SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

      For the fiscal year ended  December 31, 1998

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

For the transition period from __________ to  __________

Commission file Number: 0-22756
                                   ATMI, Inc.
             (Exact name of registrant as specified in its charter)

             Delaware                               06-1481060
             --------                               ----------
 (State or other jurisdiction of        (I.R.S. Employer Identification No.)
 incorporation or organization)

 7 Commerce Drive, Danbury, CT                                  06810
 -----------------------------                                  -----
(Address of principal executive offices)                     (Zip Code)

                                  203-794-1100
                                  ------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
                                                       Name of each exchange
                  Title of each class                   on which registered
                  -------------------                   -------------------
                         None                               Not Applicable

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

                          Common Stock, $.01 par value
                          ----------------------------
                              (Title of each class)

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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 [ ]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant at March 2, 1999,  was  approximately  $363,177,000  based on the
closing price of $20.88 per share.

     The number of shares  outstanding  of the  registrant's  common stock as of
March 2, 1999 was 22,251,328.

DOCUMENTS INCORPORATED BY REFERENCE:

     Proxy  Statement for the Annual Meeting of  Stockholders  to be held on May
26, 1999 (Part III).
<PAGE>


                                   ATMI, INC.
                           Annual Report on Form 10-K
                   For the Fiscal Year Ended December 31, 1998

                                TABLE OF CONTENTS
                                                                          Page
Part I

Item 1. Business............................................................3

Item 2. Properties.........................................................17

Item 3. Legal Proceedings..................................................18

Item 4. Submission of Matters to a Vote of Security Holders................18

Item 4A. Executive Officers of the Registrant..............................18

Part II

Item 5. Market for Registrant's Common Equity and Related
        Stockholder Matters................................................20

Item 6. Selected Financial Data............................................21

Item 7. Management's Discussion and Analysis of Financial
        Condition and Results of Operations................................23

Item 7A. Quantitative and Qualitative Disclosures About Market Risk........31

Item 8. Financial Statements and Supplementary Data........................31

Item 9. Changes In and Disagreements with Accountants on
        Accounting and Financial Disclosure................................31

Part III

Item 10. Directors and Executive Officers of the Registrant................31

Item 11. Executive Compensation............................................31

Item 12. Security Ownership of Certain Beneficial Owners and Management....32

Item 13. Certain Relationships and Related Transactions....................32

Part IV

Item 14. Exhibits, Financial Statement Schedule, and Reports
         on Form 8-K.......................................................32

Index to Consolidated Financial Statements and Financial Statement Schedule.F-1

Signatures .................................................................S-1
<PAGE>

                                    PART I

Item 1. Business.


     ATMI,  Inc.  ("ATMI" or the  "Company") is a holding  company that performs
executive,   financial,   and   administrative   functions   for  its  operating
subsidiaries.  ATMI was  incorporated  in  Delaware  in  April,  1997 and is the
successor registrant to Advanced Technology Materials,  Inc. ("ATM"),  which was
incorporated in Connecticut in 1986 and  reincorporated  in Delaware in 1987 and
which is now a wholly-owned  subsidiary of ATMI. As used in this report,  "ATMI"
means either ATMI, Inc. itself, or ATMI, Inc. and its consolidated subsidiaries,
including its predecessor registrant, ATM, as the context may indicate.

     ATMI is a leading supplier of thin film materials,  equipment, and services
used worldwide in the manufacture of semiconductor  devices. The Company targets
high growth consumable and equipment  markets within the semiconductor  industry
with proprietary and patented products.  The Company currently  provides:  (i) a
broad  range of  ultrahigh-purity  thin  film  materials  and  related  delivery
systems; (ii) a full line of point-of-use semiconductor  environmental equipment
and services; and (iii) specialty epitaxial thin film deposition services.  Over
the last four years,  the Company has achieved a leadership  position in each of
its target  markets by  providing  a more  complete  line of  products  than its
competitors.  ATMI's  strategy is to continue  its growth  through  product line
expansion in each of its existing markets and to leverage its core technology to
create new high growth businesses.  The Company's  customers include most of the
leading semiconductor manufacturers in the world.

     ATMI  has  capitalized  on the  growth  of the  semiconductor  industry  in
general,  and chemical vapor  deposition  ("CVD")  processing in particular,  by
providing leading edge products and services in each of its target markets.  The
Company has recently organized its operations along two business segments:  ATMI
Materials  and  ATMI   Technologies.   ATMI  Materials  consists  of  the  ADCS,
NovaSource,  and NOW divisions  which develop and market  ultrahigh-purity  thin
film materials and proprietary  delivery  systems,  including the "Safe Delivery
Source," or SDS, and high  performance  containers  and  dispensing  systems for
advanced  purity  chemicals used in the  manufacture of  microelectronics.  ATMI
Technologies consists of the EcoSys, Epitronics, Emosyn, and Ventures divisions.
The Company  believes EcoSys is the only provider of point-of-use  environmental
equipment  offering  all of the  key  technologies  for  semiconductor  effluent
abatement.  The  Company's  Epitronics  division is a world  leader in specialty
epitaxial   services,   providing  high  quality  processing  of  silicon,   and
next-generation III-V and wide bandgap, wafers. The Company's Emosyn division is
bringing to market a new generation of semiconductor devices, initially targeted
at the high growth market for smart card integrated circuits.  ATMI participates
in United States  government-funded  research and development  contracts through
its  Ventures  division.  Certain  financial  information  regarding  ATMI's two
business  segments and  geographic  areas is contained in Item 7,  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations,"  and
in Note 14 to ATMI's Consolidated Financial Statements.

     The  Company's  business  mix  has  evolved  to  consist  predominantly  of
consumables  and  services  which track wafer  starts,  or the volume of silicon
wafers processed into fully functional semiconductor devices. Consequently, ATMI
believes  that its  overall  business  is less  volatile  than that of a typical
semiconductor  capital equipment supplier.  ATMI Materials and ATMI Technologies
segments accounted for approximately  50.2% and 49.8%,  respectively,  of ATMI's
revenues  in 1998,  and  approximately  49.1%  and  50.9%,  and  40.7% and 59.3%
respectively, of ATMI's revenues in both 1997 and 1996.
<PAGE>



     On  August  4,  1998,  ATMI  acquired  NOW   Technologies,   Inc.  and  its
subsidiaries, a manufacturer of proprietary,  state-of-the-art, high performance
containers  and  dispensing  systems for advanced  purity  chemicals used in the
manufacture of microelectronics,  particularly semiconductor integrated circuits
and active  matrix flat panel  displays,  in exchange  for  1,593,952  shares of
Common Stock.  The  operations  of NOW have become a part of the ATMI  Materials
segment. This transaction was accounted for as a pooling of interest.

     In October 1997, ATMI acquired Advanced Delivery & Chemical Systems Nevada,
Inc. and its affiliates  (collectively,  the "ADCS Group"),  a manufacturer  and
distributor of  ultrahigh-purity  semiconductor  thin film materials and related
delivery  systems,  in  exchange  for  5,468,747  shares  of Common  Stock.  The
operations of the ADCS division are part of the ATMI Materials segment.  Also in
October 1997, ATMI acquired Lawrence  Semiconductor  Laboratories,  Inc. and its
affiliate  (collectively,  "LSL"),  a provider  of silicon  epitaxial  thin film
deposition  services,  in exchange for  3,671,349  shares of Common  Stock.  The
operations of LSL were combined with the Company's  Epitronics  division,  which
offers a wide spectrum of epitaxial services and is an operating division of the
ATMI Technologies  segment.  Both transactions were accounted for as poolings of
interest.

     Semiconductor Industry Background

     The  semiconductor  industry  has  grown in recent  years as  semiconductor
devices have proliferated in a wide variety of consumer and industrial products,
especially in computing,  networking, and communications equipment. According to
Dataquest Inc., the semiconductor  industry achieved  worldwide sales in 1998 of
$138 billion and is estimated to achieve worldwide sales of over $235 billion in
2001. This increase in demand for  semiconductor  devices has been fueled by the
ability of semiconductor  manufacturers  to deliver  products with  consistently
enhanced performance  characteristics and functionality,  improved  reliability,
increased memory capacity,  reduced size, weight,  power consumption,  and cost.
These  advances  have been  made  possible  by  innovations  in the  fabrication
processes,   equipment,   and  the  materials  used  in  manufacturing  advanced
semiconductor  devices.  At the same time, as the construction and management of
fabrication facilities has become more complex, semiconductor manufacturers have
sought to streamline their vendor relationships and reduce the number of vendors
upon which they rely, which in turn has driven significant  consolidation  among
the  providers of  semiconductor  capital  equipment and materials and materials
delivery systems.

     Semiconductor  devices are  manufactured  by repeating a complex  series of
process steps on a wafer substrate, usually made of silicon. The primary process
steps include  deposition,  patterning,  and etch.  During  deposition,  several
layers of conducting,  semiconducting,  or insulating thin films are formed on a
wafer. Precise and reliable control of the deposition of these films is vital to
the ultimate  performance  of an individual  device.  The initial method of thin
film deposition was physical vapor deposition ("PVD"), which has in recent years
been largely  supplanted by chemical vapor deposition ("CVD") for the deposition
of  semiconducting  and insulating  thin films.  In the CVD process,  wafers are
placed in a  sophisticated  reaction  chamber  (a  "reactor"),  and a  specially
designed gas or vaporized liquid material is introduced.  Simultaneously, a form
of  energy  (e.g.,  heat or  plasma)  is  added  to the  reactor  to  cause  the
decomposition   of  the  material  being   introduced.   As  a  result  of  this
decomposition, a thin film of material is deposited on the surface of the wafer.

     The advantages of CVD include the relative thinness of the films applied to
the wafer, as well as their conformality (ability to coat evenly,  especially in
holes and trenches  designed into the device),  purity,  and the ability to coat
large areas.  These advantages have led to rapid growth in sales of reactors and
related CVD process consumables and equipment. Consumables and related equipment
include  the raw  materials  used in the CVD process  and the  delivery  systems
required  to  transport  the  materials  around a  semiconductor  plant and to a
reactor.  Related  equipment  also  includes  specially  designed  environmental
equipment that is used to abate the toxic or otherwise  hazardous  effluent from
CVD reactors.
<PAGE>
     In addition to deposition on patterned wafers,  CVD thin film processes are
used to prepare bare wafers prior to the  fabrication of integrated  circuits to
provide  the wafer  surfaces  with the  desired  uniformity  of  electrical  and
physical  properties.  Such CVD thin film deposition is referred to as epitaxial
deposition,  and such wafers when  processed  are referred to as  epitaxial,  or
"epi," wafers. The complexity,  sensitivity, and capital intensive nature of the
CVD  processes  used for epitaxy have created a market for  epitaxial  thin film
deposition services, or contract manufacture of epi wafers using CVD processes.

     Materials and Delivery Systems

     The market for  semiconductor  thin film  consumables has expanded with the
growth of the  market  for  semiconductor  devices.  The design of new thin film
deposition  materials  and  equipment  to  transport  these  materials  around a
semiconductor plant and to reactors has experienced ongoing innovation driven by
the demand for expanding  semiconductor  device  capabilities and  corresponding
decreases  in  circuit  dimensions.  Safe and  effective  thin  film  deposition
requires dedicated systems designed to deliver and vaporize precursor  materials
for deposition in reactors without contamination or inadvertent release of toxic
gases. Tetraethylorthosilicate ("TEOS") is a principal liquid precursor material
used in the  deposition of silicon  dioxide  layers,  which  generally  serve as
insulators  between  the  conductive  layers in a  semiconductor  device.  Other
important  materials  include  trimethylphosphite   ("TMP"),   triethylphosphate
("TEPO"),  trimethylborate  ("TMB"), and triethylborate  ("TEB"), which are used
for the deposition of phosphorous and boron containing materials.

     Because  thin  film  precursors  are  consumables,  the  market  for  these
materials and delivery systems  generally tracks wafer starts, as opposed to the
market for equipment,  which generally tracks investment in new plants. The thin
film materials market is also  characterized by segmentation into a wide variety
of material types and forms. For example, most thin film precursors are now sold
as  pressurized  gases,  which  allows  for  easy  transport  around  a  typical
semiconductor manufacturing plant. However, many of these gases are toxic and/or
hazardous, leading to the development of safer alternatives including the use of
liquid or solid CVD precursors and the adoption of gas handling technologies and
delivery  systems that  minimize the danger of a  catastrophic  release of toxic
gas. The Company  estimates that the total annual market for thin film precursor
materials and delivery  systems exceeds $500 million and has grown  historically
at a rate in excess of 15% per year.

     Environmental Equipment

     The use of CVD processes has also required the development of environmental
equipment  designed to abate the effluent  from CVD reactors.  In general,  less
than 25% of the  materials  entering a CVD reactor are deposited as a thin film.
The remainder of the source materials,  and certain  by-products,  constitute an
effluent stream  containing toxic and hazardous  material that must be abated to
meet   increasingly   strict  worldwide   environmental,   safety,   and  health
regulations. Traditionally, abatement has been accomplished by the use of "whole
plant"  environmental  systems  which  aggregate  the  effluents  from an entire
facility.  However,  growing  variations in the processes used and the drive for
increased  productivity  have led to the  growth of  point-of-use  environmental
systems in which a single  environmental  unit is attached to a single  reactor.
This approach provides for superior abatement because the system can be tuned to
the unique hazards of a particular  effluent stream.  In addition,  point-of-use
environmental  systems  can improve  plant  productivity  by  reducing  downtime
associated with servicing environmental systems. The Company believes the market
for this type of point-of-use  environmental  equipment exceeds $150 million per
year.
<PAGE>

     Specialty Epitaxial Deposition Services

     The  demand  for  higher  performance   integrated  circuits  and  discrete
semiconductor  devices has driven the use of epitaxial  wafers in a wide variety
of  applications.  Because  epitaxy  involves  a high  degree of  expertise  and
requires  significant  capital  expenditures,  a merchant  market for  epitaxial
wafers,  primarily silicon  epitaxial wafers,  has in recent years grown to more
than $2.3 billion.  This market is  subdivided  into  "generic"  wafers for high
volume   applications   such  as  dynamic  random  access  memory  ("DRAM")  and
"specialty"  wafers for use in applications  such as automotive  electronics and
sensors,  silicon-based  low power  telecommunications  circuits,  analog  power
controls,  and robust  application-specific  integrated  circuits.  The  Company
believes that specialty epi products  currently account for approximately 15% of
the total epi wafer  market and will  constitute  a  significant  portion of the
overall growth of the merchant market for epitaxial wafers.

     The continued  drive for improved device  performance and new  applications
for integrated  circuits has led to the  development  and  commercialization  of
alternative  semiconductor  technologies.  A newer  generation  of  devices  has
emerged that use epitaxial wafers made of III-V and wide bandgap  materials,  as
opposed to silicon, to achieve this improved performance.  III-V semiconductors,
including gallium arsenide and indium phosphide,  are finding  increasing use in
wireless  communication devices where high frequency performance is critical, in
optoelectronic   devices   where   the   electronic   structure   of  the  III-V
semiconductors allows energy-efficient light generation,  and in solar cells for
satellite  applications  where efficient  generation of electricity is critical.
Wide bandgap  semiconductors  such as silicon  carbide and gallium nitride offer
advantages in high power, optoelectronic, and high temperature devices.

     ATMI Business Strategy

     ATMI is a leading  supplier of thin film  materials  and  related  delivery
systems, of a full line of point-of-use  semiconductor  environmental equipment,
and of specialty epitaxial  deposition services for the semiconductor  industry.
The Company's objective is to establish and enhance leadership positions in each
of the markets it serves. The Company's strategy consists of key elements:

     Target  High  Growth  Semiconductor  Markets.  ATMI  targets  semiconductor
markets where technology-driven  paradigm shifts are occurring or are enabled by
the use of ATMI's core  technologies.  The Company  typically focuses on markets
with high growth rates that require products that are consumed in the production
process, such as thin film materials. For example, ATMI believes that the market
for low  pressure gas delivery  systems and related  consumables,  served by the
Company's  SDS gas delivery  product line, is growing at a rate in excess of the
overall growth rate of the semiconductor equipment industry.

     Provide   Full   Market-Basket    Solutions.   To   address   semiconductor
manufacturers'  desire to streamline their vendor  relationships,  ATMI seeks to
provide a full market-basket  solution,  or "one-stop  shopping," in each of its
target markets. To provide such capability, ATMI pursues internal development of
new products and seeks to acquire  complementary  product  lines and services to
continually expand its capabilities. For example, the Company acquired "wet" and
"combustion" scrubber product lines to complement its internally developed "dry"
scrubber  product line in order to expand its  capabilities  to abate  effluents
from all major semiconductor front-end processes. This approach allows EcoSys to
serve a wide spectrum of the semiconductor industry's environmental needs and to
provide comprehensive worldwide service.
<PAGE>

     Provide  a  Superior   Alternative  in  Advanced  Chemical   Packaging  and
Dispensing Systems. ATMI has built a business strategy to develop containers and
dispensing  systems for advanced purity chemicals that provide greater levels of
purity, productivity,  safety, and environmental responsiveness than traditional
containers and  dispensing  systems.  By providing a pure,  safe, and convenient
means of chemical  packaging and  dispensing,  ATMI's system  results in greater
productivity in industries  where minute levels of yield  enhancement have large
and rapid paybacks.  As performance  requirements for high-purity  materials are
becoming   more   demanding,   applications   are   increasingly   sensitive  to
contamination from sub-micron particle sizes and from  parts-per-billion  levels
of metal ions. The systems  designed by ATMI's NOW business are designed to meet
the demanding  requirements  of chemical  users who  scrutinize  every aspect of
chemical delivery,  from the chemical suppliers'  facilities to the point-of-use
production area.

     Leverage CVD Technology Leadership. The Company has invested extensively in
developing  proprietary and patented CVD thin film technology which it leverages
to commercialize new products to meet customer requirements.  Its CVD technology
is based on a  multidisciplinary  approach  that  draws upon the  experience  of
ATMI's  personnel in  chemistry,  physics,  materials  science,  and  electrical
engineering.  ATMI dedicates  significant resources to maintaining its expertise
in CVD technology and protecting its intellectual  property,  which now includes
118 issued U.S. patents and numerous counterparts outside the United States. The
Company  intends to continue to develop new  products  and new lines of business
that leverage its core competencies.

     Accelerate Product  Introduction  Through Strategic  Alliances.  ATMI forms
strategic  alliances,  including joint  development  programs and  collaborative
marketing  efforts,  to accelerate the introduction of its products into markets
that have manufacturing and/or distribution  barriers.  Most of ATMI's strategic
alliances  are with leading  semiconductor  manufacturers,  such as IBM,  Lucent
Technologies,  Micron Technology,  Siemens, and Texas Instruments, each of which
has participated in advanced  materials  development  programs with the Company.
Such programs  enhance ATMI's core technology base and promote the  introduction
of targeted  products  while  reducing the  Company's  need to make research and
development  and  capital  expenditures.   In  addition,   since  the  Company's
inception, the United States government has provided approximately $69.0 million
in research  funding  directed  towards the costly  development of new thin film
processes and materials for complex electronic devices.

     ATMI Businesses and Products

     ATMI conducts its operations through two primary operating  segments;  ATMI
Materials and ATMI Technologies, which contain various divisions of the Company.
ATMI Materials consists of ADCS, NovaSource, and NOW. ATMI Technologies consists
of EcoSys,  Epitronics,  Emosyn, and Ventures. ADCS designs,  manufactures,  and
markets  ultrahigh-purity thin film materials and their related delivery systems
equipment for CVD,  diffusion,  and etch  applications in the  semiconductor and
semiconductor  equipment  industries.  NovaSource  manufactures and markets SDS,
which stores dangerous  high-pressure gases as "no pressure," considerably safer
gases,  in  cylinders,  providing  increased  safety and  substantially  greater
operating efficiencies.  NOW manufactures high performance packages, containers,
and dispensing  systems for advanced purity chemicals used in the manufacture of
various microelectronic applications.  EcoSys manufactures,  sells, and services
point-of-use environmental equipment for the semiconductor industry.  Epitronics
provides specialty epitaxial  deposition services to the semiconductor  industry
for a wide variety of end-use  applications.  Emosyn is currently developing and
seeking to  commercialize  smart card devices  employing the Company's  advanced
materials and process integration technology. Additionally, ATMI participates in
United States  government-funded  research and development contracts through its
Ventures division.
<PAGE>

     Consistent with its corporate  strategy,  the Company actively explores new
opportunities  to  commercialize  its  core  technology.  Within  the  Company's
Ventures  division,  the  Company  conducts  development  and  research  that it
believes may comprise  future  business  units.  Such  development  is currently
focused on gas-sensing devices that will allow for the detection and measurement
of the many  gases  used in thin  film  processing,  and on the  development  of
metrology  tools that will detect  thin film  properties  during the  deposition
process.

     ATMI Materials Segment

     Semiconductor Materials and Delivery Systems

     The Company  believes its Materials  segment is one of the fastest  growing
suppliers  of  ultrahigh-purity  thin film  materials  and  associated  delivery
systems equipment to the semiconductor industry. The Company has taken advantage
of the changes in the market for thin film  materials  and delivery  systems by:
(i) developing and  commercializing a wide range of CVD liquid precursors;  (ii)
commercializing  innovative bulk delivery  systems which  automatically  deliver
materials of the highest purity and consistency to the reactor; (iii) developing
innovative  delivery  systems that allow for the  introduction of low volatility
liquids and even solids to the  reactor;  (iv)  developing  and  commercializing
patented  low-pressure  gas delivery  systems for safe  handling and delivery of
toxic and hazardous gases to semiconductor process equipment; and (v) developing
manufacturing  processes to meet the critical purity and integrity  requirements
of the microelectronics industry.

     The  businesses  within the Materials  segment  strive to ensure that their
materials and related  delivery  systems meet and exceed the requirements of its
customers, which include semiconductor device manufacturers, chemical suppliers,
and OEMs located  throughout the world.  In developing  its business,  Materials
seeks:  (i) to offer the most complete line of  consumable  and delivery  system
products; (ii) to offer the most consistent,  highest purity thin film materials
available; (iii) to offer the most reliable, innovative equipment products; (iv)
to improve  the level of  customer  service,  technical  support,  and  response
offered and to remain  cost-effective  to its  customers;  (v) to meet  customer
needs for statistical  quality and process control and  dock-to-stock  programs;
and (vi) to  continue  to meet the  industry's  needs  for  advanced  thin  film
materials required for all future generation devices and beyond.

     Products and Services

     The Materials  segment has four primary product lines: thin film materials,
liquid  delivery  systems,  gas delivery  systems,  and chemical  containers and
dispensing  systems.  The Materials  segment also provides  services relating to
each of these product lines.

     Thin  Film  Materials.  The ADCS  division  within  the  Materials  segment
produces  a  broad  range  of thin  film  materials  that  are  used  in  making
semiconductor devices. In addition to the widely used CVD precursors--TEOS, TMP,
TEPO,  TMB,  and  TEB--ADCS  also  sells  thin  film  materials  used  in  other
semiconductor  manufacturing processes,  including phosphorous and boron halides
used for doping by diffusion processing. ADCS also manufactures and sells source
reagents  that allow CVD of  advanced  materials,  including  titanium  nitride,
platinum,  copper,  tantalum oxide, lead zirconate  titanate,  strontium bismuth
tantalate, and barium strontium titanate thin films.
<PAGE>

     All of these thin films  must be of very high  purity in order to  function
properly  within the device,  particularly  with  respect to  unwanted  metallic
contamination.  The  purity of the  starting  chemicals  used in the  process is
critical.  A proprietary  DOUBLE  DISTILLATION  purification  process is used to
produce these high-purity specifications. In order to preserve this high purity,
the chemicals are packaged and delivered in high quality,  carefully constructed
and cleaned  containers.  Coupled with its Quality Control Program,  the Company
believes  that  ADCS's  cleaning  and  container  technology  produces  the most
consistent,  highest purity  chemicals in the industry and ensures their quality
as delivered into the reactor.  Consistent with this commitment to quality, ADCS
achieved ISO 9001 certification in 1997.

     Liquid Delivery Systems. ADCS designs,  manufactures, and sells proprietary
continuous refill and delivery systems.  These systems and hardware products are
designed  to deliver  ultrahigh-purity  thin film  materials  to the CVD reactor
under the desired physical conditions. ADCS's delivery hardware products include
stainless  steel ampules,  stainless steel MINIBULK  canisters,  stainless steel
SKINNIBULK canisters,  quartz bubblers,  bulk chemical delivery cabinets,  level
sensing   systems,   manual   and   continuous   refill   systems,   and   other
application-specific equipment.

     The  Company  believes  that its  continuous  refill  systems  enhance  the
performance  of the process tools they support by eliminating  process  downtime
resulting from canister changes.  Typically,  process tools must cease operation
when canister changes are made to replenish source material.  ADCS's bulk refill
systems  allow  continuous  delivery  of source  material.  In  addition  to the
elimination of the downtime associated with canister changes, this configuration
also minimizes the atmospheric and moisture  contamination that can occur during
these change-outs.

     Safety Delivery Source (SDS). NovaSource's patented SDS uses a standard gas
cylinder containing an adsorbent material. The cylinder is filled with gas under
conditions such that the gas is adsorbed onto the material, and the SDS cylinder
is at sub-atmospheric  pressure,  minimizing any potential leak of hazardous gas
and allowing more gas to be introduced  into the cylinder than would be possible
under traditional high pressure conditions.  Consequently, material delivery via
SDS is both safer and provides  higher rates of  productivity  than  traditional
methods. Since most semiconductor  processes operate at reduced pressure and the
gas can be desorbed or released from the SDS under  vacuum,  it can be installed
and operated like a conventional  high-pressure  gas cylinder.  These advantages
have led major chip manufacturers to adopt this technology.

     To date,  several gases,  including arsine,  phosphine,  boron trifluoride,
silicon tetrafluoride, and germanium tetrafluoride, using the SDS technology has
been  introduced.  Each is used to  "dope"  silicon  wafers  using  ion  implant
processes.  All of these gases are available in different  size  cylinders,  and
some have different  adsorbents  that allow for additional gas capacity within a
cylinder.  These products are  manufactured by the Company and, on a toll basis,
by Matheson Gas Products  ("Matheson"),  the Company's exclusive distributor for
SDS used in ion implant applications.

     The Company also  believes that  significant  markets for SDS exist outside
ion  implant.  The  Company is now  conducting  beta site  tests  with  selected
semiconductor manufacturers and OEMs for CVD applications using SDS. The Company
believes that commercial introduction of SDS products for this market will occur
in the  first  half of 1999.  ATMI  also has  undertaken  extensive  development
efforts to identify new markets and products for the SDS technology. The Company
believes that certain etch gases used in the semiconductor  industry and certain
gases normally delivered in bulk within the semiconductor  industry are possible
candidates for SDS.
<PAGE>

     Chemical Containers and Delivery Systems.  NOW manufactures three different
types of  container  assemblies:  the  "Bag-in-a-Bottle"  ("BIB"),  Bag-in-a-Can
("BIC"), and "Bag-in-a-Drum"  ("BID").  Each features a pre-cleaned  collapsible
inner liner, or "bag," inside a rugged,  high-density  polyethylene or stainless
steel  overpack.  The  standard  liner  film is made of  polytetrafluoroethylene
("PTFE") which  provides  unmatched  inertness to virtually all  chemicals.  The
empty inner liner is easily removed for waste  consolidation and the outer shell
is recyclable or returnable for insertion of a new replacement liner.

     NOW's  initial  and  largest  market  is  packaging  for   photolithography
chemicals used in the manufacture of semiconductor integrated circuits ("IC's").
These  chemicals  are  typically  packaged in one liter  through  ten-liter  BIB
containers.  NOW's market  applications for chemicals used in the manufacture of
active matrix flat panel  displays as well as for the  pharmaceutical,  biotech,
and  laboratory  markets are  typically  in 18-20 liter BIB and BIC  containers.
Additionally,   applications  have  recently  expanded  beyond  photolithography
chemicals in the semiconductor niche to include ancillary  chemicals,  polishing
slurries,  and process  chemicals for which the new 200-liter BID is the package
design of choice.

     Services.  In addition to its thin film materials and  associated  delivery
systems equipment,  ADCS offers custom manufacturing services, such as stainless
steel and quartz  delivery  hardware  fabrication.  ADCS also  provides  special
services such as custom bulk refill, container cleaning, and hardware repair.

     ATMI Technologies Segment

     Point-of-Use Semiconductor Environmental Equipment

     ATMI  believes  EcoSys is the only provider of  point-of-use  environmental
equipment offering all of the key technologies for effluent gas abatement to the
semiconductor industry: dry chemical,  liquid, and active oxidation. As a result
of this broad  product line,  ATMI believes  EcoSys is a global market leader in
the  manufacture  and  sale of  point-of-use  semiconductor  effluent  abatement
equipment.  ATMI's  strategy  is to  grow  EcoSys's  market  share  through  the
continued  development  and  acquisition  of  new  semiconductor   environmental
products and services. The Company believes that this full line of semiconductor
environmental  products,  coupled with a comprehensive  service  strategy,  will
allow for continued market penetration by its EcoSys business.

     EcoSys  has  three  primary   product  lines.   Each  of  the  three  major
point-of-use  products  has  cost  of  ownership  advantages  for  semiconductor
customers in certain applications such as CVD, ion implant, and etch.

     Novapure dry chemical  scrubbers adsorb and concentrate  hazardous effluent
through the use of  consumable  resins at rates many times that of  conventional
effluent  treatment  methods.  ATMI believes  that EcoSys,  through its patented
adsorption materials, is a market leader for point-of-use semiconductor effluent
dry scrubbing  throughout the world.  Additionally,  demand for consumable resin
material is increasing as the installed base of dry scrubbers increases.

     Vector wet scrubbers are designed for cost effective  removal of acidic and
high particulate  bearing gases commonly used in the wafer fabrication  process.
Vector scrubbers recirculate scrubbing water,  minimizing overall water use, and
are effective in removing high particulate effluent.

     Guardian  active  oxidation   scrubbers  treat  a  variety  of  combustible
materials  used  in  semiconductor  processing.  The  Guardian  product  line is
designed for low cost of ownership  by  operating  on  inexpensive  methane fuel
while achieving very high removal  efficiencies.  These combustion  systems also
abate certain  global  warming  gases such as  perfluorinated  carbon  compounds
("PFCs") at high efficiency, with near zero nitrous oxide generation.
<PAGE>

     Specialty Epitaxial Deposition Services

     Epitronics is primarily a service business  providing  specialty  epitaxial
deposition  services  for  silicon,  III-V,  and wide  bandgap  wafers.  Desired
electrical and physical  properties of the epitaxial layers are specified by the
customer and developed in collaboration  with Epitronics.  The properties of the
epitaxial  layers are selected to maximize  the  performance  of the  customer's
integrated  circuit  or  device  while  maximizing  yield and  minimizing  cost.
Epitronics'  fundamental  competitive advantages include the manufacture of high
quality epitaxial layers with high yield. In addition, Epitronics differentiates
itself by offering quality  epitaxial  deposition  services with fast turnaround
and in flexible volumes.

     ATMI believes that  Epitronics is the only provider  offering CVD thin film
deposition services for each of the key materials used in semiconductor  devices
today,  and that it is now a world  leader  in  specialty  epitaxial  deposition
services. Epitronics' strategy is to maximize market share through the continued
development  and  acquisition  of  new  semiconductor  thin  film  products  and
services. A key element of the business strategy is to work with the customer in
the  early  stages  of  product  development  to ensure  that  proven  epitaxial
processes are in place when the decision is made to expand into manufacturing.

     Products and Services

     Epitronics  provides commercial  epitaxial  deposition services for silicon
and III-V materials.  Epitaxial  services for wide band gap  semiconductors  and
several new products in silicon and gallium arsenide are in development.

     Silicon Epitaxial Wafers.  Epitronics currently processes silicon epitaxial
wafers in Mesa,  Arizona.  Epitronics  has experience in a wide range of silicon
epitaxial  processes  and selects the process that provides the highest value to
the customer. Processes include deposition from trichlorosilane, dichlorosilane,
and silane which can be operated at atmospheric or reduced pressure.  Epitronics
is  particularly  skilled at: (i) the  deposition of epitaxial  layers on wafers
that already have patterns or buried circuits created by selective  implantation
and  diffusion;  (ii) the  deposition  of epitaxial  layers with highly  uniform
values of thickness and resistivity; and (iii) the deposition of lattice-matched
silicon thin films  containing  high amounts of boron and germanium  that can be
used in sensor  applications.  Epitronics also distributes  SIMOX (Separation by
Implanted  Oxygen)  substrates  manufactured by Nippon Steel  Corporation in the
United States and Europe.

     III-V Epitaxial  Wafers.  Epitronics  processes  III-V epitaxial  wafers in
Phoenix,  Arizona.  III-V epi  products are finding  increasing  use in wireless
communications,  satellites,  and optoelectronics for data and telecommunication
markets.  In particular,  there is an increased  demand for III-V epi wafers for
heterojunction  bipolar  transistors  for use in  power  amplifiers.  Epitronics
markets its epitaxial  services and sells the product of the service,  epitaxial
wafers,  directly to industry and government customers according to their design
specifications.

     Wide Bandgap Epitaxial Wafers. Epitronics is developing epitaxial processes
for  silicon  carbide  and  gallium  nitride on  silicon  carbide  and  sapphire
substrates in Danbury,  Connecticut and in Phoenix, Arizona. In 1998, Epitronics
signed a technology license agreement that transferred  substantially all of its
silicon  carbide  substrate  manufacturing  assets and  technology  to  Sterling
Semiconductor of Sterling,  Virginia. Under the license,  Sterling will continue
the  operation of the silicon  carbide  manufacturing  facility in Danbury.  The
Company  is  engaged  in  several   collaborations   which  address   technology
development and commercial epitaxial product introduction issues associated with
future optoelectronic, sensor, and power device products.
<PAGE>

     Developmental  Products.  The Epitronics  Silicon  Division is developing a
silicon  germanium  epitaxial  process for use in  silicon-based  heterojunction
devices for high speed communication and computation  integrated circuits, and a
ultrathin  silicon on  sapphire  process  for use in high  frequency,  low power
applications.  The III-V Division continues  development of epitaxial structures
for gallium arsenide-based  electronics devices including heterojunction bipolar
transistors   (HBTs)  and  high  electron   mobility   transistors   (HEMTs)  in
collaboration  with  its  customers.   Wide  bandgap  epitaxial   processes  for
electronic and  optoelectronic  devices are under  development in  collaboration
with, and with funding from, the U. S. government and customers.

          Development and Commercialization of Smart Card Devices

     Emosyn is  currently  developing  and seeking to  commercialize  smart card
devices  employing the  Company's  advanced  materials  and process  integration
technology.  Emosyn  entered into a strategic  alliance with a subsidiary of SMH
Swatch, the largest watch maker in Switzerland, to design, develop, manufacture,
and  distribute  integrated  circuits for use in smart cards.  In November 1998,
Emosyn also entered into a strategic  alliance with Xicor,  Inc.  focused on the
distribution  of  integrated  circuits  to smart  card  applications.  Under the
agreement  Emosyn has the right to become  Xicor's  exclusive  sales channel for
Xicor integrated circuit products in chip or module form, to customers who focus
on smart card  applications,  and holds an option to purchase  the product  line
beginning in 2001.

     Products and Services.  Emosyn's first semiconductor  products are targeted
at the fast- growing market for  micro-controller-based  smart card IC's. Emosyn
has teamed up with EM  Microelectronics  of Marin in  Switzerland to bring these
products to market.  By  combining  Emosyn's  expertise in  non-volatile  memory
technology and Emosyn's  Rania  development  environment  with EM's expertise in
ultra-low power and radio frequency technology, Emosyn is positioned to uniquely
address  the needs of the smart card  market.  This  partnership  has  defined a
roadmap for contacting, contactless, and combi smartcard IC's and will operate a
unified sales and marketing team.

     Development.  With no legacy  architecture  to  support,  Emosyn is able to
select and apply the best technologies for smartcard IC solutions.  Two years of
market research by Emosyn has allowed them to define the "Theseus"  architecture
which extends the envelope of existing technologies in terms of density,  speed,
power, and memory partitioning.  Emosyn's innovative approach to applying memory
technologies  provides a silicon solution that  significantly  reduces the major
problem of time-to-market with no penalty in the die area. Along with Rania, the
Theseus  architecture is part of Emosyn's  commitment to reducing the total cost
of ownership for its customers.

     Customers, Sales, and Marketing

     ATMI sells and  distributes  its  products  worldwide,  both  directly  and
through   manufacturers'   representatives.   Many  of  ATMI's   customers  have
relationships  with more  than one  segment  of the  Company,  or are  acting as
collaborators on ATMI's development programs.

     The ATMI Materials segment primarily distributes its materials and delivery
system  products  to  end-use  customers,   chemical  suppliers,  and  equipment
suppliers  through  its direct  sales force in North  America  and  Europe,  and
through  regional  manufacturing  representatives  in Asia. ADCS distributes its
products   in  South  Korea   through   ADCS-Korea   Co.  Ltd.   ("ADCS-Korea").
Additionally, the equipment product lines are marketed and sold to semiconductor
equipment  OEMs,  who in turn  resell  to end  users.  NOW  generally  sells its
containers to chemical  suppliers.  The chemical  companies then sell their high
purity  chemicals in NOWPak  containers at the request of end-users.  NovaSource
currently  markets and sells the SDS product  solely into the ion implant market
through an exclusive distribution agreement with Matheson.
<PAGE>

     The  businesses  within  the  ATMI  Technologies  segment  distribute  both
directly and through various manufacturing representatives.

     EcoSys  distributes  its  point-of-use   environmental   equipment  through
manufacturers'  representatives  throughout  the world.  Direct sales  personnel
serve as regional managers who coordinate the  representatives'  activity within
their respective regions. Additionally, EcoSys markets directly to semiconductor
end-user facility managers to provide full-fab  environmental  solutions as well
as installation and on-going service.

     Epitronics  markets  and  sells  its  thin  film  deposition  services  and
epitaxial wafers primarily on a direct basis. In particular,  silicon epi wafers
and  services are sold  directly  throughout  the world.  Wide bandgap and III-V
epitaxial wafers are sold directly in North America and through distributors and
agents in Europe and Asia.

     Substantially  all of the Company's sales are to customers in the worldwide
semiconductor  industry.  The Company's  results of operations,  therefore,  are
materially  dependent upon economic and business conditions in the semiconductor
industry.  The semiconductor industry has historically  experienced  significant
growth;  however periods of reduced  semiconductor unit demand and manufacturing
overcapacity,  as seen throughout 1998,  could result in  significantly  reduced
demand for  semiconductor  materials,  capital  equipment,  and wafer processing
services.

Manufacturing

     ATMI Materials Segment

     ADCS  manufactures  its thin film  materials  and  delivery  systems at its
Burnet, Texas and Danbury,  Connecticut  facilities.  In addition,  ADCS-Korea's
facility  in  Anseong,  South  Korea  manufactures  thin  film  materials  to be
distributed in the South Korean market. NovaSource manufacturers SDS in Danbury,
which is complemented by contracted  manufacturing from Matheson's facility. NOW
manufactures its chemical  containers and dispensing systems at its Bloomington,
Minnesota facility.  The Company believes that these facilities are adequate for
its current needs.

     ATMI Technologies Segment

     EcoSys   manufactures  the  majority  of  its  point-of-use   environmental
equipment  in  San  Jose,   California.   EcoSys  manufactures  its  proprietary
adsorbents for its gas treatment products at ATMI's Danbury facility.

     Epitronics  processes its specialty  silicon  epitaxial wafers at its Mesa,
Arizona facility and processes III-V  semiconductor  wafers for the wireless and
optoelectronic  industries at its Phoenix,  Arizona facility.  It processes wide
bandgap epitaxial wafers and produces high performance thin films in Danbury.

     Emosyn conducts its research and development  under its alliance  agreement
with EM Microelectronics of Marin, Switzerland,  in San Jose, California, at its
offices in the United Kingdom, and its Danbury facility.

     Raw materials for ATMI's products and processes are available from multiple
domestic and foreign sources.
<PAGE>

     Competition

     The semiconductor  thin film materials and delivery systems,  environmental
equipment,  and  epitaxial  deposition  services  markets are  characterized  by
rapidly evolving  technology and products.  Both large and small companies offer
products  in  these  markets,  and many of these  companies  have  significantly
greater financial and other resources than ATMI. The Company attempts to compete
by leveraging its  substantial  investment in CVD thin film technology to expand
product  offerings in  combination  with tactical  acquisitions  to provide full
market-basket solutions to customers that are increasingly seeking to streamline
their vendor relationships.

     ATMI Materials Segment

     ADCS's  primary  competitors  in the  United  States  are the Air  Products
Corporation and the Diffusion Systems Division of Olin Hunt Specialty  Products,
Inc. Outside of North America,  ADCS competes with these companies and also with
Yamanaka Hutech Corporation and Kojundo in Asia, and Merck in Europe.  There are
several  other smaller  participants  in these  markets.  There are currently no
direct  competitors to the patented  NovaSource SDS product.  Several companies,
however, provide gases in high-pressure containers that compete with the process
capability of SDS. There are numerous  domestic and foreign companies that offer
products  that  compete with NOW's  products.  However,  NOW  believes  that its
ability to compete in the  markets  for  containers  and  dispensing  systems is
dependent largely upon its proven ability to continually enhance and improve its
products and technologies.

     ATMI Technologies Segment

     EcoSys's  primary  competition  in effluent gas treatment is from companies
focused on water and combustion  treatment  methods.  The primary water scrubber
competitor is Delatech,  while combustion scrubber  competitors include Delatech
and Alzeta. Dry scrubber  competitors include CS GmbH, Ebara, Japan Pionics, and
the Edwards Division of British Oxygen Corporation.

     As a  supplier  of  a  broad-based  line  of  epi  services  and  products,
Epitronics has competitors in each of its primary product areas. In silicon epi,
Epitronics competes with Moore Technologies, Reaction Technologies, and a number
of  specialty  wafer  manufacturers  with  their own epi  capabilities.  In some
product areas,  Epitronics  competes with the major silicon wafer  manufacturers
including  Wacker,  Mitsubishi  Silicon  America,  and  Sumitomo.  In III-V epi,
Epitronics competes with Kopin,  Epitaxial Products International (EPI), Emcore,
and a number of smaller manufacturers.

     Emosyn is evolving as a  commercial  presence in a very large smart card IC
marketplace.  Several large companies are also working to provide  semiconductor
devices into that marketplace, including Phillips, Atmel, and Samsung.

     Research and Development and Strategic Alliances

     ATMI's  research and  development  expenses  consist of personnel and other
direct and indirect costs for  internally  funded  project  development.  ATMI's
external  funding is almost  exclusively  from  various  agencies of the federal
government  through  its  Ventures  division.  ATMI also  participates  in joint
development efforts with certain  semiconductor  manufacturers and semiconductor
equipment  OEMs.  Total sums expended for research and development for the years
ended December 31, 1998, 1997, and 1996 were $18.3 million,  $18.7 million,  and
$18.4 million,  respectively.  Of those amounts, $5.9 million, $7.9 million, and
$8.4 million respectively,  were externally funded and are classified as cost of
contract  revenues  on  ATMI's  Consolidated  Financial  Statements,  and  $12.4
million, $10.8 million, and $10.0 million, respectively,  were internally funded
expenditures  by the Company and are  classified  as  research  and  development
expenses on ATMI's Consolidated Financial Statements. Over the last three years,
a significant  portion of the Company's  research and development has focused on
ferroelectric materials and SDS gas delivery systems.
<PAGE>

     Ferroelectric  Materials.  The Company believes that further  reductions in
circuit dimensions will require changes in the materials used for the thin films
required to store,  transmit, and switch electricity in the complex circuitry of
semiconductor  devices. As a result, in August 1992, the Company entered into an
agreement with IBM, Micron Technology, and Texas Instruments (the "Collaborating
Group")  to develop  advanced  thin film  capacitor  materials  and CVD  process
technology delivery equipment for next-generation memory devices. This agreement
focused on developing  CVD process  technology to fabricate  ferroelectric  thin
films, such as barium strontium  titanate,  for high performance memory devices.
Barium  strontium  titanate can store over 30 times more electrical  charge than
conventional  thin films.  Use of this material could  significantly  reduce the
manufacturing complexity of advanced memory devices. In April 1993, the Advanced
Research  Projects  Agency awarded a $5 million  contract for the development of
thin film materials  technology to the Collaborating  Group, with the Company as
prime contractor.  This program was successfully  completed in 1996 with a total
cost of over $20 million. The Company, through its Emosyn division, continues to
use the  technology  developed  under the program to develop  and  commercialize
smart card devices  pursuant to a strategic  alliance  with a subsidiary  of SMH
Swatch. In addition, ATMI's ferroelectric thin film technology has also expanded
to  other   ferroelectric   materials  that  have   applications   ranging  from
non-volatile memory devices to wireless components. This in turn has led ATMI to
enter into strategic  alliances  with Lucent  Technologies,  Siemens,  and Texas
Instruments to develop these materials for commercial markets.

     SDS Gas Delivery Source.  Simultaneously with the development of these thin
film  materials,  the Company  developed  and  patented a novel  approach to the
delivery of gases to semiconductor reactors. Historically, semiconductor process
gases have only been  available in  high-pressure  cylinders  that can create an
immediate danger over a large area if inadvertently released. Through the use of
in-cylinder  adsorbents,  the  SDS  product  reduces  cylinder  pressures  below
atmospheric levels. This lowered pressure allows controllable, on-demand release
of certain  semiconductor  process gases. The Company began a strategic alliance
with Matheson in January 1994, under which Matheson exclusively  distributes the
SDS product to ion implant users in the worldwide semiconductor industry.

     Government  Contracts.  ATMI  Technologies,  through it Ventures  division,
participates  in  United  States  government-funded   research  and  development
contracts.  As of December 31, 1998, the Company had received  aggregate  awards
since its inception of approximately $69.0 million from United States government
agencies,  including  approximately  $62.9 million recognized as revenue by ATMI
through  December  31, 1998.  These  contracts  fund  continued  CVD  technology
development,    development   of   high   performance   semiconductor   devices,
ferroelectric  thin  films,  and  devices  for  specific   applications,   while
offsetting the cost of research and development.  Government  contract  revenues
totaled approximately $7.9 million, $9.1 million, and $9.8 million for the years
ended  December  31,  1998,  1997,  and  1996,  respectively.   This  represents
approximately  8.1%, 7.8%, and 10.0% of ATMI's  consolidated  revenues for those
respective  periods.  The government may terminate contracts with the Company at
its convenience. The government may also exercise "march-in" rights in the event
that the  Company  fails to  continue  to develop  the  technology,  whereby the
government may exercise a non-exclusive,  royalty-free,  irrevocable,  worldwide
license to any technology  developed under  contracts  funded by the government.
ATMI  Technologies,  through  its  Ventures  division,  will  continue to submit
proposals to various government entities for additional research and development
funding as long as such  proposals  are  consistent  with its  commercialization
strategy.
<PAGE>

     Backlog

     Neither  ADCS,  which  conducts  significant  portions of its business with
open-ended,  long-term  supply  contracts which do not specify  quantities,  nor
Epitronics, which generally operates with fast turnaround,  maintain significant
backlog.  Because orders comprising the Company's  backlog may be canceled,  and
delivery schedules may be changed,  the Company's backlog at any particular date
may not be indicative of actual sales for any succeeding period.

     ATMI  considers  orders  for  products  shippable  within six months of the
backlog date and fully executed and funded  research  contract  awards as of the
backlog date as firm backlog.  As of December 31, 1998, ATMI had firm backlog of
approximately $13.4 million, consisting of approximately $5.5 million of product
orders and approximately $7.9 million of executed and funded research contracts.
This  compares to a firm  backlog  level of  approximately  $17.5  million as of
December 31, 1997,  which  consisted of  approximately  $11.1 million of product
orders and approximately $6.4 million of executed and funded research contracts.
The decline in product  backlog  when  comparing  1998 to 1997 is because of the
softness in capital spending in the semiconductor industry, since EcoSys product
lines normally constitute the majority of the Company's backlog.

     Patents and Proprietary Rights

     The  Company has made a  significant  investment  in securing  intellectual
property  protection  for  its  technology  and  products.   ATMI  protects  its
technology  by, among other things,  filing patent  applications  for technology
considered  important to the  development  of its business.  It also relies upon
trade secrets, unpatented know-how,  continuing technological innovation and the
aggressive  pursuit of licensing  opportunities to help develop and maintain its
competitive position.

     ATMI has been awarded 118 United  States  patents,  and  currently  has 138
United States patent applications  pending.  Foreign  counterparts of certain of
these applications have been filed, or may be filed at an appropriate time. ATMI
decides on a case-by-case  basis whether,  and in what  countries,  it will file
counterparts  of a United States patent  application  outside the United States.
ATMI's United States patents  expire  between 2006 and 2019.  ATMI also holds 15
United States  trademarks.  All United States trademarks are actively being used
by ATMI.

     ATMI's ability to compete  effectively with other companies will depend, in
part,  on its  ability to maintain  the  proprietary  nature of its  technology.
Although ATMI has been awarded, has filed applications for, or has been licensed
under numerous patents in the United States and other countries, there can be no
assurance  concerning the degree of protection  afforded by these patents or the
likelihood that pending patents will be issued.

     The Company requires all employees and most consultants, outside scientific
collaborators,   sponsored   researchers,   and  other   advisors   to   execute
confidentiality  agreements  upon the  commencement  of employment or consulting
relationships   with  ATMI.  These  agreements  provide  that  all  confidential
information  developed or made known to the individual  during the course of the
individual's  relationship  with the Company is to be kept  confidential and not
disclosed  to third  parties  except in  specific  circumstances.  All of ATMI's
employees have entered into agreements providing for the assignment of rights to
inventions made by them while in the employ of the Company.
<PAGE>

     Environmental Regulation

     The Company uses, generates,  and discharges toxic,  volatile, or otherwise
hazardous  chemicals and wastes in its manufacturing,  processing,  and research
and development  activities.  Therefore,  the Company is subject to a variety of
federal, state, and local governmental  regulations related to the storage, use,
and disposal of these materials. The Company believes that it has, or is seeking
to obtain,  all the permits  necessary  to conduct its  business.  However,  the
failure to comply with present or future laws,  rules,  or  regulations,  or the
failure of the  Company to obtain the  permits  it is  currently  seeking  could
result in fines or other liabilities being imposed on the Company, suspension of
production, or a cessation of operations. While the Company believes that it has
properly  handled its hazardous  materials and wastes and has not contributed to
any on-site contamination or environmental condition at any of its premises, the
various premises,  particularly the premises in Danbury,  Connecticut,  may have
been contaminated prior to the Company's occupancy.  The Company is not aware of
any  environmental  investigation,  proceeding,  or action by  federal  or state
agencies  involving  these  premises.  However,  under certain federal and state
statutes and regulations,  a government  agency may seek to recover its response
costs and/or require future remedial  measures from both operators and owners of
property  where releases of hazardous  substances  have occurred or are ongoing.
The prior occupant of the Danbury,  Connecticut premises has agreed to indemnify
the Company for remediation costs in connection with any  pre-existing,  on-site
contamination or  environmental  condition.  However,  there can be no assurance
that this  indemnification will prove adequate to cover any liability imposed on
the Company related to the  environmental  condition of the premises or the cost
of defending an environmental action, either of which could be substantial.  The
Company's  activities  may  also  result  in its  being  subject  to  additional
regulation.  Such regulations  could require the Company to acquire  significant
additional  equipment  or to incur  other  substantial  expenses  to comply with
environmental laws, rules or regulations.  Any failure by the Company to control
the use of, or to restrict  adequately  the discharge of,  hazardous  substances
could subject it to substantial  financial liabilities and could have a material
adverse  effect on the  Company's  business,  operating  results  and  financial
condition.

     Employees

     As of  December  31,  1998,  ATMI  employed  a  total  of 455  individuals,
including 139 in sales and administration, 258 in operations, and 58 in research
and  development.  Of these employees,  51 hold Ph.D.  degrees and 38 hold other
advanced  degrees  in  electrical  engineering,  materials  science,  chemistry,
physics,  or related  fields.  None of the  Company's  employees  are covered by
collective bargaining  agreements.  ATMI has not experienced any work stoppages,
and considers its relations with its employees to be strong.

Item 2.  Properties.

     ATMI's headquarters are located in Danbury, Connecticut,  where it leases a
72,000 square foot  facility.  The Company  occupies this facility under a lease
which  expires on August 30,  2005.  ATMI  believes  its  existing  facility  is
adequate and suitable for its current and anticipated needs.

     ADCS's  headquarters and general  corporate  offices are located in Austin,
Texas, where it leases  approximately  4,000 square feet. This lease expires May
31, 2000. ADCS also owns  approximately six acres of property in Burnet,  Texas,
on which its 12,000 square foot manufacturing  facility is located.  The Company
believes that ADCS's existing headquarters and manufacturing facilities with its
potential for expansion  are adequate for the current and  anticipated  level of
demand.

     ADCS-Korea owns  approximately  1.4 acres in an industrial park in Anseong,
South Korea, where its approximately  9,000 square foot  manufacturing  facility
and office are located.
<PAGE>

     NOW leases a 70,000 square foot facility located in Bloomington, Minnesota,
including approximately 20,000 square feet of cleanroom manufacturing. The lease
expires in 2000,  with two,  three-year  renewal  options.  ATMI believes  these
facilities are adequate and suitable for NOW's current and anticipated needs.

     EcoSys leases  45,000  square feet of  facilities in San Jose,  California,
which leases expires in March 2003. ATMI believes these  facilities are adequate
and suitable for EcoSys's current and anticipated needs.

     Epitronics owns its corporate  headquarters located in Mesa, Arizona.  This
facility  measures  33,000  square feet, is expandable to 50,000 square feet and
houses the specialty silicon epitaxial service business.  Epitronics also leases
a 15,000 square foot  facility in Phoenix,  Arizona,  where the III-V  epitaxial
business is located, which lease expires August 1999. The wide bandgap epitaxial
business is housed in ATMI's  corporate  facility in Danbury,  Connecticut.  The
Company obtains certain of its manufacturing  equipment by entering into capital
leases,  while other equipment is held subject to liens on the related equipment
securing notes payable. ATMI believes these facilities are adequate and suitable
for Epitronics' current and anticipated needs.

Item 3.  Legal Proceedings.

     In the  normal  course of  business,  the  Company is  involved  in various
lawsuits  and  claims.  Although  the  ultimate  outcome  of any of these  legal
proceedings  cannot be determined at this time,  management,  including internal
counsel, does not believe that the outcome of these proceedings, individually or
in the aggregate, will have a material adverse effect on the Company's financial
position or overall trends in results of operations.

Item 4.  Submission of Matters to a Vote of Security Holders.

     No  matter  was  submitted  to a vote  of  security  holders,  through  the
solicitation  of proxies or otherwise,  during the fourth  quarter of the fiscal
year ended December 31, 1998.

Item 4A.           Executive Officers of the Registrant.
<TABLE>
<CAPTION>

     The executive officers of ATMI are as follows:
<S>                         <C>   <C>

Name                        Age   Position
Eugene G. Banucci, Ph.D     55    President, Chief Executive Officer, Chairman 
                                   of the Board, and Director
Stephen H. Siegele          38    President--ADCS Division, Vice Chairman of 
                                   ATMI, and Director
Peter S. Kirlin, Ph.D       38    Executive Vice President--ATMI Technologies
Douglas A. Neugold          40    Executive Vice President--ATMI Materials
Daniel P. Sharkey           42    Vice President, Chief Financial Officer, and
                                   Treasurer
</TABLE>

     Eugene G. Banucci, Ph.D., a founder of ATMI, has served as President, Chief
Executive Officer,  Chairman of the Board, and Director since 1986.  Previously,
Dr. Banucci served in a variety of executive and managerial positions. From 1984
to 1986,  he was a director of American  Cyanamid  Company's  Chemical  Research
Division,  with  responsibility  for the  research,  development,  and technical
service activities of the Chemicals Group.
<PAGE>

     Stephen H. Siegele has served as  President  of the ADCS  Division and as a
Director of ATMI since  October  1997,  and as Vice  Chairman of ATMI's Board of
Directors  since  February 1999.  Mr.  Siegele,  a co-founder of the ADCS Group,
served as the  President  and Chief  Executive  Officer  of the ADCS  Group from
February  1994  until  October  1997,  and has  served as a  director  since its
inception in 1988.  From 1988 to 1994,  Mr.  Siegele served as Vice President of
the ADCS Group.  Prior to that time, Mr. Siegele served in sales and engineering
positions at Intel Corporation and Olin Hunt Specialty Products, Inc.

     Peter S. Kirlin, Ph.D. has served as Executive Vice President of ATMI since
1995. From 1991 to 1995, Dr. Kirlin served as Vice President of Microelectronics
and General  Manager of the former NovaMOS  division of ATMI. From 1988 to 1991,
Dr. Kirlin served as Director of  Superconductor  Materials and  Electronics for
ATMI.  Prior to  joining  ATMI,  Dr.  Kirlin was a Project  Leader and  Research
Engineer for American Cyanamid Company.

     Douglas A.  Neugold  has served as  Executive  Vice  President  of the ATMI
Materials  segment since February 1999. In January 1998, Mr. Neugold joined ATMI
as Vice  President  of the  NovaSource  division,  and since July 1998 served as
President  of that  division.  Previously,  Mr.  Neugold  served in a variety of
executive and managerial  positions with the  Electronic  Materials  Division of
Johnson  Matthey.  From 1995 to 1997, he served as Vice President,  and later as
President of the Semiconductor Packages business. From 1993 to 1995, Mr. Neugold
served as Director of Asian Operations, and prior to that served in a variety of
business and marketing management positions focused on semiconductor technology.

     Daniel P. Sharkey has served as Chief Financial  Officer since joining ATMI
in 1990, and has served as Vice President and Treasurer since 1993. From 1987 to
1990, Mr. Sharkey was Vice  President of Finance and  Administration  for Adage,
Inc., a manufacturer of high-performance  computer graphics terminals. From 1983
to 1987,  he was  Corporate  Controller  for CGX  Corporation.  Previously,  Mr.
Sharkey served as Audit Supervisor for KPMG Peat Marwick.

     Executive officers serve at the discretion of the Board of Directors. There
are no family relationships among any of the executive officers or directors.

<PAGE>


                                    PART II.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

     The Common Stock of ATMI has traded on the Nasdaq National Market under the
symbol ATMI since  October 13, 1997,  and prior thereto the Common Stock of ATM,
the  Company's  predecessor,  was  traded on the  Nasdaq  National  Market  from
November  1993 under the same  symbol.  The  following  table sets forth for the
periods  indicated the high and low sales price for the Common Stock as reported
on the Nasdaq National Market:

<TABLE>
<CAPTION>
<S>                                                       <C>          <C>

                                                               High         Low
Fiscal year ended December 31, 1997
     1st Quarter .................................         $   22.00   $   16.00
     2nd Quarter .................................             29.75       15.75
     3rd Quarter .................................             39.25       25.00
     4th Quarter .................................             42.25       18.13
Fiscal year ended December 31, 1998
     1st Quarter .................................             31.19       20.00
     2nd Quarter .................................             33.75       13.25
     3rd Quarter .................................             20.00       10.88
     4th Quarter .................................             25.38       11.25
</TABLE>

     As of March 2, 1999, there were  approximately 273 holders of record of the
Common Stock.

     The Company has never  declared or paid any cash  dividends  on its capital
stock. The Company currently intends to retain all available earnings for use in
its  business  and  does  not  anticipate  paying  any  cash  dividends  in  the
foreseeable future.  Certain financing agreements of the Company's  subsidiaries
contain  limitations  or  prohibitions  on the payment of dividends  without the
lender's  consent or in conjunction  with a subsidiary's  failure to comply with
various financial covenants.

     The Transfer Agent and Registrar for ATMI Common Stock is Boston Equiserve.


<PAGE>

Item 6.           Selected Financial Data.

     The  following  selected  consolidated  statements  of income for the years
ended  December  31,  1998,  1997,  and 1996 and the  balance  sheet  data as of
December 31, 1998 and 1997 are derived from the audited  consolidated  financial
statements of the Company.  The consolidated  statements of income for the years
ended  December  31,  1995  and  1994 is  derived  from  unaudited  consolidated
financial statements.  The balance sheet data as of December 31, 1996, 1995, and
1994 is derived from unaudited consolidated financial statements.  The unaudited
consolidated financial statements include all adjustments,  consisting of normal
recurring   accruals,   which  the  Company  considers   necessary  for  a  fair
presentation  of the financial  position and the results of operations for these
periods.  The  data set  forth  below  should  be read in  conjunction  with the
Consolidated   Financial  Statements  and  Notes  thereto  and  other  financial
information included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>

                                                                       Fiscal Year Ended December 31,
                                                                       ------------------------------
<S>                                                       <C>             <C>            <C>             <C>           <C>

                                                          1998            1997            1996            1995         1994
                                                          ----            ----            ----            ----         ----
                                                                (in thousands, except per share data)
Consolidated Statements of Income:
  Product revenues ...............................   $  89,927       $ 107,612       $  88,926       $  61,978    $  35,739
  Contract revenues ..............................       7,947           9,120           9,846           8,712        7,223
                                                         -----           -----           -----           -----        -----
  Total revenues .................................      97,874         116,732          98,772          70,690       42,962
  Cost of revenues ...............................      50,468          56,037          46,759          35,052       21,790
                                                        ------          ------          ------          ------       ------
  Gross profit ...................................      47,406          60,695          52,013          35,638       21,172
  Operating expenses:
      Research and development ...................      12,415          10,827          10,033           5,854        4,069
      Selling, general, and administrative .......      25,629          28,256          24,847          19,546       11,542
      Non-recurring expenses .....................       2,102 (1)       9,000(2)        2,000(3)            0            0
                                                         -----           -----           -------             -            -
         Total operating expenses ................      40,146          48,043          36,880          25,400       15,611
                                                        ------          ------          ------          ------       ------
  Operating income ...............................       7,260          12,612          15,133          10,238        5,561
  Interest income (expense), net .................       2,421            (349)           (100)           (238)        (239)
  Other income (expense), net ....................         541             305             152            (543)       3,769
                                                           ---             ---             ---            -----       -----
  Income before income taxes and minority interest      10,222          12,568          15,185           9,457        9,091
  Income taxes ...................................       3,646           6,637           3,134           3,432        2,398
                                                         -----           -----           -----           -----        -----
  Income before minority interest ................       6,576           5,931          12,051           6,025        6,693
  Minority interest ..............................        (111)             (2)            151              10           12
                                                          ----              --             ---              --           --
  Net income .....................................   $   6,465       $   5,929       $  12,202 (4)   $   6,035      $ 6,705 (5)
                                                     =========       =========       ========= ==    =========      ======= == 
  Net income per share--assuming dilution ........   $    0.29       $    0.29       $    0.61 (4)   $    0.32       $ 0.37 (5)
                                                     =========       =========       ========= ==    =========       ====== == 
  Weighted average shares outstanding--assuming ..      22,017          20,254          19,987          18,720       18,230
   dilution
</TABLE>
<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                                      ------------
<S>                                                      <C>              <C>             <C>              <C>        <C>
                                                         1998             1997            1996             1995       1994
                                                         ----             ----            ----             ----       ----
                                                                           (in thousands)
Consolidated Balance Sheet Data:
    Cash, cash equivalents, and marketable securities $ 83,061        $ 31,307        $ 31,688         $ 34,637   $ 17,989
    Working capital ...............................     96,293          41,578          36,081           33,155     19,261
    Total assets ..................................    169,405         113,333         102,145           87,800     45,937
    Long-term debt, less current portion ..........      7,345          14,526          15,787           11,975      7,811
    Minority interest .............................        846             595             545              535          6
    Total stockholders' equity ....................    138,658          68,071          60,121           49,568     25,866

<PAGE>

<FN>

     (1) Represents a one-time charge of $1.7 million accrued in connection with
costs incurred in investigating,  analyzing, and completing the NOW acquisition,
and a $0.4 million  charge  relating to a  restructuring  charge  primarily  for
severance at ATMI's EcoSys division.

     (2) Represents a one-time charge of $9.0 million accrued in connection with
costs incurred in  investigating,  analyzing,  and completing the ADCS Group and
LSL acquisitions.

     (3)  Represents a one-time  charge of $2.0 million  ($1.2  million,  net of
taxes)  accrued in  connection  with  patent  litigation  involving  LSL,  which
resulted in a settlement payment in May 1997.

     (4) Net income, and net income per share--assuming dilution, in 1996 include
the effect of the ADCS Group's  treatment as an  S-Corporation  for a portion of
the year. If the ADCS Group had been taxed as a  C-Corporation  for all of 1996,
the Company's net income, and net income per share--assuming dilution, would have
been  approximately  $10.7 million and $0.54,  respectively,  for the year ended
December 31, 1996.

     (5) Net income, and net income per share--assuming dilution, in 1994 include
a non-recurring gain of approximately  $3.6 million,  or $0.20 per share--related
to the restructuring of a joint venture and costs incurred in the acquisition of
The Vector Technical Group, Inc.

</FN>
</TABLE>

<PAGE>




Item 7. Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

     Overview

     ATMI,  Inc. is a leading  supplier of thin film materials,  equipment,  and
services used worldwide in the manufacture of semiconductor devices. The Company
targets high growth  consumable and equipment  markets within the  semiconductor
industry with proprietary and patented products. The Company currently provides:
(i) a broad range of  ultrahigh-purity  thin film materials and related delivery
systems; (ii) a full line of point-of-use semiconductor  environmental equipment
and services; and (iii) specialty epitaxial thin film deposition services.  Over
the last four years,  the Company has achieved a leadership  position in each of
its target  markets by  providing  a more  complete  line of  products  than its
competitors.  ATMI's  strategy is to continue  its growth  through  product line
expansion in each of its existing markets and to leverage its core technology to
create new high growth businesses. The Company has grown in recent years through
strategic acquisitions in its target markets.

     ATMI  has  capitalized  on the  growth  of the  semiconductor  industry  by
providing leading edge products and services in each of its target markets.  The
Company has recently organized its operations along two business  segments--ATMI
Materials and ATMI Technologies.

     ATMI's  Materials  segment  consists  of  the  ADCS,  NovaSource,  and  NOW
divisions.  ADCS develops and markets  ultrahigh-purity  thin film materials and
proprietary delivery systems.  NovaSource develops and markets SDS, which stores
dangerous  gases  as  solids  in  cylinders,   providing  increased  safety  and
substantially greater operating efficiencies.  NOW manufactures high performance
containers  and  dispensing  systems for advanced  purity  chemicals used in the
manufacture of microelectronics. The Materials segment contributed approximately
50% of consolidated revenues in 1998.

     ATMI's Technologies segment consists of the EcoSys, Epitronics, Emosyn, and
Ventures  divisions.  The  Company  believes  EcoSys  is the  only  provider  of
point-of-use  environmental  equipment  offering all of the key technologies for
semiconductor  effluent abatement.  The Company's Epitronics division is a world
leader in specialty epitaxial  services,  providing  high-quality  processing of
silicon and next-generation III-V and wide bandgap, wafers. The Company's Emosyn
division  is  bringing  to market a new  generation  of  semiconductor  devices,
initially targeted at the high growth market for smart card integrated circuits.
ATMI  participates in United States  government-funded  research and development
contracts through its Ventures division.  The Technologies  business contributed
approximately 50% of consolidated revenues in 1998.

<PAGE>

    Results of Operations

     The following table sets forth,  for the periods  indicated,  certain items
from the Company's  consolidated  statements of income expressed as a percentage
of total revenues:
<TABLE>
<CAPTION>

                                                  Percentage of Total Revenues
                                                 Fiscal Year Ended December 31,
                                                 ------------------------------
<S>                                                 <C>        <C>        <C>

                                                     1998       1997       1996
                                                     ----       ----       ----
Product revenues ...............................     91.9%      92.2%      90.0%
Contract revenues ..............................      8.1        7.8       10.0
                                                      ---        ---       ----
Total revenues .................................    100.0      100.0      100.0
Cost of revenues ...............................     51.6       48.0       47.3
                                                     ----       ----       ----
Gross profit ...................................     48.4       52.0       52.7
Operating expenses:
   Research and development ....................     12.7        9.3       10.2
   Selling, general, and administrative ........     26.2       24.2       25.2
   Non-recurring expenses ......................      2.1        7.7        2.0
                                                      ---        ---        ---
     Total operating expenses ..................     41.0       41.2       37.4
                                                     ----       ----       ----
Operating income ...............................      7.4       10.8       15.3
Interest income (expense), net .................      2.5       (0.3)      (0.1)
Other income, net ..............................      0.5        0.3        0.2
                                                      ---        ---        ---
Income before income taxes and minority interest     10.4       10.8       15.4
Income taxes ...................................      3.7        5.7        3.2
                                                      ---        ---        ---
Income before minority interest ................      6.7        5.1       12.2
Minority interest ..............................     (0.1)       0.0        0.2
                                                     ----        ---        ---
Net income .....................................      6.6%       5.1%      12.4%
                                                      ===        ===       ==== 
</TABLE>

     Comparison of Fiscal Years Ended December 31, 1998, 1997, and 1996

     Revenues.  Revenues  decreased  16.2% to $97.9  million in 1998 from $116.7
million in 1997,  following  an increase of 18.2% in 1997 from $98.8  million in
1996.  Product  revenues  decreased  16.4% to $89.9  million in 1998 from $107.6
million in 1997,  and increased  21.0% in 1997 from $88.9 million in 1996.  Soft
market conditions in 1998,  evidenced by a decline in semiconductor  unit demand
in the  second  and  third  quarters  of 1998  and a  significant  reduction  in
semiconductor equipment spending during most of 1998, were the primary causes of
the revenue  decline when  comparing 1998 with 1997. The growth in revenues from
1996 to 1997 was driven  primarily  by a  substantial  increase  in SDS  product
sales,  increased  market  penetration  within most product  lines,  and healthy
overall growth in the semiconductor industry in 1997.

     Contract  revenues  decreased  12.9%  to $7.9  million,  or  8.1% of  total
revenues,  in 1998 from $9.1 million,  or 7.8% of total  revenues,  in 1997, and
decreased 7.4% in 1997 from $9.8 million in 1996, or 10% of total revenues.  The
decline in 1998 and 1997 as  compared  to the  previous  years  resulted  from a
general  decrease  in  government  funding of the  Company's  contract  research
activities,  reflecting the completion of certain contract research programs and
the  Company's  decision  to  focus  on  research  relating  to  more  specific,
commercially relevant efforts.

     Gross Profit.  Gross profit  decreased  21.9% to $47.4 million in 1998 from
$60.7 million in 1997.  Gross margin decreased to 48.4% of revenues in 1998 from
52.0% of revenues in 1997. Gross margin on product  revenues  decreased to 50.4%
in 1998 from 55.2% in 1997,  primarily as a result of less efficient  fixed cost
absorption   attendant  to  the  decrease  in  revenues   experienced  in  1998,
particularly within the EcoSys, Epitronics, and NOW businesses.  Gross margin on
contract revenues increased to 25.7% in 1998 from 13.7% in 1997. The increase in
contract  margins  resulted  from the  completion  of various  firm-fixed  price
contracts during 1998.
<PAGE>

     Gross profit increased 16.7% to $60.7 million in 1997 from $52.0 million in
1996. Gross margin decreased to 52.0% of revenues in 1997 from 52.7% of revenues
in 1996. Gross margin on product revenues  decreased to 55.2% in 1997 from 56.8%
in 1996.  The decrease of product  margins was primarily  attributable  to lower
margins in the silicon epi business  because of the relocation of  manufacturing
equipment during the first half of 1997 and duplicate facility costs during that
period.  Additionally,  margin  decreases were caused by lower selling prices to
end-user  customers  of ADCS and the  fact  that the SDS  revenue  stream  was a
smaller  but  higher  margin  royalty  stream  in 1996.  Margin  decreases  were
partially  offset by the improved  margin profile of the overall  product mix of
EcoSys in 1997.  Gross  margin on contract  revenues  decreased to 13.7% in 1997
from 15.3% in 1996.  Contract  margins  varied  slightly when  comparing the two
periods due to different fee arrangements and indirect cost absorption.

     Research  and  Development  Expenses.  Research  and  development  expenses
increased  14.7% to $12.4  million  in 1998  from  $10.8  million  in 1997,  and
increased  7.9% in 1997  from  $10.0  million  in 1996.  The 1998  increase  was
primarily due to the development efforts to extend the SDS technology beyond ion
implant  applications  into  CVD,  etch,  and bulk  gas  delivery,  and  product
development  activities within the Company's Emosyn division.  The 1997 increase
was primarily due to increased staffing for several  development efforts related
to the Company's  advanced thin film technology and  applications.  Research and
development  expenses as a  percentage  of revenues  increased to 12.7% in 1998,
compared with 9.3% in 1997, which was a decrease from 10.2% in 1996.

     Selling,  General,  and  Administrative  Expenses.  Selling,  general,  and
administrative  expenses  decreased  9.3% to $25.6  million  in 1998 from  $28.3
million in 1997,  and increased  13.7% in 1997 from $24.8  million in 1996.  The
1998 decrease was primarily due to a reduction of administrative costs resulting
from  reductions  in  personnel,  a  decrease  in  executive  compensation,  and
decreased  commissions on lower product revenues.  ATMI's variable selling costs
grew in 1997 in line with the Company's  revenue  growth from 1996 levels.  ATMI
also added  administrative staff in 1997 as compared to 1996, to support revenue
growth, and incurred increased costs related to the businesses acquired in 1997.
Selling,  general,  and  administrative  expenses  as a  percentage  of revenues
increased to 26.2% in 1998, compared with 24.2% in 1997 and 25.2% in 1996.

     Non-Recurring  Expenses.  The 1998 and 1997  operating  results  included a
one-time,  non-recurring charge of $1.7 million and $9.0 million,  respectively,
related to the costs incurred in completing the NOW  acquisition in 1998 and the
ADCS Group and LSL  acquisitions in 1997. The 1996 operating  results included a
one-time charge of $2.0 million in connection with patent  litigation  involving
LSL, which resulted in a settlement  payment in May 1997.  Additionally,  in the
third  quarter  of  1998,  the  Company  recorded   approximately   $400,000  of
non-recurring  charges related to workforce  reductions in the EcoSys  business,
which was recorded in  non-recurring  charges,  and an increase of approximately
$900,000 in general business  reserves,  deemed necessary by the weakness in the
semiconductor  industry in 1998,  which was recorded in cost of sales,  selling,
general, and administrative expenses.

     Interest Income  (Expense),  Net.  Interest  income  increased 149% to $4.0
million in 1998 from $1.6 million in 1997,  and decreased 5.5% in 1997 from $1.7
million in 1996. The 1998 increase in interest  income is a direct result of the
increased cash and marketable securities that resulted from the Company's public
offering in the first quarter of 1998.  The decrease in interest  income in 1997
was due to lower  levels of cash on hand from the  acquisition  cost of ADCS and
LSL in the fourth  quarter of 1997.  Interest  expense  decreased  20.4% to $1.6
million in 1998 from $1.9 million in 1997,  and increased 8.8% in 1997 from $1.8
million in 1996.  The 1998 decrease was due to lower debt  balances  outstanding
during  1998,  as capital  lease lines were paid down and certain  high-interest
rate debt was  retired.  Interest  expense  was  higher in 1997 than  1996,  due
primarily to increased borrowings under capital lease lines.
<PAGE>

     Income Taxes.  Income tax expense  decreased  45.1% to $3.6 million in 1998
from $6.6 million in 1997, and increased 112% in 1997 from $3.1 million in 1996.
The effective income tax rate decreased to 36.1% in 1998 from 52.8% in 1997, and
increased from 20.4% in 1996. ATMI's income tax expense related to United States
federal and state taxes in 1998,  which was partially  offset by various foreign
sales  corporation  benefits,  and research and  development  credits.  The 1998
effective  tax  rate  was  increased  by no tax  benefit  being  taken  for  the
non-recurring  charge  of  $1.7  million  related  to the NOW  acquisition.  The
significant increase in 1997 to a level above statutory rates was due in part to
the 1997  operating  results  including  the $9.0 million  non-recurring  charge
related  to the ADCS Group and LSL  acquisitions  for which no tax  benefit  was
taken.

     Minority  Interest.  Minority interest  represents the 30% interest held by
K.C. Tech Co., Ltd. ("K.C. Tech") in the operations of ADCS-Korea a South Korean
chusik hoesa,  which is a joint venture  established to  manufacture,  sell, and
distribute chemicals to the semiconductor and related industries in South Korea.

     Earnings  Per Share.  Earnings  per  share,  on a diluted  basis,  remained
constant at $0.29 per share in 1998 and 1997,  a decline from $0.61 per share in
1996.  However,  after  adjusting  earnings  to exclude  the  non-recurring  and
one-time charges recognized in 1998, 1997, and 1996, and to adjust 1996 earnings
on a pro forma basis to treat the ADCS Group as a C-Corporation for all of 1996,
earnings per share, on a diluted basis, decreased 46% to $0.40 per share in 1998
from $0.74 per share in 1997,  and increased 37% in 1997 from $0.54 per share in
1996.  Basic  earnings per share  decreased 3.1% to $0.31 per share in 1998 from
$0.32 per share in 1997,  and  decreased  50.8% in 1997 from  $0.65 per share in
1996.

Segment Data

     During 1998, the Company  adopted FASB  Statement No. 131 Disclosure  About
Segments of an Enterprise and Related  Information.  ATMI has two segments--ATMI
Materials and ATMI  Technologies.  ATMI  Materials,  which consists of the ADCS,
NovaSource,  and NOW divisions,  develops and markets ultrahigh purity thin film
materials and proprietary  delivery systems.  ATMI Technologies  consists of the
EcoSys,  Epitronics,  Emosyn,  and  Venture  divisions.  EcoSys is a provider of
point-of-use  environmental  equipment  offering all of the key technologies for
semiconductor effluent abatement.  Epitronics is involved in specialty epitaxial
services,  providing  high quality  processing of silicon,  and  next-generation
III-V and wide bandgap, wafers. Emosyn is bringing to market a new generation of
semiconductor  devices,  initially  targeted at the high growth market for smart
card integrated  circuits.  ATMI participates in United States government funded
research and development  contracts through its Ventures  division.  The Company
has a corporate  headquarters,  which is not a separate operating unit. Activity
of the corporate headquarters has been classified in Corporate listed below. The
reportable  segments are each managed  separately  because they  manufacture and
distribute distinct products with different production processes.

     The  Company  evaluates   performance  and  allocates  resources  based  on
operating profit or loss, not including interest and other income or expense and
income taxes. The accounting policies of the reportable segments are the same as
those  described  in the summary of  significant  accounting  policies in ATMI's
Consolidated  Financial  Statements.  Intercompany  sales are not material among
segments or operating divisions.  The general corporate assets include primarily
cash and marketable  securities,  goodwill,  and other long-lived  assets of the
Company.
<PAGE>

<TABLE>
<CAPTION>

     The following tables provide reported results for each of these segments:
<S>                                <C>              <C>              <C>

Revenues                                    1998             1997             1996
--------                                    ----             ----             ----
ATMI Materials .................   $  49,086,000    $  57,304,000    $  40,154,000
ATMI Technologies...............      48,788,000       59,428,000       58,618,000
                                      ----------       ----------       ----------
Consolidated Revenues ..........   $  97,874,000    $ 116,732,000    $  98,772,000
                                   =============    =============    =============

Operating Income (Loss)                     1998             1997             1996
-----------------------                     ----             ----             ----
ATMI Materials .................   $  13,452,000    $  17,771,000    $  10,871,000
ATMI Technologies ..............      (2,201,000)       5,198,000        6,882,000
Non-recurring charges ..........      (2,102,000)      (9,000,000)      (2,000,000)
Corporate ......................      (1,889,000)      (1,357,000)        (620,000)
                                      ----------       ----------         -------- 
Consolidated Operating
 Income ........................   $   7,260,000    $  12,612,000    $  15,133,000
                                   =============    =============    =============

Identifiable Assets ............            1998             1997             1996
-------------------                         ----             ----             ----
ATMI Materials .................   $  32,934,000    $  27,999,000    $  21,695,000
ATMI Technologies ..............      48,848,000       50,077,000       47,885,000
General Corporate Assets .......      87,623,000       35,257,000       32,565,000
                                      ----------       ----------       ----------
Total Consolidated Assets ......   $ 169,405,000    $ 113,333,000    $ 102,145,000
                                   =============    =============    =============

Consolidated Net Income ........            1998             1997             1996
-----------------------                     ----             ----             ----

Operating Income from reportable
segments  ......................   $   7,260,000    $  12,612,000    $  15,133,000
Other Profit or (Loss) .........       2,851,000          (46,000)         203,000
Income Taxes (Provision) .......      (3,646,000)      (6,637,000)      (3,134,000)
                                      ----------       ----------       ---------- 
Consolidated Net Income ........   $   6,465,000    $   5,929,000    $  12,202,000
                                   =============    =============    =============

</TABLE>


Business Segments Results

ATMI Materials

     Overall  revenues in the  Materials  segment in 1998 declined 14% from 1997
levels,  which had  increased 43% from 1996 levels.  A decline in  semiconductor
unit demand during the second and third quarters of 1998 slowed sales of many of
ATMI Materials' product offerings. During the fourth quarter, semiconductor unit
demand began to rebound and caused  sequential  revenue  growth in the Materials
segment.  The 1997  Materials  revenue  growth was  spurred  by strong  industry
conditions and significant market penetration,  particularly  related to the SDS
and NOW product lines.

     Operating  income in the Materials  segment  declined 24% in 1998 from 1997
levels,  which had increased 63% from 1996 levels.  The revenue  decline in 1998
reduced gross margins within the segment and drove the operating income decline.
Alternatively, the revenue growth in 1997 when compared to 1996, increased gross
margins and generated higher operating  profitability.  Operating  income,  as a
percentage of revenues,  was 27.4%,  31.0%,  and 27.1% for 1998, 1997, and 1996,
respectively.
<PAGE>


ATMI Technologies

     Overall net revenues in the Technologies  segment in 1998 declined 18% from
1997  levels,   which  had   increased   1%  from  1996  levels.   Semiconductor
manufacturing  capacity  expansion  came to a virtual  standstill  in early 1998
which caused a significant  decline in revenues within the EcoSys and Epitronics
businesses. Although signs of a slow steady recovery have emerged in early 1999,
utilization  of existing  manufacturing  capacity  must  increase  significantly
before substantial capacity expansion occurs.  Government contract revenues also
declined in 1998 due to the  completion  of various  programs in 1998.  The 1997
revenue growth of EcoSys (9%) and Epitronics  (2%) was partially  offset by a 7%
decline in contract revenues.

     Operating income within the Technologies segment declined to a loss in 1998
based on the decline in EcoSys'  operating  results to below break-even  levels,
and the significantly  increased research and development efforts focused on the
Company's  Emosyn  business  and  other  new  business   ventures.   Epitronics'
profitability  also  declined  in  1998  by  virtue  of  revenue  declines  on a
relatively  fixed cost base. In 1997, the increased  operating  income generated
through  the growth of the  EcoSys  and  Epitronics  businesses  were  offset by
reduced profitability on government contracts and incremental  investment in the
Emosyn venture.

Corporate

     Corporate expenses continued to increase in 1998 from 1997 and 1996, due to
the overall increase in general and administrative support in 1998 and 1997. The
growth of the Company,  driven by three  acquisitions in the last five quarters,
has  required  additional  corporate  infrastructure.   The  corporate  expenses
increased  12% in 1998 from 1997,  which had  increased  118% from 1996  levels.
Corporate   identifiable   assets  consist  primarily  of  cash  and  marketable
securities.

Liquidity and Capital Resources

     To date,  the  Company  has  financed  its  activities  through the sale of
equity, its operations,  external research and development  funding, and various
lease and debt  instruments.  The Company's  working capital  increased to $96.3
million at December 31, 1998 from $41.6 million at December 31, 1997.

     In 1998,  operations provided cash of approximately $9.7 million.  The $1.7
million of  non-recurring  transaction  costs,  expensed in the third quarter of
1998,  reduced the cash generated from operations by approximately $1.1 million,
as  approximately  $0.6 million  remained  unpaid at December 31, 1998. Net cash
generated  from  operations  in 1997 was  approximately  $8.8  million.  Working
capital increases,  most notably in accounts  receivable,  inventory,  and other
assets,  resulted  in  significant  uses of cash in 1997.  The $9.0  million  of
non-recurring transaction costs, expensed in the fourth quarter of 1997, reduced
the  cash  generated  from  operations  by   approximately   $7.0  million,   as
approximately  $2.0 million  remain unpaid at December 31, 1997.  In 1996,  ATMI
generated  net cash  from  operations  of $13.9  million,  primarily  due to the
profitability of operations.

     The Company's investing  activities included capital  expenditures of $12.0
million, $6.7 million, and $12.0 million in 1998, 1997, and 1996,  respectively.
The  1998   expenditures   primarily   related  to  installation  of  additional
manufacturing capacity in Danbury,  Connecticut;  San Jose,  California;  and in
Burnet,  Texas.  The 1997  expenditures  included both the  installation  of SDS
manufacturing  capacity in the Danbury,  Connecticut facility and an increase in
epitaxial capacity in Epitronics' Arizona facilities.  Capital  expenditures for
1996 included final construction of Epitronics'  manufacturing facility in Mesa,
Arizona,  as well as  manufacturing  expansion  for EcoSys and  ADCS-Korea,  and
laboratory construction for customer application work for EcoSys.
<PAGE>

     Among other investing activities,  the Company invested approximately $47.9
million  raised  primarily  from the sale of its Common  Stock  into  marketable
securities  for future working  capital  requirements  and potential  merger and
acquisition activities.  The Company sold $0.8 million in marketable securities,
net in 1997, while in 1996, ATMI sold $3.6 million in marketable securities, net
and made a $4.0 million payment in connection  with the 1995  acquisition of the
Guardian Systems product line.

     As of December 31, 1998,  ATMI has  financed a  significant  portion of its
capital  equipment  purchases,  particularly  the  silicon  epitaxial  capacity,
through  capital  leases  with  approximately  $6.2  million  of  capital  lease
obligations  outstanding.  During  1998,  the Company  made  payments on capital
leases of approximately $2.7 million.  Financial institutions have also provided
collateral-based  loans for other equipment purchases.  During 1998, the Company
made payments on notes of approximately $5.3 million,  with the most significant
payment  being  the  mortgage  on the Mesa,  Arizona  Epitronics  facility.  The
Company's NOW business has an industrial revenue bond arrangement outstanding in
the amount of $2.7 million, which was used for equipment and improvements at its
manufacturing facility and corporate office. At December 31, 1998, $14.5 million
of loans,  bonds, and financing remained  outstanding.  Management believes that
its debt  service  obligations  can be  adequately  satisfied by cash flows from
operations.

     ATMI believes its existing cash balances,  marketable securities,  existing
sources of liquidity, and anticipated funds from operations,  including those of
the newly acquired  businesses,  will satisfy its projected  working capital and
other cash requirements through at least the end of 1999. However, ATMI believes
the level of financing  resources  available  to it is an important  competitive
factor in its industry and may seek additional  capital prior to the end of that
period.   Additionally,   ATMI  considers,  on  a  continuing  basis,  potential
acquisitions  of  technologies  and  businesses  complementary  to  its  current
business. There are no present agreements with respect to any such acquisitions.
However, any such transactions may affect ATMI's future capital needs.

Operations Outside the United States

     In the years ended  December 31, 1998,  1997,  and 1996,  sales outside the
United States, including Asia and Europe, accounted for 25.4%, 23.6%, and 30.4%,
respectively,  of the  Company's  revenues.  The Company  anticipates  its sales
outside the United States will continue to account for significant percentage of
its revenues.  In addition,  the Company has a joint venture agreement with K.C.
Tech  pursuant to which it has a 70%  interest  in  ADCS-Korea,  a South  Korean
chusik hoesa, which manufactures,  sells, and distributes thin film materials to
the semiconductor and related industries in South Korea.

Year 2000 Compliance

     ATMI has  formed an  internal  compliance  team to  evaluate  its  internal
information technology infrastructure and application systems ("IT Systems") and
other non-IT infrastructure systems ("Non-IT Systems") to determine whether such
systems will operate correctly with regard to the import, export, and processing
of date  information,  including  correct  handling of leap years, in connection
with the change in the calendar  year from 1999 to 2000 (the "Year 2000 Issue"),
and to evaluate  the Year 2000 Issue with  respect to the systems of third party
partners  and  suppliers  with which the  Company  has a  material  relationship
("Third Party Systems").
<PAGE>

     ATMI has completed an IT Systems inventory analysis and risk assessment. As
previously  planned and budgeted,  the Company is actively upgrading its core IT
Systems to incorporate  additional desired features and functionality  including
Year 2000 compliant operators.  ATMI has completed these upgrades. In connection
with such  upgrades,  the Company  expects its core IT Systems will be Year 2000
compliant.  The Company does not expect that any additional  costs of addressing
the Year 2000 Issue for its IT Systems  will have a material  adverse  impact on
the Company's financial position and results of operations or cash flows.

     ATMI has  also  completed  a  Non-IT  System  inventory  analysis  and risk
assessment. As a result of the analysis, no remediation actions were required in
order to be Year 2000  compliant.  Because  ATMI  believes  the number of Non-IT
Systems is relatively  small and therefore,  does not expect that any additional
costs of addressing  the Year 2000 Issue for Non-IT Systems will have a material
adverse  impact  on  its  operations  or  its  financial  position,  results  of
operations, or cash flows.

     ATMI is in the  process of  completing  a Third  Party  inventory  and risk
assessment.  ATMI expects to verify Year 2000  compliance of Third Party Systems
no later than June 30, 1999.  ATMI  believes the number of material  Third Party
Systems is relatively  small.  However,  until Year 2000 compliance of all Third
Party Systems is ascertained  and written  assurances are received,  the risk to
ATMI's  operations and any additional costs relating to such Third Party Systems
is unknown.  ATMI believes that its most reasonably  likely worst-case Year 2000
scenarios  would involve Third Party Systems  rather than its internal  systems.
The Company  believes  that its greatest  risks would be the partial or complete
shutdown  of a critical  supplier or  strategic  partner  and its  inability  to
provide  critical  supplies  and  services to the Company on a timely  basis.  A
contingency plan addressing  potential issues related to Third Party Systems has
been  developed.  The contingency  plan consists of ensuring  adequate levels of
critical supplies used in the Company's  manufacturing  processes are on hand at
the end of year 1999.  The Company has also compiled a listing of  manufacturers
of alternative  supply sources for its critical  products.  In the event a third
party   supplier  is  affected  by  Year  2000  issues  the  Company  is  making
arrangements with alternative suppliers for its critical raw materials.

     ATMI has tested its products for Year 2000  compliance  and has  determined
that all ATMI products  currently  available  for sale have either  successfully
passed Year 2000  compliance  testing or are not subject to Year 2000 compliance
because such products do not import,  export, or process date information in any
manner.

     For  the  year  ending   December  31,  1998,   the  Company  has  incurred
approximately  $550,000  of expense  relating  to  inventory  analysis  and risk
assessment.  The funds to cover the cost  incurred  to date  were  derived  from
general  operations.  The costs  primarily  relate  to  desktop  compliance  and
standardization to Year 2000 compliance. These Year 2000 expenditures are within
the Company's planned  organizational  budgets and include the cost of reviewing
of key operating  systems.  The  remaining  planned  expenditures  for Year 2000
relate primarily to Third Party System reviews and internal resources working on
the Year 2000 issue as well as planned upgrades or planned  replacement  systems
which will have a positive impact on resolving the Year 2000 issue. ATMI expects
the cost  related to the Third Party  Systems  compliance  to be minimal.  As of
December 31, 1998, no IT Systems projects have been deferred because of problems
associated with the Year 2000 Issue.
<PAGE>

Forward-Looking Statements

     The  statements  contained  in this  report  which are not  historical  are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Examples of forward-looking  statements include, without limitation,
statements by ATMI regarding financial projections,  expectations for demand and
sales  of new  and  existing  products,  market  and  technology  opportunities,
business strategies, business opportunities, objectives of management for future
operations, semiconductor industry market segment growth, and efforts to achieve
Year  2000  compliance.  In  addition,  when  used in  this  report,  the  words
"anticipate,"  "plan," "believe,"  "estimate," "expect," and similar expressions
as they  relate to the  Company  or its  management  are  intended  to  identify
forward-looking  statements.  All  forward-looking  statements involve risks and
uncertainties.  Actual results may differ materially from those discussed in, or
implied  by,  the  forward-looking  statements  as a result of  certain  factors
including,  but not limited to, changes in the pattern of semiconductor industry
growth,  the markets for or customer  interest in the products of ATMI,  product
and  market   competition,   delays  or   problems   in  the   development   and
commercialization of products,  technological changes affecting the competencies
of ATMI,  and  unanticipated  internal  and/or third party delays or failures in
achieving Year 2000  compliance.  The cautionary  statements made in this report
should be read as being  applicable  to all related  forward-looking  statements
wherever they appear in this report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     Market risks  relating to the Company's  operations  result  primarily from
changes in interest  rates and foreign  exchange  rates,  as well as credit risk
concentrations.  The  Company's  customer  base  is  composed  of  semiconductor
manufacturers  that are located  throughout the United States,  Europe,  and the
Pacific Rim. There is no single  geographic area of  concentration in the United
States,  Europe,  or the Pacific Rim.  The  Company's  market  risks  related to
interest and foreign exchange rates are not material to the operating results.


Item 8. Financial Statements and Supplementary Data.

     The Report of Independent Auditors,  the consolidated financial statements,
and  the  financial   statement  schedule  that  are  listed  in  the  Index  to
Consolidated  Financial Statements and Financial Statement Schedule are included
herein on pages F-1 through F-25.

Item 9. Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.

     There have been no changes in or disagreements with accountants required to
be reported herein.


Item 10. Directors and Executive Officers of the Registrant.

     Information  regarding ATMI's directors is incorporated by reference herein
to the Company's  Proxy  Statement for its Annual Meeting of  Stockholders to be
held on May 26, 1999 ("1999  Proxy  Statement").  Information  regarding  ATMI's
executive officers is included as Item 4A in Part I of this Form 10-K.


Item 11. Executive Compensation.

     Information regarding  compensation of ATMI executive officers,  except the
Compensation  Committee Report and the Stock Performance  Graph, is incorporated
by reference herein to the 1999 Proxy Statement.
<PAGE>


Item 12. Security Ownership of Certain Beneficial Owners and Management.

     Information regarding the beneficial ownership of shares of Common Stock of
the Company by certain persons is  incorporated by reference  herein to the 1999
Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

     Information  regarding  certain  transactions  of ATMI is  incorporated  by
reference herein to the 1999 Proxy Statement.

                                     PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.

     (a) (1) and (2) Financial Statements and Schedule

     The report of independent auditors,  consolidated financial statements, and
financial  statement  schedule  listed  in the Index to  Consolidated  Financial
Statements  and Financial  Statement  Schedule on page F-1 hereof,  are filed as
part of this report, commencing on page F-5 hereof.

     All other financial statement schedules not listed in the Index are omitted
as the required information is not applicable or the information is given in the
financial statements or related notes.
<PAGE>


(a) (3) Exhibits

Exhibit No.
                                     Description

     2.01  Agreement  and Plan of Merger  and  Exchange  by and  among  Advanced
Technology Materials, Inc., ATMI Holdings, Inc. (now known as ATMI, Inc.), Alamo
Merger,  Inc.,  Advanced  Delivery & Chemical  Systems  Nevada,  Inc.,  Advanced
Delivery & Chemical Systems Manager,  Inc., Advanced Delivery & Chemical Systems
Holdings, LLC, Advanced Delivery & Chemical Systems Operating,  LLC and Advanced
Delivery & Chemical  Systems,  Ltd.  dated as of April 7, 1997  (Exhibit 2.01 to
Advanced  Technology  Materials,  Inc.  Quarterly  Report  on Form  10-Q for the
quarter ended June 30, 1997, File No. 0-22756 ("June 30, 1997 Form 10-Q")). (1)

     2.02(a)  Agreement  and Plan of  Merger by and  among  Advanced  Technology
Materials, Inc., ATMI Holdings, Inc. (now known as ATMI, Inc.), Welk Acquisition
Corporation,    Lawrence   Semiconductor   Laboratories,   Inc.   and   Lawrence
Semiconductor  Laboratories  Marketing and Sales,  Inc. dated as of May 17, 1997
(Exhibit 2.02(a) to June 30, 1997 Form 10-Q).(1)

     2.02(b) First Amendment to Agreement and Plan of Merger dated as of June 6,
1997 (Exhibit 2.02(b) to June 30, 1997 Form 10-Q). (1)

     2.02(c)  Second  Amendment to Agreement and Plan of Merger dated as of July
30, 1997 (Exhibit 2.02(c) to June 30, 1997 Form 10-Q. (1)

     2.03 Merger Agreement by and among ATMI, Inc., Glide Acquisition,  Inc. and
NOW  Technologies,  Inc.  dated as of February 19, 1998  (Exhibit 2.03 to ATMI's
Registration  Statement on Form S-1,  Registration  No. 333-46609 (the "Form S-1
Registration Statement")). (1)

     3.01(a) Certificate of Incorporation of the Registrant (Exhibit 3.01 to the
ATMI's   Registration   Statement  on  Form  S-4,  filed   September  10,  1997,
Registration No. 333-35323 (the "1997 Form S-4 Registration Statement")). (1)

     3.01(b)  Certificate of Amendment to Certificate of Incorporation  (Exhibit
4.1(b)to the ATMI's Post-Effective  Amendment No. 1 to Registration Statement on
Form S-8, filed October 10, 1997, Registration No. 33- 77060). (1)

     3.01(c)  Certificate of Amendment to Certificate of Incorporation  (Exhibit
3.01(c) to the  ATMI's  Registration  Statement  on Form S-4,  Registration  No.
333-51333). (1)

     3.02  Bylaws  of ATMI  (Exhibit  3.02 to the  1997  Form  S-4  Registration
Statement). (1)

     4.01 Specimen of the ATMI's Common Stock  Certificate  (Exhibit 4.01 to The
1997 Form S-4 Registration Statement). (1)

     10.01 Employment  Agreement  between Eugene G. Banucci,  Ph.D. and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.01 to the Form S-1
Registration Statement). (1)
<PAGE>

Exhibit No.
            Description

     10.02  Employment   Agreement   between  Daniel  P.  Sharkey  and  Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.02 to the Form S-1
Registration Statement). (1)

     10.03 Employment Agreement between Stephen H. Siegele and Advanced Delivery
& Chemical  Systems  Nevada,  Inc.  dated October 13, 1997 (Exhibit 10.05 to the
Form S-1 Registration Statement). (1)

     10.04 Consulting  Agreement  between Lawrence  Semiconductor  Laboratories,
Inc. and Lawrence Semiconductor Investments, Inc. dated October 10,1997 (Exhibit
10.06 to the Form S-1 Registration Statement). (1)

     10.05 Agreement of Lease between Melvyn J. Powers and Mary P. Powers D/b/a/
M&M Realty and  Advanced  Technology  Materials,  Inc.  dated  December 23, 1994
(Exhibit  10.09 to Advanced  Technology  Materials,  Inc.  Annual Report on Form
10-K/A for the year ended  December  31,  1994,  File No.  0-22756  ("1994  Form
10-K/A")). (1)

     10.06(a) Lease Agreement  between  Montague Oaks  Associates  Phase III and
ATMI  EcoSys  Corporation  dated  February 7, 1995  (Exhibit  10.10 to 1994 Form
10-K/A). (1)

     10.06(b) First Amendment to Lease between  Montague Oaks  Associates  Phase
III and ATMI EcoSys  Corporation  dated September 30, 1997 (Exhibit  10.08(b) to
the Form S-1 Registration Statement). (1)

     10.07 Lease Agreement  between  Montague Oaks  Associates  Phase I & II and
ATMI EcoSys  Corporation dated September 30,  1997(Exhibit 10.09 to the Form S-1
Registration Statement). (1)

     10.8(a) Standard Industrial Lease--Net between GKZ Investments and
Epitronics  Corporation  dated June 20, 1994  (Exhibit  10.10(a) to the Form S-1
Registration Statement). (1)

     10.8(b) Lease  extension  letter  between GKZ  Investments  and  Epitronics
Corporation  dated  September  18,  1996  (Exhibit  10.10(b)  to  the  Form  S-1
Registration Statement). (1)

     21.01  Subsidiaries  of  ATMI  (Exhibit  21.01  to  Form  S-1  Registration
Statement). (1)

     23.01 Consent of Ernst & Young LLP. (2)

     23.02 Consent of PriceWaterhouseCoopers LLP. (2)

     23.03 Consent of Deloitte & Touche LLP. (2)

     27.01 Financial data schedule. (2) (1) Incorporated by reference. (2) Filed
herewith.
<PAGE>

b) Reports on Form 8-K

     On October 10, 1998,  the Company  filed a Form 8-K/A to amend a previously
filed Form 8-K dated August 4, 1998.

<PAGE>
                                    
                                   ATMI, INC.

   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                                                          Page
                                                          ----
Report of Ernst & Young LLP                               F-2
Report of Deloitte & Touche LLP                           F-3
Report of PriceWaterhouseCoopers LLP                      F-4

Financial Statements

Consolidated Balance Sheets                               F-5
Consolidated Statements of Income                         F-6
Consolidated Statements of Stockholders' Equity           F-7
Consolidated Statements of Cash Flows                     F-8
Notes to Consolidated Financial Statements                F-9
<PAGE>


                         Report of Independent Auditors

The Board of Directors and Stockholders of
ATMI, Inc.

     We have audited the accompanying  consolidated balance sheets of ATMI, Inc.
as of December 31, 1998 and 1997,  and the related  consolidated  statements  of
income,  stockholders'  equity and cash flows for each of the three years in the
period ended December 31, 1998. Our audits also included the financial statement
schedule  listed in the Index at Item 14 (a).  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 did not audit the financial  statements of NOW  Technologies,  Inc.,
("NOW"),  a wholly  owned  subsidiary,  as of March 31, 1998,  which  statements
reflect  total  assets  constituting  9% at March  31,  1998 and  reflect  total
revenues  constituting  13% and 10% for the years ended March 31, 1998 and 1997,
respectively,  (which were combined with the accounts of ATMI,  Inc. at December
31,  1997 and for the two years  then  ended).  Nor did we audit  the  financial
statements  or  Valuation  and  Qualifying  Accounts  schedule  data of Lawrence
Semiconductor Laboratories ("Lawrence"), a wholly-owned subsidiary, for the year
ended  December 31, 1996.  These  financial  statements  reflect total  revenues
constituting  21% of the  consolidated  financial  statement  total for the year
ended December 31, 1996.  Those  statements were audited by other auditors whose
reports have been  furnished  to us, and our  opinion,  insofar as it relates to
data  included for NOW and Lawrence for the periods  indicated  above,  is based
solely on the reports of such other auditors.

     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 and the  reports  of the other  auditors  provide a
reasonable basis for our opinion.

     In our opinion,  based on our audits and the reports of other auditors, the
consolidated  financial  statements  referred to above  present  fairly,  in all
material respects, the consolidated financial position of ATMI, Inc. at December
31, 1998 and 1997, and the  consolidated  results of its operations and its cash
flows for each of the three years in the period  ended  December  31,  1998,  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

Stamford, Connecticut
February 8, 1999

<PAGE>

                           INDEPENDENT AUDITORS REPORT

Board of Directors
NOW Technologies, Inc. and Subsidiaries
Bloomington, Minnesota

     We have audited the consolidated  balance sheet of NOW  Technologies,  Inc.
and Subsidiaries  (the Company) as of March 31, 1998 and the related  statements
of income,  stockholders' equity and cash flows for each of the two years in the
period ended March 31, 1998 (not presented herein). These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

     We conducted  our audits 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,  such consolidated  financial statements present fairly, in
all material  respects,  the  financial  position of the Company as of March 31,
1998 and the  results of its  operations  and its cash flows for each of the two
years in the period ended March 31, 1998, in conformity with generally  accepted
accounting principles.


DELOITTE & TOUCHE, LLP
Minneapolis, Minnesota
May 1, 1998
<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
of Lawrence Semiconductor Laboratories, Inc. and Affiliate

     In our opinion, the combined statements of income and retained earnings and
of cash flows of Lawrence  Semiconductor  Laboratories,  Inc. and Affiliate (not
presented  separately  herein) present  fairly,  in all material  respects,  the
results of  operations  and cash flows of Lawrence  Semiconductor  Laboratories,
Inc. and  Affiliate for the year ended  December 31, 1996,  in  conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the company's management;  our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these  statements in accordance with generally  accepted  auditing  standards
which require that we plan and perform the audit to obtain reasonable  assurance
about whether the financial  statements  are free of material  misstatement.  An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for the opinion expressed above.


Price Waterhouse LLP
Phoenix, Arizona
May 17, 1997, except for the last paragraph of Note 3
which is as of July 29, 1997 and
the last paragraph of Note 6 which
is as of December 18, 1997
<PAGE>
<TABLE>
<CAPTION>


                                   ATMI, INC.

                           CONSOLIDATED BALANCE SHEETS

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

                                                                                         1998                1997
                                                                                         ----                ----
                                     ASSETS
Current assets:
     Cash and cash equivalents (Note 1) ......................................      $ 18,510,000      $ 13,846,000
     Marketable securities (Notes 1 and 2) ...................................        64,551,000        17,461,000
     Accounts receivable, net of allowance for doubtful accounts of
        $567,000 in 1998, and $405,000 in 1997 (Note 3) ......................        16,250,000        20,920,000
     Inventories (Notes 1 and 4) .............................................        11,130,000         9,450,000
     Other ...................................................................         5,549,000         4,493,000
                                                                                       ---------         ---------
          Total current assets ...............................................       115,990,000        66,170,000
Property and equipment, net (Notes 1 and 5) ..................................        45,202,000        40,457,000
Goodwill and other long-term assets, net (Notes 1 and 10) ....................         8,213,000         6,706,000
                                                                                       ---------         ---------
                                                                                    $169,405,000      $113,333,000
                                                                                    ============      ============
                                                                                                                       
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Notes and bonds payable, current portion (Note 6) .......................      $  4,709,000       $ 5,655,000
     Capital lease obligations, current portion (Note 7) .....................         2,488,000         2,671,000
     Accounts payable ........................................................         3,540,000         5,638,000
     Accrued expenses ........................................................         6,998,000         6,874,000
     Accrued commissions .....................................................         1,248,000         2,113,000
     Income taxes payable (Note 8) ...........................................           714,000         1,078,000
     Deferred income taxes (Note 8) ..........................................                --           563,000
                                 -                                                       -------           -------     
          Total current liabilities ..........................................        19,697,000        24,592,000
Notes payable, less current portion (Note 6) .................................         3,609,000         8,288,000
Capital lease obligations (Note 7) ...........................................         3,736,000         6,238,000
Deferred income taxes (Note 8) ...............................................         2,764,000         4,874,000
Other long-term liabilities ..................................................            95,000           675,000

Minority interest.............................................................           846,000           595,000 

Stockholders' equity (Note 9):
     Preferred stock, par value $.01: 2,000,000 shares authorized;
        None issued and outstanding...........................................                --                --  
     Common stock, par value $.01: 50,000,000 shares authorized;
        Issued  22,160,000 in 1998, and 19,744,000 in 1997....................           222,000           197,000 
     Additional paid-in capital...............................................       106,174,000        41,841,000 
     Retained earnings........................................................        33,495,000        27,132,000 
     Accumulated other comprehensive income (Note 11).........................        (1,233,000)       (1,099,000)
                                                  --                                  ----------        ----------       
          Total stockholders' equity..........................................       138,658,000        68,071,000 
                                                                                     -----------        ----------        
                                                                                    $169,405,000      $113,333,000 
                                                                                    ============      ============ 
</TABLE>


                             See accompanying notes.
<PAGE>


<TABLE>
<CAPTION>

                                   ATMI, INC.

                        CONSOLIDATED STATEMENTS OF INCOME


                                                                                              Year Ended December 31,
                                                                                              -----------------------
<S>                                                                     <C>                  <C>                  <C>

                                                                                 1998                 1997                 1996
                                                                                 ----                 ----                 ----
Revenues (Note 1):
     Product revenues ...............................................   $  89,927,000        $ 107,612,000        $  88,926,000
     Contract revenues ..............................................       7,947,000            9,120,000            9,846,000
                                                                            ---------            ---------            ---------
Total revenues ......................................................      97,874,000          116,732,000           98,772,000
Cost of revenues:
     Cost of product revenues .......................................      44,561,000           48,170,000           38,418,000
     Cost of contract revenues ......................................       5,907,000            7,867,000            8,341,000
                                                                            ---------            ---------            ---------
Total cost of revenues ..............................................      50,468,000           56,037,000           46,759,000
                                                                           ----------           ----------           ----------
Gross profit ........................................................      47,406,000           60,695,000           52,013,000
Operating expenses:
     Research and development (Note 1) ..............................      12,415,000           10,827,000           10,033,000
     Selling, general, and administrative ...........................      25,629,000           28,256,000           24,847,000
     Non-recurring expenses (Notes 10 and 12) .......................       2,102,000            9,000,000            2,000,000
                                   --     --                                ---------            ---------            ---------
                                                                           40,146,000           48,083,000           36,880,000
                                                                           ----------           ----------           ----------
Operating income ....................................................       7,260,000           12,612,000           15,133,000
Interest income .....................................................       3,966,000            1,592,000            1,684,000
Interest expense (Note 6) ...........................................      (1,545,000)          (1,941,000)          (1,784,000)
Other income, net ...................................................         541,000              305,000              152,000
                                                                              -------              -------              -------
Income before taxes and minority interest ...........................      10,222,000           12,568,000           15,185,000
Income taxes (Note 8) ...............................................       3,646,000            6,637,000            3,134,000
                                                                            ---------            ---------            ---------
Income before minority interest .....................................       6,576,000            5,931,000           12,051,000
Minority interest ...................................................        (111,000)              (2,000)             151,000
                                                                             --------               ------              -------
Net income ..........................................................       6,465,000        $   5,929,000        $  12,202,000
                                                                            =========        =============        =============
Net income per share--basic (Notes 1 and 9) ..........................   $        0.31        $        0.32        $        0.65
                                                                        =============        =============        =============
Net income per share--assuming dilution (Notes 1 and 9) ..............   $        0.29        $        0.29        $        0.61
                                                                        =============        =============        =============
Weighted average shares outstanding (Notes 1 and 9) .................      20,830,000           18,802,000           18,779,000
                                                                           ==========           ==========           ==========
Weighted average shares outstanding--assuming dilution
   (Notes 1 and 9) ..................................................      22,017,000           20,254,000           19,987,000
                                                                           ==========           ==========           ==========

</TABLE>


                             See accompanying notes.
<PAGE>


<TABLE>
<CAPTION>

                                   ATMI, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<S>                                           <C>          <C>            <C>             <C>             <C> 

                                                                                          Accumulated
                                                             Additional                      Other
                                                 Common        Paid-in      Retained     Comprehensive
                                                  Stock        Capital      Earnings         Income          Total
Balance at December 31, 1995 ................ $  194,000   $ 38,590,000   $ 10,793,000    $    (10,000)   $ 49,567,000
Issuance of 54,199 common shares pursuant
   to the exercise of employee stock options       1,000        188,000             --              --         189,000
Distributions to stockholders ...............         --             --    (1,792,000)              --      (1,792,000)

Net income ..................................         --             --     12,202,000              --      12,202,000
Cumulative translation adjustment ...........         --             --             --         (45,000)        (45,000)
                                                                                                              --------
Comprehensive income ........................                                                               12,157,000
                                               -----------------------------------------------------------------------
Balance at December 31, 1996 ................    195,000     38,778,000     21,203,000         (55,000)     60,121,000
Issuance of 82,520 common shares pursuant
   to the exercise of employee stock options          --        454,000             --              --         454,000
Issuance of 151,250 common shares pursuant
   to the exercise of warrants ..............      2,000      1,688,000             --              --       1,690,000
Compensation for the issuance of common
   shares ...................................         --        243,000             --              --         243,000
Tax benefit related to nonqualified stock
   options ..................................         --        678,000             --              --         678,000

Net income ..................................         --             --      5,929,000              --       5,929,000
Cumulative translation adjustment ...........         --             --             --      (1,044,000)     (1,044,000)
                                                                                                          ------------
Comprehensive income ........................                                                                4,885,000
                                               ------------------------------------------------------------------------
Balance at December 31, 1997 ................    197,000     41,841,000     27,132,000      (1,099,000)     68,071,000
Issuance of  158,918 common shares pursuant
   to the exercise of employee stock options       2,000        647,000             --              --         649,000
Sale of 2,257,000 common shares, net of
   issuance costs of $4,161,000.                  23,000     62,403,000             --              --      62,426,000
Compensation for the issuance of common
   shares ...................................         --        184,000             --              --         184,000
Tax benefit related to nonqualified stock
   options ..................................         --      1,099,000             --              --       1,099,000
Adjustment to reflect change in pooled
entity fiscal year ..........................         --             --       (102,000)                       (102,000)

Net income ..................................         --             --      6,465,000                       6,465,000
Unrealized loss on available-for-sale
securities (net of tax benefit of $281,000) .         --             --             --        (500,000)       (500,000)
Cumulative translation adjustment ...........         --             --             --         366,000         366,000
                                                                                                             ---------
Comprehensive income........................                                                                 6,331,000

                                              ------------------------------------------------------------------------      
Balance at December 31, 1998................  $  222,000   $106,174,000   $ 33,495,000    $ (1,233,000)   $138,658,000
                                             =========================================================================
</TABLE>

                             See accompanying notes.
<PAGE>

<TABLE>
<CAPTION>


                                   ATMI, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                  Year Ended December 31,
                                                                                                  -----------------------
<S>                                                                              <C>                <C>                <C>

                                                                                         1998               1997               1996
                                                                                         ----               ----               ----
Operating activities
Net income ................................................................      $  6,465,000       $  5,929,000       $ 12,202,000
Adjustments to reconcile net income to net cash provided by
     operating activities:
   Depreciation and amortization ..........................................         7,604,000          6,253,000          5,531,000
   Stock option compensation ..............................................           184,000            243,000                -- 
   Effect  of change of fiscal year of pooled entity ......................          (102,000)               --                 -- 
   Bad debt expense .......................................................           242,000            365,000            280,000
   Deferred income taxes ..................................................        (2,365,000)         1,773,000          1,038,000
    Tax benefit of nonqualified stock options .............................         1,099,000            678,000                -- 
   Minority interest in net earnings of subsidiaries ......................           111,000              2,000           (151,000)
   Changes in operating assets and liabilities
       (Increase) decrease in accounts receivable .........................         4,428,000         (4,281,000)        (2,340,000)
       Increase in inventory ..............................................        (1,680,000)        (1,825,000)        (4,284,000)
       Increase in other assets ...........................................        (2,944,000)        (2,120,000)          (201,000)
       Increase (decrease) in accounts payable ............................        (2,098,000)           (35,000)            41,000
       Increase (decrease) in accrued expenses ............................          (741,000)         1,037,000          3,392,000
       Increase (decrease) in other liabilities ...........................          (529,000)           791,000         (1,617,000)
                                                                                     --------            -------         ---------- 
            Total adjustments .............................................         3,209,000          2,881,000          1,689,000
                                                                                    ---------          ---------          ---------
            Net cash provided by operating activities .....................         9,674,000          8,810,000         13,891,000
                                                                                    ---------          ---------         ----------
Investing activities
Capital expenditures ......................................................       (11,968,000)        (6,664,000)       (11,995,000)
Long-term investment ......................................................                --           (250,000)                --
Sale (purchase) of marketable securities, net .............................       (47,871,000)           777,000          3,617,000
Advances to LSL stockholder on note receivable ............................                --                 --           (286,000)
Payments for acquisitions .................................................                --                 --         (4,000,000)
Proceeds from sale of assets ..............................................                --                 --            619,000
                                                                                  -----------         ----------        -----------
            Net cash used by investing activities .........................       (59,839,000)        (6,137,000)       (12,045,000)
                                                                                  -----------         ----------        ----------- 
Financing activities
Proceeds from issuance of notes payable ...................................                --            141,000          4,475,000
Principal payments on notes and bonds payable .............................        (5,625,000)        (2,026,000)        (2,754,000)
Distribution to ADCS stockholders .........................................                --                 --         (1,792,000)
Repayment of amounts borrowed .............................................                --                 --           (135,000)
Payments on capital lease obligations .....................................        (2,685,000)        (2,447,000)        (1,274,000)
Proceeds from sale of common stock, net ...................................        62,426,000                 --                 -- 
Investment by minority stockholder ........................................                --             48,000            160,000
Proceeds from exercise of stock options and warrants ......................           649,000          2,144,000            189,000
                                                                                      -------          ---------            -------
            Net cash provided (used) by financing activities ..............        54,765,000         (2,140,000)        (1,131,000)
                                                                                   ----------         ----------         ---------- 
Effects of exchange rate changes on cash ..................................            64,000           (137,000)           (45,000)
                                                                                       ------           --------            ------- 
Net increase  in cash and cash equivalents ................................         4,664,000            396,000            670,000
Cash and cash equivalents, beginning of year ..............................        13,846,000         13,450,000         12,780,000
                                                                                   ----------         ----------         ----------
Cash and cash equivalents, end of year ....................................      $ 18,510,000       $ 13,846,000       $ 13,450,000

                                                                                 ============       ============       ============
</TABLE>
                             See accompanying notes.
<PAGE>



                                   ATMI, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

     Basis of Presentation

     The consolidated  financial  statements  include the accounts of ATMI, Inc.
and its majority-owned subsidiaries,  after elimination of intercompany accounts
and transactions.  In addition,  these  consolidated  financial  statements give
retroactive effect to the acquisition of NOW Technologies,  Inc. ("NOW"),  which
has been accounted for using the  pooling-of-interests  method. This acquisition
occurred  on August 4,  1998,  as part of the  consummation  of the  transaction
described in Note 10.

     Certain  amounts  have  been   reclassified  to  conform  to  current  year
presentation.

     Company's Activities

     ATMI,  Inc.  together with its  subsidiaries  (the  "Company") is a leading
supplier of thin film materials,  equipment,  and services used worldwide in the
manufacture of semiconductor devices. The Company targets high growth consumable
and equipment  markets within the  semiconductor  industry with  proprietary and
patented  products.   Specifically,  the  Company  provides  a  broad  range  of
ultrahigh-purity  thin film materials and related delivery systems,  a full line
of   point-of-use   semiconductor    environmental   equipment   and   services,
state-of-the-art,   high  performance  containers  and  dispensing  systems  for
advanced  purity  chemicals,   and  specialty  epitaxial  thin  film  deposition
services.

     Revenue Recognition

     Product revenues are recognized upon shipment of goods.  Contract  revenues
under fixed-price contracts and cost-reimbursement-type contracts are recognized
using  the  percentage-of-completion   method  based  upon  costs  incurred  and
estimated future costs. Provisions for expected losses on contracts are recorded
in the period when  identified.  Revenues under  fixed-price  contracts from the
U.S. Government were $2,739,000,  $3,708,000, and $4,046,000 for the years ended
December   31,   1998,   1997,   and   1996,   respectively.    Revenues   under
cost-reimbursement-type  contracts  from the U.S.  Government  were  $5,208,000,
$5,412,000,  and  $5,800,000  for the years ended  December 31, 1998,  1997, and
1996, respectively.

     Use of Estimates

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

     Research and Development

     Research and development costs,  including  materials,  labor, and overhead
related to  self-funded  projects,  are expensed as incurred.  External  funding
provided  to the  Company  through  cost-reimbursement  contracts  with the U.S.
Government, are expensed as cost of contract revenues.
<PAGE>

                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



1. Summary of Significant Accounting Policies (continued)

     Marketable Securities and Investments

     Highly liquid  investments  with  maturities of three months or less,  when
purchased,  are  classified  as cash  and  cash  equivalents.  Investments  with
maturities  greater than three months and less than two years are  classified as
marketable securities.

     The Company  accounts  for  investments  in  accordance  with SFAS No. 115,
"Accounting  for  Certain  Investments  in  Debt  and  Equity  Securities."  The
Company's  policy is to protect the value of its  investments  portfolio  and to
minimize  principal risk by earning returns based on current interest rates. All
of the Company's marketable  securities are classified as  available-for-sale as
of the balance sheet date and are reported at fair value with  unrealized  gains
and losses recorded in accumulated other  comprehensive  income, net of tax. The
cost of securities sold is based on the specific identification method. Interest
on these securities is accrued and included in interest income.

     Management  determines the  classification of marketable debt securities at
the time of purchase and reevaluates  such  designation as of each balance sheet
date.

     Inventories

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

     Property and Equipment

     Property and equipment is stated at cost.  Depreciation and amortization of
property  and  equipment  is computed  using the  straight-line  method over the
estimated  useful  lives of the  assets,  which vary from  three to  thirty-five
years.

     Foreign Currency Translation

     Adjustments relating to the translation of foreign currency to U.S. dollars
are reported as a separate component of accumulated other comprehensive  income.
Gains or losses  resulting from foreign  currency  transactions  are included in
other income (expense) and have been immaterial.

     Taxes

     The Company  accounts for income  taxes in  accordance  with the  liability
method.  Under this method,  deferred tax assets and  liabilities are determined
based upon differences  between financial  reporting and the tax basis of assets
and liabilities,  and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1. Summary of Significant Accounting Policies (continued)

     Fair Values of Financial Instruments

     The  Company's  financial  instruments  include cash and cash  equivalents,
marketable securities,  accounts receivable,  short-term investments,  and debt.
Marketable  securities  are  accounted  for at fair value.  All other  financial
instruments  are  accounted for on an  historical  cost basis which,  due to the
nature of these instruments, approximates fair value at the balance sheet dates.

     Long-Lived Assets

     The  Company  reviews,  on a periodic  basis,  the value of its  long-lived
assets to determine whether an impairment  exists. At December 31, 1998, no such
impairment  existed.  Goodwill  and other  long-term  assets  are  stated net of
accumulated  amortization  of  $1,227,000  and $837,000 at December 31, 1998 and
1997, respectively.

     Stock Based Compensation

     Effective in fiscal year 1996,  the Company  adopted  Financial  Accounting
Statement No. 123,  "Accounting  for Stock-Based  Compensation."  This statement
defines a fair value-based  method of accounting for employee stock compensation
plans.  However,  it also allows an entity to  continue to measure  compensation
cost for those plans in accordance with Accounting Principle Board (APB) Opinion
No.  25,  "Accounting  for  Stock  Issued  to  Employees."  Under  APB  No.  25,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date over the amount the  employee  must pay to acquire  the stock.
The  Company  has  elected  to  continue  to  account  for  its  employee  stock
compensation  plans under APB No. 25. Pro forma  disclosures of net income,  net
income per share-basic,  and net income per share-assuming  dilution,  as if the
fair value based method of accounting had been applied, are presented in Note 9.

     Per Share Data

     Basic and diluted per share is calculated in accordance with FASB Statement
No. 128,  "Earnings  Per Share." All earnings per share  amounts for all periods
have been  presented  in  accordance  with,  and where  appropriate  restated to
conform to, the requirements of Statement 128.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2. Marketable Securities
<TABLE>
<CAPTION>

     Marketable securities are comprised of the following at December 31, 1998:

                                                                Gross Unrealized    Estimated Fair
                                                       Cost           Loss               Value
<S>                                                <C>           <C>                <C>
                                                       ----           ----               -----
 Corporate obligations .........................   $49,563,000          --          $49,563,000
 U.S. Government obligations ...................     8,695,000          --            8,695,000
 Certificates of deposit .......................     4,887,000          --            4,887,000
                                                     ---------                        ---------
  Total debt securities ........................    63,145,000          --           63,145,000
                                                    ----------                       ----------
 Other equity ...................................    2,187,000   $  (781,000)         1,406,000
                                                     ---------   -----------          ---------
  Total available for sale .....................   $65,332,000   $  (781,000)       $64,551,000
                                                   ===========   ===========        ===========
</TABLE>
<TABLE>
<CAPTION>

     Marketable securities are comprised of the following at December 31, 1997:

                                                                Estimated Fair
                                                    Cost            Value 
<S>                                                <C>           <C>

                                                    ----            -----                                                      
 Corporate obligations..................           $10,590,000   $10,590,000
 U.S. Government obligations............             6,407,000     6,407,000
 Certificates of deposit................               464,000       464,000
                                                       -------       -------
  Total marketable securities                      $17,461,000   $17,461,000
                                                   ===========   ===========
</TABLE>


     All of the Company's marketable securities have maturities of less than two
years.

3. Accounts Receivable

     Amounts due from various agencies of the U.S. Government were approximately
$2,054,000 and $2,619,000 of accounts  receivable at December 31, 1998 and 1997,
respectively.  Unbilled  accounts  receivable were $620,000 and $1,019,000,  and
customer advances, included in other liabilities,  were $790,000 and $612,000 at
December 31, 1998 and 1997, respectively.

     Credit is extended to commercial  customers based on an evaluation of their
financial condition, and collateral is not generally required. The evaluation of
financial condition is performed to reduce the risk of loss. The Company has not
experienced any material losses due to uncollectible  accounts  receivable since
inception.  Certain transactions with foreign customers are supported by letters
of credit.  The Company  maintains an allowance for doubtful accounts at a level
that management believes is sufficient to cover potential credit losses.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Inventories
<TABLE>
<CAPTION>

     Inventories are comprised of the following:

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

                               1998            1997
                       ------------    ------------
Raw materials ......   $  9,815,000    $  7,995,000
Work in process ....        544,000       1,040,000
Finished goods .....      1,894,000       1,478,000
                       ------------    ------------
                         12,253,000      10,513,000
Obsolescence reserve     (1,123,000)     (1,063,000)
                       ------------    ------------
                       $ 11,130,000    $  9,450,000
                       ============    ============
</TABLE>


5. Property and Equipment
<TABLE>
<CAPTION>

     Property and equipment is comprised of the following:

                                           December 31,
<S>                            <C>             <C>
                                       1998            1997
                                       ----            ----
Land .......................   $  1,471,000    $  1,323,000
Buildings ..................      7,518,000       7,243,000
Machinery and equipment ....     55,748,000      46,897,000
Furniture and fixtures .....      2,313,000       1,965,000
Leasehold improvements .....      6,936,000       5,240,000
                                  ---------       ---------
                                 73,986,000      62,668,000
Accumulated depreciation and
 amortization ..............    (28,784,000)    (22,211,000)
                                -----------     ----------- 
                               $ 45,202,000    $ 40,457,000
                               ============    ============
</TABLE>

     Depreciation expense for the years ended December 31, 1998, 1997, and 1996,
was $7,214,000, $5,919,000, and $5,100,000, respectively.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Notes and Bonds Payable
<TABLE>
<CAPTION>

     Notes and bonds payable consist of the following:

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

                                                                                                1998            1997
                                                                                                ----            ----
Note payable in conjunction with acquisition of Guardian Systems,
bearing interest at 8.5%, due in three annual installments beginning January 1, 1999    $  2,000,000    $  2,000,000
Term loans with Connecticut state agency, bearing interest ranging between 5%-6%, due
between April 2001 and June 2002 ....................................................      1,649,000       1,713,000
Equipment credit line with a commercial bank, bearing interest at 8.25%, due through
June 2000 ...........................................................................        525,000       1,128,000
Notes payable with commercial banks and leasing companies, bearing interest ranging
between 7.3%-11.52%, due between April 1998 and June 2001
                                                                                           1,444,000       6,102,000
City of Bloomington,  Minnesota Industrial Revenue Bond, interest rate is variable
(4.40% and 4.05% at December 31, 1998 and 1997), quarterly payments of $100,000, due
September 2005 ......................................................................      2,700,000       3,000,000
                                                                                           ---------       ---------
                                                                                           8,318,000      13,943,000
Less current portion ................................................................     (4,709,000)     (5,655,000)
                                                                                          ----------      ---------- 
                                                                                        $  3,609,000    $  8,288,000
                                                                                        ============    ============
</TABLE>
<TABLE>
<CAPTION>

     The approximate aggregate debt maturities are as follows as of December 31,
1998:
<S>   <C>    <C>

      1999   $2,409,000
      2000    1,995,000
      2001    1,684,000
      2002    1,130,000
      2003      400,000
Thereafter      700,000
             ----------
             $8,318,000
             ==========
</TABLE>


     The  term  loans  are  collateralized  by  various   equipment,   leasehold
improvements,  and  renovations  in  the  Company's  Connecticut  facility.  The
majority of the Company's notes payable are secured by the related real property
or equipment.  The Company's  equipment credit line bears interest at prime plus
0.5% per annum and is  collateralized  by  certain  assets.  The  Company  is in
compliance with the credit line and notes payable covenants.

     Certain  of  the  Company's   subsidiaries'  financing  agreements  contain
limitations  or  prohibitions  on the payment of dividends  without the lender's
consent or in conjunction with the  subsidiary's  failure to comply with various
financial  covenants.  The Company has never  declared or paid cash dividends on
its capital stock. The Company does not anticipate  paying any cash dividends in
the foreseeable future.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Notes and Bonds Payable (continued)

     The bondholders may tender the City of Bloomington,  Minnesota bonds at any
time for the principal amount plus accrued interest.  As a result they have been
classified  as a current  liability.  The  Company has the option to convert the
bonds to a fixed rate  provided all bonds can be  remarketed  at the fixed rate.
The first fixed rate optional  redemption  date would be July 1 of the year that
is halfway  between  the  conversion  date and July 1, 2005.  If  redeemed,  the
Company  must pay 102% and 101% of bond  principal in the first and second years
following the first fixed rate optional redemption date, respectively.  Prior to
conversion  to a fixed  rate,  the  Company  has the  option to redeem the bonds
without premium.


     Interest paid was $1,585,000,  $1,940,000,  and  $1,770,000,  for the years
ended December 31, 1998, 1997, and 1996, respectively.


7. Leases

     The Company is obligated  under  capital  leases for certain  machinery and
equipment  that expire at various  dates  during the next five years.  The gross
amount of  machinery  and  equipment  under the  capital  leases and the related
accumulated depreciation were as follows:
<TABLE>
<CAPTION>

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

                                      1998            1997
                                      ----            ----
Machinery and equipment ...   $ 11,865,000    $ 14,060,000
Accumulated depreciation ..     (2,911,000)     (3,346,000)
                                ----------      ---------- 
                              $  8,954,000    $ 10,714,000
                              ============    ============
</TABLE>
<TABLE>
<CAPTION>

     The following is a schedule of future  minimum  lease  payments for capital
leases as of December 31, 1998:
<S>  <C>                                                        <C>
                                                               Capital Leases
                                                               --------------
     1999 ...................................................   $ 2,937,000
     2000 ...................................................     2,167,000
     2001 ...................................................     1,564,000
     2002 ...................................................       359,000
                                                                -----------
Total lease payments ........................................     7,027,000
Less amount representing interest . .........................      (803,000)
                                                                -----------
Present value of net capital lease payments .................     6,224,000
Less current portion ........................................    (2,488,000)
                                                                -----------
Long-term portion ...........................................   $ 3,736,000
                                                                ===========
</TABLE>

     The  Company  leases  office  and  manufacturing  facilities,  and  certain
manufacturing  equipment,  under several  operating leases expiring between 1999
and 2005.  Rental expense was $3,028,000,  $2,962,000,  and $2,741,000,  for the
years ended December 31, 1998, 1997, and 1996, respectively.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. Leases (continued)
<TABLE>
<CAPTION>

     The following is a schedule of future  minimum lease payments for operating
leases as of December 31, 1998:

                                                           Operating
                                                             Leases
                                                             ------
<S>  <C>                                                   <C>

     1999 ..............................................   $2,509,000
     2000 ..............................................    1,739,000
     2001 ..............................................    1,490,000
     2002 ..............................................    1,090,000
     2003 ..............................................      581,000
     Thereafter ........................................      810,000
                                                           ----------
Total minimum lease payments ...........................   $8,219,000
                                                           ==========


</TABLE>


8. Income Taxes
<TABLE>
<CAPTION>

     Significant  components  of the  provision for income taxes for the periods
presented are as follows:

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

                                           1998           1997          1996
                                           ----           ----          ----
Current:
     Federal ....................   $ 4,913,000    $ 4,412,000   $ 1,554,000
     State ......................     1,098,000        452,000       542,000
                                      ---------        -------       -------
Total current ...................     6,011,000      4,864,000     2,096,000
Deferred:
     Federal ....................    (1,801,000)     1,520,000       747,000
     State ......................      (564,000)       253,000       291,000
                                       --------        -------       -------
Total deferred ..................    (2,365,000)     1,773,000     1,038,000
                                     ----------      ---------     ---------
                                    $ 3,646,000    $ 6,637,000   $ 3,134,000
                                    ===========    ===========   ===========
</TABLE>
<TABLE>
<CAPTION>

     Significant components of the Company's deferred tax assets and liabilities
are as follows:

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

                                      1998           1997
                                      ----           ----
Deferred tax assets:
     Accrued liabilities ...   $   662,000    $   392,000
     Inventory reserves ....       892,000        382,000
     Other, net ............       218,000        289,000
                                   -------        -------
                                 1,772,000      1,063,000
Deferred tax liabilities:
     Depreciation ..........    (2,737,000)    (2,155,000)
     Capital leases ........    (1,184,000)    (1,182,000)
     Other, net ............      (615,000)    (3,163,000)
                                  --------     ---------- 
                                (4,536,000)    (6,500,000)
                                ----------     ---------- 
Net deferred tax liabilities   $(2,764,000)   $(5,437,000)
                               ===========    =========== 

</TABLE>

<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Income Taxes (continued)

     Income taxes paid for the years ended  December 31,  1998,  1997,  and 1996
were $7,495,000, $4,472,000, and $3,550,000.
<TABLE>
<CAPTION>

     The reconciliation of income tax computed at the U.S. federal statutory tax
rate to the Company's tax expense is:

                                                        For the Year Ended December 31,
                                                        -------------------------------
<S>                                             <C>            <C>            <C>

                                                       1998           1997           1996
                                                       ----           ----           ----
U.S. statutory rate .........................   $ 3,437,000    $ 4,296,000    $ 5,216,000
State income taxes ..........................       353,000        448,000        672,000
Effect of nondeductible acquisition expenses        578,000      3,420,000             --   
Income not subject to federal income taxation       (58,000)       (75,000)    (1,571,000)
Net operating loss carryforward utilization .            --       (237,000)    (1,263,000)

Foreign sales corporation benefit ...........      (322,000)            --             --   
Reversal of valuation allowance .............            --     (1,163,000)            --   
Tax credits .................................      (200,000)            --             --   
Other, net ..................................      (142,000)       (52,000)        80,000
                                                   --------        -------         ------
                                                $ 3,646,000    $ 6,637,000    $ 3,134,000
                                                ===========    ===========    ===========
</TABLE>

     Prior to ATMI's  acquisition  of the Advanced  Delivery & Chemical  Systems
Nevada,  Inc.  and  its  affiliates   (collectively,   the  "ADCS  Group"),  the
stockholders  of  Advanced  Delivery  & Chemical  Systems  Nevada,  Inc.  ("ADCS
Nevada") elected  S-Corporation status effective April 1, 1996. In October 1996,
as a result of a transfer of shares to an ineligible S-Corporation  shareholder,
the S  status  was  terminated.  During  the  period  that  ADCS  Nevada  was an
S-Corporation,  its earnings were not subject to federal  corporate  income tax.
Additional  federal  corporate  income tax of $1,483,000  would have resulted if
ADCS Nevada had been taxed as a C-Corporation for all of 1996, and the pro forma
consolidated net income,  and net income per share-assuming  dilution,  for ATMI
for the year ended  December  31,  1996 would have been  $10,719,000  and $0.54,
respectively.

     South Korea has granted the Company a five year full income tax  exemption,
which expires in 2003, and an additional three year 50% exemption, which expires
in 2006, for its operations at ADCS-Korea Co., Ltd. ("ADCS-Korea")

     The former  securityholders  of the ADCS Group have agreed to indemnify the
Company against losses arising out of certain tax matters. As security for these
tax matters, the former securityholders of the ADCS Group have delivered 700,000
shares of the Company's common stock which they received into escrow.  Any claim
for such tax matters adversely determined against the Company, regardless of the
escrow,  would result in a charge to the Company's  results of  operations.  The
former  securityholders  of the ADCS Group  believe that any  exposure  would be
immaterial,  and the Company  believes that any successful  challenge to the tax
matters is not probable.  While the possible exposures, if any, are difficult to
quantify,  the  Company  believes  that,  regardless  of  the  probability  that
liabilities  arise,  the  potential  exposures  range  from  $0 to  $22  million
depending on the tax matter.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9. Stockholders' Equity

     In March 1998,  the  Company  completed a  registered  underwritten  public
offering of  5,428,000  shares,  including  over-allotments,  of common stock at
$29.50 per share. Net proceeds to the Company of $62,426,000 were from 2,257,291
shares  sold  by the  Company  while  3,170,709  shares  were  sold  by  certain
stockholders.  Costs of the offering,  including underwriting commissions,  were
$4,161,000.

     Stock Plans

     In May 1998, the Company's  stockholders  approved the adoption of the 1998
Stock Plan ("1998  Plan"),  which  provides  for the granting of up to 2,000,000
nonqualified  stock options,  stock  appreciation  rights and  restricted  stock
awards to employees, directors, and consultants of the Company.

     In May 1997, the Company's  stockholders  approved the adoption of the 1997
Stock Plan  ("1997  Plan"),  which  provides  for the  granting of up to 900,000
nonqualified  stock  options,  "incentive  stock  options"  ("ISOs"),  and stock
appreciation rights to employees, directors, and consultants of the Company.

     In May 1995, the Company's  stockholders  approved the adoption of the 1995
Stock Plan  ("1995  Plan"),  which  provides  for the  granting of up to 500,000
nonqualified  stock options,  ISOs and stock  appreciation  rights to employees,
directors,  and  consultants of the Company.  The Company's 1987 Stock Plan (the
"1987  Plan"),  as  amended,  provided  for  the  granting  of up  to  1,115,833
nonqualified stock options.

     Under the terms of these stock plans,  nonqualified options granted may not
be at a price of less than 50% of the fair market value of the common stock, and
ISOs granted may not be at a price of less than 100% of fair market value of the
common  stock on the date of grant.  All  grants  have been made at fair  market
value under the plans.  Options are generally  exercisable  commencing  one year
after  the date of grant at the  rate of 20% per  annum on a  cumulative  basis.
Nonqualified  options  expire up to ten years  from the date of grant,  and ISOs
expire five to ten years from the date of grant.
<TABLE>
<S>                                                <C>          <C>

                                                     Number of    Option Price
                                                      Shares        Per Share
                                                      ------        ---------
Options outstanding at December 31, 1995 ......      974,305    $ 0.28 - $13.88
     Granted ..................................       92,500    $ 9.88 - $17.63
     Canceled .................................      (54,390)   $ 0.53 - $12.50
     Exercised ................................      (54,199)   $ 0.28 - $12.50
                                                     -------    ------   ------
Options outstanding at December 31, 1996 ......      958,216    $ 0.28 - $17.63
     Granted ..................................      900,490    $16.88 - $40.13
     Canceled .................................     (348,250)   $ 0.53 - $40.13
     Exercised ................................      (82,520)   $ 0.28 - $13.50
                                                     -------    ------   ------
Options outstanding at December 31, 1997 ......    1,427,936    $ 0.28 - $29.38
     Granted ...................................      752,440    $4.04 - $33.00
     Canceled ..................................     (110,130)   $5.63 - $33.00
     Exercised .................................     (158,918)   $0.28 - $17.63
                                                     --------    -----   ------
Options outstanding at December 31, 1998 ......    1,911,328    $16.88 - $40.13
                                                   =========    ======   ======
</TABLE>

<PAGE>

                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


9. Stockholders' Equity (continued)


     At December 31, 1998,  1997,  and 1996  options for 773,241,  657,396,  and
567,066 shares, respectively, were exercisable, and at December 31, 1998 options
for  1,945,293  shares were  available  for grant.  Exercise  prices for 764,158
options  outstanding ranged from $0.44-$10.00;  for 422,050 options  outstanding
ranged from  $10.01-$20.00;  and for  725,120  options  outstanding  ranged from
$20.01-$33.00 as of December 31, 1998.

     The weighted  average  exercise  price and  remaining  contractual  life of
options outstanding at December 31, 1998 was $14.56 and 7.5 years, respectively.

     As a result of the NOW merger in 1998,  stock options of NOW were converted
into 205,089 of ATMI stock options. These stock options were converted into ATMI
stock options at historical prices ranging from $4.04 to $8.90.

     If compensation expense for the Company's plans had been determined for all
stock option  grants based on the fair value at the grant dates for awards under
those plans, consistent with the method described in SFAS No. 123, the Company's
net  income,  net income  per  share-basic  and net  income  per  share-assuming
dilution would have been reduced to the pro forma amounts indicated below:
<TABLE>
<S>                                        <C>          <C>          <C>

                                                  1998         1997         1996
                                                  ----         ----         ----
Net income ..............................  $4,514,000   $5,090,000   $11,871,000
Net income per share--basic .............  $     0.22   $     0.27   $      0.63
Net income per share--assuming dilution .  $     0.21   $     0.25   $      0.59
</TABLE>

     The fair value of each option grant, for pro forma disclosure purposes, was
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:
<TABLE>
<S>                        <C>        <C>        <C>

                             1998       1997       1996
                             ----       ----       ----
Expected dividend yield      None       None       None
Risk free interest rate      5.50%      6.00%      6.25%
Expected volatility ...      62.8%      56.0%      54.6%
Expected life of options   7.5 years  7.5 years  7.5 years
</TABLE>

     The weighted  average fair value of  non-canceled  stock options granted in
1998, 1997, and 1996 was $14.74, $17.04, and $8.21, respectively.

     Employee Stock Purchase Plan

     The Employee Stock Purchase Plan ("ESPP Plan") was approved in May 1998 and
enables all employees to subscribe at six month  intervals to purchase shares of
common  stock at the lower of 85% of the fair market  value of the shares on the
first day or last day of each six month period.  A maximum of 500,000 shares are
authorized  for  subscription.  At  December  31, 1998 no shares had been issued
under the ESPP Plan.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


9. Stockholders' Equity (continued)
<TABLE>
<CAPTION>

     Earnings Per Share

     The following table presents the computation of basic and diluted  earnings
per share:
<S>                                                    <C>           <C>           <C>

                                                              1998          1997          1996
                                                              ----          ----          ----
Numerator:
     Net income ....................................   $ 6,465,000   $ 5,929,000   $12,202,000
                                                       ===========   ===========   ===========
Denominator:
     Denominator for basic earnings per share-
        Weighted-average share .....................    20,830,000    18,802,000    18,779,000
     Dilutive effect of contingent shares related to
        the ADCS Group and NOW acquisitions ........       780,000       780,000       780,000
     Dilutive effect of employee stock options .....       407,000       672,000       428,000
                                                           -------       -------       -------
     Denominator for diluted earnings per share ....    22,017,000    20,254,000    19,987,000
                                                        ----------    ----------    ----------
Net income per share--basic ........................   $      0.31   $      0.32   $      0.65
                                                       ===========   ===========   ===========
Net income per share--assuming dilution ............   $      0.29   $      0.29   $      0.61
                                                       ===========   ===========   ===========
</TABLE>

     Options to purchase  720,520,  16,000,  and 32,000  shares of common stock,
outstanding  as of December 31, 1998,  1997,  and 1996,  respectively,  were not
included in the computation of diluted earnings per share because their exercise
prices were  greater  than the average  market  price of the common  shares and,
therefore, their inclusion would be antidilutive.

10. Mergers and Acquisitions

     On  August  4,  1998,  pursuant  to  a  Merger  Agreement,   NOW  became  a
wholly-owned  subsidiary of ATMI. Pursuant to the Merger, each outstanding share
of NOW Common Stock was converted into .865338  shares of ATMI Common Stock.  In
the aggregate,  1,593,952 shares of ATMI Common Stock were issued in the Merger.
In addition,  each outstanding  option to purchase one share of NOW Common Stock
was  converted  into a stock  option to purchase  .865338  shares of ATMI Common
Stock. The Merger has been accounted for as a pooling of interests. NOW's fiscal
year ended on March 31. The Company's  consolidated  financial  statements  have
been  restated  to combine  NOW's  fiscal  year end March 31 and ATMI's year end
December 31. Certain  adjustments have been made to the financial  statements to
combine the operations.  An adjustment of $102,000 was made to retained earnings
to adjust for the  different  fiscal year ends.  NOW  manufactures  proprietary,
state-of-the-art,   high  performance  containers  and  dispensing  systems  for
advanced  purity   chemicals  used  in  the  manufacture  of   microelectronics,
particularly  semiconductor  integrated  circuits  and active  matrix flat panel
displays.

     The former securityholders of NOW have agreed to indemnify the Company from
and against  certain  losses  arising out of  breaches  of  representations  and
warranties  made  by the  respective  securityholders.  As  security  for  these
obligations,  the former  securityholders of NOW delivered  approximately 80,000
shares  of the  Company's  Common  Stock  which  they  received  into  escrow in
connection with the acquisition by the Company of NOW.
<PAGE>


                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Mergers and Acquisitions (continued)

     Non-recurring  costs of  approximately  $1,700,000,  primarily  related  to
investment  banker,  legal, and accounting fees have been recorded as a one-time
charge in 1998 in conjunction with the investigation,  analysis, and August 1998
closing of the NOW transaction.

     The  acquisition of NOW was treated as a pooling of interests.  For the six
month  period  ended June 30, 1998 and years ended  December  31, 1997 and 1996,
prior to the  acquisition,  revenues  and net income of ATMI and NOW included in
the financial statements are as follows:
<TABLE>
<CAPTION>

                                     Six Months Ended
<S>                                   <C>            <C>            <C>

Revenues:                             June 30, 1998          1997           1996
---------                             -------------          ----           ----
ATMI ..............................   $ 49,006,000   $101,877,000   $ 88,661,000
NOW ...............................   $  6,043,000   $ 14,855,000   $ 10,111,000

                                     Six Months Ended
Net Income:                           June 30, 1998          1997           1996
-----------                           -------------          ----           ----
ATMI ..............................   $  5,999,000   $  4,421,000   $ 12,017,000
NOW ...............................   $    240,000   $  1,508,000   $    185,000

</TABLE>

     On  October  10,  1997,  pursuant  to an  Agreement  and Plan of Merger and
Exchange dated April 7, 1997 (the "Merger and Exchange Agreement"),  the Company
issued  5,468,747  shares of its Common Stock in exchange for all the  ownership
interests of the ADCS Group. The ADCS Group manufactures,  markets,  and designs
ultrahigh-purity  specialty thin film materials and related  delivery  equipment
for the semiconductor and semiconductor equipment manufacturing industries.  The
acquisition of ADCS was accounted for as a pooling of interests.

     Also on October  10,  1997,  pursuant to an  Agreement  and Plan of Merger,
dated as of May 17, 1997,  as amended (the  "Lawrence  Merger  Agreement"),  the
Company issued  3,671,349  shares of the Company's  Common Stock in exchange for
all of the outstanding common stock of Lawrence Semiconductor Laboratories, Inc.
and its affiliate  (collectively,  "LSL") in a merger transaction.  As a result,
LSL became a  wholly-owned  subsidiary  of the  Company.  LSL is a  provider  of
epitaxial   processing  of  silicon  wafers  using  chemical  vapor   deposition
technology to meet customer specifications. The acquisition of LSL was accounted
for as a pooling of interests.

     The former  securityholders  of the ADCS Group have agreed to indemnify the
Company   from  and  against   certain   losses   arising  out  of  breaches  of
representations  and warranties made by the respective  securityholders  and for
certain  tax   matters.   As  security   for  these   obligations,   the  former
securityholders  of the ADCS Group  delivered  700,000  shares of the  Company's
Common Stock which they received into escrow in connection  with the acquisition
by the Company of the ADCS Group.

     Non-recurring  costs of  approximately  $9,000,000,  primarily  related  to
investment banker, legal, accounting fees, and a break-up fee in connection with
a  transaction  between LSL and another  investor,  were  recorded as a one-time
charge in 1997 in conjunction with the investigation, analysis, and October 1997
closings of the ADCS Group and LSL transactions.
<PAGE>



                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Mergers and Acquisitions (continued)


     For the nine month period ended  September 30, 1997 and year ended December
31,  1996,  prior to the  acquisition,  revenues and net income of ATM, the ADCS
Group, and LSL included in the financial statements are as follows:
<TABLE>
<CAPTION>

                                              Nine Months Ended
<S>                                               <C>           <C>
Revenues:                                     September 30, 1997       1996
---------                                     ------------------       ----
ATM ...........................................   $41,286,000   $46,350,000
ADCS and LSL ..................................   $32,262,000   $42,311,000

                                               Nine Months Ended
Net Income:                                    September 30, 1997      1996
-----------                                    ------------------      ----
ATM ...........................................   $ 3,979,000   $ 3,321,000
ADCS and LSL ..................................   $ 5,134,000   $ 8,696,000
</TABLE>

11. Comprehensive Income

     During the first quarter of 1998,  the Company  adopted FASB  Statement No.
130, "Reporting  Comprehensive Income." Statement No. 130 requires the reporting
of comprehensive income in addition to net income from operations. Comprehensive
income  is a more  inclusive  financial  reporting  presentation  that  includes
disclosure  of certain  financial  information  that  historically  has not been
recognized in the calculation of net income.
<TABLE>
<CAPTION>

     The components of comprehensive income are as follows:



                                             Currency    Unrealized Loss on
                                            Translation   Available-for-Sale
                                            Adjustments     Securities           Total
<S>                                        <C>            <C>               <C>

                                            -----------     ----------           -----
Balance at December 31, 1996 ...........   $   (55,000)            --       $   (55,000)
Cumulative translation adjustment ......    (1,044,000)            --        (1,044,000)
                                            -----------    -----------      -----------
Balance at December 31, 1997 ...........    (1,099,000)            --        (1,099,000)
Unrealized loss on available-for-sale
securities, (net of tax benefit of $281,000)        --    $  (500,000)         (500,000)
Cumulative translation adjustment ......       366,000             --           366,000 
                                               -------        -------            -------
Balance at December 31, 1998 ...........   $  (733,000)   $  (500,000)      $(1,233,000)
                                            ===========    ===========       =========== 
</TABLE>

12. Restructuring Charge

     During the third  quarter of 1998,  the Company  reduced its  workforce and
recorded a $400,000 restructuring charge. The Company's initiative was completed
by December 31, 1998.
<PAGE>

                                   ATMI, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

13. Commitments and Contingencies

     On May  15,  1997,  LSL  settled  patent  infringement  litigation  with an
equipment manufacturer, related to equipment used by LSL that was purchased from
another manufacturer.  Under the terms of the related settlement agreement,  LSL
agreed to pay the  manufacturer  $2,000,000  and to purchase  reactors  from the
manufacturer assuming LSL's business conditions justify such purchases.  LSL has
purchased a reactor at an  approximate  fair  market  value of  $2,500,000.  LSL
accrued the $2,000,000 relating to this settlement in the accompanying financial
statements  for the year ended  December  31,  1996.  The amount was paid to the
manufacturer during the year ended December 31, 1997.

     In the  normal  course of  business,  the  Company is  involved  in various
lawsuits  and  claims.  Although  the  ultimate  outcome  of any of these  legal
proceedings  cannot be determined at this time,  management,  including internal
counsel,  does not believe that the outcome of theses proceedings,  individually
or in the  aggregate,  will have a  material  adverse  effect  on the  Company's
financial position or overall trends in results of operations.

14. Segment and Geographic Data

     Segment   information   included  under  the  caption   "Segment  Data"  in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations is incorporated herein by reference, and is an integral part of these
financial statements.
<TABLE>
<CAPTION>

     The Company's  geographic data for years ended December 31, 1998, 1997, and
1996, are as follows:

Revenues from external customers             1998           1997           1996
--------------------------------             ----           ----           ----
<S>                                  <C>            <C>            <C>


            United States ........   $ 73,017,000   $ 89,163,000   $ 68,713,000
            Pacific Rim ..........     18,855,000     22,300,000     25,422,000
            Europe ...............      6,002,000      5,269,000      4,637,000                              
                                        ---------      ---------      ---------                              
Total revenues from 
    external customers               $ 97,874,000   $116,732,000   $ 98,772,000
                                     ============   ============   ============
</TABLE>

     Revenues are attributed to countries based on the location of the customer.
No one specific  country within the Pacific Rim or Europe  accounted for greater
than 10% of consolidated revenues in 1998 and 1997. During 1996, the Company had
export sales of approximately  21% to South Korea.  Approximately  all assets of
the Company are based in the United States.  Assets outside of the United States
are  immaterial  to the  consolidated  balance sheet at December 31, 1998 and at
December 31, 1997. Net income recorded by the Company's foreign  subsidiaries is
not material to the  consolidated  operations of the Company for the three years
ended December 31, 1998. The Company utilized one vendor to manufacture  product
that  accounted  for  approximately  14% and 11% of  revenues  in 1998 and 1997,
respectively.
<PAGE>

<TABLE>
<CAPTION>



                   Quarterly Results of Operations (unaudited)
                (Thousands of Dollars, except per share amounts)

                                                                         Quarter
                                                                         -------
1998                                                     First     Second      Third       Fourth
----                                                     -----     ------      -----       ------
<S>                                                    <C>        <C>        <C>          <C>

Revenues ...........................................   $ 30,534   $ 24,516   $ 21,729     $ 21,095
Gross profit .......................................     16,522     11,851      9,233        9,800
Net income (loss) ..................................      4,565      1,674     (1,120)(1)    1,346
Net income (loss) per share--basic .................   $   0.24   $   0.08   $  (0.05)(1) $   0.06
Net income (loss) per share--assuming dilution .....   $   0.22   $   0.07   $  (0.05)(1) $   0.06

                                                                         Quarter
                                                                         -------
1997                                                     First     Second      Third       Fourth
----                                                     -----     ------      -----       ------
Revenues ...........................................   $ 26,744   $ 27,386   $ 31,115     $ 31,487
Gross profit .......................................     13,218     14,118     16,781       16,578
Net income (loss) ..................................      3,057      3,089      4,375       (4,592)(2)
Net income (loss) per share--basic .................   $   0.16   $   0.16   $   0.23     $  (0.24)(2)
Net income (loss) per share--assuming dilution .....   $   0.15   $   0.15   $   0.22     $  (0.24)(2)
<FN>

     (1) Includes  non-recurring  charges of $2.1 million  accrued in connection
with costs  incurred  in  completing  the NOW  acquisition,  and  severance  for
employees,  as well as $0.9 million  accrued in  connection  with an increase in
general business reserves.  (2) Includes a non-recurring  charge of $9.0 million
accrued in connection with the ADCS Group and LSL acquisitions.

</FN>
</TABLE>




<PAGE>



<TABLE>
<CAPTION>
                                   Schedule II

                                   ATMI, INC.
                         VALUATION & QUALIFYING ACCOUNTS

                                     Balance at                             Balance at
                                      Beginning   Charged to                   End
Year Ended                            of Period   Cost/Expense Deductions    of Period
----------                            ---------   -----------------------    ---------
<S>                                  <C>          <C>          <C>          <C>

December 31, 1998
   Allowance for doubtful accounts   $  405,000   $  242,000   $   80,000   $  567,000
   Obsolescence reserve ..........    1,063,000    1,173,000    1,113,000    1,123,000
   Restructuring reserve .........            0      402,000      402,000            0

December 31, 1997
   Allowance for doubtful accounts      361,000      365,000      321,000      405,000
   Obsolescence reserve ..........      752,000    1,134,000      823,000    1,063,000

December 31, 1996
   Allowance for doubtful accounts      109,000      280,000       28,000      361,000
   Obsolescence reserve ..........      276,000      476,000            0      752,000
</TABLE>

<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.

                                                                   ATMI, Inc.

March 29, 1999

Signature                          Title                                   Date
/S/ Eugene G. Banucci      President, Chief Executive                    3/29/99
Eugene G. Banucci, Ph.D    Officer, Chairman of the Board
                           and Director(principal executive officer)   

/S/ Daniel P. Sharkey      Vice President, Chief Financial               3/29/99
Daniel P. Sharkey          Officer and Treasurer (principal financial and
                           accounting officer)  

/S/ Mark A. Adley          Director                                      3/29/99
Mark A. Adley     

/S/ Robert S. Hillas       Director                                      3/29/99
Robert S. Hillas

/S/ Stephen H. Mahle        Director                                     3/29/99
Stephen H. Mahle

/S/ Stephen H. Siegele     Director                                      3/29/99
Stephen H. Siegele

/S/ Lamonte H. Lawrence     Director                                     3/29/99
Lamonte H. Lawrence

<PAGE>


                                  EXHIBIT INDEX



Exhibit No.
                                  Description

     2.01  Agreement  and Plan of Merger  and  Exchange  by and  among  Advanced
Technology Materials, Inc., ATMI Holdings, Inc. (now known as ATMI, Inc.), Alamo
Merger,  Inc.,  Advanced  Delivery & Chemical  Systems  Nevada,  Inc.,  Advanced
Delivery & Chemical Systems Manager,  Inc., Advanced Delivery & Chemical Systems
Holdings, LLC, Advanced Delivery & Chemical Systems Operating,  LLC and Advanced
Delivery & Chemical  Systems,  Ltd.  dated as of April 7, 1997  (Exhibit 2.01 to
Advanced Technology Materials, Inc. Quarterly Report on Form 10-Qfor the quarter
ended June 30, 1997, File No. 0-22756 ("June 30, 1997 Form 10-Q")). (1)

     2.02(a)  Agreement  and Plan of  Merger by and  among  Advanced  Technology
Materials, Inc., ATMI Holdings, Inc. (now known as ATMI, Inc.), Welk Acquisition
Corporation,    Lawrence   Semiconductor   Laboratories,   Inc.   and   Lawrence
Semiconductor  Laboratories  Marketing and Sales,  Inc. dated as of May 17, 1997
(Exhibit 2.02(a) to June 30, 1997 Form 10-Q).(1)

     2.02(b) First Amendment to Agreement and Plan of Merger dated as of June 6,
1997 (Exhibit 2.02(b) to June 30, 1997 Form 10-Q). (1)

     2.02(c)  Second  Amendment to Agreement and Plan of Merger dated as of July
30, 1997 (Exhibit 2.02(c) to June 30, 1997 Form 10-Q. (1)

     2.03 Merger Agreement by and among ATMI, Inc., Glide Acquisition,  Inc. And
NOW  Technologies,  Inc.  dated as of February 19, 1998  (Exhibit 2.03 to ATMI's
Registration  Statement on Form S-1,  Registration  No. 333-46609 (the "Form S-1
Registration Statement")). (1)

     3.01(a) Certificate of Incorporation of the Registrant (Exhibit 3.01 to the
ATMI's   Registration   Statement  on  Form  S-4,  filed   September  10,  1997,
Registration No. 333-35323 (the "1997 Form S-4 Registration Statement")). (1)

     3.01(b)  Certificate of Amendment to Certificate of Incorporation  (Exhibit
4.1(b)to the ATMI's Post-Effective  Amendment No. 1 to Registration Statement on
Form S-8, filed October 10, 1997, Registration No. 33- 77060). (1)

     3.01(c)  Certificate of Amendment to Certificate of Incorporation  (Exhibit
3.01(c) to the  ATMI's  Registration  Statement  on Form S-4,  Registration  No.
33-51333). (1)

     3.02  Bylaws  of ATMI  (Exhibit  3.02 to the  1997  Form  S-4  Registration
Statement). (1)

     4.01 Specimen of the ATMI's Common Stock  Certificate  (Exhibit 4.01 to the
1997 Form S-4 Registration Statement). (1)

     10.01 Employment  Agreement  between Eugene G. Banucci,  Ph.D. and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.01 to the Form S-1
Registration Statement). (1)

     10.02  Employment   Agreement   between  Daniel  P.  Sharkey  and  Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.02 to the Form S-1
Registration Statement). (1)

     10.03 Employment Agreement between Stephen H. Siegele and Advanced Delivery
& Chemical  Systems  Nevada,  Inc.  dated October 13, 1997 (Exhibit 10.05 to the
Form S-1 Registration Statement). (1)

     10.04 Consulting  Agreement  between Lawrence  Semiconductor  Laboratories,
Inc. and Lawrence Semiconductor Investments, Inc. dated October 10,1997 (Exhibit
10.06 to the Form S-1 Registration Statement). (1)

     10.05 Agreement of Lease between Melvyn J. Powers and Mary P. Powers d/b/a/
M&M Realty and  Advanced  Technology  Materials,  Inc.  dated  December 23, 1994
(Exhibit  10.09 to Advanced  Technology  Materials,  Inc.  Annual Report on Form
10-K/A for the year ended  December  31,  1994,  File No.  0-22756  ("1994  Form
10-K/A")). (1)

     10.06(a) Lease Agreement  between  Montague Oaks  Associates  Phase III and
ATMI  EcoSys  Corporation  dated  February 7, 1995  (Exhibit  10.10 to 1994 Form
10-K/A). (1)

     10.06(b) First Amendment to Lease between  Montague Oaks  Associates  Phase
III and ATMI EcoSys  Corporation  dated September 30, 1997 (Exhibit  10.08(b) to
the Form S-1 Registration Statement). (1)

     10.07 Lease Agreement  between  Montague Oaks  Associates  Phase I & II and
ATMI EcoSys  Corporation dated September 30,  1997(Exhibit 10.09 to the Form S-1
Registration Statement). (1)

     10.8(a)  Standard   Industrial   Lease--Net  between  GKZ  Investments  and
Epitronics  Corporation  dated June 20, 1994  (Exhibit  10.10(a) to the Form S-1
Registration Statement). (1)

     10.8(b) Lease  extension  letter  between GKZ  Investments  and  Epitronics
Corporation  dated  September  18,  1996  (Exhibit  10.10(b)  to  the  Form  S-1
Registration Statement). (1)

     21.01  Subsidiaries  of  ATMI  (Exhibit  21.01  to  Form  S-1  Registration
Statement). (1)

     23.01 Consent of Ernst & Young LLP. (2)

     23.02 Consent of PricewaterhouseCoopers LLP. (2)

     23.03 Consent of Deloitte & Touche LLP. (2)

     27.01 Financial data schedule. (2) (1) Incorporated by reference. (2) Filed
herewith.
<PAGE>