates:
--------------------------

Investments in affiliates at May 30, 1999 and May 31, 1998 consist of:

(Dollars in Thousands)
                                                  1999              1998
                                                 ------            ------
   KryoTech preferred stock                      $3,736            $4,710
   SMIS ordinary and preferred stock                -               2,854
                                                 ------            ------
                                                 $3,736            $7,564
                                                 ======            ======

KryoTech:
---------

On March 23, 1998, the Company acquired 1,172,840 shares of the Series B
Convertible Preferred Stock, $.01 par value per share, of KryoTech, a
privately-held, South Carolina corporation, and a warrant to purchase an
additional 237,416 shares, at a cost of $4,750,000. The warrant may be
exercised, in whole or in part, at any time on or before March 23, 2008 at a
price equal to $1.053 per share. On an as-converted basis, the Company's
holdings represent approximately 20.7% of the outstanding voting securities of
KryoTech.

                                       49
<PAGE>


KryoTech was formed on March 15, 1996 for the purpose of developing, marketing,
manufacturing and selling thermal management products, which are designed
specifically for the computer industry. The preferred shares have the same
voting rights as common stock. Accordingly, the Company is accounting for its
investment in KryoTech using the equity method of accounting. The acquisition
cost exceeded the underlying equity in net assets by $3,645,000, which is being
amortized over a period of 15 years. Accumulated amortization at May 30, 1999
and May 31, 1998 was $283,000 and $40,000, respectively. During the year ended
May 30, 1999, the Company recorded $974,000 as its share of KryoTech's losses.
As KryoTech is privately held, the market value of this investment is not
readily determinable.

SMIS:
-----

As of May 30, 1999 and May 31, 1998, the Company owned 354,223 ordinary shares
(approximately 23%) of SMIS acquired at a cost of $3,530,000, and 980,000
redeemable preference shares acquired at a cost of $1,511,000. The preference
shares are convertible into ordinary equity of SMIS. The Company has recorded
its investment using the equity method of accounting, and, accordingly, has
reduced its investment by amortizing the excess of the cost of its investment in
the ordinary shares over the underlying equity over a period of 40 years and by
recording its proportionate share of SMIS' losses. The total amount written off
amounted to $2,674,000 at May 30, 1999, and $2,156,000 at May 31, 1998. Also, as
of May 31, 1998, the Company had made advances to SMIS of approximately
$2,476,000 in the form of loans which are convertible into ordinary equity of
SMIS. In May, 1998, the Company guaranteed repayment of one half of the
outstanding balance of borrowings under a line of credit obtained by SMIS at
that time. The maximum amount guaranteed is 1,250,000 pounds (approximately
$2,000,000 at May 30, 1999). During the year ended May 30, 1999, the Company
advanced a total of $1,015,000 to SMIS, of which $611,000 was repaid.

As a result of SMIS' inability to achieve the anticipated improvements in its
business plan, including new product orders, improved manufacturing results and
cost reductions, SMIS continued operating at a loss in 1999. In March, 1999, it
was determined by SMIS management that additional funds would be required to
sustain operations based on projected cash flows and the deterioration in its
backlog. Based on the Company's evaluation of SMIS' past performance and
projections for future results it was determined by management in the fourth
quarter of fiscal 1999 that it would not provide additional funding to SMIS.
Additionally, during July 1999, SMIS management agreed in principle to sell the
majority of its operations at a price that will not result in any return to its
shareholders. Accordingly, the Company wrote off its remaining investment in and
advances to SMIS and provided for the estimated amount that it will be required
to pay as a result of the financial guarantee discussed above. The total amount
written off was $7,300,000, consisting of the write off of the ordinary and
redeemable preference shares in the amount of $2,337,000, notes receivable in
the amount of $2,924,000 and the accrual of approximately $2,000,000 related to
the financial guarantee. The write off is shown as "Write off of investment in
unconsolidated affiliate" in the accompanying consolidated statement of
operations.


NOTE E - NOTES PAYABLE AND LONG-TERM DEBT

The Company has an unsecured line of credit of $25,000,000, which expires in
November 2000, of which $4,850,000 was in use at May 30, 1999 and none at May
31, 1998. The Company may elect to apply interest rates to borrowings under the
line which relate to either the London Interbank Offered Rate (LIBOR) or prime,
whichever is the most favorable. The weighted average interest rate with respect
to borrowings at May 30, 1999 was 5.4134%. The line of credit agreement provides
for various covenants, including requirements that the Company maintain
specified financial ratios. The Company was not in compliance with its minimum
tangible net worth and interest coverage ratios for the fiscal year ended May
30, 1999. The Company has received a waiver dated August 30, 1999 from the
financial institutions related specifically to these events of default as of May
30, 1999 and a commitment from the financial institutions to amend the
aforementioned financial ratios. The Company has issued letters of credit in the
aggregate amount of 1,250,000 pounds (approximately $2,000,000 at May 30, 1999)
in support of guarantees of indebtedness for SMIS and the performance of a
contract.


                                       50

<PAGE>


Long-term debt consists of the following:

(Dollars in Thousands)                   May 30,                May 31,
                                          1999                   1998
                                        --------               --------
Revenue bonds                            $1,550                $ 1,650
Mortgage payable                          5,633                  5,830
Convertible debentures                   19,765                 21,625
                                        -------                -------
                                         26,948                 29,105
Less current portion                        317                    272
                                        -------                -------
Long-term debt                          $26,631                $28,833
                                        =======                =======

Revenue bonds consist of a subsidiary's obligation under an agreement with an
Economic Development Authority with respect to revenue bonds issued in
connection with the acquisition of certain land, building and equipment acquired
at a total cost of $2,408,000. The bonds bear interest at a weekly adjustable
annual rate (convertible to fixed rate at the option of the Company) which
averaged 3.68% for the year ended May 30, 1999 (4.04% for the year ended May 31,
1998). The bonds mature serially in amounts ranging from $100,000 in December,
1999 to $200,000 in December, 2009. In the event of default or upon the
occurrence of certain conditions, the bonds are subject to mandatory redemption
at prices ranging from 100% to 103% of face value. As long as the interest rate
on the bonds is adjustable weekly, the bonds are redeemable at the option of the
Company at face value. The Company makes monthly advance payments to restricted
cash accounts in amounts sufficient to meet the interest and principal payments
on the bonds when due. The balances of these accounts, included in "Cash and
Short-Term Investments" on the accompanying consolidated balance sheets, were
$52,000 at May 30, 1999 and $51,000 at May 31, 1998.

The mortgage payable bears interest at the rate of LIBOR plus 0.9% and is
payable in monthly installments of $50,000, including principal and interest,
through October 2005 with a final payment of $3,943,000 due in November 2005.
The loan is secured by land and buildings and certain equipment acquired at a
cost of approximately $10,800,000. The Company has entered into an interest rate
swap agreement, the effect of which is to fix the rate on this loan at 6.88%.

Convertible debentures at May 30, 1999 consist of $19,765,000 of 5.75%
convertible subordinated debentures due September, 2003, issued in a private
placement. The debentures are convertible into Common Stock at approximately
$14.272 per share. Interest on the debentures is payable semi-annually. The
debentures are redeemable, in whole or in part, at the option of the Company at
any time at prices ranging from 103.450% to 100.575%. The debentures also
provide for redemption at the option of the holder upon a change in control of
the Company, as defined, and are subordinated to senior indebtedness, as
defined.

In February 1999, the Company paid $1,550,000 for the early retirement of
Convertible Subordinated Debentures with a carrying value of $1,860,000. As a
result of the early retirement of debt, the Company recognized a gain of
approximately $275,000 in fiscal year 1999.

Aggregate maturities of long-term debt for the next five fiscal years are: 2000
- $317,000; 2001 - $332,000; 2002 - $349,000; 2003 - $392,000; and 2004 -
$20,174,000.

Interest paid for the years ended May 30, 1999, May 31, 1998, and May 25, 1997
amounted to $1,961,000, $1,910,000, and $1,800,000, respectively.


                                       51
<PAGE>

NOTE F - SHAREHOLDERS' EQUITY

In July, 1998, the Company declared a 2% stock dividend to be distributed on all
outstanding shares, except Treasury Stock, on September 17, 1998. The
consolidated financial statements have been adjusted retroactively to reflect
this stock dividend in all numbers of shares, prices per share and earnings per
share.

The Company has established two stock option plans: the 1981 Stock Option Plan
and the 1990 Stock Option Plan. Shares and prices per share have been adjusted
to reflect the 2% stock dividends declared in July, 1998 and July, 1997,
respectively. The total shares authorized for grant under the 1981 and 1990
plans are 1,492,996 and 3,042,208, respectively.

Option activity under these plans was as follows:
<TABLE>
<CAPTION>


                                                                 Fiscal Year Ended
                          ------------------------------------------------------------------------------------------------
                                    May 30, 1999                     May 31, 1998                    May 25, 1997
                          ------------------------------------------------------------------ -----------------------------
                                              Weighted                          Weighted                       Weighted
                                               Average                           Average                        Average
                              Number          Exercise          Number          Exercise         Number        Exercise
                            of Shares           Price          of Shares          Price        of Shares         Price
                          ------------------------------------------------------------------------------------------------
<S>                          <C>              <C>              <C>              <C>             <C>             <C>
Outstanding,
  beginning of year          1,802,704        $ 9.477          1,687,977        $ 9.319         1,552,307       $ 8.656
Granted                        480,897          6.766            353,485          9.567           365,221        10.785
Exercised                     (188,556)         5.000           (132,214)         5.684          (133,024)        5.124
Forfeited                     (171,414)        12.445           (106,544)        11.953           (96,527)        9.993
                             ---------                         ---------                        ---------
Outstanding,
  end of year                1,923,631          8.975          1,802,704          9.477         1,687,977         9.319
                             =========                         =========                        =========

Exercisable,
  end of year                1,042,355        $ 9.543          1,060,485        $ 8.648           870,331       $ 7.842
                             =========                         =========                        =========
</TABLE>
<TABLE>
<CAPTION>
                                                                            May 30, 1999
                            --------------------------------------------------------------------------------------------
                                             Options Outstanding                             Options Exercisable
                            ------------------------------------------------------    ----------------------------------
                                                                      Weighted
                                                    Weighted          Average                                 Weighted
                                                     Average         Remaining                                 Average
Range of Option  Exercise            Number         Exercise         Contractual              Number          Exercise
Prices                            Outstanding         Price            Life                Exercisable          Price
                               ----------------- ---------------- -----------------    ------------------- ---------------
<S>                                <C>               <C>              <C>                   <C>               <C>
$3.265 to $5.875                     325,289          $ 4.767          3.1 years               309,637         $ 4.711
$6.125 to $7.000                     461,322            6.511          8.0 years                32,949           6.277
$7.782 to $10.813                    541,465            9.237          5.9 years               227,348           9.574
$11.253 to $12.900                   400,979           11.670          3.5 years               321,924          11.673
$13.096 to $20.142                   194,576           15.563          4.1 years               150,497          15.594
                                   ---------                                                 ---------
                                   1,923,631          $ 8.975          5.2 years             1,042,355         $ 9.543
                                   =========                                                 =========
</TABLE>

The Company uses the intrinsic value based method of accounting for stock-based
compensation, under which compensation cost is measured as the excess, if any,
of the quoted market price of the stock at the grant date over the amount an
employee must pay to acquire the stock. Since the exercise price of stock
options granted under the 1981 and 1990 Stock Option Plans is not less than the
market price of the underlying stock on the date of grant, no compensation cost
has been recognized for such grants.

                                       52
<PAGE>

The following pro forma net income (loss) and earnings (loss) per share
information has been determined as if the Company had accounted for stock-based
compensation awarded under the 1990 Stock Option Plan using the fair value-based
method. Under the fair value-based method, the estimated fair value of awards
would be charged against income ratably by installments over the vesting period.
The pro forma effect on net income for fiscal years 1999, 1998 and 1997 is not
representative of the pro forma effect on net income in future years because, as
required by SFAS No. 123, "Accounting for Stock Based Compensation," no
consideration has been given to awards granted prior to fiscal 1996.

(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                          Fiscal Year Ended
                             ----------------------------------------------------------------------------------------
                                   May 30, 1999                   May 31, 1998                      May 25, 1997
                             --------------------------    ---------------------------     --------------------------
                                  As                              As                            As
                               Reported      Pro Forma         Reported     Pro Forma         Reported    Pro Forma
                             ------------- -------------    ------------- -------------    ------------- -------------
<S>                             <C>           <C>               <C>           <C>              <C>           <C>
Net income (loss)               $(7,029)      $(8,359)          $2,753        $1,816           $2,615        $1,886
Earnings (loss) per Common
   Share:
   Basic                       $  (0.57)     $  (0.67)         $  0.22       $  0.14          $  0.21       $  0.15
                               =========     =========         =======       =======          =======       =======
   Diluted                     $  (0.57)     $  (0.67)         $  0.21       $  0.14          $  0.20       $  0.15
                               =========     =========         =======       =======          =======       =======
</TABLE>

The weighted average fair value of each option granted under the 1990 Stock
Option Plan during fiscal years 1999, 1998 and 1997 was $3.808, $5.446 and
$6.550, respectively. The fair value of each option grant was estimated on the
date of grant using the Black-Scholes Model with the following weighted average
assumptions. The risk-free interest rates for fiscal years 1999, 1998 and 1997
were 5.1%, 5.9% and 6.3%, respectively. The expected volatility of the market
price of the Company's Common Stock for fiscal years 1999, 1998 and 1997 grants
was 51.3%, 55.3% and 58.4%, respectively. The expected average term of the
granted options for fiscal years 1999, 1998 and 1997 was 6.6 years, 5.9 years
and 6.4 years, respectively. There was no expected dividend yield for the
options granted for fiscal years 1999, 1998 and 1997.

Following are the shares of Common Stock reserved for issuance and the related
exercise prices for the outstanding stock options, convertible subordinated
debentures, Preferred Stock, and Warrants at May 30, 1999:

                                              Number           Exercise Price
                                            of Shares             Per Share
                                            ---------          -----------------

1981 Stock Option Plan                          28,565                    $3.265
1990 Stock Option Plan                       1,895,066         $4.103 to $20.142
Convertible subordinated debentures          1,384,879                   $14.272
Preferred Stock                                883,431
Warrants                                       700,000
                                             ---------
Shares reserved for issuance                 4,891,941
                                             =========

In June 1997, the Company, as part of a long-term strategic alliance, entered
into a Warrant Agreement with a distributor under which the distributor could
purchase up to 1,200,000 shares of Common Stock. The distributor paid $120,000
for the rights to the warrants and an initial warrant (which expired on November
16, 1998) to purchase 500,000 shares at $12.50 per share was issued. Future
warrants are conditioned on the distributor meeting specified performance levels
and would be issued at market prices at that time. No additional warrants have
been issued. In connection with the initial warrant, the Company incurred a
non-cash charge of $600,000 in fiscal 1998 which was included as marketing,
general and administrative expense in the accompanying consolidated statement of
operations.

                                       53
<PAGE>


During the year ended May 31, 1998, the Company issued 69,992 shares of Series A
Preferred Stock, valued at $100 per share, in connection with its acquisition of
Polycold. These shares are redeemable, at the option of the Company, at any
time, for cash of $102 per share, or after the first anniversary of their
issuance, for Common Stock valued at $102 per share. In the event the shares
have not been redeemed by November 30, 1999, or upon the occurrence of certain
change of control events, they will automatically convert to Common Stock. The
price of Common Stock used for redemption or conversion is based on the average
trading price for a specified ten-day period preceding the redemption or
conversion.

The Series A Preferred Stock issued by the Company is non-voting, and has no
dividend or liquidation preference, but is entitled to participate in any cash
dividend or liquidation distribution, on an "as converted" basis, with the
Company's Common Stock.

During the year ended May 30, 1999 and May 31, 1998, in connection with the
grant of stock options to consultants, the Company has recognized compensation
cost in the amount of $61,000 and $24,000, respectively. In addition, during the
year ended May 31, 1998, the Company issued 89,018 shares of Treasury Stock at
fair market value in connection with the purchase of inventory from a supplier.

NOTE G - RETIREMENT PLANS

The Company has a non-contributory, defined benefit plan covering all eligible
employees. Benefits under the plan are based on years of service and employees'
career average compensation. The Company's funding policy is to contribute
annually an amount sufficient to meet or exceed the minimum funding standard
contained in the Internal Revenue Code. Contributions are intended to provide
not only for benefits attributable to service to date, but also for those
expected to be earned in the future. As of December 31, 1998 the Company froze
all pension benefits except for approximately 50 bargaining unit employees at a
subsidiary. Since prior Company contributions were intended to fund both
benefits earned and those expected to be earned in the future, the freezing of
the benefits generated a "curtailment gain" of $1,465,000, which has been
credited to the appropriate operating expenses containing salary and wages
expense. The Company has been advised that the pension plan has sufficient
assets to permit termination of the plan and has begun the required steps to do
so in accordance with statutory requirements.

The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheets at May 30, 1999 and May 31, 1998:

                                       54
<PAGE>
<TABLE>
<CAPTION>
                                                                                        Fiscal year ended
                                                                                        -----------------
                                                                               May 30, 1999            May 31, 1998
                                                                             ----------------        --------------
<S>                                                                             <C>                    <C>
Change in benefit obligation during year:
  Benefit obligation at beginning of year                                          $9,399                  $7,065
  Service cost                                                                        393                     590
  Interest cost                                                                       645                     571
  Benefit payments                                                                   (221)                   (221)
  Administrative expenses                                                             (98)                    (78)
  Actuarial (gain) or loss                                                           (507)                    845
  Plan amendments                                                                                             627
  Curtailments                                                                     (1,465)
                                                                                  -------                 -------
  Benefit obligation at end of year                                                $8,146                  $9,399
                                                                                  =======                 =======

Change in plan assets during year:
  Fair value of plan assets at beginning of year                                   $9,583                  $7,114
  Employer contributions                                                                                      398
  Benefit payments                                                                   (221)                   (221)
  Administrative expenses                                                             (98)                    (78)
  Actual return on plan assets                                                      1,692                   2,370
                                                                                  -------                 -------
  Fair value of plan assets at end of year                                         10,956                   9,583

Reconciliation of funded status at end of year:
  Funded status                                                                     2,810                     184
  Unrecognized net transition obligation                                               22                      28
  Unrecognized prior service cost                                                     598                     649
  Unrecognized net (gain)                                                          (2,895)                 (1,454)
                                                                                  -------                 -------
  Net amount recognized                                                            $  535                  $ (593)
                                                                                  -------                 -------

Amounts recognized in the consolidated balance sheet at end of year:
  Prepaid benefit cost                                                             $  535
  Accrued benefit liability                                                                                $ (593)
                                                                                  -------                 -------
  Net amount recognized                                                            $  535                  $ (593)
                                                                                  =======                 =======
Net periodic benefit cost recognized for year
  Service cost                                                                     $  392                  $  590
  Interest cost                                                                       645                     571
  Expected return on plan assets                                                     (752)                   (577)
  Amortization of net transition obligation                                             6                       6
  Amortization of prior service cost                                                   51                      51
  Amortization of net (gain)                                                           (6)
                                                                                  -------                 -------
  Net periodic benefit cost                                                        $  336                  $  641
                                                                                  =======                 =======
Additional amounts recognized for year
  Curtailment (gain)                                                              $(1,465)
Weighted-average assumptions for year
  Discount rate                                                                      7.00%                   7.50%
  Rate of compensation increases                                                     4.50%                   4.50%
  Expected long-term rate of return on plan assets                                   8.00%                   8.00%

Weighted-average assumptions at end of year
  Discount rate                                                                      7.50%                   7.00%
  Rate of compensation increases                                                     4.50%                   4.50%
</TABLE>

The Company also maintains an employee savings plan, covering substantially all
employees, under Section 401(k) of the Internal Revenue Code. Under this plan,
the Company matches a portion of employees' contributions. Expenses under the
plan during the fiscal years ended May 30, 1999, May 31, 1998 and May 25, 1997
aggregated $348,000, $252,000 and $277,000, respectively.

The Company also maintains supplemental retirement and disability plans for
certain of its executive officers. These plans utilize life insurance contracts
for funding purposes. Expenses under these plans were $56,000, $67,000 and
$22,000 for the fiscal years ended May 30, 1999, May 31, 1998 and May 25, 1997,
respectively.

                                       55
<PAGE>


NOTE H - INCOME TAXES

The components of the provision for income taxes (benefit) are as follows:
<TABLE>
<CAPTION>


(Dollars in Thousands)                                                         Fiscal Year Ended
                                               ------------------------------------------------------------------------
                                                    May 30, 1999              May 31, 1998             May 25, 1997
                                               ---------------------    ----------------------    ---------------------
<S>                                                  <C>                       <C>                       <C>
Current
  Federal                                             $(1,727)                  $2,487                    $1,513
  State                                                   176                      352                       280
  Foreign                                                 112                      180                       216
                                                      -------                  -------                    ------
    Total current                                      (1,439)                   3,019                     2,009
Deferred
  Federal                                                (57)                    (920)                      (527)
  State                                                   284                    (108)                       (62)
                                                      -------                  -------                    ------
    Total deferred                                        227                  (1,028)                      (589)
                                                      -------                  -------                    ------

Provision for income taxes (benefit)                  $(1,212)                 $1,991                     $1,420
                                                      =======                  =======                    ======
</TABLE>


The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>


(Dollars in Thousands)
                                                                    May 30, 1999               May 31, 1998
                                                                    ------------               ------------
<S>                                                                   <C>                        <C>
Deferred tax assets:
  Inventory reserves                                                  $2,766                     $2,264
  Non-deductible accruals                                                863                      1,161
  Product warranty reserve                                               560                        431
  Foreign subsidiaries                                                    -                         317
  Equity in net loss of unconsolidated
    affiliate                                                            368                        736
  Restructuring and other accruals                                     1,600                         -
  Capital loss carryforward                                            1,329                         -
  Unrealized loss on available for sale securities                       280                         -
                                                                      ------                     ------
    Total gross deferred tax assets                                    7,766                      4,909
  Less valuation allowance                                            (1,520)                      (604)
                                                                      ------                     ------
    Deferred tax assets                                                6,246                      4,305

Deferred tax liabilities:
  Unrealized gain on available for sale securities                        -                        (446)
  Depreciation and amortization differences                             (452)                      (446)
  Intangibles                                                         (1,475)                        -
  Pension curtailment gain                                              (538)                        -
  Other, net                                                             (24)                      (155)
                                                                      ------                     ------
    Total gross deferred tax liabilities                              (2,489)                    (1,047)
                                                                      ------                     ------

  Net deferred tax assets                                             $3,757                     $3,258
                                                                      ======                     ======
</TABLE>

                                       56

<PAGE>


The foregoing assets and liabilities are classified in the accompanying
consolidated balance sheets as follows:


(Dollars in Thousands)
                                              May 30, 1999         May 31, 1998
                                              ------------         ------------

  Net current deferred tax assets               $4,069               $3,583
  Net long-term deferred tax liabilities           312                  325
                                                ------               ------
                                                $3,757               $3,258
                                                ======               ======

During fiscal 1998, in connection with the acquisition of Polycold, the Company
recorded $123,000 of deferred tax assets.

During fiscal 1999 the Company increased the valuation allowance to an amount it
believes is necessary to reduce deferred taxes to an amount which is more than
likely not to be realized.


Changes made to the valuation allowance during fiscal 1999 and 1998 were an
increase of $916,000 and a decrease of $230,000, respectively.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income and capital gains during
the periods in which those temporary differences become deductible. Management
considers projected future taxable income, the character of such income, and tax
planning strategies in making this assessment. The Company had Federal taxable
income (loss) of approximately ($3,250,000) in fiscal 1999, $7,000,000 in fiscal
1998, and $3,700,000 in fiscal 1997. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than
not the Company will realize the benefits of the remaining deductible
differences. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
are reduced.


The reasons for the differences between the provision for income taxes (benefit)
and the amount of income tax (benefit) determined by applying the applicable
statutory Federal tax rate to income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>


(Dollars in Thousands)                                                               Fiscal Year Ended
                                                        -------------------------------------------------------------------
                                                             May 30, 1999            May 31, 1998          May 25, 1997
                                                        --------------------    --------------------    -------------------
<S>                                                              <C>                      <C>                     <C>
Pre-tax income (loss) at statutory tax rate (34%)               $(2,802)                $1,613                  $1,372
State taxes, net of Federal benefit                                 304                    161                     200
Benefit of Foreign Sales Corporation                               (210)                  (288)                   (186)
Non-deductible distribution expense                                                        204
Amortization of intangibles                                         539                    392                     110
Non-deductible loss on IMiG LLC                                                             36                     151
Benefit of tax credits                                              (45)                                          (257)
Change in valuation allowance                                       916                   (230)
Other, net                                                           86                    103                      30
                                                                -------                 ------                  ------
Provision for income taxes                                      $(1,212)                $1,991                  $1,420
                                                                =======                 ======                  ======
</TABLE>
                                       57
<PAGE>

The Company paid income taxes, net of cash refunds received, of $2,504,000,
$1,815,000, and $1,347,000 during the years ended May 30, 1999, May 31, 1998,
and May 25, 1997, respectively.


NOTE I - PER SHARE INFORMATION

The following table provides calculations of basic and diluted earnings per
share:
<TABLE>
<CAPTION>

(Dollars in Thousands, Except Per Share Amounts)

                                                                          Fiscal Year Ended

                                                   May 30, 1999            May 31, 1998              May 25, 1997
                                                   ------------            ------------              ------------
<S>                                                <C>                     <C>                       <C>
Income (loss) available to
  common stockholders                               $   (7,029)            $     2,753               $     2,615
                                                    ==========             ===========               ===========

Weighted average shares                             12,429,039              12,755,733                12,325,001

Dilutive potential Common
  Shares:
    Convertible Preferred Stock                                                325,925
    Stock options                                                              327,302                   468,935
                                                    ----------               ----------                ----------
Adjusted weighted average
  shares                                            12,429,039              13,408,960                12,793,936
                                                    ==========             ===========               ===========

Earnings (loss) per Common Share:
    Basic                                           $    (0.57)            $      0.22               $      0.21
                                                    ==========             ===========               ===========
    Diluted                                         $    (0.57)            $      0.21               $      0.20
                                                    ==========             ===========               ===========
</TABLE>

Shares issuable upon conversion of convertible debentures are considered in
calculating "diluted" earnings per share, but have been excluded, as the effect
would be anti-dilutive. Shares issuable upon conversion of convertible preferred
stock and exercise of stock options have been excluded for the year ended May
30, 1999 as their effect would be anti-dilutive.

The Company distributed 2% stock dividends on September 17, 1998 and September
16, 1997. The distributions have been made from the Company's authorized but
unissued shares. All data with respect to earnings per share, weighted average
shares outstanding and common stock equivalents have been adjusted to reflect
these stock dividends.


NOTE J - COMMITMENTS AND CONTINGENCIES

The Company leases certain manufacturing facilities and equipment under
operating lease agreements expiring at various dates through December, 2021.
Certain of the leases provide for renewal options. Total rent expense was
$519,000, $400,000 and $331,000 for the years ended May 30, 1999, May 31, 1998,
and May 25, 1997, respectively.

Future minimum rental commitments, excluding renewal options, under the
noncancellable leases covering certain manufacturing facilities and equipment
through the term of the leases are as follows:

                                       58
<PAGE>



   Fiscal Year
   -----------

   2000                            $  836,000
   2001                               825,000
   2002                               667,000
   2003                               509,000
   2004                               369,000
                                   ----------
   Total                           $3,206,000
                                   ==========


In addition to operating lease agreements, the Company also has a five-year
maintenance agreement for $113,000 per year beginning January 1, 1999 for a
newly implemented computer system.

At May 30, 1999, the Company's capital equipment commitments were approximately
$2,000,000.

The Company has negotiated a multi-year contract with a key supplier in order
to stabilize supply and price on materials for a long term production contract.

In connection with AISA the Company has agreed to purchase approximately
$3,000,000 of superconducting wire for use in producing MRI magnets.

The Company is subject to certain claims and lawsuits arising in the normal
course of business. Based on information currently available, it is the opinion
of management, based upon advice of counsel, that the ultimate resolution of
these matters would not have a material adverse effect on the Company's
consolidated financial position or results of operations. However, based on
future developments and as additional information becomes known, it is possible
that the ultimate resolution of such matters could have a material adverse
effect on the Company's results of operations in future periods.


                                       59


<PAGE>



NOTE K - SEGMENT AND RELATED INFORMATION

The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information", in fiscal year 1999. SFAS No. 131 changes the way the
Company reports information about its operating segments. The information for
1998 and 1997 has been restated from the prior year's presentation in order to
conform to the 1999 presentation.

The Company's individual business units have been aggregated into three
reportable segments: (1) Electromagnetics; (2) Superconducting Materials; and
(3) Refrigeration, on the basis of similar products, processes and economic
circumstances, among other things. The Electromagnetics segment designs,
manufactures and sells magnet systems and radio frequency ("RF") coils used in
MRI for medical diagnostics. The Superconducting Materials segment manufactures
and sells superconducting wire principally for the construction of
superconducting MRI magnet systems. The Refrigeration segment designs, develops,
manufactures and sells refrigeration equipment and refrigerants.

The accounting policies of the reportable segments are the same as those
described in Note A of the Notes to Consolidated Financial Statements.
Intersegment sales and transfers are accounted for as if the sales or transfers
were to third parties, that is, at current market prices. The Company evaluates
the performance of its reportable segments based on operating income (loss).

Summarized financial information concerning the Company's reportable segments is
shown in the following table:


<TABLE>
<CAPTION>


(Dollars in Thousands)                                                        Fiscal Year Ended
                                         -----------------------------------------------------------------------------------------
                                                                              May 30, 1999
                                         --------------------------------------------------------------------------------------
                                                                     Superconducting
                                            Electromagnetics          Materials          Refrigeration            Total
                                         --------------------------------------------   ------------------   ------------------

<S>                                       <C>                       <C>                  <C>                   <C>
Net sales from external customers:
  Magnet systems                                   $ 46,723                                                           $ 46,723
  RF Coils                                           12,926                                                             12,926
  Superconductive wire                                                      $ 12,160                                    12,160
  Refrigeration equipment                                                                        $ 28,268               28,268
  Refrigerants                                                                                      2,794                2,794
                                         -------------------     --------------------   ------------------   ------------------
          Total                                      59,649                   12,160               31,062              102,871

Intersegment net sales                                    -                    6,806                2,223                9,029

Segment operating profit(loss)                        4,090                    2,585               (5,895)                 780

Total assets                                         66,894                   10,857               47,707              125,458

Investment in unconsolidated
affiliates:                                                                                         3,736                3,736

Additions to property,
 plant and equipment,
 exclusive of acquisitions                            1,721                      798                  620                3,139

Additions to long lived assets:                       8.250                                                              8,750
                                                     17,207                                         9,157               26,364

Depreciation and
 amortization expense                                 3,294                      871                1,471                5,636

Other significant non-cash items:
  Restructuring charges                               4,739                                                              4,739

</TABLE>







<PAGE>

<TABLE>
<CAPTION>
                                         --------------------------------------------------------------------------------------
                                                                           May 31, 1998
                                         --------------------------------------------------------------------------------------
                                                                     Superconducting
                                            Electromagnetics          Materials          Refrigeration            Total
                                         --------------------------------------------   ------------------   ------------------
<S>                                       <C>                       <C>                  <C>                   <C>
Net sales from external customers:
  Magnet systems                                   $ 49,874                                                           $ 49,874
  RF Coils                                           10,746                                                             10,746
  Superconductive wire                                                      $ 11,131                                    11,131
  Refrigeration equipment                                                                        $ 21,947               21,947
  Refrigerants                                                                                      2,196                2,196
                                         -------------------     --------------------   ------------------   ------------------
          Total                                      60,620                   11,131               24,143               95,894

Intersegment net sales                                                         7,775                4,141               11,916

Segment operating profit(loss)                        3,707                    2,324                 (517)               5,514

Total assets                                         69,607                   13,872               44,297              127,776

Investment in unconsolidated
affiliates:                                           5,330                                         4,710               10,040

Additions to property,
 plant and equipment,
 exclusive of acquisitions                            2,411                      310                  425                3,146

Additions to long lived assets                                                                     10,175               10,175

Depreciation and
 amortization expense                                 3,950                      912                  562                5,424

Other significant non-cash items:
  Expense associated with
  warrants issued                                                                                     600                  600

                                                                          May 25, 1997
                                         --------------------------------------------------------------------------------------
                                                                     Superconducting
                                            Electromagnetics          Materials          Refrigeration            Total
                                         --------------------------------------------   ------------------   ------------------
<S>                                       <C>                       <C>                  <C>                   <C>
Net sales from external customers:
  Magnet systems                                   $ 50,894                                                           $ 50,894
  RF Coils                                            1,981                                                              1,981
  Superconductive wire                                                      $ 10,698                                    10,698
  Refrigeration equipment                                                                        $ 16,010               16,010
  Refrigerants                                                                                      7,469                7,469
                                         -------------------     --------------------   ------------------   ------------------
          Total                                      52,875                   10,698               23,479               87,052

Intersegment net sales                                                         8,838                3,652               12,490

Segment operating profit(loss)                          514                    2,260                  478                3,252

Total assets                                         81,379                   13,440               34,510              115,889

Investment in unconsolidated
affiliates:                                           4,918                                                              4,918

Additions to property,
 plant and equipment,
 exclusive of acquisitions                            3,789                      775                  882                5,446

Additions to long lived assets:                       9,953                                                              9,953

Depreciation and
 amortization expense                                 2,585                      856                  523                3,964

Other significant non-cash items:

</TABLE>




<PAGE>

The following are reconciliations of the information used by the chief operating
decision maker to the Company's consolidated totals:
<TABLE>
<CAPTION>

                                                                                                 Fiscal Year Ended
                                                                                ------------------------------------------

                                                                                May 30,          May 31,          May 25,
(Dollars in Thousands)                                                           1999              1998            1997
                                                                                -------          -------          -------

Reconciliation of income (loss) before income taxes:
<S>                                                                             <C>              <C>              <C>
           Total profit from reportable segments                                $   780          $ 5,514          $ 3,252
           Unallocated amounts:
                    Interest and other income                                     1,942            2,364            2,961
                    Interest and other expense                                   (2,172)          (2,125)          (1,996)
                    Write off of investment in unconsolidated affiliate          (7,300)            --               --
                    Equity in net loss of unconsolidated affiliates              (1,491)          (1,009)            (182)
                                                                                =======          =======          =======
                         Income (loss) before income taxes                      $(8,241)         $ 4,744          $ 4,035
                                                                                =======          =======          =======

</TABLE>


<PAGE>




Net sales to two customers of the Company's Electromagnetics and Superconducting
Materials segments were each in excess of 10% of the Company's total net sales.
Net sales to each of these customers during the last three years were as
follows:
<TABLE>
<CAPTION>

                                                          Fiscal Year Ended
                                     ------------------------------------------------------------

                                         May 30,               May 31,              May 25,
(Dollars in Thousands)                     1999                  1998                 1997
                                     -----------------     -----------------    -----------------

<S>                                          <C>                   <C>                  <C>
  Customer A                                 $ 41,652              $ 42,751             $ 43,548
  Customer B                                   13,747                10,408                7,378
                                     -----------------     -----------------    -----------------

             Total                           $ 55,399              $ 53,159             $ 50,926
                                     =================     =================    =================

</TABLE>

Net sales by country, based on the location of the customer, for the last three
fiscal years were as follows:
<TABLE>
<CAPTION>

                                                          Fiscal Year Ended
                                     ------------------------------------------------------------

                                         May 30,               May 31,              May 25,
(Dollars in Thousands)                     1999                  1998                 1997
                                     -----------------     -----------------    -----------------

<S>                                          <C>                   <C>                  <C>
  United States                              $ 48,558              $ 50,928             $ 39,549
  Netherlands                                  48,439                55,085               48,145
  Other countries                              12,661                 2,215                3,955
                                     -----------------     -----------------    -----------------

             Total                           $102,871              $ 95,894             $ 87,052
                                     =================     =================    =================
</TABLE>

All significant long-lived assets of the Company are located within the United
States.



                                       60

<PAGE>



NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments." Although the estimated fair value amounts
have been determined by the Company using available market information and
appropriate valuation methodologies, the estimates presented are not necessarily
indicative of the amounts that the Company could realize in current market
exchanges.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and short-term investments, receivables, and accounts payable and accrued
expenses: The carrying amounts reported in the consolidated balance sheets
approximate their fair values because of the short maturities of these
instruments.

Available for sale securities, investment in affiliates and other investments:
The fair value of the Ultralife investment is estimated based on quoted market
prices (see Note D) at the balance sheet date. The fair value of the KryoTech
investment is not readily determinable as the company is privately held. The
estimated fair value of the PowerCold investment was approximately $1,900,000 at
May 30, 1999 based on the number of PowerCold common shares that the Series A
Convertible Preferred Stock may be converted to at the option of the Company and
the quoted market price at the balance sheet date (see Note D).

Long-term debt: The fair value of the borrowings under the unsecured line of
credit reported in the consolidated balance sheets approximate the carrying
value of $4,850,000 and $0 at May 30, 1999 and May 31, 1998, respectively,
because the interest rates are based on floating rates identified by reference
to market rates and because of the short maturity of this instrument. The
carrying value of long-term debt, including current portion, was approximately
$26,900,000 and $29,100,000 at May 30, 1999 and May 31, 1998, respectively,
while the estimated fair value was $24,000,000 and $27,900,000, respectively,
based upon interest rates available to the Company for issuance of similar debt
with similar terms and discounted cash flows for remaining maturities.

Financial guarantees: The fair value of the Company's guarantee on one half of
the outstanding balance of borrowings under a line of credit obtained by SMIS
approximates the carrying value at May 30, 1999 because of the short maturity of
this instrument (see Note D).


                                       61
<PAGE>

Letters of credit: The letters of credit reflect fair value as a condition of
their underlying purposes and are subject to fees competitively determined in
the market place. The contract value and fair value of the letters of credit at
May 30, 1999 was $1,645,000.

Note M - Accumulated Other Comprehensive Income (Loss)

The accumulated balances for each classification of accumulated other
comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                                 Unrealized             Accumulated
                                           Foreign             Gains (Losses)              Other
                                          Currency         on Available for Sale       Comprehensive
                                           Items          Securities, Net of Tax       Income (Loss)
                                         ---------        -----------------------      -------------
<S>                                      <C>                    <C>                       <C>
Balances at May 26, 1996                 $  (96)                $ 2,346                   $ 2,250

Current period change - 1997                 80                  (1,733)                   (1,653)
                                         -------                -------                   -------

Balances at May 25, 1997                    (16)                    613                       597

Current period change - 1998               (338)                    237                      (101)
                                         -------                -------                   -------

Balances at May 31, 1998                   (354)                    850                       496

Current period change - 1999                194                  (1,358)                   (1,164)
                                         -------                -------                   -------

Balances at May 31, 1999                 $ (160)                $  (508)                  $  (668)
                                         =======                =======                   ========
</TABLE>

The related tax effects allocated to each component of accumulated other
comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                         Before-Tax         Tax (Expense)      Net-of-Tax
                                          Amount             or Benefit          Amount
                                        -----------         ------------       ----------
<S>                                      <C>                 <C>                <C>
Balance at May 26, 1996                  $ 3,814             $(1,564)           $ 2,250

Foreign currency translation
adjustments                                   80                  --                 80

Unrealized gains (losses) on
available for sale securities             (2,952)              1,219             (1,733)
                                         --------            --------           --------

Balance at May 25, 1997                      942                (345)               597

Foreign currency translation
adjustments                                 (338)                 --               (338)

Unrealized gains (losses) on
available for sale securities                338                (101)               237
                                         --------            --------           --------

Balance at May 31, 1998                      942                (446)               496

Foreign currency translation
adjustments                                  194                  --                194

Unrealized gains (losses) on
available for sale securities             (2,084)                726             (1,358)
                                         --------            --------           --------

Balance at May 30, 1999                  $  (948)            $   280            $  (668)
                                         ========            ========           ========
</TABLE>

NOTE N - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial data for fiscal 1999 and 1998 are as follows:
<TABLE>
<CAPTION>

(Dollars in Thousands, Except Per Share Amounts)

                                                                                                     Earnings Per:
                                                                                Net             ---------------------
                                           Net              Gross              Income             Basic       Diluted
                                           Sales            Margin             (Loss)             Share        Share
                                           -----            ------             ------             -----        -----
<S>                                       <C>               <C>               <C>               <C>          <C>
1999 Quarter Ended
  August 30, 1998                         $26,494           $9,781            $ 1,005            $ .08        $ .07
  November 29, 1998                        25,963            7,779             (1,449)            (.12)        (.12)
  February 28, 1999                        23,004            7,759                452              .04          .03
  May 30, 1999 (1)                         27,410            7,420             (7,037)            (.57)        (.57)

1998 Quarter Ended
  August 24, 1997                         $21,020           $8,048              $ 461            $ .04        $ .04
  November 23, 1997                        22,215            7,770                592              .05          .05
  February 22, 1998                        25,235            9,058                815              .06          .06
  May 31, 1998                             27,424           10,809                885              .07          .06
</TABLE>

(1)  During the quarterly period ended May 30, 1999, the Company recorded a
     $7,300,000 write-off of its investment in and advances to SMIS (See Note
     D), and recognized a $1,465,000 curtailment gain upon amendment to and
     planned termination of the Company's defined benefit pension plan (See Note
     G). In addition, due to declining sales, warranty issues and management's
     review of operations during fiscal 1999 at the Company's IGC-APD a
     $1,750,000 adjustment for inventory impairment was recorded during the
     quarter. Other adjustments and significant transactions which occurred
     during the quarterly period ended May 30, 1999 included a $300,000 gain
     upon sale of the Company's interest in AISA (See Note D) and $787,000 of
     additional restructuring charges incurred in the closure of the Company's
     Field Effects division (See Note C). The aggregate effect of these
     adjustments resulted in a pretax loss of $8,072,000 during the quarterly
     period ended May 30, 1999.


                                       62

<PAGE>


                                  2. Schedule



                                       63
<PAGE>



                       INTERMAGNETICS GENERAL CORPORATION
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
                                                                  (Dollars in Thousands)
------------------------------------------------------------------------------------------------------------------------------------
                        COL. A                COL. B                      COL. C                       COL. D              COL. E
------------------------------------------------------------------------------------------------------------------------------------
                                                                        Additions
                                                           ------------------------------------
                                            Balance at       Charged to            Charged to
                                            Beginning         Costs and         Other Accounts-        Deductions-       Balance at
                     DESCRIPTION            of Period         Expenses              Describe            Describe       End of Period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>               <C>             <C>                  <C>                 <C>
Year Ended May 30, 1999

Deducted from asset accounts:
  Allowance for doubtful accounts             $ 350              $ 206              119  (11)         $ 412   (3)           $ 401
                                                                                    138  (10)

  Reserve for inventory obsolescence          6,843              3,732            1,820  (10)         4,113   (5)           8,282

Included in liability accounts:
  Product warranty reserve                      996              2,152                                1,571   (1)           1,577
                                                                                                        265   (2)
  Contract adjustment reserve (4)               458                 70                                  227   (9)             301
  Upgrade Reserve (4)                            60                 40                                   60   (2)              40

Year Ended May 31, 1998

Deducted from asset accounts:
  Allowance for doubtful accounts             $ 302               $ 60             $ 88   (2)         $ 130   (3)           $ 350
                                                                                     30   (7)
  Reserve for inventory obsolescence          6,653              1,266               (9)  (6)         1,087   (5)           6,843
                                                                                     20   (7)
Included in liability accounts:
  Product warranty reserve                      911                664               70   (7)           649   (1)             996
  Contract adjustment reserve (4)               274                184                                                        458
  Upgrade Reserve (4)                            60                 60                                   60   (8)              60

Year Ended May 25, 1997

Deducted from asset accounts:
  Allowance for doubtful accounts             $ 169               $ 92              $ 2   (6)           $ 1   (3)           $ 302
                                                                                     40   (7)
  Reserve for inventory obsolescence          5,225              1,465                1   (6)            58   (5)           6,653
                                                                                     20   (7)
Included in liability accounts:
  Product warranty reserve                    1,100                724               29   (7)           942   (1)             911
  Contract adjustment reserve (4)               234                 81                                   41   (2)             274
  Upgrade Reserve (4)                             0                  8               60   (7)             8   (8)              60
</TABLE>

(1)  Cost of warranty performed.
(2)  Adjustments from accruals.
(3)  Write-off uncollectible accounts.
(4)  Classified in the Balance Sheet with other liabilities and accrued
     expenses.
(5)  Write-off or sale of obsolete inventory.
(6)  Foreign currency translation.
(7)  Balance at date of acquisition of subsidiary.
(8)  Cost of upgrade work performed.
(9)  Cost to finalize contracts.
(10) Restructuring charges.
(11) SMIS write-off.

                                       64


<PAGE>


                                  Exhibit Index


Page    Exhibit
----    -------
        10.1       Employment Agreement dated June 1, 1999 between
                   Intermagnetics General Corporation and Glenn H. Epstein

        21         Subsidiaries of the Company

        23         Consent of Independent Auditors