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                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

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

                                   FORM 10-K

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

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934 for fiscal year ended March 28, 1999

                                      OR

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

                        Commission file number 0-21294

                               Aseco Corporation
            (Exact name of registrant as specified in its charter)

               Delaware                              04-2816806
    (State or other jurisdiction of     (I.R.S. Employer Identification No.)
    incorporation or organization)

           500 Donald Lynch Boulevard, Marlboro, Massachusetts 01752
                   (Address of principal executive offices)

              Registrant's telephone number, including area code
                                 508-481-8896

          Securities registered pursuant to Section 12(b) of the Act:
                                     None

          Securities registered pursuant to Section 12(g) of the Act:
                         Common stock, $.01 par value

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

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

  The aggregate market value of voting stock held by non-affiliates of the
registrant was $3,850,658 as of May 28, 1999.

                                   3,850,658
       (Number of shares of common stock outstanding as of May 28, 1999)

                      Documents Incorporated by Reference

  Part III incorporates by reference certain information from the Registrant's
proxy statement for the annual meeting of stockholders to be held on August
11, 1999.

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                                    PART I

ITEM 1. BUSINESS

Overview

  Aseco designs, manufactures and markets test handlers used to automate the
testing of integrated circuits in surface mount packages. Aseco provides high
quality, versatile test handlers designed to maximize the productivity of the
significantly more costly testers with which they operate. Aseco also designs,
manufactures and markets integrated circuit wafer handling and inspection
systems. These systems are used to load, sort and transport wafers during both
manual and automatic inspection as well as other wafer processing steps in the
semiconductor manufacturing process.

Industry Background

  The manufacture of integrated circuits (IC's) takes place in ultra-clean
fabrication plants. Flat circular discs of silicon ("wafers"), of extremely
high perfection and purity, are taken through a variety of processes--
principally micro-patterning, where small structures are etched into the
surface, and physical and chemical processes, where material is deposited or
implanted into the structures. Between these major processing steps the wafers
must be transported cleanly and safely and inspected and assessed for quality
and cleanliness. Automated wafer handling and inspection equipment facilitates
the safe transport, handling and defect detection and assessment of wafers
between process steps preventing damage, contamination and breakage which
often results from manual intervention.

  Following the manufacturing process, IC devices are tested by semiconductor
manufacturers for quality and electrical performance before shipment to end
users. In addition, volume purchasers of IC devices often test IC devices
during incoming inspection. Test handlers facilitate the fast, automated and
cost-effective testing of IC devices. The automated test process requires two
major pieces of equipment: a tester and a test handler. Testers are
specialized, computer-controlled electronic systems that perform the
electrical test of IC devices, including memory, logic, linear, microprocessor
and Application Specific Integrated Circuit (ASIC) devices. Test handlers are
electro-mechanical systems which are connected to and communicate with the
tester. IC devices are loaded into the test handler and are then stabilized at
a specified temperature to simulate operating extremes for the IC device. The
test handler then transports the IC device to a contactor, which provides an
electrical connection between the IC device and the tester and allows an
interchange of electrical signals between the tester and device under test so
the tester can evaluate the performance of the IC. Finally, the handler
segregates the devices as determined by the tester.

  Traditionally, IC devices were attached to one side of a printed circuit
board by means of pins, also referred to as leads, that were inserted into
pre-drilled holes and soldered to the electrical circuits on the board, a
technique known as "through-hole" mounting. Surface mount technology ("SMT"),
an alternative technology which is widely used, involves soldering of IC
devices directly to the surface of the board. This technology has been
increasingly adopted in response to the introduction of more powerful IC
devices with more leads and the demand for ever more increasing
miniaturization. SMT has several distinct advantages over through-hole
technology. First, because IC device leads are not inserted through the board,
IC device leads can be closer together allowing IC devices and the boards they
populate to be smaller. This reduction in IC device size also enhances circuit
processing speed and thus board and system performance. Second, because IC
device leads are not inserted through the board, boards can be populated on
both sides which further reduces overall required board size.

  The demand for test handlers is driven primarily by IC device production
levels and technological changes relating to the packaging of integrated
circuits. Because only the test handler has physical contact with the IC
devices, changes in integrated circuit packaging have minimal effect on tester
requirements but generally have a major effect on test handler requirements
and the demand for the test handlers.


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  The test handler market is commonly segmented on the basis of the function
of the IC devices handled: test handlers which process memory IC devices, such
as Dynamic Random Access Memory devices (DRAM) and Static Random Access Memory
devices (SRAM), and test handlers which process non-memory IC devices, such as
digital, logic, linear, ASIC and microprocessor devices. Non-memory IC devices
generally have short test times, are often configured with leads on four
sides, come in a wide variety of package configurations and are produced in
relatively small lot sizes. Consequently, non-memory IC device test handlers
must be able to handle devices gently and transport them to and from the
contactor rapidly ("index time") and must be adaptable to accommodate many
different package types. Memory IC devices, by contrast, generally have longer
test times, have leads on just two sides, come in fewer package configurations
and are produced in larger lot sizes. The index time of memory IC device test
handlers is less important because of the long test times of memory IC
devices.

  Test handlers capable of facilitating the testing of multiple IC devices
simultaneously ("multi-site test handlers") have been developed to improve
test handler throughput of memory IC devices. Traditionally, multi-site test
handlers have not been used in connection with the testing of non-memory IC
devices. Recently, however, as non-memory IC devices have become more complex
and their test times have correspondingly increased, multi-site test handlers
have been used in connection with the testing of non-memory IC devices as
well. In addition, certain SRAM IC devices possess characteristics typical of
non-memory IC devices, such as shorter test time, leads on four sides and
wider variety of package configurations, therefore creating the demand in the
SRAM market for a multi-site test handler with fast index speed and gentle
handling capabilities.

  The majority of DRAM IC devices are manufactured in Japan and Korea while
the majority of non-memory IC devices are manufactured in the United States. A
significant number of SRAM IC devices are manufactured in the United States as
well as in Japan and Korea.

  To date, the Company's products have primarily addressed the non-memory
surface mount device portion of the test handler market.

Aseco's Automation Equipment

 Test Handlers

  Test handlers are used to automate the electrical testing of IC devices. IC
devices are loaded into the handler from tubes, magazines or trays. They are
then transported to a temperature chamber within the test handler where they
are thermally conditioned at temperatures typically ranging from -55 to + 155
Celsius to simulate operating extremes for the IC device. After the IC devices
are stabilized at a specified temperature, the test handler positions the IC
devices within a contactor, which provides an electrical connection between
the IC device and the tester and insulates the tester from the temperature
extremes inside the handler. Test routines can last from fractions of a second
to minutes depending on the type of IC device being tested and the purpose of
the test. After testing, the tester signals the test handler to sort the IC
devices into various categories for shipment, additional testing or disposal.

  There are four basic types of test handlers: gravity-feed systems, pick and
place systems, belt-conveyance systems and air-bearing systems. The
appropriate type of test handler is generally determined by the size and lead
configuration of the IC devices being tested. The gravity-feed system, the
oldest of the four test handler types, is the predominant test handler for
through-hole IC devices. As the name indicates, gravity-feed systems rely on
gravity to move IC devices through the test handler. This type of test handler
has the advantage of being able to process IC devices quickly, but has a
greater tendency to damage IC devices with leads on four sides. Damaged leads
can cause soldering defects when the IC devices are mounted on boards, which
in turn increases re-work and warranty costs. Pick and place systems, in
contrast, transport IC devices by means of robotic arms, which prevent the IC
devices from coming into contact with one another and reduce the chance of
lead damage. While pick and place systems are suitable for fragile IC devices
that are susceptible to lead damage such as the Quad Flat Pack (QFP), they
typically process IC devices more slowly than other types of test handlers.
Air-

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bearing systems, which transport IC devices on a bed of air in the temperature
chamber, permit high-speed processing while minimizing the potential for lead
damage characteristic of gravity-feed systems. Belt-conveyance systems move
large quantities of devices quickly into and out of the system on belts
without damaging fragile leads.

 Key Test Handler Features

  The primary function of the test handler is to automate the testing process
thereby increasing the productivity of the tester resulting in the accurate
testing of IC devices at the lowest per unit cost possible. Important test
handler features include:

  Gentle Handling. In order for the test handler user to maximize yield and
the quality of the IC devices it ships, it is imperative that the test handler
not damage the IC devices it processes. Due to their fragility, surface mount
IC device leads are especially susceptible to damage, and as IC devices with
higher lead counts and more fragile leads have become more prevalent, gentle
handling has become an increasingly important test handler feature. Aseco
currently offers test handlers with four IC device transport mediums--gravity-
feed, air-bearing, pick and place and belt-conveyance test handlers. The four
transport mediums allow customers to use the type of test handler most
suitable for the IC device being tested. In addition, Aseco test handlers are
equipped with vacuum stops, limited force contactors and other features to
further minimize lead damage.

  Signal Integrity. Signal integrity is the ability of the test handler to
facilitate accurate transmission of electrical signals between the tester and
the IC device being tested. Poor transmission can lead to incorrect test
results. Aseco maximizes its performance in this area by equipping its test
handlers with Aseco's proprietary contactors which position the IC device
under test in close proximity to the tester which allows fast and accurate
signal transmission. If so desired by customers, other contactors can also be
used with Aseco equipment.

  Cold Operation. The ability of the test handler to operate for extended
periods of time at cold temperatures (typically -55 Celsius) without
interruption for defrosting is an especially important factor in the overall
productivity of the test handler. Aseco has developed considerable expertise
in thermal engineering and insulation technology which is reflected by the
fact that its test handlers are capable of operating for long periods over
multiple work shifts without interruption.

  Productivity. The productivity of a test handler is largely a function of
the rate at which it moves IC devices through the test handler ("throughput")
and the percentage of time the test handler is available for use ("uptime").
The throughput of Aseco's test handlers is enhanced by their use of forced air
to thermally condition IC devices. This produces an effect analogous to wind
chill and minimizes the time IC devices are required to stay in the
temperature chamber. The Company believes its handlers are able to achieve
high uptime because of their relatively simple design that reduces jam rates
and the frequency and duration of required maintenance. Maintenance time is
also reduced by the diagnostic software incorporated in each Aseco test
handler.

  Versatility. With the increase in the number of different IC device lead
configurations, an important feature of a test handler is its ability to
accommodate IC devices with different lead configurations. Through the use of
easy to install conversion kits, Aseco's test handlers are currently capable
of processing many different IC device configurations.

 Test Handler Products

  The Company's test handlers share certain common features including the
ability to operate at cold, ambient and hot temperatures and a menu-driven CRT
user interface that displays test handler performance and diagnostic
information. The following is a complete list of the Company's test handler
product offerings:

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Model S-130 Test Handler

  The S-130 is a versatile air-bearing test handler, capable of handling a
broad array of non-memory IC device types. Through the use of conversion kits,
the S-130 is currently able to accommodate a wide variety of IC device
configurations. The S-130 reaches throughput rates of 2,400 devices per hour,
and has the capability to operate at temperatures between -55 and +150
Celsius. The versatility of the S-130 has made it popular with suppliers of
ASIC devices and others who need to test a relatively small number of many
different IC device package types.

Model S-133 Test Handler

  The S-133 is a modified version of the S-130 test handler. It offers all the
features and capabilities of the S-130 plus the ability to position the device
for electrical testing of accelerometers while under physical shock. An
accelerometer is a device that activates when a large amount of force is
placed upon it and is used in such applications as car airbags.

Model S-170 Test Handler

  The S-170 is a high-speed gravity-feed test handler capable of a throughput
rate of 6,000 IC devices per hour. This test handler is equipped with high
performance contactors and provides test handling at temperatures ranging from
-55 to +155 Celsius. Changing between different IC device package lead counts
is achieved by simple keypad entry on a menu-driven CRT display. The S-170 is
most appropriate for high volume testing of small surface mount IC devices
having short test times and leads on only two sides such as linear devices.

Model S-170C and S-170D Test Handlers

  The S-170C and S-170D are modified versions of the S-170 gravity feed test
handler. Each offers all the features and capabilities of the S-170 plus the
ability to handle a broader spectrum of the popular SOIC package types. In
addition, the S-170D offers plunge to board capability that allows an
electrical connection between the IC device and a device under test ("dut")
board eliminating the need for a contactor and facilitating testing of IC
devices with very short lead lengths.

Model S-170CS Test Handler

  The S-170CS is a modified version of the S-170. The S-170CS offers all the
features and capabilities of the S-170 including plunge to board capability.
This test handler, which is used to handle newer chip-scale packages, offers a
significantly faster and less expensive alternative to conventional "pick-and-
place" test handlers traditionally used to handle chip scale packages.

Model S-200 Test Handler

  The S-200 is a pick and place test handler, particularly suitable for
handling fragile lead IC devices such as the popular QFP package. The S-200
has a throughput capacity of 1,200 devices per hour and operates at
temperatures ranging from -55 to +155 Celsius. Key features of the S-200
include its simple design, which enhances uptime, and the ease with which it
can be converted to handle different package types plus automatic tray loading
and unloading. A key distinguishing feature is its ability, through the
addition of an optional machine vision system, to provide in-line lead
inspection in addition to its normal electrical test handling capability.

Model S-450 Test Handler

  The S-450 test handler employs an air-bearing transport system. This product
incorporates the many features of Aseco's other test handlers, while
incorporating additional capabilities such as a touch screen user interface,
multi-site testing, high throughput and automated IC device loading and
unloading. The S-450 handles PLCC, SOIC(W), Molded Carrier Ring (MCR) devices
and may be used in SRAM applications. The multi-site test capability of the S-
450 allows up to eight IC devices to be tested simultaneously, can be
converted to handle

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numerous IC device package types and, like the Company's other test handler
models, allows testing at hot, cold and ambient temperatures.

Model VT8000 Test Handler

  The VT8000 employs a combination of machine vision and multi track belt
conveyance to enable more gentle handling of fragile devices. The VT8000
allows up to 16 IC devices to be tested simultaneously with simplified
conversion kits resulting in cost savings for customers and less complicated
set up and changeover. Machine vision facilitates lead inspection of IC
devices before and after testing to identify parts with damaged leads. The
VT8000 handles a variety of package types and incorporates an optional plunge-
to board feature.

 Wafer Handling and Inspection Automation Equipment

  Wafer handling and inspection equipment is used to automate the transfer and
inspection of wafers between semiconductor manufacturing process steps.
Generally, wafers are transported through the factory in receptacles called
cassettes. Basic bench top wafer handling equipment extracts a wafer from a
cassette and places it on a horizontal stage where microscope inspection takes
place. More sophisticated bench top equipment facilitates "macro-inspection"
of wafers (i.e., not under a microscope) by placing each wafer on a stage
which tilts and rotates the wafer at all angles under a high intensity lamp to
reveal defects.

  During the wafer fabrication process, wafers are tracked in lots (typically
of 25 wafers) which often need to be broken down into sub-lots in order to fit
into certain process equipment and then returned to the original lots. In
order to accomplish this, wafers are identified by alphanumeric or bar-code
symbols etched into the surface of each wafer. Integrated wafer automation
equipment enables the user to select any wafer from a maximum of 100 wafers
(usually 4 lots of 25), identify it automatically, assign it a new position
among the wafers, extract a given number of wafers from a batch, reorder the
wafers or combine two lots or sublots. These wafer sorting devices then are
able to communicate wafer and system status to an external factory computer
enabling the sorter to function as an automation center under the control of
the central factory automation system. Another type of wafer automation
equipment is an integrated inspection station. Such a module enables the user
to extract a wafer from a cassette, place it on a stage, inspect the wafer
under a microscope using a monitor to view the microscope imaging, identify
defects, collect and analyze data and return the wafer to its cassette for
further processing.

 Key Wafer Automation Equipment Features

  Cleanliness--Semiconductor wafer fabrication is conducted under ultra-clean
conditions; therefore, cleanliness of the equipment which operates in this
environment is important. Aseco achieves cleanliness in its wafer automation
and inspection equipment by covering all moving parts, ensuring that all
moving parts are below the wafer plane and carefully selecting the materials
used to make the equipment.

  As wafer sizes and therefore equipment sizes grow and as cleanliness assumes
greater importance, the cost of producing wafer fabrication cleanrooms will
become prohibitively high. As an alternative, minienvironment technology
offers lower costs in the construction of cleanrooms. Within such
minienvironments, only the air immediately above the equipment where the wafer
resides needs to be clean and this area is isolated by shields from the
general area surrounding the equipment. Wafers are carried from process to
process in sealed boxes which interface with the equipment shield via a "SMIF"
Port (Standard Mechanical Interface). Aseco's entire range of benchtop and
integrated systems are compatible with SMIF technology.

  Safety of Handling--Each wafer processed by a semiconductor manufacturer
requires dozens of costly passes through each manufacturing process and
ultimately yields numerous individual IC's. As a result, safety of handling,
or zero wafer breakage, is of paramount importance to semiconductor
manufacturers. Aseco has achieved safe handling using designs which
incorporate both hardware sensors and software checks.


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  Versatility--An important aspect of Aseco's technology and product range is
the maximum wafer size that it can accommodate. State of the art fabrication
units currently are running 8 inch (200mm) wafers. The next generation wafer
size is expected to be 12 inches. Aseco offers a full range of 6 inch and 8
inch compatible equipment and plans to broaden its product line to accommodate
12-inch wafers in time to take advantage of the construction of fabrication
plants needed to produce 12-inch wafers.

 Wafer Handling and Inspection Products

  The following is a complete list of the Company's wafer handling and
inspection product offerings:

Model AL-1000

  The AL-1000 extracts a wafer from its carrying cassette and places it on a
flat, horizontal stage, usually for microscope inspection. Wafers can be
selected specifically or randomly for quality assurance functions. The
microscope operator is freed from the delicate and potentially damaging task
of manipulating the wafer to concentrate on the inspection task.

Model AV-1000

  The AV-1000 shares the same functions and features of an AL-1000 and has a
built in "macro-inspection" stage, which tilts and rotates the wafer at all
angles ensuring good visibility of all surface features of the wafer. A high
intensity lamp shines on the wafer surface revealing wafer defects.

Model AS-1000

  The AS-1000 is an integrated solution allowing semiconductor wafers to be
automatically identified and sorted using advanced vision processing. Operator
contact is eliminated as wafer movements are completed by a precision robotic
transfer module ensuring clean and safe transfers. The AS-1000 may be fitted
with an optional SMIF minienvironment SubClass 1, which creates a clean
environment surrounding the cassette transport modules.

Model AI-1000

  The AI-1000 is an integrated inspection station that provides fully
automatic detection of surface contamination, damage and process errors and
dimensional tolerance failures on semiconductor wafers. The machine
incorporates an autosizing function for 4 to 8 inch wafers, which speeds set
up and changeover for multi-size fabrication operations. Wafers are pre-
aligned, automatically identified by machine vision and loaded to the
microscope for fine alignment and flaw detection. The machine collects and
stores inspection data for future recall and reference.

 Remanufacturing Services

  The Remanufacturing Services Group provides services such as machine
upgrades, reconditioning and reconfiguration for all of the Company's test
handler models.

 Distribution Agreements

  In November 1997, Aseco entered into a distribution agreement with Rasco
A.G. ("Rasco") pursuant to which Aseco markets and sells Rasco's SO1000 test
handler in the United States, Canada and Taiwan. The SO1000 is a high speed,
multi-site gravity fed test handler especially suited to high volume
semiconductor test floors. It is designed to handle small SOIC, SSOP, TSSOP,
MSOP, and SOT packages in dual as well as quad test site configuration.

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Customers

  Customers for the Company's products are primarily semiconductor
manufacturers, but also include volume purchasers of IC devices and companies
engaged in the business of testing IC devices for others.

  Since its inception, the Company has sold 1,390 test handler systems to
approximately 145 customers in more than 161 worldwide locations. In fiscal
1999, two customers, Analog Devices, Inc., and Motorola accounted for 14% and
13% of net sales, respectively. In fiscal 1998, two customers, Maxim
Integrated Products, Inc and Analog Devices, Inc., accounted for 23% and 16%
of net sales, respectively. In fiscal 1997, one customer, Analog Devices,
Inc., accounted for 17% of net sales.

Sales and Marketing

  The Company markets its products primarily through manufacturers'
representative organizations and, in certain geographic regions, a direct
sales force. As of March 28, 1999, the Company had 15 United States
manufacturers' representatives and 11 international manufacturers'
representatives located in England, Germany, France, Israel, Hong Kong, Italy,
Malaysia, Singapore, Sweden, and Taiwan.

  The Company's sales organization coordinates the activities of the Company's
manufacturers' representatives and actively participates with them in selling
efforts. Aseco provides sales and technical support to its manufacturers'
representatives through the Company's sales and service offices in Marlboro,
Massachusetts, Santa Clara, California, and Singapore. The Company employs a
direct sales force to market and sell test handlers in New England. The
Company's marketing efforts include participation in industry trade shows and
production of product literature. These efforts are designed to generate sales
leads for the Company's manufacturers' representatives.

  To date, the Company's international sales have been primarily to customers
located in the Asia Pacific region (excluding Japan) and Western Europe.
International sales accounted for approximately 39%, 36%, and 52% of the
Company's net sales in fiscal 1999, 1998, and 1997, respectively.

  During fiscal 1999 and 1998 a small percentage of the Company's
international sales were invoiced in foreign currencies and, accordingly, were
subject to fluctuating currency exchange rates. The Company's international
sales are subject to certain risks common to many export activities, such as
governmental regulations, export license requirements and the risk of
imposition of tariffs and other trade barriers.

Backlog

  The Company's backlog, which consists of customer purchase orders which the
Company expects to fill within the next twelve months, was approximately
$1,285,000 as of March 28, 1999 compared to approximately $4,011,000 as of
March 29, 1998. Because all purchase orders are subject to cancellation or
delay by customers with limited or no penalty, the Company's backlog is not
necessarily indicative of future revenues or earnings. The Company typically
ships its test handlers and wafer automation equipment within eight to ten
weeks of receipt of purchase order and its conversion kits and spare parts
within a shorter period.

Customer Service

  The Company believes that strong customer service is important in achieving
its goal of high customer satisfaction. Aseco's customer service organization,
augmented by the Company's engineering personnel, provides product training,
telephone technical support, applications support, maintenance and operations
manuals and on-site service and repair. Such services are provided from the
Company's headquarters in Marlboro, Massachusetts and from one other domestic
and one international field service center, each strategically located near
customers to minimize response time to customer service requests. In addition,
the Company's eleven international manufacturer's representatives maintain
field service centers.

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  The Company warranties its products against defects in material and
workmanship for a period of up to one year. To date, the Company's warranty
claims have not been material. The Company believes its accrual for product
warranties at March 28, 1999 is adequate.

Product Development

  The Company believes that its future success will depend in large part on
its ability to enhance and broaden, with the input of its customers, its
existing product line to meet the evolving needs of the test handler market.
To date, the Company has relied on internal development and two acquisitions
(the TL-50, the forerunner of the S-200, and the Company's wafer automation
and inspection equipment) to extend its product offering. The Company is
continually engaged in improving its current products and expanding the types
of IC devices its test handlers can accommodate and the size of wafers its
wafer automation equipment can manage. In addition, the Company is currently
focused on the continued development of enhancements and features for its
current automation products. As the semiconductor equipment market continues
to develop, the software component of the Company's products plays an
increasingly important role. The Company currently develops all software in-
house and would as needed expand its expertise in this area by hiring
additional personnel.

Manufacturing and Supply

  The Company manufactures its products at its facilities in Marlboro,
Massachusetts. In the second quarter of fiscal 1999, the Company announced a
plan to consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
The Company's manufacturing operations consist of procurement and inspection
of components and subassemblies, assembly and extensive testing of finished
products.

  A significant portion of the components and subassemblies of the Company's
products, including circuit boards, vacuum pumps, optical sensors,
refrigeration units and contactor elements, are manufactured by third parties
on a subcontract basis. Currently all components, subassemblies and parts used
in Aseco's products are available from multiple sources.

  Quality and reliability are emphasized in both the design and manufacture of
the Company's equipment. All components and subassemblies are inspected for
mechanical and electrical defects. Fully assembled products are thoroughly
tested and inspected for conformity to specifications of both Aseco and the
customer. Test handler products are tested at all temperatures and with all
the IC device packages to be accommodated.

Competition

  The test handler and wafer handling and inspection markets are highly
competitive. Aseco competes with a large number of companies ranging from very
small businesses to large companies, many of which have substantially greater
financial, manufacturing, marketing and product development resources than the
Company. Certain of these companies manufacture and sell both testers and test
handlers. The Company's test handlers are compatible with all major testers,
including those manufactured by companies which sell both testers and test
handlers. The large companies in the overall surface mount IC device test
handler market with which the Company competes include Advantest and Cohu. In
general, the particular companies with which the Company competes vary with
the Company's different markets, with no one company dominating the overall
test handler market. The companies with which the Company competes most
directly in the surface mount non-memory IC device test handler market are
companies such as Multitest, JLSI, Aetrium and Micro Component Technology,
Inc.

  The Company's competitors in the wafer handling and inspection market vary
depending upon the type of equipment. The Company's major competitors,
however, in this market are Irvine Optical, Kensington, PST, Cybeq, Leica,
Nikon, Zeiss and JenOptic.


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  The Company competes primarily on the basis of the speed, ease-of-use,
accuracy and other performance characteristics of its products, the breadth of
its product lines, the effectiveness of its sales and distribution channels
and its customer service.

Intellectual Property Rights

  Aseco attempts to protect the proprietary aspects of its products with
patents, copyrights, trade secret laws and internal nondisclosure safeguards.
The Company has several patents covering certain features of the S-200 and the
contactor elements incorporated in certain of its other test handlers. In
addition, the Company has a patent application pending with respect to the
machine vision technology in the VT8000. The source code for all software
contained in the Company's products is protected as a trade secret and as
unpublished copyrighted work. In addition, the Company has entered into
nondisclosure and assignment of invention agreements with each of its key
employees. Despite these restrictions, it may be possible for competitors or
users to copy aspects of the Company's products or to obtain information which
the Company regards as a trade secret.

  Because of the rapid pace of technological changes in the test handler
industry, the Company believes that patent, trade secret and copyright
protection are less significant to its competitive position than factors such
as the knowledge, ability and experience of the Company's personnel, new
product development, frequent product enhancements, name recognition and
ongoing reliable product maintenance and support.

  The Company believes that its products and trademarks and other proprietary
rights do not infringe the proprietary rights of third parties. There can be
no assurance, however, that third parties will not assert infringement claims
in the future.

Employees

  As of March 28, 1999, Aseco had 116 regular employees and 4 contract
employees including 42 in manufacturing, 36 in engineering and product
development, 11 in general administration and finance, 28 in sales and
marketing and 3 in customer service. None of the Company's employees are
represented by a labor union or are subject to a collective bargaining
agreement. The Company has never experienced a work stoppage and believes that
its employee relations are adequate.

ITEM 2. PROPERTIES

  The Company's administrative, manufacturing and product development, and its
principal sales, marketing and field service office is located in Marlboro,
Massachusetts where the Company occupies approximately 61,000 square feet
under a lease that expires in May 2000.

  The Company also leases and occupies approximately 2,900 square feet of
space in Santa Clara, California under a lease that expires in fiscal 2001 and
213 square meters of space in Singapore under a lease that expires in
September 2000. The Company uses these latter two locations for sales and
field service support operations.

  The Company believes its facilities are adequate for all its reasonable
foreseeable requirements.

ITEM 3. LEGAL PROCEEDINGS

  None.

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

  No matters were submitted to a vote of the Company's security holders during
the last quarter of the fiscal year ended March 28, 1999.


                                       9
<PAGE>

                     EXECUTIVE OFFICERS OF THE REGISTRANT

  The following table sets forth the executive officers of the Company, their
ages, present position and principal occupations held for at least the past
five years.

<TABLE>
<CAPTION>
Name                  Age Position
----                  --- --------
<S>                   <C> <C>
Sebastian J.
 Sicari.............   47 President, Chief Executive Officer
Mary R. Barletta....   38 Vice President, Chief Financial Officer, Treasurer
Robert L. Murray....   47 Vice President, Worldwide Customer Support
Robert E. Sandberg..   41 Vice President, Sales
Richard S. Sidell...   56 Vice President and Chief Technologist
Phillip J. Villari..   50 Vice President, Engineering & Manufacturing Operations
</TABLE>

  Mr. Sicari has been President and Chief Executive Officer of the Company
since August 1998. Mr. Sicari served as President and Chief Operating Officer
of the Company from June 1998 until August 1998. Mr. Sicari served as Vice
President, Finance and Administration and Chief Financial Officer of the
Company from December 1985 until June 1998, served as Treasurer of the Company
from July 1988 until August 1998 and has been a Director since 1993.

  Ms. Barletta has been Vice President, Chief Financial Officer of the Company
since June 1998 and Treasurer since August 1998. Ms. Barletta served as Vice
President, Corporate Controller from August 1997 to June 1998 and served as
Corporate Controller since 1993.

  Mr. Murray has been Vice President, Worldwide Customer Support since June
1998. Mr. Murray served as Director of Worldwide Customer Support from
February 1997 until June 1998. From January 1992 to January 1997, Mr. Murray
was Director of Worldwide Support at Optronics, a division of Intergraph, a
manufacturer of laser image setters and scanners.

  Mr. Sandberg has been Vice President, Sales since June 1998. While working
at Aseco, Mr. Sandberg served as Director of WED Worldwide Sales from April
1998 to June 1998, Director of Asian Operations from April 1997 to April 1998,
Far East Sales Manager from April 1996 to April 1997 and Eastern Region Sales
Manager from January 1994 to April 1996. Prior to January 1994, Mr. Sandberg
was Marketing Manager at Symtek Systems, Inc., a manufacturer of automatic
test handlers.

  Dr. Sidell has been Vice President and Chief Technologist since October
1998. From 1996 to 1998, Dr. Sidell was Director of Product Engineering,
Semiconductor Business Unit, Electro Scientific Industries, Inc., a
manufacturer of laser based equipment for circuit fine tuning, memory repair
along with equipment for testing surface mount capacitors. Prior to joining
ESI in 1996, Dr. Sidell was Senior Vice President of Engineering at XRL, Inc.,
a manufacturer of laser-based capital equipment.

  Mr. Villari has been Vice President, Engineering & Manufacturing Operations
since June 1998. Mr. Villari served as Vice President, Manufacturing
Operations from April 1998 until June 1998. From July 1995 to March 1998, Mr.
Villari was Director and General Manager, Semiconductor Business Unit, Electro
Scientific Industries, Inc., a manufacturer of laser based equipment for
circuit fine tuning, memory repair along with equipment for testing surface
mount capacitors. From February 1993 to June 1995 Mr. Villari served as
President and CEO of XRL, Inc. a manufacturer of laser based capital
equipment.

  Executive officers of the Company are elected by the Board of Directors and
serve until their successors have been duly elected and qualified. There are
no family relationships among any of the executive officers or directors of
the Company.

                                      10
<PAGE>

                                    PART II

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

  Aseco Corporation's common stock is traded on the NASDAQ National Market
under the symbol "ASEC." The table below sets forth the high and low sale
prices of the common stock during the two most recent fiscal years:

<TABLE>
<CAPTION>
                                                                       1999
                                                                   -------------
Period                                                              High   Low
------                                                             ------ ------
<S>                                                                <C>    <C>
First Quarter.....................................................  $8.00  $3.66
Second Quarter....................................................   4.31   1.00
Third Quarter.....................................................   2.50    .63
Fourth Quarter....................................................   2.66   1.19

<CAPTION>
                                                                       1998
                                                                   -------------
Period                                                              High   Low
------                                                             ------ ------
<S>                                                                <C>    <C>
First Quarter..................................................... $13.38 $ 8.63
Second Quarter....................................................  19.00  10.63
Third Quarter.....................................................  18.88   8.38
Fourth Quarter....................................................  11.38   7.25
</TABLE>

  On May 28, 1999, the closing price of the Company's common stock was $1.00
per share. On such date there were 3,850,658 shares outstanding held of record
by 109 persons. This number does not include stockholders for whom shares are
held in a "nominee" or "street" name.

  The Company has not paid cash dividends on its common stock and does not
intend to do so in the foreseeable future. The Company's bank line of credit
prohibits the payment of cash dividends without the bank's consent.

                                      11
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                 Year Ended
                              -------------------------------------------------
                              March 28,  March 29, March 30, March 31, April 2,
                                1999       1998      1997      1996      1995
                              ---------  --------- --------- --------- --------
                                   (in thousands, except per share data)
<S>                           <C>        <C>       <C>       <C>       <C>
Statement of Operations Data
Net sales...................  $ 19,218    $44,246   $34,320   $41,569  $29,192
Income (loss) from
 operations.................   (14,320)    (8,411)    2,623     6,397    3,987
Net income (loss)...........   (13,673)    (8,143)    2,288     4,406    3,088
Earnings (loss) per share,
 diluted....................     (3.64)     (2.20)      .62      1.17      .85

Balance Sheet Data
Total assets................  $ 15,324    $33,691   $36,640   $36,681  $29,267
Long term capital lease
 obligations................       --          25        29        42       53
Stockholders' equity........    10,005     23,582    31,113    28,416   22,711
</TABLE>

  In the second quarter of fiscal 1999, the Company announced a plan to
consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States as well as the
discontinuation of several older product models in an effort to focus the
operation's product offerings. (See Note M to the Consolidated Financial
Statements). In conjunction with this plan, the Company recorded a $2.2
million special charge including a $850,000 charge to cost of sales for
inventory write-downs related to product discontinuation and a $1.3 million
restructuring charge. The principal components of the restructuring charge
include $627,000 for a write-down of fixed and other long-term assets no
longer used by the operation, $241,000 for severance related charges, $325,000
for a write-down of goodwill related to the impairment of such assets
indicated using estimated future cash flows, and $65,000 of lease termination
and related costs. As of January 1999, the closure and transfer were
substantially complete, fixed assets were disposed of and severance related
costs were paid.

  In the fourth quarter of fiscal 1999, the Company recorded a special charge
of $6.2 million. The charge reflects the impact of continuing unfavorable
conditions in the semiconductor capital equipment market, a more gradual
recovery than was previously anticipated and expected future technology
changes in this market upon the Company's product line, cost structure and
asset base (See Note M to the Consolidated Financial Statements). Components
of the charge include 1) a $5.0 million charge to cost of goods sold for
write-downs related principally of excess inventory based on revised fiscal
year 2000 and beyond forecasted operating plans; 2) a $351,000 charge to
research and development for the write-down of development equipment no longer
used by the Company as a result of a refocusing of development efforts to
address expected technology changes and; 3) a $854,000 charge to selling,
general and administrative expense including $544,000 related to the write-
down of various assets whose net realizable value was adversely affected based
on revised fiscal year 2000 and beyond forecasted operating plans, $280,000
related to costs associated with the layoff of 13 employees and $30,000
related to the closure of the Company's Malaysian subsidiary.

  Net loss for the year ended March 29, 1998 includes i) $1.8 million of
charges resulting from valuation adjustments for inventory being carried in
excess of normal replacement cost and the discontinuation of certain products,
ii) acquired in process research and development costs totaling $6.1 million,
and the write down of goodwill and other intangible assets totaling $963,000,
related to the Company's 1998 acquisition of WED, and iii) approximately
$500,000 of expenses related to the layoff of 40 employees.

                                      12
<PAGE>

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

 Results of Operation--Fiscal 1999 Versus Fiscal 1998

  Net sales for fiscal 1999 decreased 57% to $19.2 million from $44.2 million
in fiscal 1998. The decrease in net sales resulted from a 69% decrease in
units shipped during fiscal 1999 compared to fiscal 1998 as a result of an
industry wide semiconductor market downturn causing a drop in demand for
semiconductors and semiconductor capital equipment during the latter part of
fiscal 1998 and throughout fiscal 1999.

  As a percentage, international sales increased to 39% of net sales in fiscal
1999 compared to 36% of net sales in fiscal 1998. Approximately 81% of all
international sales were to customers located in the Pacific Rim region.

  As noted above, the Company began experiencing declining bookings and, as a
result, lower net sales in the fourth quarter of fiscal 1998 as a result of
adverse market conditions in the semiconductor industry. The Company expects
that such market conditions will continue into the foreseeable future and as a
result, will continue to unfavorably impact bookings and net sales levels for
some period of time. (See Liquidity and Capital Resources)

  In the second quarter of fiscal 1999, the Company announced a plan to
consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States as well as the
discontinuation of several older product models in an effort to focus the
operation's product offerings. (See Note M to the Consolidated Financial
Statements). In conjunction with this plan, the Company recorded a $2.2
million special charge including a $850,000 charge to cost of sales for
inventory write-downs related to product discontinuation and a $1.3 million
restructuring charge. The principal components of the restructuring charge
include $627,000 for a write-down of fixed and other long-term assets no
longer used by the operation, $241,000 for severance related charges, $325,000
for a write-down of goodwill related to the impairment of such assets
indicated using estimated future cash flows, and $65,000 of lease termination
and related costs. As of January 1999, the closure and transfer were
substantially complete, fixed assets were disposed of and severance related
costs were paid.

  In the fourth quarter of fiscal 1999, the Company recorded a special charge
of $6.2 million. The charge reflects the impact of continuing unfavorable
conditions in the semiconductor capital equipment market, a more gradual
recovery than was previously anticipated and expected future technology
changes in this market upon the Company's product line, cost structure and
asset base (See Note M to the Consolidated Financial Statements). Components
of the charge include 1) a $5.0 million charge to cost of goods sold for
write-downs related principally of excess inventory based on revised fiscal
year 2000 and beyond forecasted operating plans; 2) a $351,000 charge to
research and development for the write-down of development equipment no longer
used by the Company as a result of a refocusing of development efforts to
address expected technology changes and; 3) a $854,000 charge to selling,
general and administrative expense including $544,000 related to the write-
down of various assets whose net realizable value was adversely affected based
on revised fiscal year 2000 and beyond forecasted operating plans, $280,000
related to costs associated with the layoff of 13 employees and $30,000
related to the closure of the Company's Malaysian subsidiary. As of June 1999,
fixed assets deemed no longer useable were put out of service and segregated
for disposal, and all severance related costs were paid.

  Gross profit for fiscal 1999 was $1.4 million, or 7% of net sales, compared
to $17.5 million, or 40% of net sales, in fiscal 1998. The fiscal 1999 decline
in gross profit resulted from a product shipment mix including a larger
component of the Company's lower gross margin products, manufacturing excess
capacity because of lower production levels and special charges of $5.9
million relating to cost of goods sold, described above, recorded during
fiscal 1999.

  Research and development costs decreased 22% to $5.3 million in fiscal 1999
from $6.8 million in fiscal 1998. Fiscal 1999 research and development
expenses included a special charge of $351,000 previously

                                      13
<PAGE>

described. Net of the charge, the decrease in research and development costs
during fiscal 1999 was principally due to decreased headcount.

  Selling, general and administrative expenses decreased 30% to $9.1 million
in fiscal 1999 from $13.0 million in fiscal 1998. Selling, general and
administrative expenses included a special charge of $854,000 in fiscal 1999
previously described and a special charge of $1.5 million in fiscal 1998
described in "Results of Operations--Fiscal 1998 versus Fiscal 1997." Net of
such charges in each year, the decrease in selling, general and administrative
expenses during fiscal 1999 was a result of reductions in headcount and strict
controls over discretionary spending during the year.

  As a result of the above, the Company generated an operating loss of $14.3
million (including $8.4 million of special charges) for fiscal 1999 compared
to an operating loss of $8.4 million (including $9.4 million of special
charges) for fiscal 1998.

  Other income, net consists principally of interest income earned on cash and
cash equivalents and interest expense paid on the Company's outstanding line
of credit balance.

  The Company recorded a tax benefit of $690,000 in fiscal 1999 compared to a
tax benefit of $139,000 in fiscal 1998. No tax benefit was recorded in the
third or fourth quarters of fiscal 1999 because no additional benefits from
operating loss carryback provisions were available to the Company. Furthermore
in fiscal 1999, the Company recorded a valuation allowance for deferred tax
assets, principally representing net operating loss carryforwards and other
deferred tax assets the realization of which the Company does not deem more
likely than not.

  Net loss for fiscal 1999 was $13.7 million, or $3.64 per share, compared to
net loss for fiscal 1998 of $8.1 million, or $2.20 per share.

 Results of Operations--Fiscal 1998 versus Fiscal 1997

  Net sales for fiscal 1998 increased 29% to $44.2 million from $34.3 million
in fiscal 1997. The increase in net sales resulted from a 34% increase in
units shipped during fiscal 1998 compared to fiscal 1997 offset in part by a
decrease in average selling price of equipment resulting from large quantity
order discounts earned by customers during fiscal 1998. Although unit sales
increased in each of the first three quarters of fiscal 1998 from the previous
quarter, unit sales declined 10% in the fourth quarter compared to the third
quarter of fiscal 1998 as a result of a drop in the demand for semiconductors
and semiconductor capital equipment experienced in the fourth quarter.

  International sales declined to 36% of net sales in fiscal 1998 compared to
52% of net sales in the prior fiscal year. International sales, which
represented approximately 46% of sales through the third quarter of fiscal
1998, decreased substantially to 20% of sales in the fourth quarter as orders
from countries in the Far East slowed.

  Gross profit for fiscal 1998 was $17.5 million, or 40% of net sales,
compared to $16.2 million, or 47% of net sales, in fiscal 1997. Fiscal 1998
gross profit was impacted by a special charge, recorded in the fourth quarter,
of $1.8 million, or 4% of net sales, resulting from valuation adjustments for
VT8000 inventory being carried in excess of normal replacement cost, and to a
lesser extent, the discontinuation of certain product lines.

  Excluding the special charge, fiscal 1998 gross profit was $19.3 million, or
44% of net sales, a decrease of 3% from the prior fiscal year gross profit
margin percentage. The decrease in gross margin percentage was a result of
higher than normal discount rates earned by customers on larger quantity
orders shipped during fiscal 1998, a shift in product mix away from older
product lines with higher gross margins and manufacturing excess capacity
experienced in the fourth quarter of fiscal 1998.

                                      14
<PAGE>

  Research and development costs increased approximately 30% to $6.8 million
in fiscal 1998 from $5.2 million in fiscal 1997. Research and development
costs were 15% of sales in both fiscal years. The increase in such spending
resulted from the addition of Western Equipment Developments (Holdings) Ltd.
("WED") in the first quarter of fiscal 1998 (see Note L to the Consolidated
Financial Statements), and the hiring of additional engineering personnel and
procurement of prototype material for continuing development projects.

  Selling, general and administrative expenses increased 56% to $13.0 million
in fiscal 1998 from $8.4 million in fiscal 1997. As a percentage of net sales,
selling, general and administrative expenses increased to 29% of net sales in
fiscal 1998 compared to 24% of net sales in fiscal 1997. Selling, general and
administrative expenses were affected by a special charge of $1.5 million
recorded in the fourth quarter of fiscal 1998. Components of the special
charge were $963,000 related to the writedown of certain intangible assets
associated with the acquisition of WED, as discussed below, and approximately
$500,000 related to costs associated with the layoff of 40 employees.
Excluding the special charge, selling, general and administrative expense for
fiscal 1998 was $11.5 million or 26% of net sales. The balance of the increase
in selling, general and administrative expenses was a result of the addition
of WED in the first quarter of fiscal 1998, increased promotional and trade
show costs related to the VT8000 introduction, increased costs of travel, an
increase to the bad debt reserve to cover potential exposure in accounts
receivable on Far East shipments and costs related to the establishment of a
new sales and service office in Singapore.

  The Company's initial allocation of purchase price at the date of its
acquisition of WED resulted in an estimate of acquired in-process research and
development of $4.9 million, and developed technology, goodwill and other
intangibles totaling $3.0 million. However, during 1998, the Company
determined that certain acquired technology was not as developed as originally
expected, and certain in-process technology would require more time to develop
than originally anticipated. At the end of fiscal 1998, the Company completed
the allocation of the purchase price and estimated the fair values of the
acquired in-process research and development, developed technology, goodwill
and other intangibles using estimated future discounted cash flows. The final
allocation resulted in an additional in-process research and development
charge of $1.2 million recorded in the fourth quarter, resulting in an
aggregrate charge of $6.1 million for fiscal 1998. The acquired in-process
research and development had not yet reached technological feasibility and had
no alternative future use. As of the end of fiscal 1998, the Company estimated
that $1.2 million would be expensed over the next three years in connection
with the completion of acquired research and development. During fiscal 1999
the Company incurred approximately $600,000 related to the completion of these
products. None of the new products was completed or shipped in fiscal 1999;
however, the Company expects that such products will be ready for customer
shipment beginning in fiscal 2000. The Company does not expect to exceed its
original estimate of $1.2 million.

  Since WED incurred operating losses in fiscal 1998 which were not originally
anticipated, the year end assessments for developed technology and related
goodwill indicated that the amounts originally recorded for these assets would
not be recovered and thus were impaired. Therefore, these assets were written
down to their estimated fair values, resulting in a separate fourth quarter
charge of $963,000, which is included in selling, general and administrative
expenses in the accompanying statement of operations.

  As a result of the above, the Company generated an operating loss of $8.4
million for fiscal 1998 (including $9.4 million of fiscal 1998 special
charges) compared to operating income of $2.6 million for fiscal 1997.

  Other income, net consists principally of interest income earned on cash and
cash equivalents which decreased in fiscal 1998 because of the lower average
cash balance maintained during the year after the acquisition of WED.

  The Company recorded a tax benefit of $139,000 in fiscal 1998 compared to a
tax provision of $1.0 million in fiscal 1997. The Company's tax rate was
affected by the inability to offset losses incurred by WED against income
earned in the United States and the write-off of acquired in process research
and development and goodwill associated with the acquisition of WED, both of
which are not deductible for tax purposes. Furthermore, the Company recorded a
valuation allowance principally representing net operating loss carryforwards
and other

                                      15
<PAGE>

deferred tax assets at WED the realization of which the Company does not deem
to be more likely than not. The effective tax rate for fiscal 1997 was 30%.

  Net loss for fiscal 1998 was $8.1 million, or $2.20 per share, compared to
net income for fiscal 1997 of $2.3 million, or $.62 per diluted share.

 Liquidity and Capital Resources

  The Company historically has funded its operations primarily through cash
flows from operations, bank borrowings and the private and public sale of
equity securities. At March 28, 1999, the Company had cash and cash
equivalents of $754,000, net of borrowings, and working capital of
approximately $7.8 million.

  The Company used approximately $3.0 million in cash for operating activities
during fiscal 1999. The primary working capital factors affecting cash from
operations were accounts receivable and accounts payable and accrued expenses.
Accounts receivable decreased approximately $5.1 million as a result of the
decrease in net sales in fiscal 1999 versus fiscal 1998. Accounts payable and
accrued expenses decreased approximately $4.6 million during the fiscal year
as a result of the decrease in business volume in fiscal 1999.

  The Company used approximately $579,000 in cash during fiscal 1999 to fund
the acquisition of capital equipment which included the completion of the
Company's implementation of a new enterprise-wide management information
system and $200,000 to fund internal software development costs.

  The Company generated cash from financing activities in fiscal 1999 of
approximately $118,000 from employee stock purchases under the Company's
employee stock option and stock purchase plans and $475,000 from borrowings
under the Company's working capital line of credit.

  The Company has a revolving line of credit with a bank which expires
November 1, 1999 (the "Line of Credit"). Borrowings under the Line of Credit
were $475,000 and $575,000 at March 28, 1999 and June 27, 1999, respectively.
As of June 27, 1999, maximum availability under the Line of Credit was equal
to the lesser of (i) $1.3 million or (ii) 80% of qualified accounts receivable
(the "Borrowing Base"). Such maximum availability decreases to the lesser of
(i) $350,000 or (ii) the Borrowing Base after the earlier of August 31, 1999
or receipt by the Company of a refund of federal taxes paid by the Company in
respect of fiscal 1998 and prior years, which refund the Company expects will
be approximately $1.3 million. At June 27, 1999, the Borrowing Base was $1.3
million. The Credit Line is secured by all assets of the Company. The credit
agreement establishing the Credit Line prohibits the payment of dividends
without the bank's consent and requires the maintenance of specified debt to
net worth and current ratios. The credit agreement also requires that the
Company maintain a minimum capital base and not incur net losses of more than
a specified amount. As of March 28, 1999, the Company was in default of the
debt to net worth and net loss covenants but has since obtained appropriate
waivers from the bank. The Company is currently refinancing its bank debt and
has received a commitment from another lender to provide a replacement credit
line to the Company. The replacement line of credit will have a two-year term
and will allow for maximum availability of $3.0 million based on a percentage
of qualified accounts receivable and inventory. The line will be secured by
all the assets of the Company and will be subject to certain financial
covenants including specified levels of net worth, and debt to net worth
ratios and limitations on capital expenditures. The replacement line of credit
will accrue interest at a rate of prime plus 1.5%. The bank may alter or
terminate its commitment with respect to the replacement line of credit if
there is any material adverse change in the Company's financial position or
otherwise. However, to the extent that there is a shortfall of funds under the
commitment, management has the ability and intent to adjust the Company's cash
flows to be able to meet operational needs at least through the end of fiscal
2000.

  The Company expects to continue to experience a slowdown in the volume of
business due to adverse market conditions in the semiconductor industry, a
more gradual recovery than was previously anticipated and the effect of
expected future technology changes in this market upon the Company's product
line. As a result, the Company intends to monitor, and further reduce if
necessary, its expenses if projected lower net sales levels continue. Although
the Company anticipates that it will incur losses in future quarters which
will negatively

                                      16
<PAGE>

impact its liquidity position, the Company believes that funds generated from
operations, existing cash balances and available borrowing capacity will be
sufficient to meet the Company's cash requirements for at least the next
twelve months. (See Note E and Note O to the Consolidated Financial
Statements). However, if the Company is unable to meet its operating plan, and
in particular its forecast for product shipments, the Company may require
additional capital. There can be no assurance that if the Company is required
to secure additional capital that such capital will be available on reasonable
terms, if at all, at such time as required by the Company.

  The Company has been notified by The Nasdaq-Amex Group that the Company
currently is not in compliance with the Nasdaq National Market listing
requirement that the market value of the Company's common stock held by the
public be greater than $5,000,000. If the Company is unable to satisfy this
requirement for at least ten consecutive days prior to September 16, 1999, its
common stock will be delisted at the opening of business on September 20,
1999. Although in that event the Company could apply to list its shares with
the Nasdaq SmallCap Market, its delisting from the Nasdaq National Market
could adversely affect the liquidity of the Company's stock. In addition,
delisting from the Nasdaq National Market might negatively impact the
Company's reputation and, as a consequence, its business.

 Year 2000

  Historically, certain computer programs have been written using two digits
rather than four to define the applicable year, which could result in a
computer recognizing a date using "00" as the year 1900 rather than the year
2000. This in turn, could result in major system failures or miscalculations,
and is generally referred to as the "Year 2000 Problem".

  In the second quarter of fiscal 1999, the Company completed its
implementation of a new enterprise-wide management information system that the
vendor has represented is Year 2000 compliant. In addition, the Company has
completed an assessment of other software used by the Company for Year 2000
compliance and has noted no material instances of non-compliance. On an on-
going basis, the Company reviews each of its new hardware and software
purchases to ensure that it is Year 2000 compliant. The Company also has
conducted a review of its product line and has determined that most of the
products it has sold and will continue to sell do not require remediation to
be Year 2000 compliant. This conclusion is based partly on third party
representations that product components, such as personal computers, will be
year 2000 compliant. The Company had no means of ensuring that such suppliers'
components will be Year 2000 compliant.

  The Company is in the process of gathering information about the Year 2000
compliance status of its significant suppliers and customers. Additionally,
the compliance status of the Company's external agents who process vital
Company data such as payroll, employee benefits, and banking information have
been queried for Year 2000 compliance. To date, the Company is not aware of
any such external agent with a Year 2000 issue that would materially impact
the Company's results of operations, liquidity, or capital resources. However,
the Company had no means of ensuring that external agents will be Year 2000
ready.

  To date the Company has incurred approximately $870,000 ($207,000 expensed
and $663,000 capitalized for new systems and equipment) related to all phases
of the Year 2000 compliance initiatives.

  Although the Company does not believe that it will incur any additional
material costs or experience material disruptions in its business associated
with preparing its internal systems for Year 2000 compliance, there can be no
assurances that the Company will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in
the technology used in its internal systems, which is comprised of third party
software and third party hardware that contain embedded software.

  The most reasonably likely worst case scenarios would include (i) corruption
of data contained in the Company's internal information systems relating to,
among other things, manufacturing and customer orders, shipments billing and
collections, (ii) hardware failures, (iii) the failure of infrastructure
services provided by government agencies and other third parties (i.e.,
electricity, phone service, water transport, payroll, employee benefits,
etc.), (iv) warranty and litigation expense associated with third-party
software incorporated into the Company's products that is not Year 2000
compliant, and (v) a decline in sales resulting from disruptions in the
economy generally due to Year 2000 issues.

                                      17
<PAGE>

  The Company has contingency plans for certain critical applications and is
working on such plans for others. These contingency plans involve among other
actions, manual workarounds and adjusting staffing strategies.

  The impact of inflation on the Company's business during the past three
fiscal years has not been significant.

 Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

  This Annual Report on Form 10K contains forward-looking statements relating
to future events or the future financial performance of the Company, including
but not limited to statements contained in Item 1--"BUSINESS" Item 2--
"PROPERTIES" and Item 7--"MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS". Readers are cautioned that such
statements, which may be identified by words including "anticipates,"
"believes," "intends," "estimates," "plans," and other similar expressions,
are only predictions or estimations and are subject to known and unknown risks
and uncertainties, over which the Company has little or no control. In
evaluating such statements, readers should consider the various factors
identified below which could cause actual events, performance or results to
differ materially from those indicated by such statements.

  Liquidity--As of June 27, 1999 the Company had net borrowings of $196,000
and working capital of approximately $7.4 million. As a result of anticipated
continued weakness in the semiconductor market, the Company expects to incur
further losses in future quarters which will negatively impact its liquidity
position. Although the Company believes that funds generated from operations,
existing cash balances and available borrowing will be sufficient to meet the
Company's cash requirements for at least the next twelve months, if the
Company is unable to meet its operating plan, the Company may require
additional capital. There can be no assurance that if the Company is required
to secure additional capital that such capital will be available on reasonable
terms, if at all, at such time as required by the Company.

  Nasdaq National Market Delisting--The Company has been notified by The
Nasdaq-Amex Group that the Company currently is not in compliance with the
Nasdaq National Market listing requirement that the market value of the
Company's common stock held by the public be greater than $5,000,000. If the
Company is unable to satisfy this requirement for at least ten consecutive
days prior to September 16, 1999, its common stock will be delisted at the
opening of business on September 20, 1999. Although in that event the Company
could apply to list its shares with the Nasdaq SmallCap Market, its delisting
from the Nasdaq National Market could adversely affect the liquidity of the
Company's stock. In addition, delisting from the Nasdaq National Market might
negatively impact the Company's reputation and, as a consequence, its
business.

  Semiconductor Market Fluctuations--The semiconductor market has historically
been cyclical and subject to significant economic downturns at various times,
which often have a disproportionate effect on manufacturers of semiconductor
capital equipment. As a result, there can be no assurance that the Company
will not experience material fluctuations in future quarterly or annual
operating results as a result of such a market fluctuation. The semiconductor
industry in recent periods has experienced decreased demand, and it is
uncertain how long these conditions will continue.

  Reliance on Supplier--In November 1997, Aseco entered into a distribution
agreement with Rasco A.G. ("Rasco") pursuant to which Aseco markets and sells
Rasco's SO1000 test handler in the United States, Canada and Taiwan. To
achieve its sales objectives, the Company must rely on Rasco to build and ship
test handlers in accordance with a quarterly schedule. There can be no
assurance that Rasco will be able to consistently meet such a schedule.
Accordingly, the Company's operating results are subject to variability from
quarter to quarter and could be adversely affected for a particular quarter if
shipments of Rasco equipment for that quarter were lower than anticipated.
Additionally, termination of the Rasco relationship with the Company could
adversely affect the Company's financial performance. There can be no
assurance that the Company will be able to maintain its current distribution
arrangement with Rasco.

                                      18
<PAGE>

  Variability in Quarterly Operating Results--During each quarter, the Company
customarily sells a limited number of systems, thus a change in the shipment
of a few systems in a quarter can have a significant impact on results of
operations for a particular quarter. To achieve sales objectives, the Company
must generally obtain orders for systems to be shipped in the same quarter in
which the order is obtained. Moreover, customers may cancel or reschedule
shipments with limited or no penalty, and production difficulties could delay
shipments. Accordingly, the Company's operating results are subject to
significant variability from quarter to quarter and could be adversely
affected for a particular quarter if shipments for that quarter were lower
than anticipated. Moreover, since the Company ships a significant quantity of
products at or near the end of each quarter, the magnitude of fluctuation is
not known until late in or at the end of any given quarter.

  New Product Introductions--The Company's success depends in part on its
continued ability to develop and market new products. There can be no
assurance that the Company will be able to develop and introduce new products
in a timely manner or that such products, if developed, will achieve market
acceptance. Additionally there can be no assurance that the Company will be
able to manufacture such products at profitable levels or in sufficient
quantities to meet customer requirements. The inability of the Company to do
any of the foregoing could have a material adverse effect on the Company's
operating results.

  International Operations--In fiscal 1999, 39% of the Company's net sales
were derived from customers in international markets. The Company is therefore
subject to certain risks common to many export activities, such as
governmental regulations, export license requirements, air transportation
disruptions, freight rates and the risk of imposition of tariffs and other
trade barriers. A portion of the Company's international sales are invoiced in
foreign currencies and, accordingly, are subject to fluctuating currency
exchange rates. As such there can be no assurance that the Company will be
able to protect its position by hedging its exposure to currency exchange rate
fluctuations.

  Competition--The markets for the Company's products are highly competitive.
The Company's competitors include a number of established companies that have
significantly greater financial, technical, manufacturing and marketing
resources than the Company. The Company also competes with a number of smaller
companies. There can be no assurance that the Company will be able to compete
successfully against current and future sources of competition or that the
competitive pressures faced by the Company will not adversely effect its
profitability or financial performance.

  Customer Concentrations--Although the Company has a growing customer base,
from time to time, an individual customer may account for 10% or more of the
Company's quarterly or annual net sales. During the year ended March 28, 1999,
two customers accounted for 14% and 13% of net sales, respectively. The
Company expects that such customer concentration of net sales will continue to
occur from time to time as customers place large quantity orders with the
Company. As a result, the loss of, or significant reduction in purchases by,
any such customer could have an adverse effect on the Company's annual or
quarterly financial results.

  Investments in Research & Development--The Company is currently investing in
specific time-sensitive strategic programs related to the research and
development area which the Company believes is critical to its future ability
to compete effectively in the market. As such, the Company plans to continue
to invest in such programs at a planned rate and not to reduce or limit the
increase in such expenditures until such programs are completed. As a result
there can be no assurance that such expenditures will not adversely affect the
Company's quarterly or annual profitability or financial performance.

  Reliance on Third Party Distribution Channels--The Company markets and sells
its products primarily through third-party manufacturers' representative
organizations which are not under the direct control of the Company. The
Company has limited internal sales personnel. A reduction in the sales efforts
by the Company's current manufacturers' representatives or a termination of
their relationships with the Company could adversely affect the Company's
operations and financial performance. There can be no assurance that the
Company will be able to retain its current manufacturers' representatives or
its distribution channels by selling directly through its sales employees or
enter into arrangements with new manufacturers' representatives.

                                      19
<PAGE>

  Dependence on Key Personnel--The Company's success depends to a significant
extent upon a number of senior management and technical personnel. These
persons are not bound by employment agreements. The loss of the services of a
number of these key persons could have a material adverse effect on the
Company. The Company's future success will depend in large part upon its
ability to attract and retain highly skilled technical, managerial and
marketing personnel. Competition for such personnel in the Company's industry
is intense. There can be no assurance that the Company will continue to be
successful in attracting and retaining the personnel it requires to
successfully develop new and enhanced products and to continue to grow and
operate profitably.

  Dependence on Proprietary Technology--The Company's success is dependent
upon proprietary software and hardware which the Company protects primarily
through patents and restrictions on access to its trade secrets. There can be
no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of its technology or
independent development by others of similar technology. Although the Company
believes that its products and technology do not infringe any existing
proprietary rights of others, the use of patents to protect software and
hardware has increased and there can be no assurance that third parties will
not assert infringement claims against the Company in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

  Market risk represents the risk of loss that may affect the consolidated
financial statements of the Company due to adverse changes in financial market
prices and rates. The Company's market risk exposure is primarily the result
of fluctuations in foreign exchange rates. The Company has not entered into
derivative or hedging transactions to manage risk in connection with such
fluctuations.

  The Company derived approximately 39% of its net sales in fiscal 1999 from
customers based outside of the United States. Certain of the Company's
international sales are denominated in foreign currencies. The price in
dollars of products sold outside the United States in foreign currencies will
vary as the value of the dollar fluctuates against such foreign currencies.
Although the Company's sales denominated in foreign currencies in fiscal 1999
were not material, there can be no assurance that such sales will not be
material in the future and that there will not be increases in the value of
the dollar against such currencies that will reduce the dollar return to the
Company on the sale of its products in such foreign currencies.

                                      20
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

  Consolidated Financial Statements included in Item 8:

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Report of Independent Auditors............................................  22
Consolidated Balance Sheets as of March 28, 1999 and March 29, 1998.......  23
Consolidated Statements of Operations for the years ended March 28, 1999,
 March 29, 1998, and March 30, 1997.......................................  24
Consolidated Statements of Changes in Stockholders' Equity for the years
 ended March 28, 1999, March 29, 1998, and March 30, 1997.................  25
Consolidated Statements of Cash Flows for the years Ended March 28, 1999,
 March 29, 1998, and March 30, 1997.......................................  26
Notes to Consolidated Financial Statements................................  27
</TABLE>

                                       21
<PAGE>

                        Report of Independent Auditors

The Board of Directors and Stockholders
Aseco Corporation

  We have audited the accompanying consolidated balance sheets of Aseco
Corporation as of March 28, 1999 and March 29, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for each of the three years in the period ended March 28, 1999. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and 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 Aseco Corporation at March 28, 1999 and March 29, 1998 and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended March 28, 1999 in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

ERNST & YOUNG LLP

Boston, Massachusetts
May 10, 1999, except for Note O as to which the date is July 9, 1999


                                      22
<PAGE>

                               ASECO CORPORATION

                          Consolidated Balance Sheets
                (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                            March 28, March 29,
                                                              1999      1998
Assets                                                      --------- ---------
<S>                                                         <C>       <C>
Current assets
  Cash and cash equivalents................................  $ 1,229   $ 4,431
  Accounts receivable, less allowance for doubtful accounts
   of $1,027 in 1999 and $781 in 1998......................    4,041     9,140
  Inventories, net.........................................    5,893    11,875
  Prepaid expenses.........................................      370       533
  Income tax receivable....................................    1,351       596
  Deferred taxes...........................................      --      1,603
  Other current assets.....................................      197        29
                                                             -------   -------
    Total current assets...................................   13,081    28,207
Plant and equipment, less accumulated depreciation and am-
 ortization................................................    2,134     4,041
Other assets, net..........................................      109     1,443
                                                             -------   -------
                                                             $15,324   $33,691
                                                             =======   =======
Liabilities and Stockholders' Equity
Current liabilities
  Line of credit...........................................  $   475   $   --
  Accounts payable.........................................    1,964     4,591
  Accrued expenses.........................................    2,868     4,886
  Current portion of capital lease obligations.............       12        13
                                                             -------   -------
    Total current liabilities..............................    5,319     9,490
Deferred taxes payable.....................................      --        594
Long-term capital lease obligations........................      --         25
Stockholders' equity
  Preferred stock, $.01 par value, 1,000,000 shares
   authorized, none issued and outstanding.................      --        --
  Common stock, $.01 par value: 15,000,000 shares autho-
   rized, 3,832,799 and 3,731,718 shares issued and out-
   standing in 1999 and 1998, respectively.................       38        38
Additional paid in capital.................................   18,321    18,203
Retained earnings (accumulated deficit)....................   (8,382)    5,291
Accumulated other comprehensive income:
Foreign currency translation adjustment....................       28        50
                                                             -------   -------
    Total stockholders' equity.............................   10,005    23,582
                                                             -------   -------
                                                             $15,324   $33,691
                                                             =======   =======
</TABLE>

                See notes to consolidated financial statements.

                                       23
<PAGE>

                               ASECO CORPORATION

                     Consolidated Statements of Operations
                (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                       Year Ended
                                              -------------------------------
                                              March 28,  March 29,  March 30,
                                                1999       1998       1997
                                              ---------  ---------  ---------
<S>                                           <C>        <C>        <C>
Net sales.................................... $  19,218  $  44,246  $  34,320
Cost of sales................................    17,856     26,761     18,113
                                              ---------  ---------  ---------
  Gross profit...............................     1,362     17,485     16,207
Research and development costs...............     5,305      6,773      5,227
Selling, general and administrative ex-
 penses......................................     9,077     13,023      8.357
Restructuring charge.........................     1,300        --         --
Acquired in process research and development
 costs.......................................       --       6,100        --
                                              ---------  ---------  ---------
  Income (loss) from operations..............   (14,320)    (8,411)     2,623
Other income (expense):
  Interest income............................        96        309        664
  Interest expense...........................      (146)      (119)        (7)
  Other, net.................................         7        (61)        11
                                              ---------  ---------  ---------
                                                    (43)       129        668
                                              ---------  ---------  ---------
Income (loss) before income taxes............   (14,363)    (8,282)     3,291
Income tax expense (benefit).................      (690)      (139)     1,003
                                              ---------  ---------  ---------
Net income (loss)............................ $ (13,673) $  (8,143) $   2,288
                                              =========  =========  =========
Earnings (loss) per share, basic............. $   (3.64) $   (2.20) $     .63
                                              =========  =========  =========
Shares used to compute earnings (loss) per
 share, basic................................ 3,758,000  3,695,000  3,640,000
Earnings (loss) per share, diluted........... $   (3.64) $   (2.20) $     .62
                                              =========  =========  =========
Shares used to compute earnings (loss) per
 share, diluted.............................. 3,758,000  3,695,000  3,717,000
</TABLE>


                See notes to consolidated financial statements.

                                       24
<PAGE>

                               ASECO CORPORATION

           Consolidated Statements of Changes in Stockholders' Equity
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                   Accumulated
                           Common Stock                Retained       Other
                          --------------- Additional   Earnings   Comprehensive
                                     Par   Paid-in   (Accumulated    Income
                           Shares   Value  Capital     Deficit)     (Expense)    Total
                          --------- ----- ---------- ------------ ------------- -------
<S>                       <C>       <C>   <C>        <C>          <C>           <C>
Balance at March 31,
 1996...................  3,611,501  $36   $17,234     $11,146        $--       $28,416
Issuance of shares under
 stock plans............     53,018    1       344         --          --           345
Tax benefit from
 exercise of stock
 options................        --   --         64         --          --            64
Net income..............        --   --        --        2,288         --         2,288
                                                                                -------
Comprehensive income....        --   --        --          --          --         2,288
                          ---------  ---   -------     -------        ----      -------
Balance at March 30,
 1997...................  3,664,519   37    17,642      13,434         --        31,113
Issuance of shares under
 stock plans............     67,199    1       449         --          --           450
Tax benefit from
 exercise of stock
 options................        --   --        112         --          --           112
Net loss................        --   --        --       (8,143)        --        (8,143)
Foreign currency
 translation
 adjustment.............        --   --        --          --           50           50
                                                                                -------
Comprehensive loss......                                                         (8,093)
                          ---------  ---   -------     -------        ----      -------
Balance at March 29,
 1998...................  3,731,718   38    18,203       5,291          50       23,582
Issuance of shares under
 stock plans............    101,081  --        118         --          --           118
Net loss................        --   --        --      (13,673)        --       (13,673)
Foreign currency
 translation
 adjustment.............        --   --        --          --          (22)         (22)
                                                                                -------
Comprehensive loss......                                                        (13,695)
                          ---------  ---   -------     -------        ----      -------
Balance at March 28,
 1999...................  3,832,799  $38   $18,321     $(8,382)       $ 28      $10,005
                          =========  ===   =======     =======        ====      =======
</TABLE>


                See notes to consolidated financial statements.

                                       25
<PAGE>

                               ASECO CORPORATION

                     Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                                            Year ended
                                                   ------------------------------
                                                   March 28,  March 29, March 30,
                                                     1999       1998      1997
                                                   ---------  --------- ---------
<S>                                                <C>        <C>       <C>
Operating activities:
Net income (loss)................................  $(13,673)   $(8,143)  $ 2,288
Adjustments to reconcile net income (loss) to net
 cash (used in) provided by operating activities:
  Depreciation...................................     1,505      1,238       776
  Amortization...................................       290        484       166
  Deferred taxes.................................     1,009       (471)     (310)
  Lower of cost or market and other inventory
   adjustments...................................     5,600      1,777       --
  Acquired in process research and development
   costs and write down of goodwill and other in-
   tangibles.....................................       763      7,063       --
  Fixed asset write down.........................       476        --        --
  Restructuring charge...........................       774        --        --
Changes in assets and liabilities:
  Accounts receivable............................     5,099        639     3,193
  Inventories, net...............................       544     (4,595)   (2,179)
  Prepaid expenses...............................        73        (33)      (61)
  Accounts payable and accrued expenses..........    (4,645)     1,296    (2,665)
  Income taxes receivable/payable................      (755)      (184)      (91)
  Other current assets...........................      (168)      (469)      (84)
  Other assets, net..............................       140        --          9
                                                   --------    -------   -------
    Total adjustments............................    10,705      6,745    (1,246)
                                                   --------    -------   -------
    Cash (used in) provided by operating
     activities..................................    (2,968)    (1,398)    1,042
Investing activities:
  Acquisition, net of cash acquired..............       --      (6,079)      --
  Acquisition of machinery and equipment.........      (579)    (1,768)     (992)
  Proceeds from sale of machinery and equipment..       --          17       --
  Increase in software development costs.........      (200)      (383)     (243)
                                                   --------    -------   -------
    Cash used in investing activities............      (779)    (8,213)   (1,235)
Financing activities:
  Loan to officer................................       --         --       (140)
  Net proceeds from issuance of common stock.....       118        450       345
  Increase (reduction) of working line of
   credit........................................       475       (477)      --
  Reductions of capital lease obligations........       (26)       (15)      (13)
                                                   --------    -------   -------
    Cash (used in) provided by financing
     activities..................................       567        (42)      192
    Effect of exchange rate changes..............       (22)         2       --
                                                   --------    -------   -------
    Net decrease in cash and cash equivalents....    (3,202)    (9,651)       (1)
Cash and cash equivalents at the beginning of the
 year............................................     4,431     14,082    14,083
                                                   --------    -------   -------
Cash and cash equivalents at the end of the
 year............................................  $  1,229    $ 4,431   $14,082
                                                   ========    =======   =======
</TABLE>

                 See notes to consolidated financial statements

                                       26
<PAGE>

                               ASECO CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     (All tabular amounts in thousands except share and per share amounts)

Note A--Nature of Business

  Aseco (the "Company") designs, manufactures and markets test handlers used
to automate the testing of integrated circuits in surface mount packages.
Aseco provides high quality, versatile test handlers designed to maximize the
productivity of the significantly more costly testers with which they operate.
Aseco also design, manufactures and markets integrated circuit wafer handling
and inspection systems. These systems are used to load, sort and transport
wafers during both manual and automatic inspection as well as other wafer
processing steps in the semiconductor manufacturing process. The Company
markets its products principally in North America, the Asia Pacific region and
Western Europe and sells its products principally to integrated circuit
manufacturers.

  The Company expects to continue to experience a slowdown in the volume of
business due to adverse market conditions in the semiconductor industry, a
more gradual recovery than was previously anticipated and the effect of
expected future technology changes in this market upon the Company's product
line. As a result, the Company intends to monitor, and further reduce if
necessary, its expenses if projected lower net sales levels continue. Although
the Company anticipates that it will incur losses in future quarters which
will negatively impact its liquidity position, the Company believes that funds
generated from operations, existing cash balances and available borrowing
capacity will be sufficient to meet the Company's cash requirements for at
least the next twelve months. (See Note E and Note O to the Consolidated
Financial Statements). However, if the Company is unable to meet its operating
plan, and in particular its forecast for product shipments, the Company may
require additional capital. There can be no assurance that if the Company is
required to secure additional capital that such capital will be available on
reasonable terms, if at all, at such time as required by the Company.

Note B--Summary of Significant Accounting Policies

  Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All
intercompany balances and transactions are eliminated.

  Use of Estimates: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.

  Cash and Cash Equivalents: The Company considers all highly liquid
investments with maturities of three months or less at the time of purchase to
be cash equivalents.

  The Company invests its excess cash in high quality commercial paper (No
such amounts at March 28, 1999 and March 29, 1998) and money market funds (No
such amounts at March 28, 1999 and $885,000 at March 29, 1998), all of which
are cash equivalents as of fiscal year end. Management determines the
appropriate classification of these investments at the time of purchase as
either held-to-maturity, available-for-sale or trading and re-evaluates such
designation at each balance sheet date. Given the short-term nature of the
Company's investments and their availability for use in the Company's current
operations, these amounts are considered to be available-for-sale.

  Available-for-sale securities are carried at fair market value and
unrealized gains or losses are reported as a separate component of
stockholders' equity. At March 29, 1998, the cost of the Company's investments
in cash equivalents approximated their fair market value.


                                      27
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Inventories: Inventories are stated at the lower of cost or market, using
the first-in, first-out method to determine cost.

  Plant and Equipment: Plant and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
applicable assets which are generally three to seven years. Leasehold
improvements and equipment under capital leases are being amortized over the
lives of the leases. To determine if the value of plant and equipment is
impaired, the Company uses estimated future cash flows as the method for
estimating the related write-down. Assets no longer used are written down to
salvage value at the time of retirement.

  Intangible Assets and Goodwill: The Company has certain intangible assets
including software development costs, developed technology and goodwill. The
Company amortizes these assets over their estimated useful lives as follows:

<TABLE>
   <S>                                                                  <C>
   Software development costs..........................................  3 years
   Developed technology, goodwill and others........................... 15 years
</TABLE>

  Accumulated amortization associated with these assets was $1,891,000 and
$1,760,000 at March 28, 1999 and March 29, 1998, respectively. In determining
the value of impaired goodwill, the Company has adopted the use of estimated
future discounted cash flows as the method for estimating the related write-
down.

  Warranty Costs: Estimated warranty costs are accrued upon shipment of
product.

  Revenue Recognition: Revenue is recognized generally upon shipment of
product, and when special contractual criteria apply, upon acceptance.

  Earnings Per Share: Basic earnings (loss) per common share is based on the
weighted average common shares outstanding. Diluted earnings (loss) per share
includes the dilutive effects of options, warrants, and convertible
securities. There was no effect of dilutive stock options on the total shares
used to compute diluted earnings (loss) per share in fiscal 1999 and fiscal
1998. The effect of dilutive stock options on the total shares used to compute
diluted earnings (loss) per share was 77,000 in fiscal 1997.

  Stock Based Compensation: The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related interpretations in accounting for its stock-based
compensation plans, rather than the alternative fair value accounting provided
for under Financial Accounting Standards Board Statement No. 123, "Accounting
for Stock-Based Compensation." Under ABP 25, for those options granted in
which the exercise price equals or exceeds the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

  Recent Accounting Pronouncements: In the first quarter of fiscal 1999, the
Company adopted Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" (SFAS 130) which establishes standards for reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements. Under this standard, certain revenues, expenses,
gains and losses recognized during the period are included in comprehensive
income, regardless of whether they are considered to be results of operations
of the period. The adoption of this standard had no material impact on the
Company's financial position.

  In the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards No. 131 "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131) which establishes

                                      28
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

standards for the way that public companies report selected information about
operating segments in annual financial statements and requires that those
companies report selected information about operating segments in interim
financial reports to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.

  The Company has not yet adopted Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133) which is required to be adopted in fiscal 2000. Adoption of this standard
is not expected to have a material impact on the Company's financial position
or results of operations.

  Reclassification: Certain prior years' amounts have been reclassified to
conform to the current years' presentation.

Note C--Inventories, net

  Net inventories consisted of the following:

<TABLE>
<CAPTION>
                                                             March 28, March 29,
                                                               1999      1998
                                                             --------- ---------
                                                               (In thousands )
   <S>                                                       <C>       <C>
   Raw materials............................................  $1,966    $ 5,612
   Work in process..........................................   3,441      4,712
   Finished goods...........................................     486      1,551
                                                              ------    -------
                                                              $5,893    $11,875
                                                              ======    =======
</TABLE>

Note D--Plant and Equipment

  Plant and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                             March 28, March 29,
                                                               1999      1998
                                                             --------- ---------
                                                               (In thousands)
   <S>                                                       <C>       <C>
   Machinery and equipment..................................  $3,076    $4,365
   Office furniture and equipment...........................   3,398     3,602
   Property under capital lease.............................     578       578
   Leasehold improvements...................................     289       251
                                                              ------    ------
                                                               7,341     8,796
   Less accumulated depreciation and amortization...........   5,207     4,755
                                                              ------    ------
                                                              $2,134    $4,041
                                                              ======    ======
</TABLE>

  During the year ended March 28, 1999 and March 29, 1998, the Company
transferred approximately $108,000 and $790,000, respectively of equipment
from inventory to fixed assets for use as manufacturing test equipment.

Note E--Indebtedness

  The Company has a $5.0 million revolving credit line with a bank, which
expires on September 1, 1999 (See Note O to the Consolidated Financial
Statements). At March 28, 1999, borrowings under such credit line were
$475,000 and an additional $1.9 million was available for borrowing. The
revolving credit line is secured

                                      29
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

by all assets of the Company. The credit agreement establishing this line of
credit prohibits the payment of dividends without the bank's consent and
requires maintenance of specified debt to net worth and current ratios. The
credit agreement also requires that the Company maintain a minimum capital
base and not incur net losses of more than a specified amount. As of March 28,
1999, the Company was in default of the net worth and net income covenants
(See Note O to the Consolidated Financial Statements). Borrowings bear
interest at the bank's prime rate plus 1.5%, which was 9.25% at March 28,
1999. There was no borrowing outstanding as of March 29, 1998.

  Cash payments of interest were approximately $146,000, 119,000, and $7,000,
for the years ended March 28, 1999, March 29, 1998, and March 30, 1997
respectively.

Note F--Leases

  The Company leases a building in Marlboro, Massachusetts for its corporate
and manufacturing activities. The Company also leases sales offices in Santa
Clara, California and Singapore.

  The operating lease for the Massachusetts facility expires in the year 2000,
subject to the Company's option to extend the term for an additional three-
year period. Rent expense for this lease is approximately $350,000 per year.
In addition, the lease is subject to escalation for increases in operating
expenses and real estate taxes.

  The Company also leases equipment under capital and non-cancelable operating
leases expiring through the year 2001.

  The following is a schedule of required minimum lease payments under
operating leases at March 28, 1999:

<TABLE>
<CAPTION>
                                                                    Operating
                                                                      Leases
                                                                  --------------
                                                                  (In thousands)
     <S>                                                          <C>
     2000........................................................      $517
     2001........................................................        72
                                                                       ----
     Total minimum lease payments................................      $589
                                                                       ====
</TABLE>

  Total rent expense for the years ended March 28, 1999, March 29, 1998, and
March 30, 1997 was approximately $480,000, $510,000, and $372,000,
respectively.

Note G--Stockholders' Equity

  The Board of Directors may, at its discretion, designate one or more series
of preferred stock and establish the voting, dividend, liquidation, and other
rights and preferences of the shares of each series, and provide for the
issuance of shares of any series. At March 28, 1999, no shares of preferred
stock were outstanding.

Note H--Stock Plans and Employee Benefits

  Omnibus Stock Plan: The Company's 1993 Omnibus Stock Plan ( the "Omnibus
Plan") is administered by the Compensation Committee of the Board of Directors
and provides for the issuance of up to 1,230,000 shares of common stock
pursuant to the exercise of options or in connection with awards or direct
purchases of stock. Options granted under the Omnibus Plan may be either
incentive stock options or non-qualified stock options. Incentive stock
options may only be granted under the Omnibus Plan to employees and officers
of the Company. Non-qualified stock options may be granted to, awards of stock
may be made to, and direct purchases of stock may be made by, employees,
officers, consultants or directors of the Company. The terms of the awards or
grants, including the number of shares, the duration and rate of exercise of
each option, the option price per share, and the determination of any
restrictions to be placed on the grants or awards, are determined by the
Compensation Committee of the Board of Directors.

                                      30
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Non-Employee Director Stock Option Plan: The Company's 1993 Non-Employee
Director Stock Option Plan (the "Director Plan") provides for the grant of
non-qualified stock options to non-employee directors of the Company for the
purchase of up to an aggregate of 165,000 shares of common stock. Under the
Director Plan, each non-employee director is entitled to receive, when first
elected to serve as a director, an option to purchase 15,000 shares. In
addition, each non-employee director is entitled to receive on April 30 of
each year an option to purchase 2,500 shares. The exercise price of the
options is equal to the fair market value of the underlying common stock on
the date of grant. Options granted under the plan may only be exercised with
respect to vested shares. One-half of the shares subject to such options vest
on the first anniversary of the date of the grant and the balance vest on the
second anniversary of the grant.

  The following is a summary of activity with respect to the Company's stock
option plans:

<TABLE>
<CAPTION>
                                                                     Weighted
                                                                     Average
                                                       Options    Exercise Price
                                                      ----------  --------------
   <S>                                                <C>         <C>
   Outstanding at March 31, 1996.....................    744,500      $13.30
     Granted.........................................    458,000       10.37
     Exercised.......................................    (33,400)       5.67
     Canceled........................................   (449,000)      17.72
                                                      ----------      ------
   Outstanding at March 30, 1997.....................    720,100        8.91
     Granted.........................................    317,500        9.92
     Exercised.......................................    (38,600)       6.16
     Canceled........................................   (130,200)      10.11
                                                      ----------      ------
   Outstanding at March 29, 1998.....................    868,800        9.33
     Granted.........................................  1,063,800        1.57
     Exercised.......................................     (3,600)        .72
     Canceled........................................ (1,115,000)       7.64
                                                      ----------      ------
   Outstanding at March 28, 1999.....................    814,000      $ 1.47
                                                      ==========      ======
</TABLE>

  As of March 28, 1999, March 29, 1998, and March 30, 1997, there were
outstanding options exercisable for approximately 473,000, 538,000, and
430,000, respectively. As of March 28, 1999, shares available for future grant
were 91,000 shares in the Director Plan and 360,000 shares in the Omnibus
Plan.

  The range of exercises prices for options outstanding at March 28, 1999 was
$.29-$13.44. The range of exercise prices is wide due to the inclusion of
options granted at a lower fair market value in years preceding the Company's
initial public offering in March 1993.

  In fiscal 1997, 391,000 options outstanding under the Company's 1993 Omnibus
Stock Plan having an exercise price of $18.69 per share were cancelled and
290,250 new shares were issued at a price of $10.38 per share representing the
fair value on the date of issuance. All other terms of these options,
including the vesting period associated with each option remained the same.

  In fiscal 1999, 915,000 options outstanding under the Company's 1993 Omnibus
Stock Plan having exercise prices ranging from $3.16 to $18.69 per share were
cancelled and 595,000 new shares were issued at a price of $.75 per share
representing the fair value on the date of issuance. All other terms of these
options, including the vesting period associated with each option remained the
same.


                                      31
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  The following table summarizes information about options outstanding at
March 28, 1999:

<TABLE>
<CAPTION>
                                 Weighted             Weighted Weighted Average
      Range of         Options   Average    Options   Average     Remaining
   Exercise Prices   Outstanding  Price   Exercisable  Price   Contractual Life
   ---------------   ----------- -------- ----------- -------- ----------------
   <S>               <C>         <C>      <C>         <C>      <C>
      $.29-$.75        750,000    $  .75    420,000    $  .75      8 Years
     $5.38-$8.98        20,000    $ 7.34      9,000    $ 7.31      8 Years
    $10.63-$13.44       44,000    $11.09     44,000    $11.09      7 Years
                       -------              -------
                       814,000              473,000
</TABLE>

  Employee Stock Purchase Plan: The Company's Employee Stock Purchase Plan
(the "Purchase Plan") is administered by the Board of Directors or by its
designee (the "Administrator") and entitles employees of the Company to
purchase shares of the Company's common stock through payroll deductions over
offering periods specified by the Administrator. Shares may be purchased at a
price equal to the lesser of 85% of the fair market value of the common stock
on the first day of the offering period, or 85% of the fair market value of
the common stock on the last day of the offering period. A total of 150,000
shares have been reserved for issuance under the Purchase Plan. During fiscal
1999 and 1998, a total of approximately 93,000 and 28,600 shares of common
stock, respectively, were issued under this plan. As of March 28, 1999, there
were no further shares available for grant under this Plan; however, on March
15, 1999 the Board of Directors approved an increase in the number of shares
issuable under the Purchase Plan from 150,000 to 300,000, subject to
subsequent shareholder approval.

  Disclosure of pro forma information regarding net income and earnings per
share is required by FASB Statement No. 123 "Accounting for Stock-Based
Compensation", and has been determined as if the Company had accounted for its
employee stock plans under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for fiscal years 1999, 1998 and 1997, respectively: risk-free interest rates
of 4.49%, 6.28% and 4.73%; dividend yields of 0% in all years; volatility
factors of the expected market price of the Company's common stock of 1.07,
 .475 and .485; and a weighted-average expected life of the options of 3.3,
3.6, and 3.0 years.

  The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

  The weighted average grant date fair value of options granted during fiscal
1999, 1998, and 1997 was $1.15, $4.34 and $4.12, respectively. The weighted
average grant date fair value of options associated with the Company's
Employee Stock Purchase Plan for fiscal 1999, 1998, and 1997 was $.56, $1.17,
and $1.47 respectively.

  For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                  March 28,  March 29, March 30,
                                                    1999       1998      1997
                                                  ---------  --------- ---------
                                                         (In thousands)
   <S>                                            <C>        <C>       <C>
   Pro forma net income/(loss)................... $(14,460)   $(9,165)  $1,633
   Pro forma earnings (loss) per share........... $  (3.85)   $ (2.48)  $  .44
</TABLE>

                                      32
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Savings Plan: Under the Company's Savings Plan (the "401(k) Plan"), eligible
employees are permitted to make pre-tax contributions up to 15% of their
salary, subject to certain limitations imposed by Section 401(k) of the
Internal Revenue Code. In addition, employees may contribute up to 10% of
their salary to the 401(k) Plan on an after tax basis. The Company may, but is
not required to, contribute for the benefit of the employees of the Company an
amount determined each year by the Company. For the years ended March 29,
1998, and March 30, 1997, the Company contributed approximately $131,000, and
$110,000, respectively to the 401(k) Plan. No Company contribution was made
for the year ended March 28, 1999.

  Stockholder Rights Plan: On August 15, 1996, the Board of Directors adopted
a Stockholder Rights Plan. Pursuant to the Stockholder Rights Plan, each share
of common stock has an associated right. Under certain circumstances, each
right entitles the holder to purchase from the Company one one-thousandth of a
share of junior preferred stock at an exercise price of $55.00 per one one-
thousandth of a share, subject to adjustment.

  The rights are not exercisable and cannot be transferred separately from the
common stock until ten days after a person acquires or obtains the right to
acquire 15% or more or makes a tender offer for 30% or more of the Company's
common stock. Upon exercise, each right will entitle the holder to purchase,
in lieu of preferred stock, at the right exercise price, common stock having a
value of two times the exercise price of the right. In addition, if the
Company is either (i) acquired in a merger or other business combination in
which the Company is not the surviving entity, or (ii) sells or transfers 50%
or more of its assets or earning power to another party, each right will
entitle its holder to purchase, upon exercise, common stock of the acquiring
Company having a value equal to two times the exercise price of the right.

  The rights have certain anti-takeover effects, in that they would cause
substantial dilution to a person or group that attempts to acquire a
significant interest in the Company on terms not approved by the Board of
Directors. The rights expire on August 15, 2006 but may be redeemed by the
Company for $.01 per right at any time prior to the tenth day following a
person's acquisition of 15% or more of the Company's common stock. So long as
the rights are not separately transferable, the Company will issue one right
with each new share of common stock issued.

                                      33
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note I--Income Taxes

  Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of March 28, 1999 and
March 29, 1998 are as follows:

<TABLE>
<CAPTION>
                                                   Total   Current  Non-current
                                                   ------  -------  -----------
                                                         (In thousands)
   <S>                                             <C>     <C>      <C>
   1999
   Deferred tax liabilities:
     Tax over book depreciation................... $ (263)    --       $(263)
     Capitalized software.........................    (42)    --         (42)
     Capital vs. operating lease..................    (65) $  (65)       --
     Other........................................    (32)    (32)       --
                                                   ------  ------      -----
   Total deferred tax liabilities.................   (402)    (97)      (305)
   Deferred tax assets:
     Asset valuation allowances...................  3,390   3,390        --
     Net operating loss carryforwards.............  1,060     --       1,060
     Product warranty.............................     59      59        --
     Other........................................    328     328        --
                                                   ------  ------      -----
   Total deferred tax assets......................  4,837   3,777      1,060
   Valuation allowance for deferred tax assets.... (4,435) (3,680)      (755)
                                                   ------  ------      -----
   Net deferred tax assets........................    402      97        305
                                                   ------  ------      -----
   Net deferred tax assets (liabilities).......... $  --   $  --       $ --
                                                   ======  ======      =====

<CAPTION>
                                                   Total   Current  Non-current
                                                   ------  -------  -----------
                                                         (In thousands)
   <S>                                             <C>     <C>      <C>
   1998
   Deferred tax liabilities:
     Tax over book depreciation................... $ (398)    --       $(398)
     Capitalized software.........................   (196)    --        (196)
     Capital vs. operating lease..................    (78) $  (78)       --
     Other........................................    (32)    (32)       --
                                                   ------  ------      -----
   Total deferred tax liabilities.................   (704)   (110)      (594)
   Deferred tax assets:
     Asset valuation allowances...................  1,384   1,384        --
     Product warranty.............................    152     152        --
     Net operating loss carryforwards.............    571     --         571
     Other........................................    368     291         77
                                                   ------  ------      -----
   Total deferred tax assets......................  2,475   1,827        648
   Valuation allowance for deferred tax assets....   (762)   (114)      (648)
                                                   ------  ------      -----
   Net deferred tax assets........................  1,713   1,713        --
                                                   ------  ------      -----
   Net deferred tax assets (liabilities).......... $1,009  $1,603      $(594)
                                                   ======  ======      =====
</TABLE>

                                      34
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Significant components of the provision (benefit) for income taxes are as
follows:

<TABLE>
<CAPTION>
                                                            Year ended
                                                   -----------------------------
                                                   March 28, March 29, March 30,
                                                     1999      1998      1997
                                                   --------- --------- ---------
                                                          (In thousands)
<S>                                                <C>       <C>       <C>
Current federal tax...............................  $(1,699)   $ 318    $1,211
Current state tax.................................      --        14       102
Deferred federal tax..............................      827     (451)     (258)
Deferred state tax................................      182      (20)      (52)
                                                    -------    -----    ------
                                                    $  (690)   $(139)   $1,003
                                                    =======    =====    ======
</TABLE>

  The reconciliation of income tax computed at the U.S. federal statutory rate
to income tax expense is as follows:

<TABLE>
<CAPTION>
                                                           Year ended
                                                  -----------------------------
                                                  March 28, March 29, March 30,
                                                    1999      1998      1997
                                                  --------- --------- ---------
<S>                                               <C>       <C>       <C>
Tax at U.S. statutory rates......................   (34.0)%   (34.0)%   34.0 %
State income taxes, net of federal benefit.......     --        --       3.1
Foreign sales corporation........................     --       (1.6)%   (3.7)
Tax credits......................................     --        (.8)%   (4.9)
Acquired in-process research and development.....     --       25.0 %    --
Non deductible goodwill and other intangibles....     --        4.6 %    --
Unbenefitted foreign net operating loss..........     --        4.8 %    --
Unbenefitted domestic net operating loss.........     7.4 %     --       --
Unbenefitted asset valuation reserve.............    18.2 %     --       --
Forfeited foreign net operating losses...........     2.9 %     --       --
Goodwill amortization............................               1.5 %
Other, net.......................................    (0.7)%      .3 %    2.0
                                                    -----     -----     ----
                                                     (4.8)%    (1.7)%   30.5 %
                                                    =====     =====     ====
</TABLE>

  During the year ended March 29, 1998 the Company recorded a tax benefit of
approximately $112,000 related to the exercise of non-qualified stock options
which amounts have been credited to additional paid-in capital.

  Income taxes paid in the years ended March 28, 1999, March 29, 1998, and
March 30, 1997, were $110,000, $827,000, and $1,404,000, respectively.

  The Company has domestic net operating loss carryforwards of approximately
$6,400,000 which will begin to expire in fiscal year 2019. In addition, the
Company has approximately $1,150,000 of net operating losses, which will
continue indefinitely. During the year, the net operating loss carryforward
related to its UK subsidiary expired as a result of the shut down of the
operations.

                                      35
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note J--Accrued Expenses

  Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                             March 28, March 29,
                                                               1999      1998
                                                             --------- ---------
                                                               (In thousands)
   <S>                                                       <C>       <C>
   Accrued commissions......................................  $  756    $1,199
   Accrued compensation and benefits........................     853     1,215
   Accrued warranty.........................................     245       823
   Other....................................................   1,014     1,649
                                                              ------    ------
                                                              $2,868    $4,886
                                                              ======    ======
</TABLE>

  As of March 28, 1999 the Company accrued approximately $300,000 related to
costs associated with the layoff of 13 employees and the shutdown of the
Company's Malaysian subsidiary, which are included in selling, general and
administrative expenses in the accompanying Statement of Operations.

  As of March 29, 1998 the Company accrued approximately $500,000 related to
costs associated with the layoff of 40 employees, which are included in
selling, general and administrative expense in the accompanying Statement of
Operations.

Note K--Segment, Geographic, Customer Information and Concentration of Credit
Risk

  The Company designs, manufactures and markets semiconductor automation
equipment and has one reportable operating segment based on the consolidated
operating results of the Company. Net sales from customers attributed to the
United States and other geographic areas are as follows:

<TABLE>
<CAPTION>
                                                            Year ended
                                                   -----------------------------
                                                   March 28, March 29, March 30,
                                                     1999      1998      1997
                                                   --------- --------- ---------
                                                          (In thousands)
   <S>                                             <C>       <C>       <C>
   United States..................................  $11,742   $28,147   $16,495
   Taiwan.........................................    2,491     4,454     6,841
   Pacific Rim....................................    3,601     8,640     7,944
   Europe.........................................      902     2,697     2,512
   Other..........................................      482       308       528
                                                    -------   -------   -------
                                                    $19,218   $44,246   $34,320
                                                    =======   =======   =======
</TABLE>

  The Company does not hold a material amount of long-lived assets outside of
the United States.

  The Company sells its products principally to integrated circuit
manufacturers. The Company performs periodic credit evaluations of its
customers' financial condition. The Company's accounts receivable included
balances owed by one customer which represented 18% of total trade accounts
receivable as of March 28, 1999, and two customers which represented 16% and
26% of total trade accounts receivable as of March 29, 1998.

  Two customers accounted for 14% and 13% of net sales for the year ended
March 28, 1999. Two customers accounted for 23% and 16% of net sales for the
year ended March 29, 1998. One customer accounted for 17% of net sales for the
year ended March 30, 1997.


                                      36
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note L--Acquisition

  On May 23, 1997, the Company acquired 100% of the outstanding stock of
Western Equipment Developments (Holdings) Ltd. ("WED"), located in Plymouth,
England, for approximately $6,100,000 in cash. WED designs, manufacturers and
markets integrated circuit wafer handling robot and inspection systems used to
load, sort, transport and inspect wafers during the semiconductor
manufacturing process. The acquisition was accounted for as a purchase and
accordingly, the results of operations of the acquired business have been
included in the Company's consolidated financial statements commencing May 23,
1997.

  The purchase price was allocated to the tangible and intangible assets
acquired and liabilities assumed based on their estimated fair values.
Intangible assets acquired consisting of developed technology, and acquired
in-process research and development were valued using risk adjusted cash flow
models under which estimated future cash flows were discounted taking into
account risks related to existing and future target markets and to the
completion of the products expected to be ultimately marketed by the Company,
and assessments of the life expectancy of the underlying technology. The
Company's initial allocation of purchase price at the date of the acquisition
resulted in an estimate of acquired in-process research and development of
$4,900,000 and developed technology, goodwill and other intangibles totaling
$3,005,000.

  However, during fiscal 1998 the Company determined that certain acquired
technology was not as developed as originally expected, and certain in-process
technology would require more time to develop than originally anticipated. At
the end of fiscal 1998, the Company completed the allocation of the purchase
price and estimated the fair values of the acquired in-process research and
development, developed technology, goodwill and other intangibles using
estimated future discounted cash flows. The final allocation resulted in an
additional in-process research and development charge of $1,200,000 recorded
in the fourth quarter, resulting in an aggregate year to date charge of
$6,100,000. Since WED incurred operating losses in fiscal 1998 which were not
originally anticipated, the year end assessments for developed technology and
related goodwill indicated that the amounts originally recorded for these
assets would not be recovered and thus were impaired. Therefore, these assets
were written down to their estimated fair values, resulting in a separate
fourth quarter charge of $963,000, which is included in Selling, General and
Administrative expenses in the accompanying statement of operations.

  The following table summarized the unaudited pro-forma consolidated results
of operations as if the acquisition had been made at the beginning of each of
the periods presented.

<TABLE>
<CAPTION>
                                                            March 29, March 30,
                                                              1998      1997
                                                            --------- ---------
                                                              (In thousands)
   <S>                                                      <C>       <C>
   Net sales...............................................  $45,274   $39,303
   Net loss................................................   (9,519)   (4,878)
   Earnings (loss) per share...............................  $ (2.58)  $ (1.31)
</TABLE>

Note M--Restructuring and Other Charges

  In the second quarter of fiscal 1999, the Company announced a plan to
consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States as well as the
discontinuation of several older product models in an effort to focus the
operation's product offerings. In conjunction with this plan, the Company
recorded a $2.2 million special charge including a $850,000 charge to cost of
sales for inventory write-downs related to product discontinuation and a $1.3
million restructuring charge. The principal components of the restructuring
charge include $627,000 for a write-down of fixed and other long-term assets
no longer used by the operation, $241,000 for severance related charges,
$325,000 for a write-down of goodwill related to the impairment of such assets
indicated using estimated future cash flows, and $65,000 of lease termination
and

                                      37
<PAGE>

                               ASECO CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

related costs. As of January 1999, the closure and transfer were substantially
complete, fixed assets were disposed of and severance related costs were paid.

  In the fourth quarter of fiscal 1999, the Company recorded a special charge
of $6.2 million. The charge reflects the impact of continuing unfavorable
conditions in the semiconductor capital equipment market, a more gradual
recovery than was previously anticipated and expected future technology
changes in this market upon the Company's product line, cost structure and
asset base. Components of the charge include 1) a $5.0 million charge to cost
of goods sold for write-downs related principally of excess inventory based on
revised fiscal year 2000 and beyond forecasted operating plans; 2) a $351,000
charge to research and development for the write-down of development equipment
no longer used by the Company as a result of a refocusing of development
efforts to address expected technology changes and; 3) a $854,000 charge to
selling, general and administrative expense including $544,000 related to the
write-down of various assets whose net realizable value was adversely affected
based on revised fiscal year 2000 and beyond forecasted operating plans,
$280,000 related to costs associated with the layoff of 13 employees and
$30,000 related to the closure of the Company's Malaysian subsidiary.

Note N--Related Party Transactions

  On April 15, 1996, the Company loaned $140,000 to an executive officer, who
is also a director of the Company. The loan bears interest at the rate of
5.33% per annum, compounded annually, and is due and payable in full on the
earlier of the termination of the executive officer's employment with the
Company or April 15, 1999. The loan is secured by shares of the Company's
common stock owned by the executive officer (See Note O of Consolidated
Financial Statement).

Note O--Subsequent Events

  On June 22, 1999 the Company entered into a loan modification agreement (the
"Credit Agreement") which extends the expiration date of its revolving line of
credit with a bank to November 1, 1999 (the "Line of Credit"). Borrowings
under the Line of Credit were $475,000 and $575,000 at March 28, 1999 and June
27, 1999, respectively. Terms of the Credit Agreement specify that as of June
22, 1999, maximum availability under the Line of Credit was equal to the
lesser of (i) $1.3 million or (ii) 80% of qualified accounts receivable (the
"Borrowing Base"). Such maximum availability decreases to the lesser of (i)
$350,000 or (ii) the Borrowing Base after the earlier of August 31, 1999 or
receipt by the Company of a refund of federal taxes paid by the Company in
respect of fiscal 1998 and prior years, which refund the Company expects will
be approximately $1.3 million. At June 27, 1999, the Borrowing Base was $1.3
million. The Credit Line is secured by all assets of the Company. The Credit
Agreement establishing the Credit Line prohibits the payment of dividends
without the bank's consent and requires the maintenance of specified debt to
net worth and current ratios. The Credit Agreement also requires that the
Company maintain a minimum capital base and not incur net losses of more than
a specified amount. As of March 28, 1999, the Company was in default of the
debt to net worth and net loss covenants but has since obtained appropriate
waivers from the bank.

  The Company is currently refinancing its bank debt and has received a
commitment from another lender to provide a replacement credit line to the
Company. The replacement line of credit will have a two year term and will
allow for maximum availability of $3.0 million based on a percentage of
qualified accounts receivable and inventory. The line will be secured by all
the assets of the Company and will be subject to certain financial covenants
including specified levels of net worth, and debt to net worth ratios and
limitations on capital expenditures. The replacement line of credit will
accrue interest at a rate of prime plus 1.5%. The bank may alter or terminate
its commitment with respect to the replacement line of credit if there is any
material adverse change in the Company's financial position or otherwise.
However, to the extent that there is a shortfall of funds under

                                      38
<PAGE>

the commitment, management has the ability and intent to adjust the Company's
cash flows to be able to meet operational needs at least through the end of
fiscal 2000.

  On July 6, 1999, an executive officer repaid $140,000 to the Company in
settlement of the principal portion of an outstanding loan (See Note N). The
Board of Directors agreed to forgive interest accrued on the loan through July
6, 1999.

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

  Not applicable.

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The information required by this item is included in the Company's Proxy
Statement to be filed in connection with the Company's 1999 Annual Meeting of
Stockholders to be held on August 11, 1999, under the section captioned
"Election of Officers" and is incorporated herein by reference thereto.

  The information required by this item with respect to executive officers of
the Company is set forth under the caption "Executive Officers of the
Registrant" in Part I of this Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

  The information required by this item is included in the Company's Proxy
Statement to be filed in connection with the Company's 1999 Annual Meeting of
Stockholders to be held on August 11, 1999, under the section captioned
"Executive Officer Compensation" and is incorporated herein by reference
thereto.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The information required by this item is included in the Company's Proxy
Statement to be filed in connection with the Company's 1999 Annual Meeting of
Stockholders to be held on August 11, 1999, under the section captioned "Stock
Ownership of Directors, Nominees, Executive Officers and Principal
Stockholders" and is incorporated herein by reference thereto.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

  On April 15, 1996, the Company loaned $140,000 to Sebastian J. Sicari, a
director and executive officer of the Company. The loan bears interest at the
rate of 5.33% per annum, compounded annually, and is due and payable in full
on the earlier of the termination of Mr. Sicari's employment with the Company
or April 15, 1999. At March 28, 1999, principal and accrued interest on the
loan totaled $163,599. The loan is secured by shares of the Company's common
stock owned by Mr. Sicari. On July 6, 1999, Mr. Sicari repaid $140,000 to the
Company in settlement of the principal portion of the outstanding loan. The
Company agreed to forgive interest accrued on the loan through July 6, 1999.

                                    PART IV

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

(a)1. Financial Statements

  The following consolidated financial statements are included in Item 8:

<TABLE>
 <C> <S>
     Consolidated Balance Sheets as of March 28, 1999 and March 29, 1998

     Consolidated Statements of Operations for the years ended March 28, 1999,
     March 29, 1998, and March 30, 1997

     Consolidated Statements of Changes in Stockholders' Equity for the years
     ended March 28, 1999, March 29, 1998 and March 30, 1997

     Consolidated Statements of Cash Flows for the years ended March 28, 1999,
     March 29, 1998 and March 30, 1997
</TABLE>

                                      39
<PAGE>

(a)2. Financial Statement Schedules

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Schedule II--Valuation and Qualifying Accounts............................. F-1
</TABLE>

  All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.

(a)3. Listing of Exhibits

<TABLE>
<CAPTION>
 Exhibit
   No.   Description
 ------- -----------
 <C>     <S>
  3.2    Third Restated Certificate of Incorporation of the Company, filed as
         Exhibit 3.2 to the Registration Statement on Form S-1 (SEC File No.
         33-57644) filed with the Commission on January 29, 1993 and
         incorporated herein by reference.

  3.3    Certificate of Designations, Rights, Preferences and Privileges of
         Series A Junior Preferred Stock of the Company, filed herewith.

  3.4    Amended and Restated By-laws of the Company, filed as Exhibit 4.2 to
         the Registration Statement on Form S-8 (SEC File No. 333-18337) filed
         with the Commission on December 19, 1996 and incorporated herein by
         reference.

  4.2    Rights Agreement dated August 15, 1996 between the Company and State
         Street Bank & Trust Company as Rights Agent (including the exhibits
         thereto), incorporated by reference from the Company's Registration
         Statement on Form 8-A filed with the Commission on August 26, 1996.

  4.3    Amendment No. 1 to the Rights Agreement dated January 2, 1997 between
         the Company and American Stock Transfer & Trust Company, filed as
         Exhibit 4.2 to the Company's Form 10-Q for the quarter ended December
         29, 1996 and incorporated herein by reference.

 10.2    1993 Non-Employee Director Stock Option Plan (as amended and restated
         as of August 11, 1998), filed as Exhibit 10.2 to the Company's Form
         10-Q for the quarter ended September 27, 1998 and incorporated herein
         by reference.

 10.3    1993 Employee Stock Purchase Plan (as amended and restated as of June
         18, 1998), filed as Exhibit 99.1 to the Registration Statement on Form
         S-8 (SEC File No. 333-68907) filed with the Commission on December 15,
         1998 and incorporated herein by reference.

 10.4    1993 Omnibus Stock Plan, as amended and restated as of June 14, 1996,
         filed as Exhibit 10.1 to the Registration Statement on Form S-8 (SEC
         File No. 333-18337) filed with the Commission on December 19, 1996 and
         incorporated herein by reference.

 10.5    Lease dated April 13, 1993, between the Company and CIGNA Investments,
         Inc., filed as Exhibit 10.5 to the Registration Statement on Form S-1
         (SEC File No. 33-57644) filed with the Commission on January 29, 1993
         and incorporated herein by reference.

 10.6    $5,000,000 Revolving Note dated November 27, 1998 made by the Company
         and payable to Fleet National Bank, filed herewith.

 10.7    Inventory, Accounts Receivable and Intangibles Security Agreement from
         the Company to Fleet National Bank, filed herewith.

 10.8    Supplementary Security Agreement from the Company to Fleet National
         Bank, filed herewith.

 10.9    Letter Agreement between the Company and Fleet National Bank dated
         November 27, 1998, filed herewith.

 10.10   Modification Agreement between the Company and Fleet National Bank
         dated June 22, 1999, filed herewith.

</TABLE>


                                      40
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.   Description
 ------- -----------
 <C>     <S>
 *10.11  Severance agreement dated December 30, 1996, between the Company and
         Sebastian J. Sicari, filed herewith.

 *10.12  Letter Agreement between Sebastian J. Sicari and the Company, dated
         August 11, 1998, filed herewith.

 *10.13  Severance Agreement dated July 8, 1998, by and between the Company and
         Mary R. Barletta, filed herewith.

 *10.14  Severance Agreement dated July 8, 1998, by and between the Company and
         Phillip Villari, filed herewith.

 *10.15  Severance Agreement dated July 8, 1998, by and between the Company and
         Robert L. Murray, filed herewith.

 *10.16  Severance Agreement dated July 8, 1998, by and between the Company and
         Robert E. Sandberg, filed herewith.

 *10.17  Severance Agreement dated October 21, 1998, by and between the Company
         and Richard S. Sidell, filed herewith.

 *10.18  Separation Agreement dated August 11, 1998, by and between the Company
         and Carl S. Archer, filed herewith.

  10.19  Promissory Note between the Company and Sebastian J. Sicari dated
         April 15, 1996, and filed as Exhibit 10.13 to the Company's Form 10-Q
         for the quarter ended December 29, 1996 and incorporated herein by
         reference.

  10.20  Pledge Agreement between the Company and Sebastian J. Sicari dated
         April 15, 1996, filed as Exhibit 10.15 to the Company's Form 10-Q for
         the quarter ended December 29, 1996 and incorporated herein by
         reference.

  10.21  Share Purchase Agreement dated as of May 23, 1997 by and among the
         Company and each of the shareholders of Western Equipment Developments
         (Holdings) Limited filed as Exhibit 2.1 to the Company's Form 8-K
         dated May 23, 1997 and incorporated herein by reference.

  10.22  Tax Deed dated May 23, 1997 by and among the Company and certain
         shareholders of Western Equipment Developments (Holdings) Limited
         filed as Exhibit 2.2 to the Company's Form 8-K dated May 23, 1997 and
         incorporated herein by reference.

  10.23  Escrow Agreement dated as of May 23, 1997 by and among the Company and
         David Carr and Philip Steven Walsh as representatives for certain
         shareholders of Western Equipment Developments (Holdings) Limited
         filed as Exhibit 2.3 to the Company's Form 8-K dated May 23, 1997 and
         incorporated herein by reference.

  21     Subsidiaries of the Company, filed herewith.

  23.1   Consent of Ernst & Young LLP, filed herewith.

  27     Financial Data Schedule, filed herewith.
--------
 *       Management contract or compensation plan or arrangement required to be
         filed as an exhibit pursuant to Item (c) of Form 10-K.
</TABLE>

(b) Reports on Form 8-K

  The Company filed no reports on Form 8-K with the Securities and Exchange
Commission during the fiscal quarter ended March 28, 1999.

                                      41
<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.

                                          ASECO Corporation

                                                  /s/ Sebastian J. Sicari
                                          By: _________________________________
                                                    Sebastian J. Sicari
                                               President and Chief Executive
                                                          Officer

                                                       July 13, 1999

  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.

<TABLE>
<CAPTION>
              Signature                         Title(s)                 Date
              ---------                         --------                 ----

<S>                                    <C>                        <C>
     /s/ Sebastian J. Sicari           President, Chief Executive    July 13, 1999
______________________________________  Officer and Director
         Sebastian J. Sicari            (Principal Executive
                                        Officer)

       /s/ Mary R. Barletta            Vice President, Chief         July 13, 1999
______________________________________  Financial Officer,
           Mary R. Barletta             Treasurer (Principal
                                        Financial and Accounting
                                        Officer)

     /s/ Carl S. Archer, Jr.           Director                      July 13, 1999
______________________________________
         Carl S. Archer, Jr.

                                       Director                      July 13, 1999
______________________________________
         Dr. Sheldon Buckler

                                       Director                      July 13, 1999
______________________________________
          Dr. Gerald Wilson

      /s/ Dr. Sheldon Weinig           Director                      July 13, 1999
______________________________________
          Dr. Sheldon Weinig
</TABLE>

                                      42
<PAGE>

                                                                    SCHEDULE II

                               ASECO CORPORATION

                       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                         Balance at Charges to
                         beginning  costs and                Other      Balance at
     Classification       of year    expenses  Deductions Changes (1)   end of year
     --------------      ---------- ---------- ---------- -----------   -----------
<S>                      <C>        <C>        <C>        <C>           <C>
Year ended March 28,
 1999
Allowance for doubtful
 accounts...............  $781,000   $200,000   $ 30,000   $ 79,000(2)  $1,027,000

Year ended March 29,
 1998
Allowance for doubtful
 accounts...............  $407,000   $407,000   $358,000   $325,000(1)  $  781,000

Year ended March 30,
 1997
Allowance for doubtful
 accounts...............  $397,000   $100,000   $ 90,000        --      $  407,000
</TABLE>
--------
(1) Represents the balance of the allowance for doubtful accounts of the
    acquisition date May 23, 1997. (See Note L to Consolidated Financial
    Statements.)
(2) Represents additional allowance for doubtful accounts resulting from final
    settlement of acquisition purchase price. (See Note L to Consolidated
    Financial Statements.)

                                      43